Why does getting an MRI in the United States cost $1,080 when it only costs $280 in France? The answer comes down to how the prices are set, reports Ezra Klein for The Washington Post.
"That may sound obvious," he writes. "But it is, in fact, key to understanding one of the most pressing problems facing our economy. In 2009, Americans spent $7,960 per person on health care. Our neighbors in Canada spent $4,808. The Germans spent $4,218. The French, $3,978."
The difference in expenditures isn't linked to the idea that Americans just use more health-care services (the opposite is actually true) or that we are sicker. A 2003 study on international heath-care costs and a survey released Friday by the International Federal of Health Plans both concluded it comes down to pricing. The latest survey showed that in 22 of 23 medical services, whether that was a routine doctor visit or coronary bypass surgery, Americans paid more than other developed countries.
The difference is based on the way the pricing is set. "Other countries negotiate very aggressively with the providers and set rates that are much lower than we do," said Gerard Anderson, who was involved in the 2003 study. In Canada and Britain, prices are set by the government. In Germany and Japan, the prices are "set by providers and insurers sitting in a room and coming to an agreement, with the government stepping in to set prices if they fail," Klein reports.
Outside of Medicare and Medicaid, which are cheaper than the commercial average, "it's a free-for-all" in the U.S., Klein wriotes. "Providers largely charge what they can get away with, often offering different prices to different insurers, and an even higher price to the uninsured."
Because the customer often doesn't have choice in whether or not he or she will purchase health care — one could be unconscious or very ill — "sellers of health-care services in America have considerable power to set prices, and so they set them quite high," Klein reports.
Fixing the problem is fraught with complication, Klein writes, because "centralized bargaining cuts across the grain of America's skepticism of government solutions." The prices are also set by very powerful industries. The federal health care reform law is not expected to fix the issue, Klein writes, though might spread awareness since there are provisions to expand transparency; hospitals will have to publish their prices, for example. "But this is, for the most part, a fight the bill ducked, which is part of the reason that even its most committed defenders don't think we'll be paying anything like what they're paying in other countries anytime soon," Klein write. (Read more)