When healthcare reform talk turns to the issue of controlling the runaway increase in our healthcare costs, there’s a lot of talk about the profits and CEO salaries and administrative costs of health insurance companies. And there’s talk about bending the Medicare cost curve over time by subtle and indirect means. For some reason, there’s hardly any talk about why medical procedures somehow cost way more in the US than they do in practically every other industrialized country.

Isn’t that pretty much the biggest factor, though, in the the runaway increase in US healthcare costs, the fact that the underlying cost of healthcare itself — as opposed to the deadweight costs of the health insurance industry — is so much higher in the US than in other countries, and it has been increasing at a much higher rate? So why is no one talking about this at all, or inquiring why it is so, or proposing to address it?

In 2007, per capita healthcare costs in the US were $6,096. That compares with $3,173 for Canada, 3,171 for Germany, $3,040 for France, $2,560 for the UK and $2,293 for Japan.

The gap between US and these other countries is huge. And only a very trivial part of the gap comes from the profits of health insurance companies or the huge salaries paid to their CEOs or their administrative costs. It is the underlying cost of healthcare itself which is the biggest factor that makes our per capita healthcare expenditure so much higher than other countries.

Nor is the difference in per capita costs due to US hospitals and doctors offering significantly better quality of care. This June 2009 op-ed from the NYT makes it clear that hospitals in other countries, even very low healthcare cost countries, offer care that’s comparable in quality to American hospitals; it’s just a lot cheaper:

One consequence of the high cost of medical care in the United States has been the rise of medical tourism. Every year, thousands of Americans undergo surgery in other countries because the allure of good care at half the price is too good to pass up.

Average total fees at well-regarded hospitals like Apollo and Wockhardt in India are 60 percent to 90 percent lower than those of the average American hospital, according to a 2007 study by the consulting group Mercer Health and Benefits (where Dr. Milstein is affiliated). Even compared with low-cost American hospitals, the offshore fees are 20 percent to 50 percent lower.

Most medical travelers seek cosmetic procedures like facelifts and liposuction, but an increasing number have high-risk operations like heart surgery and joint replacement in places like India, Singapore and Thailand.
[...]
Which Americans consider this option? Typically, they are people who have either no health insurance or meager coverage. Though not poor enough to qualify for Medicaid, they cannot afford a good health plan. But lately, even some people with good coverage have been encouraged to take advantage of cost savings abroad.

A few pioneering American insurers like Blue Cross Blue Shield of South Carolina and self-insured employers like the Hannaford Brothers supermarket chain sent American doctors to evaluate foreign hospitals. Favorably impressed, they now offer payment for travel expenses and cash incentives as high as $10,000 for choosing offshore hospitals.

For very costly operations like open heart surgery or hip joint replacement, savings far exceed these payments.
[...]
There is reason to think the quality of care at some foreign hospitals may be comparable to quality in the United States. More than 200 offshore hospitals have been accredited by the Joint Commission International, an arm of the organization that accredits American hospitals. Many employ English-speaking surgeons who trained at Western medical schools and teaching hospitals.

Like the per capita numbers before, those medical tourism numbers are from 2007. A report from the Deloitte Center for Health Solutions (part of Deloitte LLP) talks about the expected impact of the “dramatically rising U.S. health care costs” since then on medical tourism:

The impact of dramatically rising U.S. health care costs is prompting increasing numbers of consumers to consider outbound medical tourism as a viable care option. In 2007, an estimated 750,000 Americans traveled abroad for medical care; this number is anticipated to increase to six million by 2010.

An eightfold increase in three years suggests a pretty dramatic increase, between 2007 and 2010, in the disparity in healthcare costs between the US and other countries. But it still remains the white elephant in the room. Absolutely no one seems to be talking about even recognizing that it’s there, let alone doing anything about it.