Harvey Abrams PhD
Today’s post is from Guest Editor Harvey Abrams, PhD. He picks up the hearing aid Pricing issue with a vengeance, continuing our ongoing discussion and economic analysis of Price in the industry. The Starkey Hearing Blogs ran Dr Abram’s post on June 14, 2013 and graciously gave him permission to reformat and publish it at Hearing Economics as well. It’s a compelling read!
Go Ahead — Make My Day
My wife is an art historian. Nothing gets her angrier than to overhear some museum goer say, “Two million dollars for that painting? I could have done that!” It takes all of her will power not to turn around and say, “Well, why don’t you?”
I have the same reaction when I hear someone remark that they can build a hearing aid for $100. Well, why don’t you? Then after you build the first one, build several million more. What’s that you say? In order to build that many hearing aids you’re going to have to buy factory space, assembly machinery, test equipment and hire thousands of workers to research, develop, test, assemble, market and distribute your $100 hearing aid? While you’re at it, don’t forget to provide those technicians, scientists and administrative personnel with health and life insurance, paid vacation and sick leave, training, computers, supplies, a safe workplace, and contribute to their social security and pensions.
Oh yes, you’ll also need to be in compliance with the myriad of municipal, state, and federal laws that regulate the manufacture and distribution of medical devices and then be prepared to repair and replace your $100 hearing aid free of charge for at least a year. Suddenly that $100 hearing aid is looking a bit more expensive, isn’t it? Don’t forget that hearing aid manufacturers are running a business that must realize a return on investment in order to continue to operate and to continuously improve their products and develop new technology. The research and development that go into advances such as feedback management, digital noise reduction, adaptive directionality, wireless streaming, and frequency lowering don’t come cheap. The costs I’ve reviewed so far are just those associated with the making of the hearing aid. What about all of the professional costs associated with fitting the hearing aid – a process that is unique for each patient?
Not an Off-the-Shelf Device
A hearing aid is not a consumer electronic device. The proper selection and fitting of hearing aids require the skill of highly educated and trained hearing healthcare professionals. The professional services associated with the selection and fitting of hearing aids are often “bundled” with the hearing aid cost. As a result, patients are usually unaware of the how much of what they are charged relate to the professional services as opposed to the device itself. Here is just a partial list of the professional services that make up that “bundle.”
- Hearing evaluation
- Hearing aid evaluation
- Counseling concerning test results and recommendations for treatment
- Earmold impression
- Probe microphone verification
- Orientation and instructions on the use and care of the device
- Routine follow-up visits
- Unscheduled visits for adjustments
- Minor repairs
- Rehabilitation services
Each of these services takes time, specialized equipment, and supplies. And don’t forget – the audiologist is either an employee of a business or healthcare facility or a business owner him or herself with all of the costs (space, employees, utilities, insurance, licenses, maintenance, payroll, etc.) associated with running any business. That $100 hearing aid keeps getting more expensive, doesn’t it?
Adjusted (Real) Price of Hearing Aids
Finally, our friend who can make that hearing aid for $100 might be interested to know that the cost of hearing aids, corrected for inflation, has remained relatively stable over the last 35 years. Figure 1 illustrates the average cost of a hearing aid from 1975 to 2010.{{1}}[[1]] Doyle JB. How much is a hearing aid worth today? Hearing Instruments. 1980;31(9):26.[[1]] {{2}}[[2]]Fig 1 is also reproduced in a relevant discussion on hearing aid pricing by Amlani & Taylor, Three Known Factors Impeding Hearing Aid Adoption Rate.[[2]]The historic average (based on year 2000 dollars) is approximately $900. We see a sudden increase in cost of a hearing aid in the year 2000 as a result of the introduction of digital signal processing into hearing aid technology, but that cost has remained fairly constant through 2010 and is still within 1 standard deviation of the historic mean.
Our friend may respond by saying, “But shouldn’t the price have come down? After all, the cost of other digital devices like my PC has gotten lower over time.” Good question, but don’t forget, the hearing aid is a medical device, not a consumer electronic device and many hearing aids are custom-made. Most hearing aid manufacturers have a six-month cycle for introducing new technology. Imagine if Apple introduced a new version of the iPhone every six months? Speaking of phones, I remember paying $29.95 for a cordless phone not too long ago. How much did that iPhone 5 cost you? That said, the cost of digital hearing aids has decreased when compared to the inflation-corrected price of a hearing aid in 1960 (Fig. 2).{{3}}[[3]]Lundeen C. Hearing aid prices in historical context. Hearing Review. 2004;11(10):18-19.[[3]]
It’s certainly possible that factors like the Internet and direct-to-consumer sales may change the price structure of hearing aids but for now, the extraordinary sophistication and complex technology that go into those small devices and the impact they have on the quality of life of individuals with hearing loss and their families make hearing aids a real bargain.
Harvey Abrams, PhD, is the Director of Audiology Research at Starkey Laboratories. Previously, Dr. Abrams served in clinical, research, and administrative capacities with the Department of Veterans Affairs and the Department of Defense. He also teaches distance-learning courses for the University of South Florida and the University of Florida. Dr Abrams received his master’s and doctoral degrees from the University of Florida. His research has focused on treatment efficacy and improved quality of life associated with audiologic intervention. He has authored and co-authored several recent papers and book chapters and frequently lectures on outcome measures, health-related quality of life, and evidence-based audiologic practice.
(editor’s note: this is Part 5 in the multi-year Hearing Aid Pricing series. Click here for Part 4 or Part 6)
So many great points, thank you for sharing this!
Speaking of off the shelf or mail order devices, I think you can clearly see with Holly’s last Intricon post that OTC devices may be cheaper, but there’s a reason you pay more for a professionally and properly fit and adjusted hearing aid.
Yeah, yeah, yeah: You buy SoC’s from ON Semiconductor, cases from IntriCon, and “feature” algorithm (anti-feedback, noise reduction, wind noise, frequency lowering, etc…) from Two-Pi
http://www.two-pi.com/
What’s more, not all mfrs do do it the right way by designing ASIC’s like Widex & Oticon; instead trading high battery drain for low design costs.
Or, you just ship the chips & software off to a factory in China, and screw the manufacturing overhead.
~Anonymous
what gets me is that you see some of the Big 6 companies shipping most of their remaining production to China from the US and Europe. And yet we are still paying the same, even more in most cases. Something doesn’t add up!
6 companies+98% of global market= MONOPOLY!
Great blog, Harvey. In fact, it’s the best I’ve seen to answer the popular question: “why are hearing aids so expensive?”. I hope I can get permission to distribute a copy of this for my class this fall. I’ll see you later this month in MLSP. Earl
The original article distorts the issue., All those ancillary but essential services are nothing to do with the cost of the hearing aid itself. $100 is quite realistic, given a sensible volume, which is much larger for a digital aid than an analogue aid. I would emphasise that while digital aids are very much more versatile, analogue aids were widely welcomed for around 70 years and are MUCH better than no aid at all. The electronics in an analogue aid cost only a few $, even when AGC is included. Not making the aid so minute can reduce the overall cost a lot AND allow better performance.