Prices in health care

Health care prices for everything in health care – services, medical devices, procedures – tend to be much higher in the United States than elsewhere. Making prices lower would play a large role in reducing the burden of paying for health care.

How much higher are prices in the United States compared to other wealthy countries?

Office services Routine office visit:

  • U.S. = $95
  • France = $30
  • Spain = $11
Hospital services Hospital cost per day:
  • U.S. = $5,220
  • Switzerland = $4,781
  • Australia = $765
Normal hospital birth:
  • U.S. = $10,808
  • Switzerland = $7,751
  • Australia = $5,312
  • U.S. = $1,119
  • Switzerland = $503
  • Australia = $215
Procedures/surgeries Appendectomy:
  • U.S. = $15,930
  • Switzerland = $6,040
  • Australia = $3,814
Knee Replacements:
  • U.S. = $28,184
  • U.K. = $18,451
  • Australia = $15,941
Bypass Surgery:
  • U.S. = $78,318
  • Australia = $28,818
  • U.K. = $24,059
  • U.S. = $31,620
  • Switzerland = $10,066
  • U.K. = $7,264

How do incomes differ among physicians?

The top two highest paid physician fields are in specialties that are procedure-focused:

  • Orthopedists: $489,000
  • Plastic surgeons: $440,000
And, the two lowest paid physician fields are both in primary care, which traditionally perform fewer procedures:
  • Family physicians: $209,000
  • Pediatricians: $202,0000

Where do these high prices come from?

While market principles may be used to describe health economics, in reality, supply and demand concepts do not work in health care. People want to be and stay healthy, but they do not want to consume health services. One central aspect of classical markets is that a potential buyer can compare prices, negotiate a better price, or walk away. But when patients are really sick, they cannot. Health care prices do not reflect supply and demand; they are “administered prices” with levels set by private and public bureaucrats under pressure from drug companies, medical supply manufacturers, large hospital systems, big insurers, and physician guilds. Put simply, prices are high because those who set them can get away with it. For more information, see Narrative: Why Markets Don’t Work Well in Health Care

What causes physician income differences?

Physician incomes are high, particularly in procedural specialties, and are out of step with physician incomes in other developed countries. Specialists are paid more than primary care physicians, in part, because of the power of the American Medical Association’s Relative Values Update Committee (RUC), which recommends clinician reimbursement for Medicare, thus also influencing private insurance payment rates. The membership of the RUC over-represents specialists and under-represents primary care physicians. The result is a system that rewards complex procedures, and undervalues care continuity and chronic disease prevention. Another reason for high specialist pay is the fee-for-service model that dominates U.S. health care. When physicians can charge separately for each component of their care, there is a tendency to overtest, overtreat, overorder, and thus overcharge patients. Fee-for-service structures give physicians a financial incentive to increase the quantity of care, instead of focusing on quality of care. Updated 6/2/2018