How have healthcare prices grown in the U.S. over time?
Peterson-Kaiser Health System Tracker
May 8, 2018
In this analysis, we explore trends in prices for health services over time in the U.S. (A related chart collection shows trends in prices and utilization in the U.S. and comparable countries). We find that prices have increased for a variety of health services more rapidly than general economic inflation, particularly for the privately insured. Additionally, there is wide geographic variation in the prices paid for the same services across major metropolitan areas in the U.S.
Since the end of 2007, healthcare prices have grown 21.6%, while prices in the general economy (measured by the GDP deflator) have grown 17.3%.
A price index is a standardized measure of how average prices have changed over time. Prices for inpatient care have risen more rapidly for patients with private insurance when compared to prices for patients with Medicare or Medicaid. Between Mid-2014 and first quarter 2018, inpatient prices for patients with private insurance rose about 13 percent compared to about 3 percent for patients with Medicare and Medicaid, and about 6 percent for the general economy.
This recent faster growth in inpatient prices for the privately insured is the continuation of a longer trend. This chart, which updates and refines data presented here, shows that inflation-adjusted private prices for hospitals stays are higher than prices paid by public programs and have been growing much faster. In 2015, hospital inpatient prices for private patients were 68 percent above those for Medicare patients.
The increase in private prices can be seen in the cost of some common inpatient procedures. In our analysis of employer claims data, we refer to “prices” as the weighted average of actual expenditures made for a given service by insurers and enrollees in the large employer market. The average price paid by large employer plans for an inpatient admission for a laparoscopic appendectomy increased by 136% between 2003 and 2016, much faster than general price increases over the period (28%).
There is a similar story for inpatient admissions for full knee replacements, where the average price paid by large employer plans increased by 74% between 2003 and 2016, compared to 28% increase in overall inflation.
As others have shown, there is considerable variation around average price paid for the same procedures. In 2016, while the average price paid by large employers for an admission for a full knee replacement was $34,063, 25 percent of admissions had a price of $24,734 or less and another 25 percent had prices higher than $39,786. Ten percent of admissions had prices in excess of $52,181 (53% above the average).
For laparoscopic appendectomies, the average price paid for an admission was $20,192 in 2016; 25 percent of admissions had prices of $12,088 or less while another 25% had prices of over $24,847. Ten percent of admissions had prices in excess of $35,308 (75% above the average).