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Hospital Prices Skyrocket Past Inflation

One of the most important problems with U.S. health care can be expressed in a single statistic: In just one year (2011–12) the cost of basic treatments at American hospitals skyrocketed, sometimes by as much as four times higher than national inflation. That number comes from data newly released by CMS for 3,317 hospitals, and it measures the amount the hospital charges Medicare for a given procedure. The NYT has more:

Charges for chest pain, for instance, rose 10 percent to an average of $18,505 in 2012, from $16,815 in 2011. Average hospital charges for digestive disorders climbed 8.5 percent to nearly $22,000, from $20,278 in 2011.

In 2012, hospitals charged more for every one of 98 common ailments that could be compared to the previous year. For all but seven, the increase in charges exceeded the nation’s 2 percent inflation rate for that year, according to The Times’s analysis.

Hospital representatives claim that these numbers are meaningless because insurance companies (including Medicare) negotiate prices down from these levels. What Medicare or an insurance company winds up paying is usually less than the amount initially charged. But the starting point in a negotiation is important; how much one winds up taking off of a charge is as important as the amount from which one deducts. If the starting point rises each year, so will the end result. Moreover, patients who are uninsured or have a high-deductible plan may be hit by out-of-pocket charges.

When it comes to reforming American medicine, the most important data point to focus on is neither the number of uninsured U.S. citizens nor the level of government subsidies for insurance plans. Rather, it’s the fact that every year hospitals are charging far more for the same procedure. Health care is becoming more and more expensive. We cannot go on like this.

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  • ojfl

    This is a problem that higher and more complex regulation only makes worse. The only way to lower these are with price transparency with direct payments and stronger competition.

    • Jacksonian_Libertarian

      Exactly, it is the “Feedback of Competition” which forces continuous improvements in Quality, Service, and Price. The government monopoly and business paid for health insurance, separates the consumer from the market, and prevents the glorious effects of the “Feedback of Competition”.

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