How Much Does Healthcare Cost?

The Centers for Medicare and Medicaid Services has made available detailed information about the charges it’s paid for by state, facility, and procedure. I imagine there will be quite a bit of data mining going on.

A quick glance suggests it’s pretty chaotic. It doesn’t seem to make any rhyme or reason. Charges vary widely in ways that can’t be explained by geography.

36 comments… add one
  • TimH Link

    Part of the problem is that hospitals can’t charge for the services they perform in any rational way, and medicare and medicaid have ended up being a band-aid for that problem.

    You have to provide coverage for some people who can’t pay, and a lot of things are charged under cost to make them more available. Instead of a rational system of reimbursement, you have hospitals trying to make ends meet. It gets even more complicated when you move to private insurance.

    One example: Some hospitals have a minimum fee they charge for dispensing medication. Even aspirin. In some hospitals, it might be around $100. Making it more complicated, it might be $100 for one insurer, and $120 for another. And Lord help the poor patient who walks in uninsured – it could be double that. (A lot won’t pay it, hence part of the problem).

    We have neither a rational/planned health care “system” nor a market for health care.

  • jan Link

    Here’s The Hill’s take on the newly released CMS report.

    The Hill not only cites examples of huge billing discrepancies for the same procedures, but also notes how unaware the consumer is about cost.

    But the new CMS data suggests how little consumers know about the medical costs they incur.

    Generally speaking, it will help stabilize costs, if and when consumers are more involved with all aspects of their care — not only the types and relevance of prescribed treatments, but also the variations of costs between different medical facilities. Such educational clarity would generate knowledge for the recipient of medical care, creating a competitive edge that will bring the range of costs down. It’s all about giving the populace more knowledge and power over their choices, rather than having people passively accept what is given them.

    And, why we don’t do this, simply amazes me in the era of wanting every ingredient and calorie count on packaged food! Why not have the same kind of detailed information available for hospital procedures? And, why not devise a plan that would reward the consumer for engaging in making prudent, non-emergency medical decisions?

    We have neither a rational/planned health care “system” nor a market for health care.

    Everybody tries to get away with what they can in the fees charged. For patients not paying — they don’t care. For patients with health insurance picking up most of the tab — they don’t care. It’s the private-pays, who pay, and those with high deductibles who are the ones more cognitive of being caught in this pricey medical web.

  • steve Link

    The largest variability is in charges. Providers can charge just about whatever they want. Payments are adjusted by geography, but different facilities have higher degrees of utilization of services to treat any given problem. The Dartmouth group has published on this.

    Steve

  • Ben Wolf Link

    Generally speaking, it will help stabilize costs, if and when consumers are more involved with all aspects of their care — not only the types and relevance of prescribed treatments, but also the variations of costs between different medical facilities.

    Which is why Obamacare should be immediately amended to establish a $5000 per annuum HSA for every American, with whatever is left at the end of the year being deposited in their checking accounts. It would enable and incentivize consumers to discipline health care costs.

  • jan Link

    Ben,

    Such an idea has been out there, and I think it has merit. IMO, it would contribute to a more consumer-driven medical market, and be the rewards part, a fiscal carrot, motivating people to prudently select (not abuse) their access to medical care.

  • Ben:

    I recognize that your intention is to put money into the economy but I don’t think that doing it in that particular way would have the benign results you’re assuming. Contrariwise, I think it would create very bad incentives.

    Without going into it at very great length, I don’t think that for most Americans a “first dollar” system is a good idea and that at what dollar point public funds should be means-tested is an important consideration.

    As a quick summary, Ben is saying that he wants to spend an additional $1.5 trillion per year on healthcare. His proposal would be that the funds would simply be spent into existence.

    All other things being equal, that would have the effects of rapidly increasing wages in the healthcare sector and inducing investment that would otherwise be going to other sectors to go to the healthcare sector.

  • PD Shaw Link

    You could take Ben’s approach and add a regulatory requirement of cost-consistency between out-of-pockets and insurance (public and private). If I go to my doctor, who gives me an aspirin for which I pay $100 out of my HSA, then that should be the charge for more extensive care provided under a catastrophic coverage, that includes dispensing aspirin. We’ve discovered cost. Then we can focus on discovering the cost of procedures that won’t fall within $5,000 fund.

  • PD, within five years of that plan being implemented a routine physical will cost $5,000.

  • michael reynolds Link

    You know who’s really good at reducing the costs of procedures? Governments. That’s why a procedure for a Medicare patient costs less than the same procedure for a self-pay.

    I think it’s at least partly wrong to imagine that consumers can drive down costs — even if they were bearing the cost directly. Take a look at who can afford to spend 40 large on a procedure. You have a “consumer” who is obviously well-heeled. Are those people particularly good at bargain shopping?

    I just bought a pair of slacks yesterday. $450. Beautiful Canali slacks. They hang like a dream. I could have bought gray slacks at Macy’s for $100, or at Costco for $60 or at Goodwill for $5.

    You think our friend Drew is driving a 15 year-old minivan? Think he’s living in the cheapest house he could find? Think I am?

    How about Beverly Hills plastic surgeons? That’s all free market procedures. Think they’re cheap? Or do you think the doctor who charges the most attracts more customers? I think the latter. Do you think Drew or I would send our wives to the cheapest plastic surgeon we could find?

    So who are these consumers who by virtue of a freer market would drive down costs? The mom with the bleeding two year-old? The old fart clinging desperately to life burning through the savings he no longer needs?

    Sure there would be some who would bargain shop, especially for chronic stuff like dialysis. But they’ll never have the power a government with a hundred million insured can have to drive down prices.

    The real effect of pushing more of the responsibility onto patients would be fewer patients since fewer people would be able to afford care. Now, that might end up lowering costs, but I’m not sure more sick and dead people is really the best approach. Especially since we have the evidence of, oh, the entire western world with the exception of us, pointing pretty clearly to the advantages of more government management.

  • I think it’s at least partly wrong to imagine that consumers can drive down costs

    If I haven’t made myself clear on this subject I don’t think that consumers can drive down medical costs in anything but the short term and only incidentally. In other words, you can probably shop around and find somebody who’ll do an annual physical cheaper. That won’t drive down total system-wide costs, just the amount you spend this time.

  • PD Shaw Link

    Dave, I haven’t had a routine physical in five years. I would be rich, rich, rich. Unless the money is taxed, so it might make sense to spend it.

  • PD Shaw Link

    [knocks on wood]

  • Then the cost will rise for your kids’ physicals or giving shots or whatever procedures are actually being performed. Money will not be left sitting on the table.

  • steve Link

    I tried to institute an HSA plan at work. All of the young healthy people w/o kids were for it. Everyone with kids, or of a more mature age was against it. I would love to see an extended trial that was truly randomized, preferably accomplished on a multi-state trial.

    Steve

  • PD Shaw Link

    @steve, I agree that the HSAs are particularly subject to selection bias, but in my experience men prefer them to women, the relatively healthy to the not so, and the more affluent to the less, because it serves as an additional tax shelter. But I think Ben is talking about something more general than current HSA policies, including finding something for the government to print money for.

    To me the question is price discovery, and whether the government will know the cost of anything if it doesn’t retain any semblance of private transactions.

  • PD Shaw Link

    @michael, I think Medicare gets most of its cost-benefits relative to private insurance through a discount. A discount doesn’t control costs, it just prevents the government from paying the highest costs.

  • PD Shaw Link

    This is form the New York Times story today about what is causing the slowdown in healthcare cost increases:

    “In new research, the Kaiser Family Foundation estimated that the recession accounted for about three-quarters of the lower spending trajectory, with the rest attributed to other factors not directly related to the economy. Professor Cutler of Harvard calculates that the recession accounted for about 37 percent.

    Among other factors, the studies found that rising out-of-pocket payments had played a major role in the decline. The proportion of workers with employer-sponsored health insurance enrolled in a plan that required a deductible climbed to about three-quarters in 2012 from about half in 2006, the Kaiser Family Foundation has found. Moreover, those deductibles — the amount a person needs to pay before insurance steps in to cover claims — have risen sharply. That exposes workers to a larger share of their own health costs, and generally forces them to spend less.”

    http://www.nytimes.com/2013/05/07/business/slowdown-in-rise-of-health-care-costs-may-persist.html?hpw&_r=0

    Is that true? And is is possible for the economic slowdown to be a major factor without the consumer having to spend some of the out-of-pockets? And if high deductible plans are eliminated next year, what will that do to overall costs?

  • Michael Reynolds Link

    Dave:

    Yeah that was more directed at Jan. I wouldn’t claim to know all your positions but I think I kind of understand you on health care.

  • steve Link

    I keep telling you guys that costs are being looked at seriously for the first time since I have been working in medicine by physicians, hospitals, insurance companies, employers and nearly everyone else. This is from an editorial in our lead journal from the May issue. It is inconceivable (if that word means what I think it means) that I would have seen this in a journal 5-10 years ago. (Managed care in the 90s was driven by insurers and not by providers.)

    “”Regardless of politics, legislation, or policy, health care in the United States is rapidly becoming a value-based economy in a manner not seen in over six decades. In a value-based economy, value is defined by a unique and differentiating quality. Critical questions will need to be asked and answered such as: can specialists justify higher marginal costs with higher marginal quality? Will the specialists shift up the quality axis or down the cost axis or both? How we respond will shape our specialty. Data-driven evidence will build perception and realities of best-practice decisions and policy. Only by collecting, sharing, and acting on outcomes data through comparative effectiveness research can meaningful assessment and comparison be possible.”

    Note that I dont see this happening absent the ACA.

    Steve

  • jan Link

    Steve,

    You and I don’t see eye-to-eye on most of the issues surrounding the ACA. However, I do agree with you, on the point made above, about it’s controversial passage and now implementation creating a serious conversation about medical costs, seeping even into the sustainability of programs such as medicare and medicaid.

    That being said, though, I continue to hope it will be repealed and replaced by something better and less government controlled.

  • Ben Wolf Link

    Dave Schuler,

    Why? Why can’t we simply reduce government health care expenditures by a commensurate quantity to the HSAs? The goal is in fact not to spend more money into the economy, but to allow consumers to use health care dollars in a more efficient manner, which they will do so as to get a larger disbursement into their checking account. You’ve been living in too rarefied a circle if you think they won’t conserve as much of that $5000 as possible, and that means they’ll be asking providers how much things actually cost rather than saying, “Bill my insurance”.

  • Why can’t we simply reduce government health care expenditures by a commensurate quantity to the HSAs?

    We could if we had that much in government health care expenditures. We don’t. Even if you replaced all of Medicare and Medicaid with that plan it just get about 2/3s of the way there.

    Medicare and about half of of Medicaid recipients would scream bloody murder.

    Average spending per Medicare recipient: $9,103
    Average spending per Medicaid recipient: $5,500

  • PD Shaw Link

    steve, Perhaps we find that quote lacks credibility because it is at odds with at least two points you raise insistently: (a) incentives are important, and (b) there is no political will to control healthcare costs.

  • Ben Wolf Link

    You think recipients would complain if their plan was partially replaced with one that would allow them personal financial gain?

  • You think recipients would complain if their plan was partially replaced with one that would allow them personal financial gain?

    No, I think your plan would require the entirety (and a bit more) of their present plans to be replaced with one that paid them about half what the present plans do.

  • steve Link

    PD- What I am saying is that docs and hospitals are now seeing that they need to find a way to control costs. The ACA is forcing the issue. The fact that the ACA could be passed forces the issue. There is little political will in Congress, but the industry is catching on.

    Steve

  • Medicare and about half of of Medicaid recipients would scream bloody murder.

    […]

    No, I think your plan would require the entirety (and a bit more) of their present plans to be replaced with one that paid them about half what the present plans do.

    I think you need to read Ben’s comments again Dave.

    For example:

    My reading of Ben’s plan is:

    Instead of: Average spending per Medicare recipient: $9,103

    It would be: Average spending per Medicare recipient: $4,103 + $5,000 in an HSA. With the proviso that if the recipient can reduce his expenditures from the HSA anything left in the account is his to keep at the end of the year.

    Net spending in this case would be the same and if a person really wants to spend the full $5,000 they would be no worse off…hence no reason to complain.

    I actually….agree with Ben on this one to a large degree.

    In fact, I think we should do it with current HCRA. Right now if I set aside $3,000, and around October/November I have $1,000 left I’ll scramble around and find stuff to spend it one that I otherwise would not. Why? Well I wont get back the $1,000. And I’d rather have spent the $1,000 on something I kind of want vs. just letting that money go.

  • That’s not how I understood him. What I understood him to be saying is that the federal government would put $5,000 per resident (man, woman, or child) into HSAs. The total amount required for that would be on the order of $1.5 trillion per year (300 million people X $5,000).

    Some of the $1.5 trillion would be defrayed by abolishing Medicare and Medicaid. That would account for about $900 billion ($600 billion Medicare, $300 billion Medicaid). The balance would just be credited, just put on the books.

    People who spend less than $5,000 per year would get to keep whatever is left. People who spend more would need to make it up from somewhere. Private health insurance, savings, whatever.

    Since more than $5,000 per year is spent on most Medicare and Medicaid beneficiaries, that would present a major problem for beneficiaries of either plan.

    Perhaps I’ve misunderstood what Ben is proposing. He’ll need to set me straight.

  • PD Shaw Link

    I wouldn’t begin to speak for Ben, since I am one of those neoliberals, but I didn’t read him as saying anything more than he would amend, not repeal Obamacare, let alone Medicare et al., to provide a government-funded method of making sure money expended for healthcare is efficient. Repealing Medicare would implicate eliminating that portion of FICA as well, wouldn’t it?

    Speaking for myself, I wouldn’t repeal Medicare.

  • PD Shaw Link

    Dave, addressing only the Medicaid portion, is that $5,500 well spent? Is it possible that many of its beneficiaries have socio-economic issues that indirectly cause/contribute to healthcare issues that the healthcare system cannot find a way to treat effectively anyway, (e.g., obesity)?

  • Dave, addressing only the Medicaid portion, is that $5,500 well spent?

    In a sense that question cuts to the heart of the problems with our healthcare system. I guess it depends on who you ask. From the point of view of the healthcare providers, obviously yes. From the point of view of the beneficiaries, possibly yes. It’s certainly better from their point of view than nothing at all but possibly not $5,500 worth or how they’d prefer to spend the money—which may be what Ben is getting at.

    From the point of view of public health scholars the answer might well be no.

  • Andy Link

    Like anything else, I think the devil is in the details – specifically what this money could and couldn’t be spent on and if anything would be excluded. Then there’s the issue of families – does, for example, every child get this $5 grand separately or is there a “family” account? Just as an example, for a family of 4 that could be 4 $5k accounts or 1 $20k account. If the latter, one could buy a really good family health insurance policy and have money left over for deductibles or whatever (at least here in Florida). Sounds like a great deal for insurers and providers. Also sounds like a great deal for places where health care is cheaper since there is no locality adjustment.

    But maybe you wouldn’t be allowed to buy insurance with the money and instead had to pay providers directly for services. Assuming there’s some change to standardize emergency service costs so you don’t get screwed while you’re unconscious, that could potentially create a real market as people try to find the best deal. Seems it could be a lot like car maintenance and repair – the basic, known quantity stuff is easy (new tires, oil changes, brake job on the car side, shots, strep tests, x-rays, etc. on the health side) but things are more difficult if a doc has to troubleshoot/diagnose a problem. Like a car mechanic, the transaction will be based on trust as much as anything. Good sides and bad sides to that model.

  • Dave,

    I think you missed this part:

    Why can’t we simply reduce government health care expenditures by a commensurate quantity to the HSAs? The goal is in fact not to spend more money into the economy,…

    Of Ben’s second comment.

    He isn’t saying abolish Medicare, simply reduce the government’s expenditures by the size of the HSAs. Granted, you may not be able to then give it to everyone, but you could do it with Medicare/Medicaid recipients.

    Now maybe I’ve misunderstood him, but given the part I’ve quoted I think it is line with my interpretation. Maybe Ben will have time to clarify.

  • He isn’t saying abolish Medicare, simply reduce the government’s expenditures by the size of the HSAs. Granted, you may not be able to then give it to everyone,

    I saw it. I interpreted it differently. I thought that Ben was estimating the amount spent on Medicare and Medicaid as higher than we actually spend or the amount required for his proposal as lower than the actual amount that would be required or some combination.

    The additional complication is that if you limit the amount put into the proposed HSAs to the amount of federal spending for Medicare and Medicaid, reducing Medicare and Medicaid commensurately, that amount divided by the number of people in the country would be lower per HSA than the $5,000 he originally suggested. More like $2,000. The net effect would be to abolish Medicare and Medicaid and replace them with a $2,000 HSA. Practically all present Medicaid and Medicare beneficiaries get more in benefits than that per year.

  • steve Link

    “Assuming there’s some change to standardize emergency service costs so you don’t get screwed while you’re unconscious,”

    Assuming you get to negotiate deals on everything else, what will be the motivation to provide emergency care?

    Steve

  • Andy Link

    steve,

    Yeah, implementation is a bitch. What do you do about emergency care? How do you define emergency care?

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