On the outrageous cost of American healthcare

March 7, 2012 | By | 8 Replies More

In France, an MRI costs $280, while in the U.S., an MRI costs $1080. At the Washington Post, Ezra Klein discusses this huge discrepancy:

There is a simple reason health care in the United States costs more than it does anywhere else: The prices are higher. That may sound obvious. But it is, in fact, key to understanding one of the most pressing problems facing our economy. In 2009, Americans spent $7,960 per person on health care. Our neighbors in Canada spent $4,808. The Germans spent $4,218. The French, $3,978. If we had the per-person costs of any of those countries, America’s deficits would vanish. Workers would have much more money in their pockets. Our economy would grow more quickly, as our exports would be more competitive. . . . In America, Medicare and Medicaid negotiate prices on behalf of their tens of millions of members and, not coincidentally, purchase care at a substantial markdown from the commercial average. But outside that, it’s a free-for-all. Providers largely charge what they can get away with, often offering different prices to different insurers, and an even higher price to the uninsured.

What about the new health care reform law? Klein offers the bad news: “The 2010 health-reform law does little to directly address prices.” This is a stunning conclusion, given that Barack Obama’s opening sales pitch for health care reform is that we need to do rein in the high cost of health care.

On October 15, 2008, then-Sen. Barack Obama (D-IL) promised the American people: “The only thing we’re going to try to do is lower costs so that those cost savings are passed onto you. And we estimate we can cut the average family’s premium by about $2,500 per year.

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Category: Health Care Reform

About the Author ()

Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich lives in the Shaw Neighborhood of St. Louis, Missouri, where he lives half-time with his two extraordinary daughters.

Comments (8)

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  1. Adam Herman says:

    When Klein says an MRI costs $1080, for who? Is that what Medicare pays? Medicaid? Cigna? A cashpayer? Down here in South Florida, not a cheap place to live, it’s $480 to pay cash for an MRI. I suspect the $1080 figure is what a hospital charges a cashpayer, which is generally the highest price in the industry. And tertiary hospitals will charge up to quadruple what regular hospitals pay. I think Mayo charges like $3000 for an MRI.

  2. Niklaus Pfirsig says:

    One reason for high medical cost in the US is rampant medical repricing contracts. Insurance company leverage their contracts to negotiate deep discounts with the hospitals clinics and clinics. in return for the discounts, the hospitals and clinics get a preferred status from the insurer.

    The discounts are quite large. If you look at a hospital bill these discounts are typically 57 to 80 percent. In other words, the hospitals and clinics know they are only guaranteed only 15 to 26 percent of what they bill.

    Consider that a doctor on staff with a hospital may be required bill through the hospital. The doctor needs $50 per patient to cover expenses, pay staff, and make a living. The insurance company has an 86 percent contract discount. The patient pays a $20 copay and 15 percent of the remaining $30 is $7.5 for a total of $27.5. to compensate for the discount, the office visit fee increases to over $200 so the amount after the copay and discount covers the same expenses.

    On the surface it appears the insurance companies don’t gain from this setup, but since it forces the cost of health care so high, health insurance becomes a requirement.

  3. Adam Herman says:

    It’s interesting, because the irony of single-payer is that most citizens wouldn’t even need to have most health care paid for by the government if they could just pay the rates the government pays.

  4. Niklaus Pfirsig says:

    Adam,
    The rates the insurance companies pay is lower that the rates paid by Medicare in many cases.
    BTW, the original house bill included an optional single payer coberage to be offered only to lowest income people, which would have created a competition for commercial insurers. Forall their hype and hyperbole, about free market and competition, the insurers, which enjoy regional monopolies in many area, rail against freedom of market choice when it threatens their revenue streams.

    On a side note CIGNA, which posted a 12 percent increase in profits in 2011, has promised its investors an increase of 12 to 20 percent for 2012. To achieve this goal, they have greatly reduced coverage through increasing copays, coinsurance, deductibles, and premiums while creating loopholes permitting them to redefine coverage after treatment.

    The problem lies not with the government, and not with the providers, but with all the middlemen controlling the payments, extracting a private tax, and adding no real value in the process.

  5. Drangsorian says:

    I was charged 800$ for an emergency room visit where the doctor literally looked at me, asked me a question, and then told me what I already knew. She then prescribed me a generic medication that I should have been able to buy on my own but which, for some reason, I required a doctors approval for.
    Because I don’t have Insurance, I was charged that ridiculous price.
    AND THEN I was also sent a bill for the doctors services (her 30 seconds of questioning) for 300$?! I don’t understand why there are two separate bills, and why it costs so much money when I should just be able to talk to a doctor and have them help me out for a reasonable price. I am all for paying for services, but that is just ridiculous!
    WHAT the F?!

  6. L.M. says:

    Your blog post came up when I was researching how much the average MRI might cost, here in America. The reason I wanted it was so that I could compare it with the bill my doctor’s office just sent me for my MRI.

    Are you ready for this price? More than $4,000. (If memory serves, it’s $4,028, but I choked a the $4,000 part – so that’s what’s stuck in my mind.)

    It was a normal MRI for lumbar spine. No contrast. Nothing weird. No special machine, just a normal MRI machine. No previous surgery, or anything to complicate the scan. They did find problems, but that didn’t impact the price of the scan.

    Talk about being flabbergasted. And, icing on the cake, I have to go back for another one. Mine will be covered by the carrier I have for health – but that’s besides the point – that price is robbery, pure and simple. My doctor’s office is very large, with many providers, however, they are not Cleveland or Mayo! They’re just run of the mill – not even known for excellence in my locale. So, how do they justify such a price? Outrageous. Simply outrageous. This is upper midwest pricing, by the way, if that impacts perspective.

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