Graphic of the Month

The February graphic of the month highlights the change in various “costs” over the last two decades.  Costs are described in quotation marks here because many of the lines on this graph represent administrative prices, where the reimbursement for a good or service is set by a central authority rather than by the market.  This graph highlights the problem with administrative pricing: they have no relationship to “costs” as defined by the prices of various inputs.  One can see that the cost of running a practice has increased while physician reimbursement has remained flat.  There are various theories on why this has happened, but the result is clear: fewer independent physicians can survive on Medicare rates, leading to increased consolidation, private equity acquisition and worse access to care for seniors.