COST / MEASURES   (C/M)

The Office of the Actuary of CMS (Centers for Medicare and Medicaid Services, Department of Health and Human Services), analyses trends in health care expenditures. For further information: such an analysis, recently by Stephen Heffler, et al., appears on a periodic basis at the web site of "Health Affairs." National Health Expenditures (NHE) are therein reported and projected as shown in the following table (taken from Exhibit 1 of the Feb. 23, 2005 analysis).

year
1993 1998
2003 2006 2014

Total (billion$)
888 1,151 1,679
2,078
3,586
   Hospital
320
379 516
624
1,007
   Professional services
281
376 542 667 1,161
   Long-term care
88
123 151 182 291
   Drugs & equipment
88
133 232 309
608
   Administration of insurance
53
65 120
147 253
   Public health
27
38 54 69 131
   Research
16
21 40
51
91
   Construction
16
18 25 29 44
NHE per capita ($)
3,354
4,098
5,671
6,830
11,046
NHE as % of GDP
13.4
13.2
15.3
16.0
18.7


Costs are sometimes measured by charges, but a better measure usually is of expenditures.

Expenditures frequently are measured in terms of types of charges: hospitals, physicians, pharmaceuticals, etc. These may be measured for a geographic region or a health care plan/institution. The following table comes from Aaron Catlin, Cathy Cowan, Stephen Heffler, Benjamin Washington, and the National Health Expenditure Accounts Team. "National Health Spending in 2005: The Slowdown Continues," Health Affairs, January/February 2007.




Year 2004   2005  
$ (billions);   % change $ % $ %
Total 1,859 7.2 1,988 6.9
   Hospital 567 7.9 612 7.9
   Professional services 581 7.0 622 7.0
   Long-term care 158 6.2 169 7.3
   Drugs & equipment 246 7.0 259 5.4
   Administration of insurance 135 10.3 143 5.7
   Public health 53 -0.6 57 7.7
   Research 38 6.7 40 4.6
   Construction 82 7.6 87 6.3
NHE per capita ($) 6,322 6.2 6,697 5.9
NHE as % of GDP 15.9   16.0  

Costs also may be measured in terms of the (
for further information) costs of coverage for insurance purchased by an individual, an employer, or a government.

But there are several important aspects to costs, with different measures. Deciding which measure are used and publicized will influence policy, for example in deciding the agenda of public concern and creating incentives that guide the administration of programs. The measurement of costs may be done according to:
-- Classification by the source of the service, as in the above table.
-- Classification by purpose of expenditure: e.g. disease prevention, chronic disease, acute care, etc.
-- Classification by condition or procedure: e.g. back pain, VBAC
-- Classification by population group: e.g. by age, by socioeconomic status.
-- Classification by payer: e.g. employer, individual, government.
-- Classification by geographic area: e.g. by nation, by state, by rural v. urban
-- Classification by elements of Gross Domestic Product.
Consider how the choice of the classification used affects how concerns are raised, how interests are involved, how "solutions" are formulated, how programs are administered, etc.