Note: This post is not about the proper legal status of abortion or whether it is moral. It’s about medical care costs and how patients pay for it. Readers can appreciate the content of this post regardless of their position on legal abortion.

Politicians like to talk about how to keep medical care costs in check, as they’ve increased faster than the consumer price index. Perhaps the cost of abortions can provide insight as to how to keep costs low.  Dan Mitchell at the Cato Institute posted this slide from a Guttmacher institute presentation:

In constant dollars, the cost of an abortion has remained almost constant since 1983. Why?  It’s not that the supply has increased. The Institute says that ” number of U.S. abortion providers rose until 1982 and has declined since.”

I’m tempted to look at how women pay for abortions. In a different study , that Guttmacher Institute says that  “Although most abortion patients had some type of health insurance, 57% paid out of pocket for this service … 2% reported using other strategies to pay for their procedures—for example borrowing money from a friend, partner or family member.” Some states restrict how insurance policies can offer abortion coverage, either to anyone or to government employees.

Compare this with medical spending in the U.S. in general, where patients pay directly for less than 12% of all medical treatments.

Since most women pay cash for an abortion rather than through insurance it does not surprise me that abortion prices have been constant.  As Mitchell notes, the costs of cosmetic surgery and LASIK eye surgery have decreased, despite advances in technologies related to the procedures.  I’ve heard objections to these examples – that they are elective procedures, and that the same would not apply to non-elective medical procedures.

This is why the abortion example is useful – regardless of whether you think it should be legal or not.   For any women who sees abortion is a choice, I can’t imagine any woman wanting to be in a position where abortion is the best choice.

Then why are prices for abortion, cosmetic surgery, and LASIK constant or decreasing, while the costs of other medical procedures are increasing faster than inflation?  The best explanation I’ve seen is that the consumer is the customer. Patients are spending their own money, and hence are responsive to price differences.  Providers then compete on both price and quality, as they do in most markets.  As Devon Herrick writes:

Long before a patient enters a doctor’s office, third- party bureaucracies have determined which medical services they will pay for, which ones they will not and how much they will pay. The result is a highly artificial market plagued by problems of high costs, inconsistent quality and poor access. … Can the market for medical care be different? Interestingly, in health care markets where patients pay directly for all or most of their care, providers almost always compete on the basis of price and quality. And because they are not trapped in a system that pays for predetermined tasks at predetermined rates, providers are free to repackage and reprice their services — just like vendors in other markets. It is primarily in these direct-pay markets that entrepreneurs are creating many innovative services to solve the very problems about which critics of the health care system complain.

Or, as Paul B. Ginsburg of the Center for Studying Health Systems Change & Len M. Nichols of the New America Foundation and write:

When someone else pays—the health insurer—patients have little price sensitivity and almost no incentive to economize and make sure the expenditure is commensurate with the clinical value of the service.

That empowering the patients as customer keeps prices down is consistent with the RAND Health Insurance Experiment:

Participants in cost sharing plans spent less on health care; this savings came from using fewer services rather than finding lower prices. Those with 25 percent coinsurance spent 20 percent less than participants with free care, and those with 95 percent coinsurance spent about 30 percent less.

As for quality of care, the RAND study found that:

cost sharing did not significantly affect the quality of care received by participants. … In general, the reduction in services induced by cost sharing had no adverse effect on participants’ health.

Also look at recent data on HSA-qualified insurance plans, wosts increase more slowly than traditional health plans

The Guttmacher Institute sites the following sources for abortion price information:

• Henshaw SK, The accessibility of abortion services in the United States, 2000, Perspectives on Sexual and Reproductive Health, 2003, 35(1):16–24, Table 2.
• 2003-2005: Jones RK et al., Abortion in the United States: Incidence and access to services, 2005, Perspectives on Sexual and Reproductive Health, 2008, 40(1):6-16.

(Thanks to Dan Mitchell for the Herrick quote, and the book Healthy Competition for the Ginsburg/Nichols quote.)