The phrase “health care dollar” is commonly used when talking about overall medical-related expenses. But where does that health care dollar actually go?
Total hospital costs account for 40.7 cents of each dollar, according to AHIP. It breaks this expense into three categories:

• Outpatient hospital costs (19.9 cents), which are physician and facility non-drug-related payments for treatment in the outpatient department of hospitals (not including emergency room care).
• Inpatient hospital costs (17.6 cents), including the administration of prescription drugs provided during a hospital stay, payments to physicians and facility payments.
• Emergency room costs (3.2 cents), such as physician and facility non-drug-related payments for emergency room visits and ambulance transportation.

Prescription drugs account for nearly one-quarter, or 24.2 cents, of each dollar. This includes payments for outpatient prescription medications, which are mostly self-administered drugs, as well as payments for prescription medications administered in the physician’s office or clinic. The self-administered prescription drug spending was calculated net of any estimated prescription drug rebates paid by the drug manufacturers.

Other categories of expenses include:

• Doctor visits (11.6 cents), defined as payments to doctors or clinics for all non-drug-related outpatient services provided during visits to doctor offices, clinics and urgent-care facilities.
• Other outpatient care (7.1 cents) for all outpatient services incurred outside hospitals, doctor offices and clinics, such as claims from ambulatory surgery centers, labs, dialysis or at-home care.

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The remaining categories of expenses typically are for overhead rather than direct patient care:

• Taxes and fees (3.4 cents), including all taxes and assessments paid by the health insurance plan.
• Other fees and business expenses (3.3 cents), including direct sales salaries and benefits, agent and broker fees and commissions, and insurance rebate payments.
• Profit (2.4 cents) for-profit health insurance health insurance plans and the difference between total revenue and total expenses for not-for-profit health insurance plans.
• Cost containment (2.2 cents), such as claims adjustment expenses, detection and prevention of fraud and abuse, case management, expenses for appeals and expenses for developing and managing provider and prescription drugs networks.
• Quality improvement (0.8 cents) covers efforts to improve health quality and increase the likelihood of desired health outcomes, such as preventing hospital readmissions, improving patient safety, wellness and health promotion, and health information technology.

Finally, 4.3 cents of each health care dollar goes to general and administrative costs to run the business, including salaries, outsourced services, equipment, accreditation and certification fees, rent, legal fees and expenses, advertising, postage and utilities.