I’ve gotten to know a lot about medical prices over the past few years after writing a book, The Self-Pay Patient, on how to find affordable care by paying directly for treatment and avoiding the third-party payment system entirely. One idea that was reinforced during the writing process was just how nonsensical many of the “prices” in health care are. Today’s USA Today has an article that helps to explain what I mean, and why I put “prices” in quotation marks when talking about health care:
The cost of having a knee or hip replaced varies wildly and can be up to four times more in one place than another -— even in the same area, a report out Wednesday found.
A total knee replacement averaged about $31,000 in 64 markets where Blue Cross Blue Shield analyzed its claims data. But in Dallas, it ranged from $16,772 to $61,584.86.
Across the USA, knee replacements costs as little as $11,317 in Montgomery, Ala., and as much as $69,654 in New York City,
Some of the price differences are expected -— rent and other overhead costs are much higher in New York City than in Alabama. But the reasons why hip replacement in Fort Collins, Colo., costs tens of thousands more than in Pittsburgh may have more to do with whatever the market will bear…
That last bit is pretty funny, or at least would be if the lack of a real market in health care weren’t currently devastating the health care system in the U.S. But it does illustrate a key point – if through policy choices normal market forces in health care are wildly distorted and ruthlessly suppressed, under the theory that health care is somehow immune to economics or at least should be, then you’ll wind up with what are nearly random numbers for “prices,” instead of a real price of the sort a real market would generate.
It turns out health care isn’t quite so different after all when it comes to normal economic forces.