Health care costs in the United States are higher than in any other OECD (Organization for Economic Co-operation and Development) country, of which there are thirty.
By quite a lot.
Use of most health services, however, are lower in the US than elsewhere.
There are several factors as to why costs are higher, but as a 2002 study concluded, “it’s the prices, stupid”.[1]
Health Care Cost Discrepancy
Apart from Medicare and Medicaid for which the government negotiates prices for services, the nature of the free market economy is truer no where else than in the realm of health care services. For goods such as medical equipment and pharmaceuticals, manufacturers and retailers set the prices as in any other industry and can boast a 20 percent profit margin–an extraordinary feat. In the case of pharmaceuticals especially, marketing plays an important role in its sales-driven strategy and one often wonders if they are really in the business of making people’s lives better at all or selling widgets at the highest price the market will bear, like everyone else.
Consider that in some parts of the country, physicians write 96 to 143 drug prescriptions per 100 people and the money paid for prescriptions alone is in the several billions of dollars per year.
When it comes to medical care services, costs in the US are exceedingly higher than in other countries; the average price for an office visit in the US is $68 compared to $11 in Spain, an angioplasty is $16,533 versus $7,564 in France. Other countries in OECD have market economies–so why the big discrepancy in price? In other countries, prices are negotiated and set, either by government (e.g., Britain and Canada) or between insurers and providers (e.g., Germany and Japan). In the US, providers set a schedule of fees that can differ from insurer to insurer with a separate (higher) price for uninsured people.
Consumers Pay Whatever The Cost Because, Well, They Have no Choice.
Some argue that part of US health care costs is research and development, which is definitely worth funding. Tom Sackville of the International Federation of Health Plans (IFHP) gives us the bright side of the overpriced equation:
“We [the rest of the world] end up with the benefits of your investment. You’re subsidizing the rest of the world by doing the front-end research.”
The hole in that reasoning is that the amount spent on health care innovation doesn’t account for the vast difference in price between the US and other countries. Additionally, what US consumers spend on health care is money not spent on other necessities like education and infrastructure–and sometimes food.
The thing about health care is that when you need it, you need it. Whatever it costs to fix your broken arm or to fill the prescription for your child’s ear infection or perform bypass surgery for your mother–that’s what you will pay. This fact puts the providers in the driver’s seat. It’s a sad state of affairs and one that can be revamped but it’s not at the top of anyone’s list of priorities right now. People are still getting used to “Obamacare”. The ailing domestic economy and world events are taking precedence. Many Americans may even think that there is no other way in a capitalist economy to set prices for anything, including health care. Other countries’ models show otherwise.
The health care reform act of 2010 requires greater transparency when it comes to the prices charged by providers but has no provisions for reducing them.
Simply cutting prices for health care isn’t the entire solution; even if you cut cost, with overall health care use increasing every year, any savings achieved through reducing price would be eventually overcome by sheer volume. But it would be a start.
sources:
[1] https://content.healthaffairs.org/content/22/3/89.full.html