Looks like price may still be the problem

The current Health Affairs is devoted to The Price of Medical Technology. One section focuses on the Imaging Boom. The installed base of advanced imaging equipment (CT, MRI, PET, etc.) has risen rapidly and so, too have the number of procedures performed on them. That’s caused total spending to ramp up quickly, too. It seems logical to conclude that the free-market system in the US has led providers to boost the number of imaging machines and procedures. That may drive up costs but at least it ensures access that would be lacking in socialized systems, right?

An article by Anderson and Frogner in the Data Watch section puts things in a somewhat different light. Their comparison of per capita health care spending in OECD countries shows, as usual, the US spending double the average, but this chart breaks the spending out by public private and out-of-pocket. Interestingly, per capita public (i.e., government) spending in the US is higher than every country but Luxemborg and Norway. Also, US public spending per capita is higher than median total spending in the OECD. For instance, US public spending per capita is higher than total per capita spending in the UK or Italy. None of this is that surprising.

However, the following paragraph put the Imaging Boom articles in perspective.

Our previous work has consistently shown that the United States has lower utilization rates than most other OECD countries (for example, numbers of hospital days and physician visits per capita). In addition, the supply of many medical services (hospital beds per capita) and expensive technologies such as magnetic resonance imaging (MRI) units and computed tomography (CT) scanners is lower in the United States than in many other OECD countries (Exhibit 2). In each of these papers, we have returned to the conclusion that much of the spending differences are attributable to the higher per capita income of the United States and the fact that Americans pay much higher prices for medical care services (“It’s the Prices, Stupid”).

In other words, it may indeed be a serious problem that CT and MRI use is rising relentlessly in the US. However it doesn’t mean that such technologies are any less available elsewhere. Perhaps deflation –already taking root in other parts of the economy–  is the simple cure for US health care costs.

December 1, 2008

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