How much will you have to pay for a hip replacement? Depends on where you live.
If it’s the Bangor area, where the median family income is $50,853, your operation would cost $44,853. But if you lived in the Portland area, where the median income is $63,422, the same operation would cost as little as $26,824.
And if you live in the Boston area, where the median family income is $85,691, that new hip might cost as little as $16,150.
Americans spent $3.6 trillion on health care last year, which is far more than was spent in any other country – whether it’s calculated on a per capita basis, as a percentage of gross national product or just a lump sum.
You can’t fully appreciate how inefficient our system is until you take into account the perverse way those costs are allocated. In America, the poorer you are, the more you may have to pay.
These numbers were put together by Maine Sunday Telegram Staff Writer J. Craig Anderson, using data that providers are required to release in an effort to bring price transparency to consumers looking for the best value.
But what these data really expose is the way that our system, with multiple entities public and private, each looking out for its own interests, is driving up costs without providing any better outcomes.
The fact that a hip replacement costs nearly three times as much in Bangor as it does in Boston is a pretty good window into what is going wrong nationwide.
The price consumers pay is almost always out of their control.
Medicare, which covers everyone age 65 and older, and Medicaid, which provides coverage for people with low incomes, set the price they are willing to pay for a test or procedure, even if that’s less than what the provider needs to break even.
Providers also have to cover the cost of charity care and bad debt from uninsured patients. They do this by making their patients with private insurance pay more.
The mix of patients a provider has is a big driver in the kind of cost discrepancies we are seeing in Maine. Where the patients are elderly or poor, you have more unmet costs to make up. When you have fewer patients covered by private insurance, each individual’s part of the shifted cost is greater.
NARROW INTERESTS
This makes hospitals and other providers compete against each other for the pool of patients with private insurance. That can result in spending on equipment that may attract the desired patients while raising the overall cost of health care. Private health insurance premiums will rise to keep pace with the costs. And since employer plans are tax deductible, every time health care costs go up, less goes into the national treasury.
Health care costs that increase faster than inflation are unsustainable.
Single-payer coverage, or “Medicare for All,” is one solution that has been proposed, but it’s not the only one.
The state of Maryland is experimenting with an approach called “All-Payer.” It maintains the mix of public and private insurance coverage, but the state establishes prices, creating an incentive for providers to be more efficient. Germany has a system of regulated private health insurance that costs less than ours and produces better health outcomes.
We can do better than continuing to throw money into this inefficient system.
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