Health care prices in the United States of America describe market and non-market factors that determine pricing, along with possible causes as to why prices are higher than in other countries.
Compared to other OECD countries, U.S. healthcare costs are one-third higher or more relative to the size of the economy (GDP). According to the CDC, during 2015, health expenditures per-person were nearly $10,000 on average, with total expenditures of $3.2 trillion or 17.8% of GDP. Proximate reasons for the differences with other countries include higher prices for the same services (i.e., a higher price per unit) and greater use of healthcare (i.e., more units consumed). Higher administrative costs, higher per-capita income, and less government intervention to drive down prices are deeper causes. While the annual inflation rate in healthcare costs has declined in recent decades, it still remains above the rate of economic growth, resulting in a steady increase in healthcare expenditures relative to GDP from 6% in 1970 to nearly 18% in 2015.
Nature of the healthcare markets
Coverage
Health insurance coverage is provided by several public and private sources in the United States. During 2016, the U.S. population overall was approximately 325 million, with 53 million persons 65 years of age and older covered by the federal Medicare program. The 272 million non-institutional persons under age 65 either obtained their coverage from employer-based (155 million) or non-employer based (90 million) sources or were uninsured (27 million). Approximately 15 million military personnel received coverage through the Veteran's Administration. During the year 2016, 91.2% of Americans had health insurance coverage. An estimated 27 million people under the age of 65 were uninsured.
Price transparency issues
Unlike most markets for consumer services in the United States, the healthcare market generally lacks transparent market-based pricing. Patients are typically not able to comparison shop for medical services based on price, as medical service providers do not typically disclose prices prior to service. Government mandated critical care and government insurance programs like Medicare also impact the market pricing of U.S. health care. According to the New York Times in 2011, "the United States is far and away the world leader in medical spending, even though numerous studies have concluded that Americans do not get better care" and prices are the highest in the world.
In the U.S. medical industry, patients generally do not have access to pricing information until after medical services have been rendered. A study conducted by the California Healthcare Foundation found that only 25% of visitors asking for pricing information were able to obtain it in a single visit to a hospital. This has led to a phenomenon known as "surprise medical bills", where patients receive large bills for service long after the service was rendered.
Since the majority (85%) of Americans have health insurance, they do not directly pay for medical services. Insurance companies, as payors, negotiate health care pricing with providers on behalf of the insured. Hospitals, doctors, and other medical providers have traditionally disclosed their fee schedules only to insurance companies and other institutional payors, and not to individual patients. Uninsured individuals are expected to pay directly for services, but since they lack access to pricing information, price-based competition may be reduced. The introduction of high-deductible insurance has increased demand for pricing information among consumers. As high-deductible health plans rise across the country, with many individuals having deductibles of $2500 or more, their ability to pay for costly procedures diminishes, and hospitals end up covering the cost of patients care. Many health systems are putting in place price transparency initiatives and payments plans for their patients so that the patients better understand what the estimated cost of their care is, and how they can afford to pay for their care over time.