Why Are Kaiser Health Care Costs Cheaper In Southern California?

Kaiser Permanente has released their 2017 sample out-patient fees for Northern and Southern California. It’s interesting that fees for simple services such as such as a cholesterol test can be 50% more expensive for Northern California Kaiser members than for Southern California individuals. Not only are the fees higher in Northern California, the monthly premium rates can be over 30% more expensive for the same plan at the same age. Why are Kaiser fees so much cheaper in Southern California?

Kaiser Routine Health Care Services Cheaper In Southern California

First, we need to applaud Kaiser Permanente for even publishing the costs of many routine services which may be subject to a health plan’s deductible. Most health insurance companies refer members to a health care cost estimating tool, which can be wildly inaccurate in the real world. For individuals and families who may have deductible plans where certain services are not covered by a set copayment, such as a routine office visit, being able to reference a price list of services is very helpful. Download the Northern and Southern California Sample Fee Schedule at the end of the post.

Service	Nor Cal	So Cal	% Difference
New Patient Visit Level 1	$70	$60	16.67%
Well-Baby Office Visit Under 1	$175	$155	12.90%
Emergency Care by Physician, Level 1	$135	$125	8.00%
Psychoterapy Visit, Therapy	$166	$136	22.06%
Eye Exam, Routine New Patient	$141	$112	25.89%
Comprehensive Audiometry Evaluation	$77	$62	24.19%
Physical Therapy Exercises, Treatment Only	$65	$54	20.37%
Allergy Shot	$20	$15	33.33%
Colonoscopy and Removal of Abnormal Tissue using Cautery	$1,248	$967	29.06%
CT Scan of Chest, including Dye	$855	$543	57.46%
Mammogram	$514	$334	53.89%
Pregnancy Ultrasound	$443	$289	53.29%
X-Ray of Ankle	$93	$60	55.00%
Alergy Test	$14	$10	40.00%
Cholesterol Level Test	$12	$8	50.00%

Routine Fees Up To 50% More For Northern California

However, I still don’t understand why the costs for services for Southern California Kaiser members are so much lower than prices for Northern California members. Does Kaiser just have more members in Southern California to spread the fixed costs of supplying the services over? Kaiser charges 29% more for a colonoscopy in Northern California than Southern California. Are more people getting colonoscopies in Southern California so the volumes of patients help drive down the costs?

Kaiser is a unique health plan model. You can only get your services from a Kaiser facility unless they refer you to another doctor or hospital outside of Kaiser. From that perspective the Kaiser health plan is controlling costs by not having to pay different providers who may charge more than the usual and customary amounts. People either love Kaiser or they hate Kaiser. For that reason, they are not in a strict competitive environment with other health plans. A person who hates Kaiser will never consider enrolling in a Kaiser health plan unless they are forced to by an employer group plan. Consequently, having really competitive prices for routine services is unlikely to drive consumers to enroll in a Kaiser health plan. Premium rates drive consumers.

Some people will enroll in a Kaiser health plan if the monthly premium savings is great enough versus the competition such as plan from Blue Cross or Blue Shield. But it is also odd that the Northern California rates for the same age and same plan can be 30% higher in Northern California. A 40 year old in San Francisco County will pay 32% more for the same Bronze or Silver plan, with the exact same coverage benefits, than if they lived in Los Angeles County.

Both Bronze and Silver plans have deductibles for which some health care services may be subject to the deductible of the health plan.

• Region 4: San Francisco County
• Region 16: Los Angeles County
• Region 3: Sacramento, Placer and Yolo Counties

Age	20	30	40	50	60
Region 4 Bronze 60	$159.95	$285.89	$321.91	$449.86	$683.61
Region 16 Bronze 60	$120.85	$216.00	$243.22	$339.90	$516.51
% Difference	32.35%	32.36%	32.35%	32.35%	32.35%
Region 4 Silver 70	$220.55	$394.21	$443.88	$620.31	$942.63
Region 16 Silver 70	$166.64	$297.85	$335.37	$468.68	$712.21
% Difference	32.35%	32.35%	32.36%	32.35%	32.35%
Region 3 Bronze 60	$144.71	$258.66	$291.25	$407.02	$618.50
Region 16 Bronze 60	$120.85	$216.00	$243.22	$339.90	$516.51
%Difference	19.74%	19.75%	19.75%	19.75%	19.75%
Region 3 Silver 70	$199.54	$356.66	$401.60	$561.24	$852.85
Region 16 Silver 70	$166.64	$297.85	$335.37	$468.68	$712.21
%Difference	19.74%	19.74%	19.75%	19.75%	19.75%

An individual in Sacramento County will pay almost 20% more for the same plan over the Los Angeles County rate. And on top of the increased premiums, Northern California Kaiser members are subjected to higher fees for services. It’s no secret that health insurance rates in Northern California are higher than Southern California. A lot of it has to do with competition. There are more doctors, medical groups, hospitals, and labs in Southern California than in Northern California. There are also places in Northern California with large hospital organizations like Sutter Health who have a near monopoly of the regional hospitals. Fewer providers coupled with near monopolistic concentration of medical groups and hospitals will eventually lead to higher prices.

Kaiser Health Care Is Usually More Cost Effective

I tend to think of Kaiser as having this cookie cutter health care model where they replicate facilities and the delivery of health care services. The facilities of a Southern California Kaiser campus should be similar to that of Northern California. Of course, wages play a large part in determining the cost of a service to a consumer. Kaiser doctors working in the Bay Area would necessarily have to be paid more just because the cost of living is so much higher because of housing costs. But home prices in Sacramento are less than Los Angeles for the most part. So having Sacramento County rates approaching 20% more than Southern California rates cannot be explained away with a cost of living differential.

Perhaps people in Northern California are just sicker or more accident prone than people in Southern California. Therefore Kaiser Permanente has to pay more claims and in turn they have to charge higher rates. If anyone at Kaiser can explain the higher fees and rates charged in Northern California, I’m ready to listen. There has to be reasonable explanation…I think.

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