Price and utilization are the two essential elements of the nation's health spending tab, and seemingly wild differences in prices for common medical procedures appear to be driving that bill up a lot.
One of the most comprehensive, independent studies of commercial healthcare prices shows that employers and insurers that provide private health coverage can pay a lot more for services depending on the state where people live. Those price differences even exist for routine procedures, like MRIs and ultrasounds, which should not be much different in theory.
“As we think about policy responses to try and rein in increases to healthcare prices, the responses are going to have to be nuanced,” said David Newman, executive director of the Health Care Cost Institute, who led the study.
Parts of the Affordable Care Act were conceived to control health spending through value-based arrangements between payers and providers. The goal is to reward hospitals and doctors who have both low costs and great outcomes for their patients. The ACA has implemented some of these reforms through Medicare, but the commercial market has relied on providers and insurers to reform on their own.
The Health Care Cost Institute's study analyzed 3 billion medical claims from Aetna, Humana and UnitedHealthcare during 2012 and 2013, constituting about 25% of the commercially insured market. The data also represent prices actually paid to hospitals and doctors—which generally are more important than the prices that are charged—but are difficult or sometimes impossible to obtain due to gag clauses in contracts.
Researchers found the national average price for 242 common services—everything from lab tests and X-rays to more extensive procedures like hip replacements and angioplasties—varied extensively across states as well as within metropolitan areas. For example, the average price for a knee replacement in South Carolina paid by one of the three large for-profit insurers was almost $47,000; yet the average price of the same bundled procedure in New Jersey totaled only half as much—$24,000.
In Cleveland, the average price paid for a pregnancy ultrasound was $522. But just 60 miles away in Canton, Ohio, the average price was $183, according to the study.
States with the highest average prices, compared with a national benchmark, included Alaska, Minnesota, New Hampshire, North Dakota and Wisconsin while Arizona, Florida, Maryland and Tennessee had medical services that were priced much lower than the national average.