• Wow. Just… wow. The Prices!

    I don’t have much to add to Ezra Klein’s post on prices. The charts come from the International Federation of Health Plans.

    Just… wow. Hard to justify.

    @aaronecarroll

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    • America has chosen to reward physicians and other health care providers. Richly reward them. The higher costs are essentially transfer payments, not different in kind from social security payments but definitely different in amount. It wasn’t always so, as I, a descendant of two physicians, can attest. A conservative might argue that it is the result of Medicare. A liberal might argue that it is a result of the private health care market. I’d argue they are both wrong: it’s a result of different health care systems for different groups, forcing each group to compete against one another for health care spending, causing overall spending to cascade ever higher as increases in spending for one group are met with increases in spending for the other groups.

      • As a physician and a descendant of two generations of physicians you are absolutely correct. Up until the late 1950’s most physicians were in primary care and the average income was 2 to 2 1/2 times the general laborer. Then two things changed that escalated income; the increase in the number of sub specialist and the cost of medical education. Reducing these trends will go a long way in reining in health care costs.

    • I assume the pharma prices are for 30 days. Here’s the new B.C. pricing that comes into force next week. Update: generic Lipitor is included in a list of drugs that are priced at 18% of Lipitor brand price due to multi-province bargaining with generic drug suppliers.

      “New price breakdown for Lipitor
      The current cost, not including standard pharmacy fees [my pharmacy fee is $10 for 90 days prescription], of a 30-day prescription of the cholesterol-lowering drug Lipitor is $55.
      The price of the generic version of this drug today is 35 per cent of the brand name price, or about $19.
      Starting April 1, 2013, the price of the generic drug will be reduced to 25 per cent of the brand name price, or $14.
      On April 1, 2014, the price of the generic drug will be reduced another five per cent to $11.
      (Source: B.C. Ministry of Health)”
      http://www.cbc.ca/news/canada/british-columbia/story/2012/11/23/bc-generic-drug-price-cuts.html
      http://www.theglobeandmail.com/news/politics/new-generic-drugs-deal-could-save-provinces-100-million-annually/article7522670/

    • They’ve taken an important message, good data, and combined it with some pretty dishonest visualization, in my opinion.

      What is the point of showing the percentile ranges for just the US and not other countries? It only serves to make the US numbers look “scarier” than they actually are (which they don’t need to do – the averages are scary enough). At first glance, the bar graph makes it look like the cost for an angiogram is nearly 10 times higher than the other countries shown.

      Also note that they chose the 25% percentile for the bottom and the 95% percentile for the top – is there a reason they didn’t make those symmetric?

      • Ezra pointed out that other countries don’t have a range, or not much of one. Not sure how true that is, but it is has some truthiness. Anyway, I actually agree with you that it’s not the most honest presentation from one perspective. From another, a savvy data consumer can probably understand it just fine.

    • Would price transparency not result in lower, more competitive prices?

      • Perhaps, with diagnostics like colonoscopies. But it’s very hard with anything not preplanned. To begin with, you probably don’t know the diagnosis until you’ve seen a doctor. And secondly, there’s pain and worry complicating everything.

      • It could not possibly hurt, but it would not do much on its own. Possibly it might not do anything. The organizations with the bargaining power (large insurers, large hospitals, large employers) already know the prices.

        Moving on, I was also struck by how much variation there was in many, but not all, drugs, services and devices. The charts are showing the 25th percentile of US prices, the mean US price and the 95th percentile of US prices. The spread for most things is large. But the spread for nasonex, a simple allergy medication, is much narrower. Vytorin, which is a cholesterol drug, also has a narrower spread.

        Any thoughts on why? Is it a single manufacturer issue? Nasonex has a generic alternative, but Vytorin doesn’t currently (I think). In contrast, Cymbalta has a wide spread, has no direct generic alternative, and it does have competitors in the SNRI class of drugs (including one that is generic, that being venlafaxine).

    • Solution – single payer ….

    • Dr. Carroll and Frakt-
      I’m wondering if you could comment on the problem of valid price comparisons between the U.S. system and the European systems. It appears that the International Federation of Health Plans asked insurers for data on the prices they actually paid for the different goods (important if we consider that most insurers pay 40-50% of what the fee listed by charge masters is), but there still is room for inconsistencies. Co-pays may not be factored into these numbers (co-pays are often determined by a percentage of the chargemaster rate rather than the price insurers pay). Bundled payment schemes may lead to variability in the prices paid by US insurers. Subsidizing uninsured patients may bump up prices, etc. Is there good data factoring in all of these things when comparing US prices vs European prices? Are we inflating the difference in prices in studies such as this?

    • -The USA data is based only on commercial insurance claims. Including Medicare and Medicaid reimbursements would bring these numbers down

      -No physician has the market power to demand $176 for a routine office visit. Where did this number come from?

      -We know that wealthy countries pay their physicians more (GDP to PPP ratios). Given that, our 25th percentile costs look quite reasonable. Shouldn’t we model that as our positive variance rather than looking to other countries? What are these plans doing right, ie why have they been able to negotiate better prices?

    • This leaves me with a lot more questions than answers. For example, hospitals in other nations might be subsidized how does this factor into the costs since government is basically underwriting the cost of doing business. Also factor in national healthcare and other benefits for employees in other nations versus the US. How does this all shake out after we level the playing field? My gut tells me the US is still the highest based on our medical model of care and lack of disease prevention, but some procedures might be closer of the US might not even be ranked the highest.