Study: High prices still the cause of ridiculous health care spending
Researchers revisiting their 2003 work on the subject of health care costs came to the following conclusion: "It's the prices, stupid."
It doesn’t seem to matter how many new health care regulations and policy initiatives, Americans continue to outspend their peers on health care.
Just like earlier 2003 research found, higher prices continue to the primary reason why the U.S. spends more on health care than any other country, according to a new study published in Health Affairs, “It’s Still The Prices, Stupid: Why The US Spends So Much On Health Care and a tribute to Uwe Reinhardt” (the latter referring to one of the co-authors of the original study who recently died).
This is so despite the implementation of health policy reforms and the restructuring of health systems that have occurred in the U.S. and other industrialized countries since the 2003 article’s publication, conclude the researchers, Gerard F. Anderson, a professor at Johns Hopkins Bloomberg School of Public Health in Baltimore; Peter Hussey, vice president and director of healthcare at the Boston-based RAND Corp.; and Varduhi Petrosyan, professor and dean in the Turpanjian School of Public Health at the American University of Armenia.
Related: This is how a health care premium dollar is spent
The researchers used health statistics from the Organization for Economic Cooperation and Development to update their 2003 research. The updated analysis found that the U.S. still provides significantly fewer health care resources per capita compared to the OECD median country on, including for hospital beds, physicians and nurses.
“Since the U.S. is not consuming greater resources than other countries, the most logical factor is the higher prices paid in the U.S.,” the researchers write.
Because the differential between what the public and private sectors pay for medical services has grown significantly in the past fifteen years, U.S. policy makers should focus on prices in the private sector, according to the researchers. “Because the U.S. is still not devoting more real resources to medical care than the typical OECD country, we believe that the conclusion that ‘it’s the prices, stupid,’ remains valid.”
“What is different between 2003 and 2016 is that the differential between what public and private insurers pay for healthcare services has become wider,” they conclude. “Lowering prices in the U.S. will need to start with private insurers and self-insured corporations.”
Not surprisingly, reactions to the Health Affairs study was varied.
“There is no market solution to this problem,” commented one person. “The simplest solution is a regulatory limit on the ratio of commercial payer rates to Medicare payment rates. Serious study is required to determine the appropriate limit and it requires estimating what rate will support an efficient provider organization. This is a very complex task in that the industry has become operationally sloppy where increased prices can be relied upon to achieve margins (versus the hard work of making operations more cost effective).
“So, current costs cannot be the baseline,” the person writes. “Perhaps the best baseline can be established by looking at costs in truly competitive markets, which are becoming increasingly rare. But, it is doable and the sooner we embark on this strategy, the better off we will all be.”
Another person has a different take:
“Such flawed analysis is why we have struggled to bring a semblance of logic to healthcare economics,” the second person commented. “While the prices matter, the more important reason for cost is “who pays?” Because the user of service pays a fraction of the cost, does not have a say in setting the price and essentially is “an incidental” to all transactions, the price has become irrelevant. When using other peoples’ money, most humans care less what a service or product costs. Healthcare is no different. What the authors are really suggesting is a socialist government-paid health system.
“The U.S. spends more on health care because of, not despite health policy reforms and health systems restructuring,” the commenter concludes.
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