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The Dose - JK Wall

Welcome to The Dose, which tackles the finances behind local health care and life sciences and points to the most interesting national analysis. Your host is J.K. Wall.

Health Care & Life Sciences / Life Science & Biotech

Go figure: As patients’ anger over costs spikes, health care prices barely budge

October 9, 2015

Try out this paradox:
 
Health care providers are holding down their prices better than at any time in the past 25 years.
 
But patients are madder than ever about the high cost of health care.

So much so, that it looks like the biggest health care issue in the 2016 president campaign will be about health care prices—especially spiraling drug prices.
 
“It is time to deal with skyrocketing out-of-pocket costs and runaway prescription drug prices,” Hillary Clinton said on Sept. 22 when rolling out her health care proposal.
 
To put it in terms of her husband’s successful 1992 campaign slogan: “It’s the prices, stupid.”
 
And, of course, there’s a lot to work with there.
 
A classic article in the academic journal Health Affairs back in 2003 with that very title—“It’s the Prices, Stupid”—demonstrated that U.S. health care spending is higher than in other countries not because we consume more health care services but because health care providers simply charge more for them.
 
The authors wrote, “the United States spends more on health care than any of the other [developed] countries spend, without providing more services than the other countries do. This suggests that the difference in spending is mostly attributable to higher prices of goods and services."
 
Twelve years later, the evidence of that keeps rolling in. This month’s issue of Health Affairs includes an article on how hospitals hiked the prices charged to private insurance plans for common outpatient procedures far faster than did surgery centers that were independent of hospitals.
 
From 2007 to 2012, hospital outpatient departments raised prices for colonoscopies 32 percent, the price of cataract surgeries 33 percent and the price of knee arthroscopies 45 percent, according to data analyzed by Kathleen Carey, a Boston University professor of health policy.

Meanwhile, general inflation during those years totaled 13.1 percent, according to data from the Bureau of Labor Statistics.
 
Independent surgery centers, by comparison, eked out 5-year price increases of 16 percent for colonoscopies, 1 percent for cataract surgeries and 12 percent for knee arthroscopies.
 
Carey’s study used data from Truven Health Analytics, the same source of data that in 2013 showed hospital outpatient prices in Indianapolis were the highest among 13 Midwest metro areas—and 264 percent higher than what the federal Medicare program pays.
 
Also on Thursday, the Workers Compensation Research Institute released its latest data comparing prices among 17 states, including Indiana. And guess what? Prices charged in Indiana were 57 percent higher for physicians and 35 percent higher for hospitals than the median in the study, which included data from 2008 to 2013.
 
But the funny thing is, it’s really only drug prices that are going up right now. Prices for most other health care services are growing at record-low rates. And physician prices have even been moving backward.
 
According to a report Thursday by the Altarum Institute, health care prices have grown just 1.2 percent over the past year—holding near their lowest rate since data started being kept in 1990.
 
Hospital prices are up just 1 percent, nursing home prices just 1.6 percent and doctors’ prices actually fell by 1 percent.
 
It’s really only prescription drugs that are rising fast—4.7 percent in the past year—as drugmakers have rolled out a raft of exorbitantly-priced drugs for hepatitis C and cancer.
 
A June survey by the Kaiser Family Foundation find that nearly three-fourths of all Americans think drug prices are unreasonably high.
 
Even doctors have started to notice, and are saying no to high-priced “me too” drugs, according to a Thursday report from Reuters. The poster child identified by Reuters was Eli Lilly and Co.’s latest cancer drug Cyramza.
 
But drug spending is one of the smallest pieces of health care costs—less than 10 percent of all health care spending nationally.
 
What’s really changing are health plan deductibles. As I wrote last month, the average size of deductibles on employer-sponsored health insurance grown nearly seven-fold over the past five years.
 
And nowhere is that more true than in Indiana. In the state’s employer market, 89 percent of participants now have deductibles of at least $1,500, according to a survey by United Benefit Advisors.
 
That trend is very likely playing a big role in holding down health care prices.
 
And it’s not likely to end, unless Republicans in Congress—or a President Hillary Clinton—repeals the Obamacare Cadillac tax (as both have vowed to do).
 
Since President Obama won’t go for that, expect the paradox of tepid price growth and boiling patient anger to continue until at least 2017.

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