Health care prices in the United States

Unlike most markets for consumer services in the United States, the health care market generally lacks transparent market-based pricing.[1][2] Patients are typically not able to comparison shop for medical services based on price, as medical service providers do not typically disclose prices prior to service.[1][2][3] Government mandated critical care and government insurance programs like Medicare also impact market pricing of U.S. health care. According to the New York Times in 2011, "the United States is far and away the world leader in medical spending, even though numerous studies have concluded that Americans do not get better care"[2] and prices are the highest in the world.[4]

Price transparency issues

U.S. healthcare cost information, including rate of change, per-capita, and percent of GDP.

In the U.S. medical industry, patients generally do not have access to pricing information until after medical services have been rendered. A study conducted by the California Healthcare Foundation[5] found that only 25% of visitors asking for pricing information were able to obtain it in a single visit to a hospital.[6]

Since the majority (85%) of Americans have health insurance, they do not directly pay for medical services.[7] Insurance companies, as payors, negotiate health care pricing with providers on behalf of the insured. Hospitals, doctors, and other medical providers have traditionally disclosed their fee schedules only to insurance companies and other institutional payors, and not to individual patients. Uninsured individuals are expected to pay directly for services, but since they lack access to pricing information, price-based competition may be reduced. The introduction of high-deductible insurance has increased demand for pricing information among consumers. As high-deductible health plans rise across the country, with many individuals having deductibles of $2500 or more, their ability to pay for costly procedures diminishes, and hospitals end up covering the cost of patients care. Many health systems are putting in place price transparency initiatives and payments plans for their patients so that the patients better understand what the estimated cost of their care is, and how they can afford to pay for their care over time.

Organizations such as the American Medical Association (AMA) and AARP support a "fair and accurate valuation for all physician services".[8][9] Very few resources exist, however, that allow consumers to compare physician prices (one exception is CostOfDoctors.com[10]) The AMA sponsors the Specialty Society Relative Value Scale Update Committee, a private group of physicians which largely determine how to value physician labor in Medicare prices. Among politicians, former House Speaker Newt Gingrich has called for transparency in the prices of medical devices, noting it is one of the few aspects or U.S. health care where consumers and federal health officials are "barred from comparing the quality, medical outcomes or price".[11][12][13]

Recently, some insurance companies have announced their intention to begin disclosing provider pricing as a way to encourage cost reduction.[7] Other services exist to assist physicians and their patients, such as Healthcare Out Of Pocket,[14] Accuro Healthcare Solutions, with its CarePricer software.[15] Similarly, medical tourists take advantage of price transparency on websites such as MEDIGO and Purchasing Health, which offer hospital price comparison and appointment booking services.[16]

Government-mandated critical care

In the United States and most other industrialized nations, emergency medical providers are required to treat any patient that has a life-threatening condition, irrespective of the patient's financial resources. In the U.S., the Emergency Medical Treatment and Active Labor Act requires that hospitals treat all patients in need of emergency medical care without considering patients' ability to pay for service.[17]

This government mandated care places a cost burden on medical providers, as critically ill patients lacking financial resources must be treated. Medical providers compensate for this cost by passing costs on to other parts of the medical system by increasing prices for other patients and through collection of government subsidies.[18]

Medicare and Medicaid

Medicare was established in 1965 under President Lyndon Johnson as a form of medical insurance for the elderly (age 65 and above) and the disabled. Medicaid was established at the same time to provide medical insurance primarily to children, pregnant women, and certain other medically needy groups.

Medicare and Medicaid are managed at the Federal level by the Centers for Medicare and Medicaid Services (CMS). CMS sets fee schedules for medical services through Prospective Payment Systems (PPS) for inpatient care, outpatient care, and other services.[19] As the largest single purchaser of medical services in the U.S., Medicare's fixed pricing schedules have a significant impact on the market. These prices are set based on CMS' analysis of labor and resource input costs for different medical services based on recommendations by the American Medical Association.[20]

As part of Medicare's pricing system, relative value units (RVUs) are assigned to every medical procedure.[21] One RVU translates into a dollar value that varies by region and by year; in 2005 the base (not location adjusted) RVU equaled roughly $37.90. Major insurers use Medicare's RVU calculations when negotiating payment schedules with providers, and many insurers simply adopt Medicare's payment schedule. The AMA-sponsored committee in charge of determining RVUs of medical procedures that inform Medicare's payment to physicians has been shown to grossly inflate their figures.[22]

Employer-based market

The rate of increase in both health insurance premiums and out-of-pocket costs have declined in the employer-based market. For example, premiums increased at an annual rate of 5.6% from 2000-2010, but 3.1% from 2010-2016.

An estimated 155 million persons under age 65 were covered under health insurance plans provided by their employers in 2016. The Congressional Budget Office (CBO) estimated that the health insurance premium for single coverage would be $6,400 and family coverage would be $15,500 in 2016. The annual rate of increase in premiums has generally slowed after 2000, as part of the trend of lower annual healthcare cost increases.[23] The federal government subsidizes the employer-based market by an estimated $250 billion per year (about $1,612 per person covered in the employer market), by excluding health insurance premiums from employee income. This subsidy encourages people to buy more extensive coverage (which places upward pressure on average premiums), while also encouraging more young, healthy people to enroll (which places downward pressure on premium prices). CBO estimates the net effect is to increase premiums 10-15% over an un-subsidized level.[23]

The Kaiser Family Foundation estimated that family insurance premiums averaged $18,142 in 2016, up 3% from 2015, with workers paying $5,277 towards that cost and employers covering the remainder. Single coverage premiums were essentially unchanged from 2015 to 2016 at $6,435, with workers contributing $1,129 and employers covering the remainder.[24]

The President's Council of Economic Advisors (CEA) described how annual cost increases have fallen in the employer market since 2000. Premiums for family coverage grew 5.6% from 2000-2010, but 3.1% from 2010-2016. The total premium plus estimated out-of-pocket costs (i.e., deductibles and co-payments) increased 5.1% from 2000-2010 but 2.4% from 2010-2016.[25]

Prescription drugs

See also

References

  1. 1 2 Rosenberg, Tina (July 31, 2013). "Revealing a Health Care Secret: The Price". New York Times. Retrieved August 1, 2013.
  2. 1 2 3 Rosenthal, Elisabeth (June 2, 2013). "The $2.7 Trillion Medical Bill - Colonoscopies Explain Why U.S. Leads the World in Health Expenditures". New York Times. Retrieved August 1, 2013.
  3. ↑ The perils of transparent pricing: the time for speculation is over: transparent pricing is becoming a reality for hospitals. | Health Care > Health Care Professionals from AllBusiness.com
  4. ↑ Laugesen, Miriam J.; Glied, Sherry A. (September 2011). "Higher Fees Paid To US Physicians Drive Higher Spending For Physician Services Compared To Other Countries". Health Affairs. 30 (9): 1647–1656.
  5. ↑ http://www.chcf.org California Healthcare Foundation
  6. ↑ Price Check: The Mystery of Hospital Pricing - CHCF.org
  7. 1 2 U.S. Census Press Releases
  8. ↑ "RBRVS: Resource-Based Relative Value Scale". American Medical Association. Retrieved May 3, 2011.
  9. ↑ "AARP: Creating a New Health Care Paradigm". AARP. Retrieved May 3, 2011.
  10. ↑ "CostOfDoctors.com: a way to compare physician prices". Avalon Business Systems. Retrieved December 7, 2015.
  11. ↑ Newt Gingrich; Wayne Oliver (April 19, 2011). "With Health Care, Taxpayers Deserve To Know What They're Paying For". Forbes.com. Retrieved May 3, 2011.
  12. ↑ Brendon Nafziger (May 2, 2011). "Gingrich calls for medical device price transparency". DotMed. Retrieved May 3, 2011.
  13. ↑ Leigh Page (May 3, 2011). "Newt Gingrich Backs Price Transparency for Medical Devices". Becker's ASC Review. Retrieved May 3, 2011.
  14. ↑ Compare Provider Chargers
  15. ↑ Patient Estimates - Accuro Healthcare Solutions
  16. ↑ Patient Estimates - MEDIGO
  17. ↑ http://www.aaem.org/emtala/index.shtml
  18. ↑ Analysis of the Joint Distribution of Disproportionate Share Hospital Payments: Executive Summary
  19. ↑ Medicare
  20. ↑ Laugesen, Miriam J. (2016). Fixing Medical Prices: How Physicians are Paid. Cambridge, Massachusetts: Harvard University Press. p. 288. ISBN 9780674545168.
  21. ↑ AMA (RBRVS) RBRVS: Resource-Based Relative Value Scale
  22. ↑ Peter Whoriskey; Dan Keating (July 20, 2013). "How a secretive panel uses data that distort doctors’ pay". The Washington Post. Retrieved March 23, 2014.
  23. 1 2 CBO-Private Health Insurance Premiums and Federal Policy-February 2016
  24. ↑ Kaiser-2016 Employer Health Benefits Survey-September 14, 2016
  25. ↑ CEA-Economic Report of the President 2017-Chapter 8-Figure 4-34
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