In the rush to approve certain provisions in the Affordable Care Act and the subsequent excitement that surrounded the misconception that all Americans now will be covered by inexpensive health care insurance, one looming question has been lingering unanswered: How much will it cost?
The answer is a lot.
President Obama’s hallmark legislation was passed in partisan fashion in March 2010. Work to implement the complicated legislation in the ensuing years has uncovered increased costs for most associated with health care coverage. Misericordia University, for example, will experience a 9-percent increase in premiums from its insurance provider for the upcoming 2013-2014 academic year.
Society’s desire to provide adequate health care for all of its citizens is admirable. The concept of insuring a significantly larger pool of people and, thus, spreading the financial risk among more individuals is also reasonable. The costs associated with the Affordable Care Act, though, are high and the country’s new health care plan does not do enough to address these costs. Americans already pay more for health care procedures and prescription medications than do the citizens of most other developed countries.
In 2012, for example, the cost for an appendectomy in the United States ranged from $8,156 to $29,500, according to the International Federation of Health. In Australia, the same procedure cost $5,457, while it cost $5,498 and $3,408 in the Netherlands and the United Kingdom, respectively. In the same year, the normal delivery of a baby in the United States cost between $7,262 and $16,753. In Australia, the United Kingdom and New Zealand, babies were delivered for $6,846, $2,641 and $2,386. These examples demonstrate the problem with rising health care costs in the United States. Our high prices are caused by three seemingly intractable, but interrelated problems.
1. The payment side of the health care market in the United States is fragmented. A number of insurance companies have relatively weak bargaining power, especially against an increasingly consolidated health care sector. This field decreases further because of the new law, which also passes along more of the cost of Medicare onto private insurers. The United States’ propensity toward litigation and malpractice suits also raises the price of care and insurance considerably.
2. There are few incentives for health care users to shop for the best price and best quality for their care. This problem is compounded by the lack of transparency in the pricing of health care and prescriptions. Patients also are not motivated to compare prices and outcomes unless a significant portion of the cost comes out of their own pockets. The price of various medical procedures and medications can vary significantly – even within a single city.
If you will, visualize a supermarket where there are no prices on the products. Furthermore, you do not pay for your items at this supermarket’s checkout counter, but instead you are charged a bi-monthly fee that is deducted from your paycheck and from your employer. Given this situation, how can you make a rational choice about price versus quality? Can you make better judgments about which groceries to buy when you are fully informed and can compare the cost to the value of the product? In most cases, the answer is yes.
3. And lastly, often teams of health care professionals, such as nurse practitioners and physician assistants, deliver the same quality of care at a much lower cost. These health care professionals and others in specialty fields — like physical therapy and occupational therapy — can lower the cost of health care when they are used effectively in team settings with primary care physicians. It is for this reason that Misericordia University and some other institutions of higher education have created undergraduate and graduate programs in these fields of study that prepare competent and compassionate clinicians that can offer quality care at affordable prices.
Solving the health care cost issue starts with more transparent pricing for the consumer and a far greater reliance on a variety of health care professionals other than primary care physicians to cure much of what ails us. It is also very dependent upon creating incentives for people to shop for health care and medicine wisely, and to stay well. If we work to make these changes, perhaps affordable health care is in all of our futures.
Michael A. MacDowell is president of Misericordia University where he occasionally teaches economics.
Allen C. Minor, D.B.A., is the director of the health care management program at Misericordia University.