Variation in costs: Standard Operating Procedure in the U.S.A. Is this any way to run a health care non-system?

Interesting juxtaposed articles by Ewe Reinhardt and Paul Ginsberg at the Health Affairs site regarding the huge variation in payments by insurers to different hospitals for the same procedure. Imagine what an individual pays!

Here’s an example from Reinhardt’s article:

Medicynical note: These insurers are negotating with providers in a free market to provide the least payment possible for the service provided–so as to maximize the insurer’s profit. The insurers are unable to reach a consistent payment for the same services. The insurers presumably are knowledgeable and have the advantage of reams of information about payments to other providers for the same service and still cannot arrive at a consistent price.

This is the “free and open” market that our conservative friends talk about. They would argue that the consumer would have incentive to shop for the cheapest price and go to that facility, disregarding urgency, locale, quality, ability to understand alternatives, and convernience. This is not reality.

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2 responses to “Variation in costs: Standard Operating Procedure in the U.S.A. Is this any way to run a health care non-system?

  1. Perhaps instead of focusing on the high end rates and chasing the greed bogeyman, you might consider the risk taken by the low end insurers who are trying to keep their rates low to win more employer contracts. Unfortunately they then have to manage the heck out of disbursements, including denials, to keep from losing money. Then there is the monopsonistic Medicare payer who counts on the higher rates to subsidize its underpayment.

    • Thanks for the thoughtful comment.

      Of course your focus on lo ball insurers and the disparity between medicare and private insurers is a strong argument for health care reform.

      The question has been whether the private market can work to ameliorate costs.

      In my view, in health care such a denouement is magical thinking. Patent holders price according to the desperation of the patient, not the utility or actual cost of the medication’s development. The more serious the illness the higher the price demanded–even for marginally effective agents.

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