By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
Health Works CollectiveHealth Works CollectiveHealth Works Collective
  • Health
    • Mental Health
    Health
    Healthcare organizations are operating on slimmer profit margins than ever. One report in August showed that they are even lower than the beginning of the…
    Show More
    Top News
    stress management for healthcare workers
    3 Tips For Healthcare Professionals: How To Stay Beautiful, Healthy, and Happy
    November 2, 2021
    importance of relaxing on the weekend for your health
    Importance of Relaxing During the Weekend for Optimal Health
    March 25, 2022
    LASIK Eye Surgery
    What Is LASIK Eye Surgery?
    May 16, 2022
    Latest News
    The Wide-Ranging Benefits of Magnesium Supplements
    June 11, 2025
    The Best Home Remedies for Migraines
    June 5, 2025
    The Hidden Impact Of Stress On Your Body’s Alignment And Balance
    May 22, 2025
    Chewing Matters More Than You Think: Why Proper Chewing Supports Better Health
    May 22, 2025
  • Policy and Law
    • Global Healthcare
    • Medical Ethics
    Policy and Law
    Get the latest updates about Insurance policies and Laws in the Healthcare industry for different geographical locations.
    Show More
    Top News
    What Would You Do?
    January 28, 2013
    How Martin Shkreli is driving down drug prices
    May 24, 2017
    Here’s How The Body Deals With Pain – And How You Can Treat Yours
    December 31, 2018
    Latest News
    Strengthening Healthcare Systems Through Clinical and Administrative Career Development
    June 13, 2025
    Building Smarter Care Teams: Aligning Roles, Structure, and Clinical Expertise
    May 18, 2025
    The Critical Role of Healthcare in Personal Injury Recovery: A Comprehensive Guide for Victims
    May 14, 2025
    The Backbone of Successful Trials: Clinical Data Management
    April 28, 2025
  • Medical Innovations
  • News
  • Wellness
  • Tech
Search
© 2023 HealthWorks Collective. All Rights Reserved.
Reading: The Problem with Thinking We Get What We Pay for in Health Care
Share
Notification Show More
Font ResizerAa
Health Works CollectiveHealth Works Collective
Font ResizerAa
Search
Follow US
  • About
  • Contact
  • Privacy
© 2023 HealthWorks Collective. All Rights Reserved.
Health Works Collective > Business > Finance > The Problem with Thinking We Get What We Pay for in Health Care
BusinessFinance

The Problem with Thinking We Get What We Pay for in Health Care

Brad Wright
Last updated: July 25, 2014 8:00 am
Brad Wright
Share
6 Min Read
cost and value in healthcare
SHARE

cost and value in healthcareLuxury goods are items that people purchase in disproportionately greater amounts as their income increases. That’s how economists think of them, anyway. But for the average American, a luxury good means something else. We tend to think of luxury goods being things like designer clothing, luxury cars, and high-end restaurants.

cost and value in healthcareLuxury goods are items that people purchase in disproportionately greater amounts as their income increases. That’s how economists think of them, anyway. But for the average American, a luxury good means something else. We tend to think of luxury goods being things like designer clothing, luxury cars, and high-end restaurants. Our minds fill with images of Gucci, Burberry, and Louis Vuitton, or Mercedes-Benz, Porsche, and Ferrari. One thing is clear to us: items made by these manufacturers are expensive. That’s an objective fact.

Another thing may seem clear to us, but it involves more of a cognitive leap: we assume that these items are of a higher quality than their non-luxury counterparts. In effect, what we are doing is making a strong association between the price and the quality of a good or service. Granted, there are good reasons to make that association to a point, because price does correlate with the materials, labor, and so forth that go into making an item. But at a certain point, high prices tend to be used as signals or markers of exclusivity rather than indications of the true worth of an item.

For instance, on a recent trip to England, I contemplated purchasing a Burberry wallet as a gift for my wife. But, given the exclusive luxury pricing of the item, combined with the weak exchange rate, the wallet would have cost roughly $250. Was the wallet nicer than one I might pick up at Wal-Mart for $15? Without question. But was it nicer than one I might pick up at Dillard’s department store for $50? Highly questionable. In the final analysis, then, I’d be better off giving her the $50 wallet filled with $200 in cash.

More Read

5% of Patients Account for Half of Health Care Spending
Disruptive Innovation or “Woo”?
Cleveland Clinic CEO Recommends Changes to Current ACO Rules
23andMe Suspends Genetic Testing During Review Process
Social Media Summit at Mayo Clinic: Day One Exclusive Report

But plenty of people do buy that $250 wallet, and the question is why. The answer is that they assume that it is a higher quality item, that it is an exclusive brand, and that it will signal prestige to others, and that–through some sort of mental math–is somehow worth forking over the extra money.

Cut to health care. Does the same mentality apply? Is higher cost health care perceived as being higher quality? Is something better simply because it is more expensive? Based on the above analogy, you could answer yes, but only to a point. Beyond that, at some point, more health care spending is simply wasteful. But, how does it play out in practice?

Obviously, Americans spend a lot on health care, and it really comes down to two factors: prices and utilization. We’re looking at prices here. There are a variety of reasons why prices are a tad bit wonky in the U.S., including things like third-party payers and information asymmetry, but might patient perception also be a factor? The answer, according to a study funded by the Robert Wood Johnson Foundation, is yes. Asked whether higher quality care comes at a higher cost, 48% said yes, while 37% said there was no relationship, and the other 15% didn’t know or said “it depends.”

Framing the question in the negative, though, changed things. Asked whether lower quality care comes at a lower cost, only 29% said yes, while 46% said there was no relationship, and the other 25% didn’t know or said “it depends.” So, we appear to have succumbed to the idea that if you want high quality care, it’s going to cost you more, while we also seem to recognize that you can pay a lot and still receive low quality care.

What this should point out to us, is that the relationship between prices and quality in health care is limited, much like it is with other goods and services. Clearly, at lower levels, incremental increases in price are likely to reflect differences in quality, just like our wallet analogy. The real question is: At what point does the additional cost simply become a meaningless signal, unrelated to additional gains in quality, and representing excessively wasteful health care spending? And, more importantly, how do we ever convince people of this?

cost vs. value / shutterstock

Share This Article
Facebook Copy Link Print
Share

Stay Connected

1.5kFollowersLike
4.5kFollowersFollow
2.8kFollowersPin
136kSubscribersSubscribe

Latest News

Transcranial Magnetic Stimulation (TMS) Therapy
How TMS Therapy Helps with Treatment-Resistant Mental Illness
Mental Health Therapies
June 13, 2025
Strengthening Healthcare Systems Through Clinical and Administrative Career Development
Global Healthcare Policy & Law
June 11, 2025
magnesium supplements
The Wide-Ranging Benefits of Magnesium Supplements
Health
June 11, 2025
preparing for next pendamic
Preparing for the Next Pandemic: How Technology is Changing the Game
Technology
June 6, 2025

You Might also Like

healthcare consumers
BusinessSocial Media

Who Is the Healthcare Consumer?

September 12, 2013

3 Possible Scenarios for IT’s Role in Health and Healthcare

September 4, 2014

There is No Such Thing as an “Unbundled” Medical Bill

November 28, 2011
Hospital Administration

A Night in the ER

October 7, 2011
Subscribe
Subscribe to our newsletter to get our newest articles instantly!
Follow US
© 2008-2025 HealthWorks Collective. All Rights Reserved.
  • About
  • Contact
  • Privacy
Welcome Back!

Sign in to your account

Username or Email Address
Password

Lost your password?