Studies show U.S. costs are higher, benefits lower—with blame for all
The old saying that you get what you pay for doesn’t necessarily apply in healthcare.
A recent study highlighted that point once again. The report, published in the September issue of the journal Health Affairs, concluded that higher physician fees—rather than higher practice costs, volume of services or tuition expenses—were the main drivers of higher spending in this country, especially on orthopedics.
The researchers compared fees paid by public and private payers for primary-care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom and the U.S. It also examined doctor incomes (net of practice expenses), differences in paying for the costs of medical education and the relative contribution of payments per physician and physician supply in the countries’ national spending on physician services.
As Washington Bureau Chief Jessica Zigmond reported (Sept. 12, p. 6), the study found that Medicare paid about 27% higher fees for primary-care office visits than did foreign public payers, while private health plans paid 70% more. When the spotlight was turned on orthopedic care, researchers found that public payers in the U.S. shelled out 70% more for hip replacements and private payers paid 120% more.
One of the researchers, Columbia University professor Miriam Laugesen, speculated that private insurers may be less likely to negotiate fees, that there is no standard price for procedures in the private sector. The lack of price transparency in healthcare here and elsewhere may be an impediment to understanding differences, Laugesen and other experts said.
After the study’s release, physicians complained that they were being singled out for high pricing. Insurers griped that hospitals and physicians need to be more transparent about their prices.
Actually, there’s plenty of blame to go around. And this study is just the latest in a string of such reports. A 2003 study, also published in
Health Affairs, noted that per-capita health spending in the U.S. was significantly higher than that of 30 other developed nations.
Data from the Organisation for Economic Co-operation and Development showed that the U.S. spends more on healthcare than any other country, but on measures of services use, the U.S. falls below the OECD median. U.S. public spending on healthcare was almost identical to public spending in several nations.
Here’s another example: A 2005 report by other researchers came to similar conclusions. Among other things, it rejected malpractice and defensive medicine costs as a major reason for the high price tags on U.S. care. Meanwhile, experts crank out volumes of studies showing that Americans are no healthier and often sicker than their foreign counterparts despite this sky-high spending.
“But U.S. policymakers need to reflect on what Americans are getting for their greater health spending,” the authors of the 2003 study wrote. “They could conclude: It’s the prices, stupid.”
Given the accumulated research, it appears the healthcare industry escaped the most drastic cost-containment measures critics might have wanted in the Patient Protection and Affordable Care Act. While some providers howl about some cuts, the Independent Payment Advisory Board and comparative effectiveness research, these provisions are mild and gradual compared with what could have been demanded.
Unfortunately, the deficit-reduction frenzy may result in massive slashing of health programs rather than intelligent targeting of wasteful spending. Fueling some of this is a contingent in Congress that opposes public insurance of any kind, including Medicare and Medicaid.
As all this unfolds, the industry should remember that it was warned about high prices.