Because Medicare decides the price of health care procedures for people who are 65 and older, wouldn’t you expect that everywhere its per capita spending is pretty consistent?
It’s not. Similarly, with private insurance, what we pay can depend on where we live.
Where are we going? To the incentives that affect health care spending.
High and Low Health Care Spenders
Medicare and Private Payers
Using a NY Times interactive that compared per capita Medicare and private payer health care spending, I filled in several locations. As you can see, New York City has high Medicare and high private insurer per person costs while Portland, Oregon is low for both.
High and Low Procedure Prices in Different States
Below are maps that display how states vary. Simplifying somewhat, we can say that the lightest colors indicate the cheapest medical care while the darkest blue reflects the opposite:
Doctors’ Visits
Uterus Exam
Heartburn
High and Low Procedure Prices in One City
High and Low Procedure Prices In One State
Our Bottom Line: Incentive
Trying to figure out a rational pricing pattern, we can identify the incentives that make heath care more expensive. Market structure definitely makes a difference. Hospitals that have no competition on average charge 15% more–rather interesting because the same hospitals can enjoy the efficiencies of size. Similarly, with private insurance the market affects what we pay. However, because government sets the price for Medicare reimbursement, it’s the extra procedures that generate more revenue.
All of this just means that in a hodgepodge of prices and procedures, the one common denominator is incentive.
