Unbiased Analysis of Today's Healthcare Issues

Why are hospital prices crazy?

Sarah Kliff of Vox has an interesting article looking at hospital pricing.  She provides examples of $629 for a Band-Aid in an emergency department to over $3,000 to look at a bruised finger. Part of these high costs are not just physician time and treatment materials but a facility fee.  The facility fee is basically the […]

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How much money do drug companies get for their drugs?

Let’s say a you fill a 30-day prescription and the list price of the drug is $100.  Let’s say that you pay a $10 copay and your insurer pays $90.  What share of this $100, does the drug company receive. Most people would guess pretty close to $100, but a recent report by Aaron Vandervelde and […]

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Static and Dynamic Effects of Vaccine Policy on R&D

How does health policy and pricing affect investment in innovation? This is the research question investigated in Amy Finkelstein’s 2004 QJE paper on Static and Dynamic Effects of Health Policy. She examines three policy changes: 1991 CDC recommendation that all infants be vaccinated against Hepatitis B 1993 decision for Medicare to cover (without any copayments […]

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Does comparison shopping work in health care?

According to a recent study in JAMA, the answer may be no.  High-deductible health plans aim to not only reduce the use of unnecessary services, but to make consumers more price sensitive and search for high quality, low priced care.  The latter goal, however, depends crucially on whether patients have access to information on accurate […]

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End the Gag Rule

As Time Magazine reports, health care prices are fucked up.  Castlight is one company that is trying to shed some light on health care prices to improve transparency.  Their CEO, Giovanni Colella, write the following in Forbes: To start, health insurance companies should refuse to agree to “gag clauses” with hospitals who do not want their […]

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The Effect of Hospital Consolidation on Prices and Quality

An interesting report from the Robert Wood Johnson Foundation summarizes the literature describing the effect of hospital concentration in a market on prices and quality.  The general consensus from the literature is the following: Increases in hospital market concentration lead to increases in the price of hospital care Hospital mergers in concentrated markets generally lead […]

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Are Health Care Prices Becoming More Transparent?

Health economists have always said that one of the main problems with health care is that no one knows the price of any services.  Thus, individuals have less of an incentive to shop for high value care. [Other experts claim that prices don’t matter as much because demand for healthcare is inelastic.] One step towards […]

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What does drug ‘price’ mean anyway?

How much do drugs cost?  The answer to this question depends who you are and how you want to measure cost.  For instance, MediSpan‘s Master Drug Data Base (MDDB) defines drugs prices as follows: Wholesaler Acquisition Cost (WAC) – the cost reported to Medi-Span by a manufacturer at which wholesalers purchase drug products from that […]

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Uwe Reinhardt on Hospital Prices

Health Economist Uwe Reinhardt supports expanding the DRG system to all payers.   “Under Medicare’s approach, hospitals are paid one price for an entire inpatient episode, rather than piece-rate (fee-for-service) for every single supply and service delivered in that episode…To eliminate the rampant price-discrimination inherent in current hospital pricing, all hospitals under this system would […]

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Slowing medical CPI may not last

The Bureau of Labor Statistics reports that Medical CPI is only 3.2%.  This is less than the 4.1% average inflation rate over the past ten years and the 6.0% average medical inflation rate over the past 30 years.  In most markets, a slowing economy reduces demand and reduces prices (see the recent decline in oil […]

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