Neiman Marcus Prices for Walmart Healthcare

by on August 12, 2013

Everybody loves a bargain, Americans as much as anyone.

Yet they have failed to find one in their healthcare system.

Let's just take some fairly recent data, published in 2012 by the Organisation for Economic Co-operation and Development (OECD), a group of 34 countries that reports on over 1,200 health system measures. Any guesses here for the biggest loser?

God bless America.  We spend more than any other country on healthcare.  And not just a little more. We spend far more on health care per capita than any other country in the world (or at least the 34 that comprise OECD, which is a good indicator), averaging, per person, $7,960 a year, 17.4% of the GDP (again we win--that's the largest percent of any country).

Second place is Norway, which is a good $2,608 lower.

In fact, the US spends two-and-a-half times the OECD average.

What do we get for this "luxury" care, you may ask?  US life expectancy, found the survey, is 78.2 years, which was 27th (remember--that's out of 34). Nothing to write home about, it seems.

Perhaps you'd feel better knowing that our overspending is nothing new. Back in 2010, the Commonwealth Fund ran a study, saving poor readers a lot of work by summarizing the entire piece in its title:  "US Ranks Last Among Seven Countries on Health System Performance Based on Measures of Quality, Efficiency, Access, Equity, and Healthy Lives." So if you compare the US to Australia, Canada, Germany, the Netherlands, New Zealand, and the UK, well—you get the picture.

Skipping to the conclusion, the study slams its point home:  "While there is room for improvement in every country, the US stands out for not getting good value for its health care dollars, ranking last despite spending $7,290 per capita on health care in 2007 compared to the $3,837 spent per capita in the Netherlands, which ranked first overall."

And before 2010, this overspending had gone one for decades.  Just take 1998.  The US was still the significant outlier in the OECD, with per capita spending of $4,178, more than double the OECD median of $1,783 and significantly more than the country in the number two spot (in this case Switzerland, at $2,794). The more things change. . .

But perhaps, you might think, if we just looked at all this from the right angle, we’d seem to be getting a better deal. Maybe. . . if we viewed it  from the perspective of a family--and perhaps factored in insurance?

Every year, Milliman, which calls itself the "the world's largest providers of actuarial and related products and services,” does some fancy figuring on the cost of healthcare for a family of four covered by a PPO (a preferred provider plan, better care than many get, with the alternative HMO) and publishes that figure as the Milliman Medical Index (MMI). Back in 2002, the cost of healthcare for the typical family of four was $9,235. By 2011 the MMI  was $19,393, an increase of $1,319 from 2010, and an increase of $9,328 from 2002.  Things hardly seem to be headed in the right direction.  So it should come as no surprise that the newly released 2013 MMI found the total annual cost of healthcare for a typical family of four with a PPO was. . . .$22,030.

This is nothing to sneeze at. Healthcare bloggers noted that the 2012 MMI was similar to the price of an average midsize Sedan. This year it's nearly as much as it costs to send a child to an out-of-state public college for one year.  Also the actual amount that the family directly pays in health-related costs ($9,144 in payroll deductions and out-of-pocket costs) surpasses what it spends on groceries for the year--and the out-of-pocket costs on their own ($3600 for copays, coinsurance, and other cost sharing) are more than it spends on gas--and that often includes two cars.

But let us look past this fictional family of four and get back to international comparisons (since the US  likes to think of its healthcare as superior), and take a methodical look at where the money is going. The International Federation of Health Plans, founded in 1968 and billing itself as the "leading global network in the industry," with over 100 member companies from 25 countries, published the "International Federation of Health Plans 2012 Comparative Price Report Variation in Medical and Hospital Prices by Country."

One way to break down the Report and see where the money goes is to divide it into services and goods, starting with the former.

It isn’t pretty for the US. Whether we're looking at a graph of a colonoscopy, a knee replacement, an appendectomy, a hip replacement--you name it--US prices are double, and more often triple and quadruple those of the other countries'.

How about an MRI to start us off?   In all the graphs there are a number of countries with these tiny little bars--like, in our case, for MRI costs. You can hardly see Argentina's bar it's so little, at $118 per MRI. Next comes Spain, visible but small, at $230.  Around the middle comes France, still way below the graph's median, where MRIs cost $363.  In South Africa they charge $1072, and that bar almost reaches the median.  But it's put to absolute shame by the United States, with a bar that towers above all the other parts of the graph, at $2871. I'd like to say that our MRIs are of such quality that they pick up more than twice as many problems as do South Africa's, and 10 times as many as Argentina’s.  But with not one bit of research to back me up, I'll just stay mum.

To get a vivid pictorial grasp on how distressingly out of financial bounds American medical services are, take a look at the Washington Post's March 26 "21 graphs that show America’s health-care prices are ludicrous." I don't want to ruin the experience for you, but I can't help but tell you that when it comes to angioplasties, the country where they cost the most second to the US is the U.K., where they're $14,366. Picture what that bar on the graph looks like next to the U.S's., where the cost is over four times as much, at $61,649.

And, of course, one of the biggest services in medicine is visiting a doctor, right?  Well, our doctors' fees are more than twice the average cost of OECD countries. In a 2010 article in Health Affairs entitled, "Higher Fees Paid To US Physicians Drive Higher Spending For Physician Services Compared To Other Countries," the authors compared US doctors' fees (those of primary care physicians and orthopedic physicians) to those in Australia, Canada, France, Germany, and the UK--and found them the highest.

Separating out public and private payers, these researchers found that public payers paid 27% more to US primary care physicians for office visits than their counterparts in other countries, while private payers paid up to 70% more.  The numbers were more staggering for orthopedists. In that case it was 70% more for public payers--and 120% more for private.

So much for medical services. Let's take a minute to look at "goods," the best example of which is medicine itself.  Things are no better in that arena.

Granted this was a number of years ago, but in 1998 the Committee on Government Reform and Oversight of the US House of Representatives prepared a report comparing drug prices to our neighbors north and south.  The Committee found that drug prices in the US were 72% higher than Canada--and 102% higher than in Mexico.

Back to the present. The New York Times found that Americans, on average, pay 54% more for 25 commonly prescribed drugs than do Europeans. And some of the prices are truly shocking. Eldepryl is a medication for Parkinson's disease.  You can get a month's supply in Italy for $28, for $48 in Austria--and you can enjoy your 30-days' worth for $240 in the US  Back to The  Washington Post's graphs: Nexium, for acid reflux? A 30-day supply in Spain will cost you $18, in Argentina $21, France $30, the UK $32---and in the U.S? $373. Take Lipitor, for high cholesterol. A month's worth is $6 in New Zealand, $11 in South Africa, $13 in Spain, $39 in Argentina--and $145 in the US  Cymbalta, for depression, costs more all-round, as a 30-day supply in France goes for $47.  In the UK it's $48, South Africa $57, it's up to $70 in Spain; plan on paying $317 here.

If you like really big percentages, all you need is a 2012 article in Health Affairs. The authors looked at variation in brand-name drug costs in OECD countries in 2005, 2007 and 2010.  They found that brand-name prescription drug prices started at 5% higher in the U.S than in  the other countries--and went up to 198% higher. So if you add a percentage here and a 100% there, you come to find, as the consulting firm McKinsey did in their 2008 analysis of the OECD's data, that the US spends $98 billion more per year on drugs than would be expected, based on per-capita income relative to other countries.

Maybe we could tolerate such astronomical prices-- if only the country delivered more and better care. The Commonwealth Fund found that the US had fewer hospital beds, shorter lengths of stay for acute care, and fewer hospital discharges per 1,000 people than the other countries.  The average number of doctor visits in the US is 4, for once putting us below the average--6.4--and, leaving us to plead no contest with the Japanese, who go, on average, 13 times per year.

So more money, less care. The staggering costs for medication, doctor visits, and even the simplest of procedures mostly explain how we arrive at that unfair and unpleasant equation.  But there's more—another contributor to our overweening costs lies in the tremendous waste to be found within the medical system.

If we add up the unnecessary use of high-cost services, administrative wastes, medical errors (for some horrifying ideas potential errors, see this very blog, at "NoThing Left Behind - objects left inside patients after surgery!"), at Medicare and Medicaid fraud, and at poor prevention, Health Affairs estimates that waste may constitute one-third to one-half of all US health spending. This is around a mind-blowing $750 billion a year.

So let's say you're that proverbial American bargain-hunger, and you're looking for a health bargain.  There's only one piece of advice I can offer you: Don't get sick.

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  1. Johnd505

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