Shining a light on health care costs in Garfield County
December 23, 2013
Garfield and Summit County residents are understandably and rightfully upset about health insurance premiums that rank highest in the state. The cost of health insurance places a tremendous burden on working families, which explains why so many are uninsured.
In our view, though, the debate over insurance skims the real problem: why medical prices are so high in Garfield and Summit counties.
In Summit County, a magnetic resonance image (MRI) scan for an adult knee retails for $2,337, according to data from Colorado's all-payer-claims database. In Garfield County, it retails for $1,423. In Pueblo County, it costs $384.
All three counties use similar machines and technicians. In all cases, the MRI gives you the same answers. So what accounts for this variation in costs? Why does the same 20-minute procedure cost 500 percent more in Vail and 270 percent more in Glenwood Springs than in Pueblo?
One short answer is that the cost of living is higher in the mountains. Rent, food, gas and electricity cost more. But some part of this variation is simply due to the fact that the market chooses to bear it. Hospitals can charge $2,337 for an MRI because health plans that can shift the high costs to other markets have had to pay it. Health insurance rates reflect the underlying costs of care, and when the region has been defined to include a subset of the state, the health insurance rates are higher.
Like other areas of the economy, health care costs are driven by supply and demand. We demand a lot of health care. But unlike other areas of the economy, when it comes to health care, we don't use our wallets to influence the cost of the goods and services we buy.
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Health reform has brought more transparency to the system, and sometimes that transparency can be eye opening. We empathize with citizens who are shocked about their health insurance bills, but we've known for 30 years that medical resource use and cost of services vary widely throughout Colorado. The wide difference in MRI costs is just one of dozens of medical procedures that cost two to five times more in one spot over another.
The good news is that today's shock and outrage over cost differences might finally force citizens, elected officials and employers — those who pay for health insurance — to start asking the hard questions. For instance, why is there so much price variation in the state? How can employers and consumers be better purchasers? How can hospitals and physicians deliver cost-efficient and high-quality services? And, how can that translate into affordable health insurance premiums?
Our demand for health care is high, but we have the power to influence our demand as well as the supply side of the equation. When we do, costs will come down for everyone, including the citizens of Garfield and Summit counties.
Donna Marshall is the executive director of the Colorado Business Group on Health, a nonprofit organization that is changing the way employers buy health care. For more information visit http://www.cbghealth.org/.
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