Posts Tagged ‘Mailman School of Public Health at Columbia University’

Healthcare Costs Wiping Out Your Income Gains

Monday, September 26th, 2011

If Americans’ incomes are not growing, part of the blame can be placed on the high cost of healthcare.  According to the Washington Post’s Sarah Klitt, “All evidence points to American voters not really caring about rising healthcare costs.  But here’s one pretty compelling reason they should:  The escalating cost of healthcare has wiped out nearly all income gains made by the average American family in the past decade.”

Research in the September issue of Health Affairs notes that American physicians are paid more per service than in other countries — in some instances, double the amount.  There is also a larger gap between fees paid for primary care and specialty care, when compared with other industrialized countries.  These higher fees translate to higher incomes for American physicians than those earned by their foreign counterparts, and are the primary driver of higher overall spending on physicians’ services. 

The study — by Miriam Laugesen of the Mailman School of Public Health at Columbia University and Sherry A. Glied, also of the Mailman School and presently Assistant Secretary for Planning and Evaluation at the Department of Health and Human Services (HHS) — compared fees paid by public and private payers for primary-care office visits and hip replacement surgery in Australia, Canada, France, Germany, the United Kingdom, and the United States. 

The researchers determined that American primary-care physicians on average are paid 27 percent more by public payers for an office visit, and 70 percent more by private payers for an office visit, compared to the typical amount paid in other nations.  The largest difference in fees paid to American physicians versus fees paid to doctors in other countries was for hip replacements.  American physicians earned 70 percent more for these procedures by public payers, and 120 percent more by private payers, than the average fees paid to physicians in other countries.

“The gap between the fees paid for primary care and those for orthopedic services such as hip replacements is significantly bigger in the United States than it is in other countries,” Laugesen said.  “For decades, policymakers and medical leaders in this country have debated financial incentives to spur more doctors to become primary-care physicians.  Our work shows that continuing attention needs to be paid to the difference in payments across specialties, and how we can get better value for those expenditures.” 

Additionally, American physicians reported higher salaries when compared with the other countries, despite the fact that there was minimal difference in the volume of services provided.  Laugesen and Glied suggest that the differences may reflect the fact that American physicians are paid more for their skill and time than doctors in other countries.  Whether or not those higher payments have merit is a question that the study did not address.  American primary-care physicians earned the highest average annual incomes ($186,582) while French ($95,585) and Australian ($92,844) primary-care physicians earned the lowest.  American orthopedic surgeons earned the highest average annual incomes at $442,450, followed by $324,138 for surgeons in the UK.  Although UK surgeons earned 50 percent more than surgeons in the other comparison countries, they earned 30 percent less than American orthopedic surgeons.

A study by the RAND Corporation determined that rapidly rising healthcare costs have eaten nearly all the income gains made by middle-income American families over the past 10 years, leaving them with just $95 per month in extra income, after accounting for taxes and price increases.  Had healthcare costs risen only as fast as the cost of other goods and services from 1999 to 2009, the same family would have had an additional $545 per month to spend in 2009.

“Accelerating healthcare costs are a primary reason that the so many American families feel like they are just treading water financially,” said David Auerbach, the study’s lead author and an economist at the RAND Corporation, a non-profit research organization.  “Unless we reverse the trend, Americans increasingly will notice that health costs compromise their other spending options.”

Between 1999 and 2009, healthcare spending in the United States nearly doubled, from $1.3 trillion to $2.5 trillion.  During the same timeframe, the percentage of the nation’s GDP devoted to health care rose from 13.8 percent to 17.6 percent.  Per-capita healthcare spending rose from $4,600 to just over $8,000 a year.

Although the numbers are arresting, they don’t necessarily translate to the daily routine of American families because many healthcare costs are hidden, according to the researchers.  Auerbach and co-author Dr. Arthur L. Kellermann, director of RAND Health, combined information from multiple sources to describe the obligation that rising healthcare costs placed on middle-income families with employer-sponsored health insurance from1999 to 2009.  

“The complex way that the United States pays for healthcare often obscures the consequences of healthcare cost growth for most American families,” Kellermann said.  “This makes the challenge of controlling healthcare costs that much harder.”