I was going to post a diary that tries to define health care as an industry, but I need to consult several additional sources before finishing that submission. In the meantime, I wanted to make a few comments about the data that is usually presented to quantify the debate because I am not sure that the way the data is defined and used adequately helps us to understand the scope of the issue.
Virtually every single contribution to the debate about health care costs begins with the scary numbers taken from either the Congressional Budget Office or from HHS: total U.S. annual expenditures for health care will shortly exceed $3 trillion, which is 16% of the Gross Domestic Product (GDP) and will soon account for more than 20% of GDP.
Question #1. What is the GDP?
Answer: The GDP is the dollar value of all goods and services that are consumed by the society, along with the value of everything thst is produced but not yet consumed. The GDP is therefore not only a measure of the size of the economy, but also the standard of living based on the consumption of goods and services.
Question #2. Why are health care expenditures compared to the GDP?
Answer: I'm not sure. After all, there's nothing intrinsically bad or good about any particular expenditure, if it is defined in terms of economic growth. Remember, the GDP measures economic growth (or decline.) It doesn't measure fiscal trends, or household income, or any of the other factors that may be impacted negatively by health care spending.
The real problem with comparing health care expenditures to the GDP is that it seriously undercounts the real economic impact of health care on the overall economy because there is much more to health care spending than the purchase of health care services.
As to the purchase of health care services, according to HHS, Americans spent $815 billion on hospital stays, $515 billion on physician and clinic visits, $260 billion on pharmaceuticals, $195 billion on dental services, $69 billion on shrinks, therapists and chiropractors, and the balance of the $2.7 trillion expended in 2010 on various forms of residential care. In other words, the debate about health care costs is framed, data-wise, by personal consumption of health care services.
But if we are trying to figure out the impact of health care costs on the economy, shouldn't we also include such things as the more than $150 billion revenue received by manufacturers of health devices? What about the $45 billion earned by companies that make and sell medical IT hardware and software? These numbers go into the GDP as sales of goods, rather than sale of services. But not a dime of this revenue would even exist were it not for the health care services that they support.
And let's not forget the over-the-counter (OTC) marketplace, which accounts for somewhere between $20 and $30 billion in annual sales, never mind all those ankle and leg braces, diet supplements and sex stimulants which consumers purchase because, like it or not, they believe that the money for all that crap is helping them achieve better health.
The problem with the data presented in the health care debate is that it defines health care onlyas the delivery of services, when in fact, the delivery of services is only one way in which the health care industry generates revenues and profits. Like many industries, health care revenues derive from multiple markets and appeal to different types of consumers with different expectations and differening amounts of resources to expend on health care products.
This will become clearer in our next diary when we analyze health care not as a profession, not as a service, but as an industry.
