Tag: "Health Care Costs"

The U.S. Is The Third Lowest Health Spender of 13 Developed Countries

(A version of this Health Alert was published by Forbes.)

Scholars affiliated with the Commonwealth Fund recently published another report in the Fund’s series of international comparisons of U.S. health care. These reports are always well received by the media, which run articles lamenting how expensive U.S. health care is, and how great a burden on the country. Encouraged by the Commonwealth Fund to conclude that the major difference between health care in the U.S. and other developed countries is that they have “universal” health systems, many reasonable people understandably conclude that such a reform could reduce the cost of U.S. health care.

This conclusion is way off-base. According to the report, U.S. health spending accounted for 17.1 percent of Gross Domestic Product (GDP) in 2013. France comes next, at 11.6 percent. In dollar figures, the U.S. spent $9.086 per capita, versus only $6,325 in Switzerland, the runner-up. (These prices are reported at purchasing power parity, which adjusts the foreign currency exchange rates for differences in cost of living.)

These results certainly invite us to question whether we are getting our money’s worth. However, it is not clear that this spending is a burden on the U.S., given our very high incomes. Table I shows that when we subtract U.S. health spending from our Gross Domestic Product (GDP), we still had $44,049 per capita to spend on everything else we value. Only two countries, Norway and Switzerland, beat the U.S. on this measure. In the United Kingdom for example, GDP per capita after health spending was only $34,863 in 2013. So, even though American health care is significantly more expensive than British health care, the average American enjoyed $9,185 more GDP after health spending than his British peer, and just under $6,000 more than his Canadian neighbor.

20151026 Commonwealth Fund TI

CPI: Deflation Except In Health Care (Again)

I admitBLS this is getting a little repetitive, but it is not my fault the Bureau of Labor Statistics (BLS) releases the Consumer Price Index one day after the Producer Price Index. The CPI confirms (once again) the price behavior indicated by yesterday’s PPI.

While consumer prices were down 0.2 percent, month on month, and flat year on year, medical prices increased 0.2 percent and 2.5 percent (Table I). However, prescription drugs experienced quite moderate price increases last month. This means that while prices of medical goods and services overall increased, month on month, there was no sticker shock versus the CPI. Unfortunately, yesterday’s PPI suggests that price increases are flowing through the system again, and we can expect to see a pick-up in health prices versus overall inflation, in future CPIs.

PPI: Deflation Except in Health Care

BLSSeptember’s Producer Price Index declined 0.5 percent, month on month, and dropped 1.1 percent, year on year. A mild deflation appears to be taking hold in the general economy. However, it is not so in health care. Of the 14 sub-indices for health-related goods and services, only five declined month on month. Only three declined year on year (see Table I).

20151014 PPI

Castlight Health: Pricing for Medical Services Is All Over The Map

CastlightCastlight Health has published its second annual U.S. Costliest Cities Analysis, which shows astonishing variation for prices of medical procedures. This year’s report focuses on women’s preventive health:

Mammogram. Nationwide for a mammogram, a woman could pay anywhere from $43 to $1,898 for the test, a 44x difference. With some of the country’s largest cities, the clear indication is that women in larger metropolitan areas are being charged wildly varying amounts for a critical preventative test. For example:

  • In Dallas, which has the nation’s widest range, a woman could pay anywhere from $50 to $1045, roughly a 21x difference.
  • In New York City, the price can vary between $130 to $1,898, roughly a 15x difference. New York also has the most expensive mammograms in the entire country.
  • In Los Angeles, a simple mammogram could cost anywhere from $86 to $954, an 11x price variance.
  • The San Francisco Bay Area ranged from $129 to $860, a 6x difference.

OB/GYN Follow-Up Visit. Minneapolis and Seattle were the most expensive cities for an OB/GYN follow-up visit, and Phoenix and Las Vegas were the cheapest.

Preventative Gynecological Exam. The San Francisco Bay Area was the priciest for both a preventative gynecological exam and an HPV test, where it was on average 6x more expensive than Charlotte, NC for both.

HPV Test. In Philadelphia, the price of an HPV test ranged from $32 to $626, a 19x difference.

Improper Payments Up 18 Percent, Mostly Medicare & Medicaid

The Government Accountability Office (GAO) has just reported that “improper payments” (that is fraud and abuse) are up to $124. 7 billion in 2014 from $105.8 billion in 2013. Most of this is Medicare and Medicaid:

The almost $19 billion increase was primarily due to the Medicare, Medicaid, and Earned Income Tax Credit programs, which account for over 75 percent of the government-wide improper payment estimate. Federal spending in Medicare and Medicaid is expected to significantly increase, so it is critical that actions are taken to reduce improper payments in these programs.

GAO

Consumer Price Index: Amid Disinflation, Medical Prices Increasing

BLSYesterday’s Consumer Price Index (CPI) release confirmed prices of medical goods and services continue to rise at a steady pace, despite the general deflationary environment. The CPI declined 0.1 percent from July to August (seasonally adjusted), and increased just 0.2 percent in the last twelve months.

Much of the disinflation is caused by dropping energy prices. Excluding food and energy, the CPI increased 0.1 percent last month and 1.8 percent over the last twelve months. Medical care, although flat last month, increased 2.5 percent over the last twelve months (see Table I). This is moderate by historical standards, but still excessive relative to current CPI.

Why Is There No Car Care Crisis?

employer coverage 300(A version of this Health Alert was published by RealClearPolicy.)

Our health care is in “crisis.” We seem to have achieved the remarkable result of spending too much money while not ensuring access for enough people. Every politician says so, and most citizens agree. Indeed, no presidential candidate can be viewed as credible without proposing a health reform “plan.”

Hillary Clinton has sworn to protect and uphold the Affordable Care Act against all right-wing conspirators; Bernie Sanders has long advocated a government-monopoly, single-payer system; and Republican contenders will continue to roll out plans to “repeal and replace Obamacare” that will immediately come under attack by conservatives and libertarians as “Obamacare-lite.”

Let’s put the crisis in perspective. According to actuaries at the federal government, spending on health care per person in 2014 was $9,176. Yet according to the American Automobile Association (AAA), the average cost of operating and maintaining an average sedan in 2014 was $8,876 — almost exactly the same as health spending. Of course, not everyone owns a car, but most of us do. According to IHS Automotive, an industry research firm, 253 million cars traveled America’s roads last year. According to the Census Bureau, there were 239 million of us aged 18 through 84; that’s slightly more than one car per person in prime driving years.

PPI: Gap in Hospital Inpatient & Outpatient Prices

BLSAugust’s Producer Price Index was flat, month on month, and dropped 0.8 percent, year on year, continuing the trend we saw last month. Producer prices for health goods and services are rising faster than other producer prices (see Table I).

20150911 TI

Hospital Margins Up 9 Percent

This morning’s Quarterly Services Survey (QSS), published by the Census Bureau, reported that:

The estimate of U.S. health care and social assistance revenue for the second quarter of 2015, not adjusted for seasonal variation, or price changes, was $591.3 billion, an increase of 2.2 percent (± 0.8%) from the first quarter of 2015 and up 6.4 percent (± 1.3%) from the second quarter of 2014. The fourth quarter of 2014 to first quarter of 2015 percent change was revised from -0.4 percent (± 1.1%) to -0.5 percent (± 1.1%).

The QSS adds important information to the more widely reported quarterly Gross Domestic Product (GDP) and Employment Situation Summary (ESS) releases that I frequently discuss on the blog.

Health-Related Producer Prices Tame in July

BLSThe Producer Price Index (PPI) for July increased more than expected, but was still benign. Health-related producer prices were tame last month.

Prices for pharmaceutical preparations, which have increased faster than other producer goods in the long term (rising 9.4 percent since July 2014), finally turned around and actually dropped 0.4 percent last month (See Table I). This was a bigger decline than prices for all final demand goods (-0.1 percent) or for all final demand (0.2 percent).