Healthcare Prices Aren't Rising When Patients Pay The Bill

Real Costs of Cosmetic Surgery Fell Over the Last Decade

DALLAS (May 7, 2003) -- Although prices for health care services have risen almost twice as fast as consumer prices generally over the past decade, prices for cosmetic surgery are actually lower in real terms, according to the National Center for Policy Analysis (NCPA).

The key difference, according to the NCPA, is who pays the bill. Third parties (insurers, employers and government) pay most of the costs of health care. But cosmetic surgery is almost always paid by patients out of their own pocket.

"Prices are rising where patients are spending someone else's money," said Devon Herrick, NCPA research manager. "Prices are held in check where patients are spending their own money."

The report shows that most of the time patients pay only a small portion of the cost of medical care:

  • For every $1 spent on hospital care, patients pay only 3 cents out of their own pockets.
  • Patients pay less than 15 cents out of pocket for every $1 they spend on physician services.
  • For the healthcare system as a whole, patients pay only 18 cents out of each $1 they spend.

"We are always less prudent when we are spending someone else's money," said Herrick. "We are a lot more careful when the money we spend is our own. If patients pay only 18 cents out of pocket every time they spend a dollar, their incentive is to consume health care until it's worth only 18 cents to them. If the whole dollar comes out of their own pockets, they will make sure they get a dollar's worth of care."

Cosmetic surgery prices have risen only about half as fast as consumer prices generally over the last decade, according to the report. Among the factors that keep cosmetic surgery prices low are the following:

  • Cosmetic surgeons search for ways to be efficient; for example, performing operations in their offices, rather in a hospital.
  • Cosmetic surgeons often quote patients a package price, and Web sites offer competitive bids for surgical procedures.
  • When procedures become pricey, substitute products quickly emerge; for example, laser resurfacing, Retin-A treatments, botox or collagen injections, chemical peels and dermabrasion can replace the need for a costly facelift.

The report says that an explosion of third-party payment of medical bills through Medicaid (for the poor), Medicare (for the elderly) and private insurers is chiefly responsible for medical inflation in the modern era.

"Prior to the advent of Medicare and Medicaid, health care spending never exceeded 6 percent of gross national product; now it's 14 percent," Herrick noted.