How much you pay for health care often depends on one key fact: where you live.
A new study of more than 1 billion medical bills makes this fact abundantly clear. It shows huge variation in the price of basic medical procedures like ultrasounds, annual physicals, or cataract removals.
Consider this: An ultrasound for pregnancy costs an average of $183 in Canton, Ohio. But drive an hour north to Cleveland, and the average price more than doubles to $522.
This problem isn't unique to Ohio. A new study published today in the journal Health Affairs shows that massive price variation exists all over the country. Each city or state seems to have at least some prices that are sky-high when compared to the national averages.
There doesn't seem to be any rhyme or reason to the high costs; they don't just turn up in places with higher costs of living.
"If you look at Georgia, you see that allergy tests there are really expensive," says David Newman, Health Care Cost Institute's executive director and the lead author of this study. "Then in New Jersey, the thing that is expensive is lab tests. Like a diabetes test, a very low-level thing, ends up being 133 percent of the national average price."
Newman's new paper looks at a new and massive dataset of private medical bills, the largest that has ever existed in the United States. It uses data from three of the country's biggest insurers: UnitedHealth, Aetna, and Humana.
The research illuminates the price variation that exists for the most common medical procedures — but it doesn't suggest an easy solution. Instead, it shows that high prices aren't just a problem in one corner of the country. They're a problem everywhere. And there's no easy way to fix that.
How much your doctor appointment costs depends on where you live
American health care prices get set in secretive negotiations between insurers and hospitals. Hospitals have an incentive to charge a lot of money; they want their doctors to get paid as much as possible. Insurers, on the other hand, try to drive down health prices to keep premiums low.
These negotiations happen behind closed doors, and that makes it difficult to know what type of price deals various insurers and hospitals have struck. That sets the stage for huge price variation, as all these health care players strive to get the best deal but don't know how much their competitors are paying.
Separate studies have shown that, within a single city, the price of an MRI scan can vary from $400 to $2,183. Others show huge variation for how much it costs to deliver a baby, a common and standard procedure.
The new Health Affairs paper shows that the average cost of a knee replacement in the United States ranges from $26,141 in Oklahoma to $46,895 in South Carolina. There is even significant variation in how much it costs to get a chicken pox vaccine. (Minneapolis and New Hampshire appear to charge the highest prices.)
One possibly explanation is quality — that the more expensive care can lead to better outcomes than cheaper care. But health care experts are dubious: They point out that numerous studies fail to find a connection between the price of health care and the patient's outcomes. With something so routine as a chicken pox vaccine, its hard to see how this explanation flies.
Insurers used to shield patients from high prices. Not anymore.
Health insurance typically picks up the vast majority of most hospital and doctor bills, while expecting the patient to contribute a co-payment to cover a fraction of the cost.
But that's becoming less and less true — and patients are increasingly bearing the brunt of exceptionally high health care prices. Spending on co-insurance — where the patient is responsible for a specific percent of the bill — has more than doubled over the past decade, according to data from the Kaiser Family Foundation and the Peterson Institute. Employers have contributed less and less to workers' health plans, leaving patients to pick up the tab.
All of this makes price variation more consequential to patients — although Newman argues that it doesn't make sense to ask patients to fix it. It's unreasonable to expect patients to travel to another state with cheaper costs just to get a better deal on a chicken pox vaccine. Just finding good information on health care prices can be a vexing task on its own.
Insurers, on the other hand, are sitting at the table negotiating prices. They're the ones who have at least some power to push back against high prices, especially if this data shows them that their competitors are getting a better deal.
"Hopefully, someone will make good use of this," Newman says. "It will take smart people in the locality to understand why there are high prices, and what, if anything, can be done to change that."