Why Does an MRI Cost $1,080 in the U.S. and $280 in France?

March 11, 2012
James Doulgeris

Make the beneficiaries of our innovation, regulation, and recourse pay their fair share.

The Washington Post’s Ezra Klein, in an article entitled “Why an MRI costs $1,080 in the US and $280 in France,” correctly concludes the obvious: “The prices are higher.”

But what really drives these prices? Technology -from cotton balls and band aids to drugs to robotic surgical marvels - all of which represent the vast majority of our healthcare costs. They are the tools that our doctors, hospitals, and other clinicians use. Those tools, in skilled hands, have more than doubled our life spans at a vastly improved quality of life in a bit over a hundred years.

The real reason an MRI costs four times higher in the U.S. than it does in France is because we Americans bear the entire burden to invent it, develop it, make it safe, and pay if it proves not to be safe. France only pays for the product and protects its government-run system, doctors, and technicians from liability. Our doctors and hospitals are fully liable, and we bear that cost, too.

Klein accurately documents that the U.S. is far more expensive than its western counterparts, again properly citing that the single-payer, government-run systems negotiate aggressively to pay only for the product while U.S. providers, from doctors to drug companies, set their own prices. They set them high. And, the rest of the world owes us for it.

We need real and fundamental change and an honest public conversation to set things right. We need leaders with the kind of political will that takes courage, honesty, drive, and the integrity to fix fundamental problems. Our representatives, from the president to U.S. Congress, must step up because only they can enact and enforce the solution. And, they must do it now and start here with the big dollars:

1. Everyone must pay their share for innovation. Virtually the entire cost of medical and healthcare innovation for the world is recovered in high U.S. prices including the cost of all the products that don’t get to market. The rest of the world innovates, but only because they can recover their costs in the U.S. by building them into their price. Government controlled systems, from Argentina to Europe, pay only for the product. Join them and innovation stops - everywhere. They need to pony up.

2. Everyone must pay their share for product safety. Innovators bear the entire burden to satisfy regulators their innovations are safe. The costs begin in the millions and escalate into the billions for some drugs - pass or fail - and plenty fail never generating a dime in revenue. The costs are not only in the United States, but the right to sell in other countries requires paying to comply with their regulations. The U.S. bears virtually the entire cost including foreign regulatory compliance in high prices because, once again, government controlled systems pay only for the product.

3. Everyone must pay for the right of recourse. If a product proves to be harmful, even if only to a small percentage of people, the innovator pays to defend itself and, usually, plaintiffs costs. Plus damages. And government-run systems protect themselves by limiting liability to themselves and their providers, transferring liability to the innovators. They pay only for the product. We pay for the world’s right to be made whole in high prices.

Start here and we will have the resources to tackle the rest.

Make the beneficiaries of our innovation, regulation, and recourse pay their fair share.

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