Why Health Costs Vary

New research from the National Institute for Health Care Reform takes a novel approach to answering this question: analyzing health care spending by American autoworkers employed by Chrysler, Ford and General Motors. The three automakers provide health care benefits to over 1 million people, creating a huge data set of people who have access to the same health care benefits at 19 different sites across the country.

Full article on the dramatic variations of health care prices by Sarah Kliff in The Washington Post.

Comments (4)

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  1. Studebaker says:

    Of course there are differences in prices. About 88 percent of medical bills are paid for by third parties.

    People will only become price sensitive (and markets competitive) when they pay their own medical bills. In a competitive market prices for similar services will converge.

  2. Dayana Osuna says:

    There are always going to be variations in prices across the different 50 states, and one of the main reasons might just be the standard of living which differs from state to state.
    Big cities like Los Angeles, New York and Chicago tend to have higher costs and quality of goods and other commodities than lower-price communities, this is just a fact.
    The cost of living in Texas, for instance, falls 15% to 20% below the national average; while the cost of living in one of the most expensive cities in the country, New York City, is 118% higher than the national average.
    Based on this data, it should not be expected from a Texas resident to pay the same amount in medical bills than a resident from New York City, for example.
    Prices vary from place to place in just about anything, that’s why some people decide to live in expensive cities and others don’t, because they simply rather stay in places where they can afford to live.

  3. Brian says:

    From article:
    “One possible solution to bringing down health care costs – getting high cost areas to look like low cost areas – could be rate setting, with state regulators having a say in what providers charge.”

    Rate setting really?

  4. Bob Hertz says:

    Rate setting can usually be defeated by providers.
    Maryland has had rate setting for hospitals for several years, but then the number of admissions increased and more care was shifted to expensive outpatient settings.

    Way back in the 1970’s, Adamn Wildavsky said that health care will use up all the money that is available to it.

    So the ultimate answer is probably a cap on overall insurance premiums, as clumsy as that sounds.