Differences in the number of tests and treatments given from place to place are still huge for the privately insured. But the cost of health care is like the cost of groceries—the total depends on the price of every item
and on how many items you get. Both Medicare and private insurers have adopted policies and reforms that are reducing unnecessary tests and treatments and improving preventive care. In McAllen,
as I wrote in May, such changes have saved Medicare an estimated half-billion dollars for that one community alone. But cutting costs for privately insured patients also requires addressing prices. And that’s a different matter entirely.
When your grocery store is the only one in town, it can jack up prices without losing customers. The same goes for hospitals. The study found that hospital prices in monopoly markets are fifteen per cent higher than in those with four or more hospitals.
It’s the Cost Conundrum Squared. The bigger the hospital, the more it can adopt systems that deliver better-organized, higher-quality, less-wasteful care. But the bigger the hospital, the more power it has to raise prices.
We have a few ways out of the conundrum. We can regulate the prices hospitals charge insurers—this is what Maryland does. We can break up big hospitals. We can encourage hospitals to
become the insurers. (That’s what Kaiser Permanente in California has done. It provides members with prepaid care at its hospitals and clinics.) Or we can expand Medicare to more and more people until we’re single payer.