How Outlier Stories Stain Healthcare

Price opacity is one of the grievances people have with healthcare in the US. Hip replacement price variation is an oft-cited procedure, yet another example where hoarding information and obfuscation is the norm. In one city, prices can vary by a factor of 3x or more. Price transparency is a laudable goal and progress is being made, but its impact is modest. And how common are hip replacements? For the commercially insured under age 65, there are 1-2 per 1,000 lives per year. That amounts to $2.50 per employee per month, or 10x less than typical emergency room costs.

The outlier costs are what insurance is for, to protect against risk, but when people site huge variations of low frequency but high-cost procedures, it tends to be for shock effect. The good old average needs to be considered with all the precaution that comes from reading How to Lie with Statistics, a book worth revisiting every couple of years. There are many other problems: our poor collective health, regulation, inflation, technology (since, in healthcare, it tends to be inflationary), brokers and consultants who pitch the shiny new products that make them money, and healthcare and financial illiteracy to name several.

Companies and policy makers are better to focus on plan designs (the front door of change), networks, contracting, consumerism (e.g., shared savings and more cost sharing), education and making things simpler and in line with what patients want, no expensive surveys necessary. Everyone reading this has used the healthcare system. Most don’t want the all-you-can-eat-buffet. You pay and forget but you still pay.

What interests both companies and consumers? Less care at reasonable costs and with fewer barbers telling them they need haircuts. Savings. The first question should be: do I even need that hip replacement in the first place? As Benjamin Franklin said, probably thought up while doing naked yoga on the banks of the Delaware River, “If you would persuade, you must appeal to interest rather than intellect.”


Photo by Andrew Buchanan on Unsplash

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