Friday, February 24, 2006

Transparency in Health Care Prices

The Journal-Sentinel has an article today about varying prices for medical procedures at different hospitals around the Milwaukee area. The prices come from the health insurance group Humana, which is working with local businesses to provide more transparency on health care costs as a means for helping employers to identify cheaper services.

Previously these prices, which are negotiated between the insurance company and the hospital, were kept in secret--and it's no wonder why. A colonoscopy can range in price, for example, from around $1000 at Milwaukee Endoscopy Center to around $3200 at Columbia St. Mary's Hospital-Ozaukee campus. And this is within the same health insurance system! Plus, interestingly, you can get the same colonoscopy procedure at Columbia St. Mary's Hospital-Milwaukee campus for about $2300, which is $900 cheaper than the Ozaukee campus.

How exactly do you explain charging 40% more for a procedure at one of your hospitals than you do for the exact same procedure at another one of your hospitals that's only about 16 miles away?

What the article only lightly touches on is the fact that hospital prices vary not only within health care plans, but also between them and between insured and uninsured patients. Uninsured patients are charged significantly higher prices for health care because their prices are not negotiated, which is the case with those who are insured. Being part of an insurance company is similar to buying in bulk or getting a group rate on something--it's going to be cheaper for each member because you're committing to purchase more.

This is the basic rationality behind the single-payer system. Now before conservatives get overly-excited that I'm pushing "socialized medicine," I should point out that moving closer to a single payer system does not require a system like the one in Canada. In fact, many countries have a public-private hybrid form of health care.

Such is the case in France, which actually provides a much better example for the US than Canada. As health policy analyst Kate Steadman describes it, "The public component establishes a baseline of quality and care, along with the efficiency of single payer. ... Then the private component allows patients more access elective and experimental treatments and shorter waiting times."

According to a 2003 article (sub. req.) in the American Journal of Public Health, France expended only about 9.5% of its GDP on health care in 2000 while the United States was around 13% that year--and that's despite the fact coverage in France was universal while in the US we currently have about 41 million uninsured...and counting. In addition to the lower cost, French hospitals offer about 8.4 beds per 1000 people, while US hospitals only offer 3.6 beds for the same amount of people.

As the American Journal of Public Health article concludes:

"The French health care system delivers a higher aggregate level of services and higher consumer satisfaction with a significantly lower level of health expenditures, as a share of GDP, than in the United States. Add to this the enormous choice of health delivery options given to consumers, the low level of micromanagement imposed on health care professionals, and the higher level of population health status achieved by the French, and some would argue that the French model is a worthy export product."

Sounds pretty nice, doesn't it?


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