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Sunday, January 27, 2013

"Costs to the health care system" What does that even mean?

Almost everyone, not just health care policy wonks, talks about costs to the health care system.It seems that we are speaking about everything related to health care,the doctors,the labs,the hospitals, the physical therapy,the medications used.etc,etc.

When I recently got a MR of my pelvis to evaluate severe groin pain, I saw an orthopedist,who billed me and then I received a bill from the Imaging center and one from the radiologist. For illustration let us say that a total of 2500 dollars exchanged hands. If we consider the three entities who billed me they all received payments. The part of the health care system they represented incurred no net costs,just the opposite. As in typical transactions one man's cost is another person's pay check.

 Since all these elements of the system received money who can we say bore the cost? So should we consider the payers as part of the health care system? That appears  to be a strange way of looking at transactions.If the payers are included in what we mean by the system then does not everything nets out.Payments made by me and what ever insurance I have (private or from CMS) went to another part of the system ( that is if we include the payer as part of the system).

So what do we mean when we say costs to the health care system? I suggest what is really meant is that someone is paying for the service and when we say reduce costs to the system we really mean that we are reducing the amount that someone paid for health care goods or services.Further the reason there is so much talk about that is because much ( if not most) of health care is paid for in part or completely  by someone's else money and that most of the talk generated about reducing cost to the system is by those other people.

When more is spent on housing or purchasing automobiles why do we not hear cries of alarm about excessive costs to the house building system or the automobile manufacturing system. In fact ,there is more than a little panic expressed when home sales or automobile sales fall and then there is  talk about inadequate aggregate demand  and perhaps the need for a goverment stimulus. When I buy a new car, is that a cost to the automobile industry or a small step towards boosting the GDP. If and when the mystical cost curve of health care is finally bent downwards, will we be hearing talk about the need for goverment action to bolster a falling health care system?

1 comment:

Phil_in_VA said...

I appreciate this very interesting perspective. I didn't think of it that way before. The one difference between health care and housing and automobiles might be that the demand for health care is not dependent on income (inelastic? but I'm not an economist). Severe groin pain is a product of fate or lifestyle (jogging?). Society (that's us) doesn't provide you a car when yours breaks, or a house when yours burns (ok, bad example but you get my drift).

I think I'm digging myself in deeper here, proving your point.

It just seems that the demand for health care just seems to get greater and greater with time. Whenever science develops a new (and more expensive) diagnostic devise or treatment or medication the public clamors for it (with reason).

If the demand for health care ever dropped precipitously, I'm sure that there would be calls for Keynsian stimulus to keep all docs, nurses, billing clerks, pharmacy reps employed.