Get hip to how medical prices rise

Replacement $13.6K in Belgium, $78K in U.S.

August 17, 2013 

No matter where they stand on the Affordable Care Act, members of Congress should be alarmed at the costs that U.S. patients are charged for common medical procedures that are far cheaper in other countries.

They should be alarmed, but they should also be held to account for their refusal to intervene. The costs that hospitals, doctors and device makers are imposing on consumers, employers and their insurance companies have become a drag on the U.S. economy. Some $2.7 trillion is spent each year on health care in the United States, and the price keeps rising.

An illustration of the problem was provided this past Sunday by The New York Times in an ongoing series about health care costs. The latest installment examined prices for hip replacement surgeries. It focused on one man who went to Belgium to have hip replacement surgery at a total cost of $13,660. He did so after learning that the same surgery, with the same type of implant, would cost him roughly $78,000 in the United States.

Since the Times published that story, some doctors and device makers have questioned the $78,000 figure, saying it isn't representative of hip replacement prices in the Sacramento area and other parts of the country.

That may be true, but even if U.S. consumers were charged a generally accepted "fair market" price for hip replacement, they'd still face a price tag of more than $25,000, according the Healthcare Blue Book (www.healthcarebluebook.com). Such fair market prices are hardly the norm.

Why do we pay so much more than European patients for these kinds of surgeries? Part of it is exorbitant U.S. hospital costs. Part of it is the fees paid to surgeons. But a big part is the prices commanded by manufacturers of medical devices, including makers of hip implants. According to Orthopedic Network News, an industry newsletter, the list price of a total hip implant rose nearly 300 percent between 1998 and 2011.

According to the Times, a mere five companies make nearly all the hip and knee implants used in the United States, and three of the five are based in a single town — Warsaw, Ind., which calls itself the "orthopedic capital of the world." All three operate in a similar manner that some health economists describe as a cartel, with their chief executives earning more than $8 million yearly.

Patents, trade policies and a complicated Food and Drug Administration approval process have helped keep out generic and foreign-made implants. That allows manufacturers to charge hospitals up to $5,000 for implants, even though they cost just $350 to manufacture.

In addition, all these companies have strong financial ties to surgeons, and they require doctor groups and hospitals to sign non-disclosure agreements about prices, which means institutions don't know what others are paying. In 2007, joint makers paid $311 million to settle federal accusations they were paying kickbacks to surgeons who used their devices.

As the Times story illustrates, the United States faces the worst of both worlds in controlling costs. Regulators and Congress have failed to break up the hip implant cartel and adjust trade policies to increase competition. Nor has the federal government taken the route of Belgium, which regulates pricing and limits profits for these kinds of surgeries.

With hip and knees replacements expected to escalate because of obesity and aging baby boomers, Congress needs to act. The United States can't afford ever-escalating prices for basic procedures ranging from colonoscopies to joint replacements.

That is something that both Republicans and Democrats should be able to agree on, regardless of their positions on Obamacare.

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