physician orchestrates and manages patients’ medical care by making diagnoses and pointing the patient to other providers for procedures, lab work, and the like. The services provided by these other providers would be viewed as intermediate goods and services in the provision of the final output, medical care. The advantage of adopting this view of the health sector is that it provides a natural way to accommodate the new definition of the “good” through standard double-deflation methods. An important side benefit is that the new structure provides a role for both disease-based price indexes—to deflate nominal spending—and the Bureau of Labor Statistics’ Producer Price Indexes (PPIs)—to deflate the intermediate goods.1


The financing of health care, whether by private health insurance or government social insurance funds, involves complicated transactions. The standard presentation of BEA’s core accounts already involves rerouting transactions—that is, recording transactions as taking place through channels different from the ones through which they actually occur—to identify the economic purpose of these transactions.2 As part of developing a health care satellite account, some different forms of rerouting are likely to be required.

Some of the actual transactions for health care provided through an employer-provided traditional health insurance plan are shown in Figure C.1. Typically, both the employer and the employee pay premiums into the plan. The employee and his or her family then obtain goods or services from various health care providers. The health plan pays an agreed-upon portion of the cost to the provider, and the employee also pays copayments and deductibles.

BEA’s accounts, in contrast, show the entire employer contribution as part of labor cost (compensation of employees) for the firm and as part of personal income for the employee (Figure C.2). All of the purchases of health care are shown as purchases by households, representing the ultimate consumer of the health care goods and services, rather than as shared purchases by the household and the health insurance plan. In the economic accounts, the principal role of the health insurance plan is as a provider of health insurance services, an imputed transaction equal in value to the difference between premiums and expected benefits, which is treated as a service purchased by the covered employees.

A similar rerouting of transactions is associated with Medicare Part A (hospital insurance). (Other types of health care funding, such as Medicare Parts B,


Aizcorbe and Nestoriak (2007) used this framework to interpret differences in disease-based and treatment-based price indexes.


See Commission of the European Communities, International Monetary Fund, Organisation for Economic Co-operation and Development, United Nations, and the World Bank (1993, paragraphs 3.24-3.27).

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