Tuesday, October 8, 2013

Cost versus Price

Many seem to be confused about certain financial issues including health care, car payments, credit card debt, and so forth, because they don't understand Cost versus Price.

Price is what an individual pays as a monthly bill or at the time of services.  Cost is more comprehensive, including such things as subsidies, overhead, interest, and indirect costs.  For example, the Cost of a car is its sticker price plus the interest on a car loan plus operating expenses, maintenance, and insurance.

In the health care debate, politicians focus on Price -- the bill an individual pays -- while ignoring Cost -- total money involved.  Adding a layer of government bureaucracy on top of the system can only increase the Cost; there is no other possibility.  If that cost is to be covered, taxes must increase.  If that cost is not covered, national debt must increase.

Some people might see their Price of health care decrease because they are being subsidized by other tax payers, but inevitably because the Cost of health care is higher, Price and taxes must both increase.

2 comments:

  1. They cut the cost by decreasing the quality of care!

    ReplyDelete
  2. In fact, the cost of health care continues to rise without relation to quality.

    ReplyDelete

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