• Clarifying “cost” and “spending”(or “price”)

    Just a quick note, because this comes up all the time and I just noticed it in the comments. The words “cost” and “spending” sometimes confuse, but they shouldn’t. What I spend for a good is not its cost to the supplier. It might cost the baker $1 to make a loaf of bread. I spend $3 for it.

    However, so long as it is clear from context, it is OK to write that my cost for the bread is $3. Likewise, the cost of health care to the taxpayer or to the citizenry is what we spend on it. That’s different from the cost to the suppliers of health care.

    There’s no need to be confused about this. It should be clear from context what is meant by “cost.” Typically, when it comes to health care, what is meant is the cost to the payer, not the health care provider. Typically, when one means cost to the health care provider one says so explicitly.

    When I write about health care costs I am almost always talking about taxpayer costs or premiums. If it is ever unclear, just ask. But please don’t assume I don’t know the difference between a cost and a price.

    Update: Same goes for me!  – Aaron

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    • To be fair to all involved, the U.S. health care mess doesn’t exactly make it easy – there are all kinds of costs and prices, including:

      * the provider’s cost (to provide the service), which is not easily defined but is presumed to vary depending on whether it is provided on an inpatient or outpatient basis.

      * the list price (which is often completely opaque outside the hospital).

      * the charge (again, varying depending on whether the service is delivered on an inpatient or outpatient basis), which generally (but not always) is the same as the list price, and has very little relationship to…

      * the reimbursed amount (which varies across payers, sometimes on an individually negotiated in-network basis and sometimes on an out-of-network non-negotiated basis),

      * the cost to the patient, which includes copayments, coinsurance, deductibles, premiums…

      So some confusion between sender and receiver – even to the extent that one or the other appears unreasonably ignorant of basic distinctions – is, perhaps, unavoidable.