An article in The Atlantic explores the confusion surrounding the term ‘health care costs’ – and how the term’s multiple meanings are “getting in the way of a frank discussion about how the nation can address the central challenge: that we are spending more and more on health care without seeing equivalent improvements in health.”
According to the article, different stakeholder groups use the term to mean different things: “Politicians talk about costs in reference to federal and state spending on health care. When hospital administrators and physicians talk about health care costs, they are usually referring to their costs of production, the money they spend on the resources needed to care for patients. Business leaders use the term health care costs when what they really mean is the price of insurance, or the amount they spend on their employees’ health care insurance plans.”
The authors propose three distinct terms be used. Cost would refer to the cost of the production of health care services. “In order to give a patient a CT scan, a hospital has to have purchased a scanner. It must also pay a technologist to perform the scan and a radiologist to read it — to say nothing of paying for the hospital building itself, chairs in the waiting room, a receptionist at the information desk, and the parking lot outside, all of which are components of the cost of a scan.”
The second term, price, would refer to how much the hospital pays for the scanner, or how much the insurer pays for the patient’s scan.
The final term, spending, “…is the total number of dollars paid for a particular group of people over a set period of time.”
The authors argue that these distinctions are necessary because “the reason we should be worried about our rising national health care bill is that health care spending is going up faster than the rest of the economy. At current rates, the Congressional Budget Office estimates we’ll be devoting the pretty much the entire federal budget and about 50 percent of GDP to health care by 2080.”
(source: U.S. Health Care Spending 101 iPad app)
AHIP’s iPad app, U.S. Health Care Spending 101, uses federal data to show the history, components and sources of health care spending.
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