We pay more for health care because we pay more for health care

Great, great piece in the NYT today about how much money Americans waste on pregnancy and delivery care.  And I say waste because we spend way more than other modern democracies and its not like we get better babies or healthier mothers out of the bargain.  In fact, we get worse outcomes because in our patchwork system many mothers are priced out of the marketplace and don’t get the most effective care.  Here’s the key chart:


And a little explanation:

In most other developed countries, comprehensive maternity care is free or cheap for all, considered vital to ensuring the health of future generations.

Ireland, for example, guarantees free maternity care at public hospitals, though women can opt for private deliveries for a fee. The average price spent on a normal vaginal delivery tops out at about $4,000 in Switzerland, France and the Netherlands, where charges are limited through a combination of regulation and price setting; mothers pay little of that cost.

The chasm in price is true even though new mothers in France and elsewhere often remain in the hospital for nearly a week to heal and learn to breast-feed, while American women tend to be discharged a day or two after birth, since insurers do not pay costs for anything that is not considered medically necessary.

Only in the United States is pregnancy generally billed item by item, a practice that has spiraled in the past decade, doctors say. No item is too small. Charges that 20 years ago were lumped together and covered under the general hospital fee are now broken out, leading to more bills and inflated costs. There are separate fees for the delivery room, the birthing tub and each night in a semiprivate hospital room, typically thousands of dollars. Even removing the placenta can be coded as a separate charge.

Each new test is a new source of revenue, from the hundreds of dollars billed for the simple blood typing required before each delivery to the $20 or so for the splash of gentian violet used as a disinfectant on the umbilical cord (Walgreens’ price per bottle: $2.59). Obstetricians, who used to do routine tests like ultrasounds in their office as part of their flat fee, now charge for the service or farm out such testing to radiologists, whose rates are far higher.

Add up the bills, and the total is startling. “We’ve created incentives that encourage more expensive care, rather than care that is good for the mother,” said Maureen Corry, the executive director of Childbirth Connection.

You want to change these high costs you need to change the incentives.  To do that, you need to effectively regulate the health care market via the government, as all these other nations do and the US fails to do.  Alas, in America we have the “freedom” to pay 2-3x times more for a childbirth than we need to.  The NYT piece is really good and has some great personal stories in it– you should read it all.

About Steve Greene
Professor of Political Science at NC State http://faculty.chass.ncsu.edu/shgreene

2 Responses to We pay more for health care because we pay more for health care

  1. pino says:

    To do that, you need to effectively regulate the health care market via the government

    Not true.

    Remember, health insurance as we know it is a result of government regulations during the FDR era. When he implemented wage ceilings, he discovered that he couldn’t ignore economics. Skilled and talented people want and demand higher compensation. Because companies no longer could compensate via money, they found another avenue – health insurance.

    And government helped them by allowing that benefit to be extended tax free. Had they decided to extend compensation through pre-paid food plans, our grocery delivery model would look like our medical care delivery model.

    If we wanna fix our health care problem, it will take two things:

    1. Remove the tax advantage that employers enjoy by providing health insurance.
    2. Increase the deductible on health insurance so that patients bear the burden of cost.

    Until this happens, we have the moral hazard of people spending other people’s money to provide medical care. And we’ll never be able to regulate our way out of that.

    • Steve Greene says:

      I totally agree with you on #1 as do most all liberal health wonks. As for #2, the evidence is simply not there that this is an effective strategy. There is ample, overwhelming evidence that more government regulation as we see in Europe, Japan, etc., is an effective strategy. Free markets are great where they work. They don’t work in health care.

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