Why Do Medical Costs Vary So Much Across the Country?

doctor; file photo

Question: Why do medical procedure costs vary so much by region of the country?

Paul Solman: I think the best answer I’ve come across is a piece in the June 1 New Yorker by the ever-excellent Atul Gawande, The Cost Conundrum.

It’s a profile of the second most expensive health care community in the country (behind yours, Dwight: Miami): McAllen, Texas, with demographics almost identical to its neighbor, El Paso, and costs twice as high. Costs at the Mayo Clinic in Rochester, Minnesota, and in Grand Junction, Colorado, are lower still.

By way of explanation, Gawande writes:

“About fifteen years ago, it seems, something began to change in McAllen. A few leaders of local institutions took profit growth to be a legitimate ethic in the practice of medicine. Not all the doctors accepted this. But they failed to discourage those who did. So here, along the banks of the Rio Grande, in the Square Dance Capital of the World, a medical community came to treat patients the way subprime-mortgage lenders treated home buyers: as profit centers….

When you look across the spectrum from Grand Junction to McAllen — and the almost threefold difference in the costs of care — you come to realize that we are witnessing a battle for the soul of American medicine. Somewhere in the United States at this moment, a patient with chest pain, or a tumor, or a cough is seeing a doctor. And the damning question we have to ask is whether the doctor is set up to meet the needs of the patient, first and foremost, or to maximize revenue.

There is no insurance system that will make the two aims match perfectly. But having a system that does so much to misalign them has proved disastrous. As economists have often pointed out, we pay doctors for quantity, not quality. As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients. Both practices have made for serious problems.”

Lest you think that I’m out to euthanize your grandma, let me conclude by pointing out that the outcomes in McAllen are no better than at the Mayo Clinic, or in nearby El Paso, for that matter. Because, argues Gawande (himself a doctor):

“[N]othing in medicine is without risks. Complications can arise from hospital stays, medications, procedures, and tests, and when these things are of marginal value the harm can be greater than the benefits. In recent years, we doctors have markedly increased the number of operations we do, for instance. In 2006, doctors performed at least sixty million surgical procedures, one for every five Americans. No other country does anything like as many operations on its citizens. Are we better off for it? No one knows for sure, but it seems highly unlikely. After all, some hundred thousand people die each year from complications of surgery — far more than die in car crashes.”

The whole article is worth a read.