Extreme Price Variations Could Make Joints Ache

Costs for knee and hip replacement surgeries have varied by as much as 313 percent across 64 U.S. markets, according to an analysis conducted by Blue Cross and Blue Shield (BCBS). The analysis is based on three years of independent BCBS companies’ claims data and serves to inform consumers and employers of extreme price variations and shopping options. The report focused on these types of surgeries because they are emerging as the most prevalent in the United States.

Cost Increase

According to the report, Medicare actuaries expect that through 2023, health care costs will grow by an average rate of almost 6 percent each year. National health spending will increase over the next decade due to the gradual rebound of the economy and the growing numbers of newly insured individuals thanks to Medicaid expansion and affordable health care choices in Health Insurance Exchanges created through the Patient Protection and Affordable Care Act (ACA) (P.L.111-148). As the number of covered individuals grows, so too will health care use and spending. The number of uninsured is expected to decline by nearly 50 percent from 45 million in 2012 to 23 million in 2023 due to the ACA.

Report Findings

The analysis found that not only did knee and hip replacement surgery costs vary across the country, but they also varied within the same geographical areas. The average typical cost for a total knee replacement procedure was $31,000 in the 64 markets that were studied; however, the procedure could cost as little as $11,300 in Montgomery, Alabama, and as high as $70,000 in New York, New York. In Dallas, Texas, a knee replacement could cost between roughly $16,800 and $61,600 depending on the hospital, resulting in a 267-percent cost variation.

The average typical cost for a total hip replacement procedure was $30,100 throughout the 64 markets. In Birmingham, Alabama, hip replacement could cost as little as $11,300, and as much as $74,000 in Boston, Massachusetts, which also experienced the greatest variance within the same market, with costs as low as $17,900 for a 313-percent cost variation.

Benefit of Variation

BCBS notes that “a lack of cost variation within a market can negatively impact consumers when prices are consistently high.” For instance, in Fort Collins-Loveland, Colorado, there was only a less than one-percent difference in the price for a total knee replacement procedure, leaving consumers no choice but to pay the determined cost. Notably, the average hip replacement cost of $56,000 is more than $25,000 higher than the average cost for all 64 markets in the study.