• Everything costs more

    A long time reader of the blog was kind enough to alert me to the release of the International Federation of Health Plans’ Annual Comparative Price Report.  From their press release:

    The International Federation of Health Plans today released its 2010 Comparative Price Report detailing its annual survey of medical costs per unit. The study is done to help member plans better understand why health care costs are so much higher in some countries than others. Prices for the same medical procedures, tests, scans and treatments vary widely from country to country. The survey data showed that average U.S. prices for procedures were once again the highest of those in the 12 countries surveyed for nearly all of the 14 common services and procedures reviewed.

    It shouldn’t take you long to read the whole report (it’s mostly slides), but I went ahead and remade some of the charts for you to see.  They are baffling.  For each of these, you’re looking at the price, or what was charged to the insurer (this did not include Medicare in the US).  Let’s start with a CT scan of the head:

    Why does it cost so much more in the US? Does the radiation work better here?  Are the scanners different? If you’re wondering, the CT scanner was invented in the UK, so it’s not like there’s some reason to believe our machines are better.

    How about MRI’s?

    Once again, it’s the most expensive here.

    Let’s be clear.  I have no problem with things costing more when they are demonstrably better.  Or, if you’re getting more of them for your money.  But a scan is a scan is a scan.  There had better be a good reason for it costing more here, and I can’t think of a good one.

    Forget scans.  Let’s try out a procedure.  How about a normal infant delivery?

    There’s nothing wrong with paying for quality.  But – remember – we have the highest infant and maternal mortality of comparable countries.  And yet we are paying nearly double what the next nearest country is.  This is just the cost of the hospital and physician, so don’t blame the government or the insurance companies or the drug companies.

    Let’s take an easy procedure.  How about an appendectomy?

    WTF?  It’s an appendectomy!  What do we imagine we are providing for all that money?  Why can everyone else do it cheaper?

    I can almost justify all of this, though, if I squint, tilt my head, and drink heavily.  Maybe we are doing something better.  Something I can’t detect or imagine.  But maybe.

    So let’s focus on something that can’t be different.  Something like drugs:

    Words fail me.  Do we imagine that the Lipitor and Plavix somehow work better in the US?  That somehow the molecules do more here?  We must, or else there’s just no way to justify the fact that the same exact pills cost so much more here than they do anywhere else.

    I know I’m being a bit snarky, but the fact is that every time someone tells me we could never afford another country’s health care system, I want to cry.  It’s hard to find a way to show our system is of higher quality.  There’s no way to demonstrate that we have better access.  And then you see stuff like this and realize that not only are we spending way more, but we are spending more for the  exact same things.

    It’s irrational.

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    • Dr. Carroll,

      I recalled a discussion with a pharma executive who said that the main reason why drug prices are higher in the US is that the US does most of the research and we (users) pay for that research. We often are the early adopters. The rest of the world often does not pay these high prices and gets discounts or buys them from generics. In other words, pharma also cost shares like the US healthcare providers.

      Any thoughts?

      • Let me give you 2 examples of drugs that cost more in the USA.
        Aspirin and Alkaseltzer. Aspirin was developed in Germany, some 50 years ago, patent has expired. Cost of producing one pill is about 0.01 cent. One bottle of 50 pills is about 6.00 US here, and in other countries it costs anywhere from .50 to 2.00.
        Alkaseltzer is the same thing. You can take any medicine or drug and is the same.
        Not all drugs are researched and developed here in the USA.

    • Aaron G

      Go read this:

      http://theincidentaleconomist.com/wordpress/what-makes-the-us-health-care-system-so-expensive-drugs/

      It still doesn’t account for paying so much more for the same thing.

    • When you consider that the US scored highest in “Available Technology” (in your recent comparison series) the higher cost in the US for CAT and MRI scans is even more surprising.

      I still contend that the major difference between the US and most other developed countries is that in the US health care is seen as a profit making industry whereas in most other countries it is considered a social service.

    • The IFHP slides included details of how prices were measured for each country except the US. The linked WSJ story mentioned that Medicare was not included, but I couldn’t find anything official from IFHP on that.

      Nevertheless, two important points are being minimized. First, Medicare generally pays less than other payers (and Medicaid even less–no mention of whether that payer was included), and providers often charge more to private insurers to balance their overall revenue. This would drop the average for most of the charges listed (obviously not so much for normal delivery and C-section).

      Second, the original slides included the range of US prices as well as the average. Some of the countries (like the UK) essentially have no range, as the listed charges are set by the government, but in the US there is a huge range. In most cases the low end of US charges was very comparable to the rest of the world, in some cases (like Head CT) one of the lowest. The averages were pulled up by dramatically high charges on the upper end.

      I have actually priced charges for some procedures (I have a high-deductible policy) and hospitals are always 3 to 10 times as expensive as independent facilities. The big story here is not that the US as a whole is more expensive on average, but that some providers give a good value, even based on world comparisons, while others are hugely more expensive.

    • While I don’t disagree with the findings of the report, I have found it strange that no one has really questioned the methodology. I can’t speak for the prices of procedures, but as someone who researches pharmaceutical pricing and reimbursement issues I can say with some authority that the drug price comparisons seem a little fishy. The most glaring example is the substitution of beneficiary co-pays for the actual price. Take Australia. If the price paid for 10mg of Lipitor by the PBS (the national prescription drug benefit) was used instead, Australia would actually have a higher price than the UK (~$42). A similar method was used for The Netherlands, although I can’t speak for drug prices there. If the goal was to a provide an “apples-to-apples” comparison (if that’s even what the authors were aiming for), this isn’t the way to do it. Plus, they didn’t account for relative price levels, or PPP in economist-speak.

      I’m actually surprised by the data because I would have expected drug prices to be higher than what is presented.

    • It’s not just that things cost more, it’s that there’s also an unequal distribution of who gets what under the profit-making health care system. I am recently working with a family. Alisa, age 37, needed a liver transplant, was on Medicaid Managed Care Profit-Making HMO (done by the Bush brothers in 2005, because “private corporations provide government paid services so much better…”). Alisa needed the transplant in January 2010, at a cost of $97,000 for hospital and $27,000 for the surgeon = $124,000. Instead, they denied and denied coverage, but kept her in the hospital. The Medicaid bill then shot up to $424,000 FOR NOT GIVING HER THE TRANSPLANT while she lingered. We had surgeons standing by at another facility, ready to save her life, with a liver etc. all in place. However, next Tuesday will be Alisa’s funeral, leaving behind her grieving parents and her 10 year old motherless son. Can you imagine watching your adult child die, while help is just a few blocks away, all in the name of profit?

    • The past three years my aging husband received probably a dozen CT scans, several MRI’s of various parts of the body including the head, the last one this September. He had a pain and it could not be traced. There were several trips to the ER, each one “requiring” a CTscan. At one a surgeon said he needed an appendectomy, and that done the effects of the annethisia made him uncontrollable during which he took a fall and herniated the surgical area, chipped his hip, and he ended with two more surgeries and craziness. When he was sent to the Rehab he had lost most of his reasoning ability, still had the pain, but had acquired one of those awful super germs that settled in his intestinal area. Just recently when a Pain Doctor sent him to the hospital (having tried everything in his power to stop the pain and only making it worse) where it was decided his pudendal nerve was being squeezed by arthritic and back surgery scarring. This made a lot more sense about his symptoms, and we are now with another Pain Doctor who now says he had three small bulges on a disk, and gave shots for that. During the process he lost fifty pounds he could scarce loose, along with all his musclularity.which needed a whole new wardrobe, he is still in pain though its being “managed” and he sleeps 20 hours aday on pain meds. I have lost a companion, the Insurance Co. and the Doctors have gotten rich, and at 86 there is no where”up” for him to go. In a final insult our insurance isgoing up 3% in January. Oh, and
      Medicare is still laying out money on his aides and nurses. .

    • Let me tell you how you get rich as a doctor in the U.S. You buy your own MRI, alone or in a group. Your patients, and their insurance companies, and Medicare, will quickly find out that the cure for everything involves a trip to the MRI. Amortization’s a bitch.

      Contrast this to Canada, where the regional committee decides, a year in advance, based on the numbers of MRIs requested per year, how many machines are needed to fill that need. The province arranges with the General Hospital, or the Notre-Dame, to install one. Extra funds may be collected by charities to allow the hospital to put in one. Do you sometimes have to wait? Yes, unless it’s a true emergency. Idea is, if you have no profit stake in ordering an MRI, you will request one based only on need.

    • all of the horrible stories not withstanding, there is a perfectly logical explanation that nobody seems to even consider. after reading the comments and looking at the charts, and considering the good dr. carroll’s comments; is it possible that the illegal immigration factor in the u.s. has anything to do with the cost of any medical procedure. has anyone cross referenced the ratio of cost differential to the ratio of immigrant differential? does anyone realize that it is currently illegal to deny anyone care at any time in an emergency room in any hospital in the u.s.? did you notice that the differential in cost was higher in hospitals rather than in private facilities? wake up.

    • “is it possible that the illegal immigration factor in the u.s. has anything to do with the [higher] cost…”

      No.

      As a group, immigrants are healthier than native-born citizens. Illegal immigrants even more so: after all, they come here to work, and that means healthy, able-bodied people. They use fewer medical services than their native-born counterparts.

      http://www.rand.org/news/press.06/11.14.html
      http://www.migrationinformation.org/Feature/display.cfm?id=417
      http://content.healthaffairs.org/cgi/content/abstract/hlthaff.2009.0400v1

      This is why it was terribly, terribly stupid to give into immigrant-haters who said immigrants should not be allowed to use their OWN money (no government subsidies, just their own money) to buy insurance on the new exchanges. As healthier people buying insurance, they would have made it cheaper for everyone.

      But immigrant-bashing was more important than making health care affordable for American families. Great move, there.