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Health Care Prices

By December 1, 2010Commentary

The International Federation of Health Plans released a Comparative Price report for health services across twelve countries.   (IFHP Study) The study shows that the United States has the highest unit prices among these countries, which included Argentina, Australia, Canada. Chile, Spain, Switzerland, Germany, Netherlands, New Zealand and the UK.  While wealth and purchasing power differences may account for some of the variation, even if adjusted for those factors the United States would stand out as an outlier on pricing.  Prices were examined for common services such at scans, newborn deliveries, cataract surgery, bypass surgery, hospital stays and some widely prescribed drugs.

Some examples give the clearest sense of how great the differences are.  Delivering a baby costs $2,147 in Germany; $2,667 in Canada and $8,435 on average in the US.  Nexium costs $30 in the United Kingdom but an average of $186 in the United States.  Prices within the US can vary widely as well.  Hip replacement surgery costs $12,737 in the Netherlands but the 5% to 95% range of cost in America is $21,247 to $75,369; which means that at least 5% of the surgeries in the US cost more than six times as much as the cost in the Netherlands.  The US data is based on actual payments, not the nominal posted charges.  On every category of service, the American average charge is much higher than that in any other country.

A second, related piece of work called the Healthcare Transparency Index was put out by change:  healthcare.  The index is intended to provide consumers with a sense of the price variability in health care and the opportunities to save on services and goods.  It tracked the spending of about 90,000 consumers and found the most opportunity for savings on drugs, where prices among pharmacies can differ greatly.   (Transparency Index) These pieces of research add to the notion that the major cause of increased and increasing health care spending in the United States is unit pricing.  Utilization of services is often lower in the United States, so the whole difference in spending is accounted for by prices.  While it will likely take a systematic approach to address the unit cost problem, it appears that consumers could save significant dollars by taking advantage of lower-cost vendors and providers.

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