LETTER: $68,000 bill for knee replacement is symbol of the out-of-control costs of health care

Believe it or not, the average cost of health care for a family of four in America in 2023, according the Milliman Medical Index, was $31,065 in an employer plan.

Employees pay about $8,000 per year on average for premiums, co-pays and co-insurance.

Health cost inflation has consistently run hotter than the general inflation rate. Out-of-control health costs are the leading cause of personal bankruptcy in the U.S.

The runaway health costs in Wisconsin are hurting companies and the state’s economy as well.

Based on an employer survey of business leaders, Wisconsin Manufacturers and Commerce (WMC) said recently that businesses here are “at an extreme disadvantage” when it comes to health care costs.

Among the drivers of soaring costs of care are higher wages for scarce workers, mergers of providers to gain market leverage for higher prices, price sharing by providers through health plans they own together and escalating drug prices.

WMC stopped short of calling for trust-busting in the medical industrial complex or for more price regulation through a Public Service Commission.

Here’s one more factoid to make the case that soaring health costs are the number one economic issue facing citizens in the country: The Milliman Index puts the average sticker price of a joint replacement at $68,616.

That is an absurd price. Cost accounting puts the total costs for the prosthetics, hospital and surgical at less than $10,000. My company Serigraph Inc pays $28,600 through a direct contract at one of the best bone shops in the country. In short, the pricing array for procedures in America is one of chaos. The famous Omaha Surgical Center charges about $15,000 all in.

Meanwhile, more and more self-insured employers are working to change the game at the ground level. They have installed on-site care clinics that work proactively to keep people healthy and out of hospitals, and with increasing numbers of “direct primary care centers” that compete with the big systems.

They are putting together a network of direct contracts for expensive procedures at far lower prices. They are incentivizing family wellness. They are finding pharmacy benefits managers that pass along all drug companies’ rebates (aka kickbacks) for specialty drugs.

The cumulative results for companies that apply management rigor and smarts to health costs is that they operate at about half of the Milliman total.

Torinus, of West Bend, writes a blog on health care, business and politics at johntorinus. com.