I found this article on medical prices in other countries vs the United States to be a pretty good starting point. So, why do Americans pay such high prices?
“Other countries negotiate very aggressively with the providers and set rates that are much lower than we do,”
In the United States "Providers largely charge what they can get away with, often offering different prices to different insurers, and an even higher price to the uninsured."
And from the perspective of the patient in the US, there's a confluence of factors that all make it extremely difficult to be price sensitive. It seems like almost every factor that could make a market inefficient or demand for a service insensitive to price applies in some way in healthcare.
So, you are being price gouged for a medical service or products but:
- You may not be in a position to refuse this care.
- You may be in a time sensitive situation; or just as often, you may be uncertain whether or not you are in a time sensitive situation.
- You are likely to want to do "everything possible" in such an important area as personal health.
- It is hard to know what care is necessary and what might be overkill.
- There is always asymmetrical information - providers are more knowledgeable than you. Providers of care have an incentive to provide care.
- There are a lot of moving parts and complex information both medically and within the health system.
- It can be difficult to shop around or compare prices.
- The scope of the medical issue or the treatment needed to be done is often not known up front.
- It seems quite difficult to definitively know whether your insurance will cover something until you have already received services.
- If you are in the middle of a medical situation you are not in a strong position mentally, physically, or financially to negotiate.
- Physicians and care providers have position of trust and authority, even more so than in most industries.
- There are often no substitutes or alternatives for a given drug, procedure, etc.
- It is difficult to switch providers mid-treatment, and in general, or or to know if you should.
- You know that have insurance for a particular service and so you are STILL not sensitive about price.
