High Health-Care Prices: More Talk Than Action

This was published as a Wall Street Journal Think Tank column on January 12, 2015.

People in the U.S. go to the doctor less frequently and have much shorter hospital stays than people in other countries that spend far less per capita on health care. But health services are consistently more expensive here than in comparably wealthy countries. Consider:

• The average price of angioplasty in the U.S. was $27,907 in 2013. In Switzerland, it was $10,897; in the Netherlands, it was $5,295.
• For coronary bypass, the average price in this country was $75,345 in 2013. compared with $36,509 in Switzerland and $15,742 in the Netherlands.
• For MRIs, the average price here was $1,145, compared with $461 in the Netherlands and just $138 in Switzerland.

Price is the major factor that distinguishes the cost of our system from those in other developed nations. The sticker shock of some medical services and drugs is also the dimension of the health-cost problem most visible to the public. So it’s interesting that most efforts in this country to address health-care costs don’t focus on price much at all. Instead, they focus on reforming the delivery of health care and provider reimbursement to reduce the volume of health care Americans use and to weed out unnecessary procedures and hospitals days. There is a simple equation: price times volume equals spending. A comprehensive strategy would focus on both sides of the equation: volume, including eliminating unnecessary care, and price.

To be sure, high medical prices are talked about a lot. One reason there is more talk than action is the anti-government environment, which would inhibit regulatory action to constrain prices. Taking on price also means taking on health care’s powerful industry interests. More effective competition between providers would help reduce prices, but the health-care industry appears to be consolidating more than competing, as is the health insurance industry. Greater price transparency would enable consumers facing higher and higher deductibles to make more price sensitive choices, but price information is very limited and price may not be uppermost in people’s minds when they are in the middle of a medical crisis and their doctor writes a referral to get a procedure or test at a particular place.

It would be a mistake to make price the only focus of a cost-reduction strategy. But it’s striking that while price is such an important reason our system appears to cost so much more than others, efforts to reduce the high prices of medical care are not a meaningful part of current cost-reduction efforts.