News & Commentary

The price is right (in consumers' blind spot)

Medical directors at health insurance plans know all about the variation in costs for even routine services, but sometimes this “old normal” can still startle laymen. That the cost for mammograms and other health care services can vary by fourfold among nearly 180 metropolitan areas in the United States garnered some media attention last month.

Castlight Health, a company that tracks health care prices, found, for example, that the average price of a mammogram in Tulsa, Okla., is $120 compared with an average price of $485 in Sacramento, Calif. The company found even greater differences within many of those metropolitan areas.

Mammography price variation all over the map

Source: “Costliest Cities 2015: Pricing for the Same Medical Services Is All Over the Map (Literally),” Castlight Health, Oct. 7, 2015

In the Dallas-Fort Worth area, for example, the price ranges from a modest $50 to an unbelievable $1,045. “The variation was shocking,” Castlight’s chief of research, Jonathan Rende, told Kaiser Health News. “It speaks to how broken the health care system is.”

Uwe Reinhardt, the Princeton health care economist, several years ago facetiously described price variation as “another miracle of American health care: We don’t know prices … prices negotiated between hospitals and doctors are trade secrets,” he told Managed Care. “So if you don’t know prices, competition can’t work.” And that might be the most important takeaway of all.

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