Health Care and the Financial Cost to Society
The health care costs have been growing in the United States at unsustainable rates. This has prompted leadership in the health care sector to identify initiatives and strategies aimed at containing health care costs while improving quality and value of medical services. The contemporary health care system is ubiquitous with prospects capable of reducing waste and delivering more effectively coordinated medical care. More so, it is capable of improving health and wellbeing of the citizens and legal residents across the country. This however, requires prioritization of cost effective containment strategies with the greatest potential of supporting and enhancing quality and value of health care services at affordable cost. There have been several factors driving health care costs to grow rapidly. They should be applied in serving as analytical points in ensuring health care costs are contained. Health spending refers to the product of the price in order to access, receive, and utilize quality health care service. There are therefore diverse underlying drivers of price and utilization which also ensure overall health care costs continue to grow. This research will therefore analyze the driving factors. Consequently, it will select and prioritize strategies applicable in improving effectiveness, value, and quality of the system in the country providing and delivering health care. The research will therefore establish that, factors driving health care costs to increase and grow are multifaceted, overlie, and controllable. This will enable development of synchronized health care systems delivering and paying for reforms to be achieved across the health care sector in order to decrease number of uninsured citizens while encouraging delivery of higher quality care at controlled and affordable costs (BPC 4).
United States spent more than two trillion dollars on health care in 2010. According to Bipartisan Policy Center, the amount accounts for at least eighteen percent of the country’s Gross Domestic Product. This amount is relatively compared to other diverse developed nations as they often provide advanced health care services for less. For example, United Kingdom provides quality health care services at 9.6 percent of the nation’s Gross Domestic Product. Conversely, Germany and Japan provide at 11.6 percent and 9.5 percent of their Gross Domestic Product rations respectively in providing high quality and value health care services. United States therefore spends a lot towards health care costs. This however, does not translate to the country leading in establishment of measures guarantying positive health care outcomes, high quality and valuable medical services. This proves there is an opportunity to reduce health care spending. The opportunity should also be seized in ensuring health care services are improved. More so, structural aspects of the nation’s health care system contributing to inefficiency and wasteful spending should be carefully examined (Martin 209). Consequently, the government can acknowledge spending on health care should not always comprise of large fractions of the country’s economic activity. This is because the percentage of United States Gross Domestic Product committed on health care expenditure has doubled in the last thirty years. Thus, the government should acknowledge the rapid growth in health care expenditure has been creating unsustainable burden on the citizens and legal residents’ economy (BPC 4).
Businesses offering health care insurance covers to workers have not been operating on levels that can be described as stiffly competitive across international borders. The businesses believe they ought to invest in new and advanced technologies and innovation. They however face hindrances in achieving the investments due to reduced resources. As a result, the growing expenditure of employer provided health care insurance cover has contributed towards stagnation of middle class wages. This is because as salaries and wages increase, they are supplanted by employers’ subsidies towards health care benefits (Martin 210). Conversely, the private health insurance expenses have been mounting progressively. This has led resources that can be ordinarily allocated to meet other expenses such as foodstuff, accommodation, investments, and children’s education to be redirected. Consequently, government has had to increase the amount of resources it spends on health care programs with regards to Medicare and Medicaid. It has therefore been consuming federal and state budgets that have been growing. This has been hording other priorities that ought to be addressed through the federal and state budgets. Consequently, private investments have been decreasing and public debts mounting (BPC 5).
According to Bipartisan Policy Center, the latest national health care spending has been growing at a slowing rate. Thus, total health care spending has been an undeviating consequence depending on the amount of resources has been consumed to provide quality and valuable health care. This can be categorized into consumers, amount of health care services people utilize, and price of the services. Thus, in case any of the driving factors augment, health care costs are also bound to rise. Latest slow pace with regards to increase of health care costs can be credited to the dwindling use and intensity of personal health care services. Thus, Americans have had to cut back on spending for products and services including health care due to reduced income. The graph below was therefore provided by Bipartisan Policy Center to identify how health care costs have been growing between 2000 and 2010. It should therefore be reviewed in reaffirming the country ought to regulate health care costs in order to ensure Medicare and Medicaid services do not grow to over five trillion dollars by 2021 (BPC 5).
Factors Attributing to Growth in Health Care Costs
There are assorted factors mentioned by Bipartisan Policy Center attributing to growth of health care costs. The factors include population of consumers, operational rates, and health care services pricing strategies. These factors are bound to continue growing if the government does not develop strategies aimed at addressing the increased and growing health care costs and spending habits being experienced. More so, some of the driving factors will ensure they increase national health care costs even higher. This is unless structural barriers capable of reducing costs of health care spent with in the current system are identified. The structural barriers include fee-for-service reimbursement system maintained in the health care sector, fragmentation in delivery of health care, tax treatment of health care insurance, prevalence of chronic diseases, and advances in medical technology among other dynamic changes impacting overall growth of health care spending. These factors have been ensuring health care costs continue to increase and grow as discussed below (BPC 6).
This system is relied on across United States in delivery and remuneration of health care services. Consumers from the private and public sectors therefore utilize the fee-for-service system. For example, seventy eight percent of insurance plans that are employer-sponsored across the country rely on the fee-for-service system. The system asserts that, health care facilities, practitioners and professionals should be paid for each service they deliver. Thus, the more services they provide the more fees they should be paid. The reimbursement under fee-for-service system motivates high volume procedures, tests, inpatient stays, and outpatient visits to be identified. This motivation encourages processes generating high income levels. As a result, health care practitioners perform several tests and procedures. The procedures and tests are remunerated by third party insurance. The third party insurance however facades the actual cost to consumers. The economic incentives therefore encourage health care services with high fixed costs to be awarded. The strength is equally applied in making extensive use of medical equipment including imaging services. Fee-for-service system however does pay for services recognized as increasingly imperative in managing severe diseases such as chronic illnesses (BPC 8).
Fee-for-service system also does not pay for patient education and coordination of care with other medical care providers. Lack of payment for telephone calls, emails, and services offered by professionals besides general practitioners therefore challenge the process of shifting from delivery models. This is because they heavily rely on in-person contact between patients and physicians. This has prompted unconventional systems, programs, and initiatives in payment and delivery of health care services to be pursued in public and private sectors. This process however acknowledges the new systems ought to improve quality performances while earning incentive payments for care quality and cost savings. Fee-for-service has therefore been exacerbating the degree of the cost impact of other key drivers. For example, fee-for-service supports submission of new and advanced health care technologies to patients. This is undertaken before ascertaining if patients will benefit either significantly or marginally from the technology. Consequently, fee-for-service environment enhances the magnitude of cost increases due to use of advanced medical technologies (BPC 8).
Fragmentation of Care Delivery
This is attributed to fee-for-service as health care practitioners are paid based on service volume instead. Activities undertaken in order to ensure patient access quality and valuable health care services should therefore not influence the imbursement system. Consequently, little incentives coordinate with other health care providers in delivering quality and valuable medical care effectively and efficiently. Multi-specialty groups are regarded as more capable in delivering high quality coordinate health care services. Physician specialists however often opt for single-specialty groups as they guarantee higher income earnings through the fee-for-service system. This therefore enhances lack of care coordination leading to overtreatment further costing the government billion dollars on annual basis to cover health care costs. For example, a 2008 survey revealed at least thirty two percent of adults have experienced either duplicative or/and unnecessary care (BPC 9).
The survey also revealed that, forty two percent of primary care physicians believe patients are awarded too much health or medical care. This factor therefore, has also contributed to preventable medical errors that can be avoided. The errors develop when patient care is not appropriately managed when delivering crucial medical services. Medical conditions including depression, ulcers and surgical infections are part of medical errors that can be prevented. This can save the government billions as at least seventeen billion dollars were utilized in addressing medical errors in 2008. More coordinated health care should therefore be delivered especially to persons eligible for Medicare and Medicaid as well as persons suffering from multiple chronic medical conditions. This will ensure at least forty percent and twenty seven percent of Medicaid and Medicare spending respectively is saved (BPC 9).
Fragmented payment and delivery of health care services often leads to alleviated paperwork. Consequently, costs incurred by health providers and payers are augmented. As a result, a significantly large amount of physicians’ and patients’ time is utilized. For instance, health care providers often file claims with numerous health care insurance programs prompting them to utilize diverse processes for authorizing services. This also enables them to establish patient eligibility and paying claims. The process of navigating the complex system however requires significant administrative resources. They facilitate completion of necessary paperwork while making contact with payers with details on diagnoses, treatments, and referrals. Currently, the government estimates administrative costs between one hundred and fifty six and one hundred and eighty three billion dollars respectively at a growing rate. Thus, the government should develop strategies reducing administrative overheads and burden to reduce costs associated with quality health care services (BPC 10).
Population Needs for Care
The aging process among the consumers significantly impacts the federal budget which is estimated to will continue growing in coming years. For example, when people turn over sixty years their total expenditure towards health care system may not increase. The cost to the federal government on the other hand however, is bound to increase as Medicare will have to be the principal insurer. Analyses were conducted by the Congressional Budget Office. They indicated that, population aging will be solely responsible for fifty two percent growth and increase in spending on major health programs on federal level. This is likely to be observed in the next twenty five years under Alternative Fiscal Scenario. Medicare enrollment is also expected to increase by at least six million per year which will result in nearly eighty one million beneficiaries being recorded by the year 2030. Consequently, the percentage of persons above sixty five years will grow by at least thirty percent by 2022 as shown in the graph below (BPC 10).
Aging will hence continue to ensure spending increases across federal and system wide health care levels. This will prompt baby boom generation to mature and establish a population with higher proportion of seniors. Consequently, per capita spending to meet health care costs will augment. Demographic trends have therefore been applied to suggest that, for the next ten to twenty years aging will continue to increase spending growth by at least 0.5 percent annually (BPC 11).
Aging coupled with prolonged existence of the population affirms there is an increase and growth of health costs and spending respectively. Factors including advances in technology and medicine especially in attempts to treat cardiac diseases and reducing rates of smoking will also increase spending growth. This is because caring for aging patients at the end of their life spans involves provision of expensive health care services including hospice care, physician care, skilled nursing facility care, inpatient hospital stays, home health, and outpatient care. Eventually, Medicare costs will grow per beneficiary significantly in coming decades rather than slowing cost of private insurance. This factor therefore relatively depends on timing and intensity of various efforts constraining costs in private and public sectors. For example, the system-wide spending growth witnessed across the nation’s health care sector can reduce expenses incurred on either federal or/and state levels (BPC 11).
Patients with chronic diseases often exploit high volumes of multifaceted health care services. For example, at least eighty four percent of the United States health care dollars and ninety nine percent of Medicare spending has been utilized in addressing chronic diseases. Chronic diseases correlate with aging as at least eighty percent of senior citizens suffer from diverse chronic conditions. Thus, half of the nation’s population is likely to suffer from either one or more chronic diseases by 2020. This estimation is supported by research findings affirming rates of obesity have been on the rise. Effects of Obesity on prevalence and severity of diverse chronic diseases are significantly reflected on the growth of health care costs in the country. CDC conducted a research study revealing that, diverse chronic diseases are preventable. They however, depending on an individual’s personal choice as many often engage in unhealthy behaviors accelerate at diverse rates (BPC 12).
Behavioral health problems and chronic illnesses should therefore be identified as they determine the amount of health care costs incurred by the government. For example, behavioral health affecting physical and mental wellbeing involves issues allied to depression, substance abuse, and bipolar disorders. Treating them consequently complicate effective treatments aimed at addressing chronic conditions. In 2005, one hundred and thirty five billion dollars accounted in treatment of behavioral health complications. This accounted for 7.3 percent of total costs of providing health care services. They costs were settled largely through Medicaid payments. Public and private sources therefore contributed a smaller share towards the health care costs. The government should therefore develop strategies addressing health care costs incurred towards addressing chronic conditions (BPC 12).
Advancing Medical Technology
This factor has been majorly contributing towards improving health and prolonging existence. It has however encouraged utilization of new technologies. For example, less costly treatment procedures that are effective have been replaced with use of new advanced technological procedures that are costly hence, increasing health care costs. The new advanced technologies should therefore be evaluated to determine their values in improving health care sector. It should ensure it does not increase health care spending and costs. More importantly, the new technological procedures should enhance and improve patient health outcomes by ensuring health care services are high quality and valuable. New technologies should therefore be distinguished between those increasing and decreasing health care costs. Those increasing health care spending should be substituted with older technologies equally effective and expanding range of treatments without increasing health care costs. Clinical evidence should also be applied in demonstrating supplementary treatments relying on new, advanced, and expensive technologies do not necessarily improve patient health outcomes. This will encourage the government to control how advancing medical technologies are impacting health care spending patterns and rates (BPC 14).
Tax treatment of Health Insurance
The current law ensures contributions from the employer towards workers’ health paybacks are tax deductible. It is suitable due to the fact that, they are treated as business expenses to the employer hence, excluded from employees’ taxable income. Fifty four percent of workers in various firms with fewer than two hundred and over ninety percent employees in larger corporations are allowed to use pre-tax income in order to pay for employer-sponsored health care insurance. The tax exclusion has also allowed employers to provide health plan benefits that are described as generous due to lower net costs. For instance, an employee earning fifty thousand dollars can pay a marginal rate of twenty five percent in federal income taxes. The employer can also reimburse a 6.3 percent in state income taxes. Effectively, the worker can disburse a 12.4 percent for combined member of staff and employer payroll tax for social security. Consequently, the member of staff can pay a 2.9 percent for Medicare. Total employer-sponsored health insurance plan premium however can be ten thousand dollars. The tax exclusion based on this amount however, is likely to save the employee at least four thousand six hundred and sixty dollars. This is approximately 46.6 percent of the total cost in taxes. Thus, approximately five thousand, three hundred and forty is accounted as the after tax cost of health insurance. This is a relatively heavy subsidization of the premium contributions. Consequently, this can make supplementary health care insurance benefits more valuable to more workers rather than additional cash compensation. The government should also consider tax exclusion is regressive. This is because it generally subsidizes persons at higher incomes than their counterparts at lower income levels. Thus, reviewing the tax treatment of health insurance can save the government at least two hundred and fifty billion dollars in revenue loss to the United States Treasury annually. Consequently, health care costs can decrease as the government’s spending is also reduced (BPC 14).
Utilization and Prevention
The employer based incentives aim at encouraging employers in offering munificent advantageous designs. The lower patient cost sharing is therefore credited to tax exclusions. As a result, higher care utilization can be supported. For example, ninety percent of Medicare beneficiaries have sources of supplemental coverage limiting their out-pocket responsibilities. The supplemental coverage can originate from numerous sources such as Medicaid, Medigap, and employers. Majority of the payers often defend against almost all Medicare cost-sharing. This has led to higher utilization of services. Consequently, overall health care spending and costs increase as Medicare pays a larger percentage from the increased utilization. Research studies indicate that, augmented patient cost-sharing often leads to inferior utilization of inappropriate and suitable health care services. Preventive services featuring no patient cost-sharing have also been on the rise. Diverse health care services however, can reduce incidences of diseases through immunization, screenings, and early diagnoses. They however increase health care overheads as the services can be replaced with effective earlier interventions. The government should therefore focus on developing a health care system replacing preventive services with evidence-based practices. This is because the practices utilizing prevention are often cost-effective. As a result, health care expenses and the rate of expenditure can be reduced and slowed down respectively (BPC 15).
Opportunities for Change and Recommendations
The driving factors of increase in health care costs are therefore complex and multi-faceted. Thus, diverse policy solutions should be developed and implemented. This will ensure every driving factor responsible for the high and increasing health care costs is addressed. An inclusive package containing health care outlay should therefore be implemented complimentarily. It should rely on strategies and initiatives plummeting system-wide health care overheads. Consequently, the growth of health care costs can be controlled and slowed down while improving efficiency, value, and quality of medical services across the country. Consequently, the government ought to break down health care expenditure into diverse categories of spending depending on type of care. The categories can include outpatient care, public health and administration, and inpatient care among others. This will enable the government to identify medical services incurring high health care expenses. More so, the government can identify the type of medical care ensuring health care overheads continue to grow gradually. The government can then develop and implement strategies, programs, and initiatives aimed at slowing and reducing health care spending and costs respectively (OECD 5).
The United States government should also acknowledge supplementary health care does not translate to superior health care. For example, some unnecessary and undesirable treatments can be offered without providing a patient with positive outcomes. The health care system in the country should therefore be reviewed to ensure health care services being provided are necessary, effective, and efficient. This will ensure health care expenses attributed to use of new, advanced, and costly medical technologies are curbed. Consequently, the government can utilize available resources in enhancing existing health care services that are equally capable and effective in order to be aligned with initiatives enhancing quality and value of health care outcomes (Jules and Wendy 23)
Uncertainties arising from human biology inherently varying in responses to diseases and treatments attribute to increase in health care costs. For example, people suffering from influenza belief they can rapidly and easily recover. There are however people who have contacted the same virus and lost their lives. These uncertainties therefore present challenges to clinicians driving them to identify varying treatment decisions. There are however clinicians who rely on the art of medicine rather than the science in offering treatments. The government should therefore encourage health care practitioners and professionals to offer services persistent throughout their careers and molded by their clinical experiences. This will ensure medical norms and cultures forming physicians’ behaviors will identify variations in approaches in diagnosing and treating various diseases. Consequently, health care costs incurred due to either unnecessary costly treatments or malpractices will be reduced and prevented (David 11).
The government should also focus on endeavors controlling health care expenses and spending patterns by regulating drug prices. This however involves medical researches being conducted in order to develop pharmaceutical breakthroughs that do not necessarily require patients using highly priced drugs. The government should however measure this initiative against opportunity costs of health care. This will ensure the efforts are also aligned towards improving the value and quality of health care services at affordable prices. Lastly, the government should measure health care losses incurred annually. This should involve evaluation of the nature and extent of the medical losses in order to determine how they can be substantially reduced. More so, the government can develop a program to identify health care practices and services attributing to the losses in order to implement initiatives addressing them and saving the government financial resources on federal and state levels (Jim, Mark and Graham 12).
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David, Squires. Explaining High Health Care Spending in the United States: An International Comparison of Supply, Utilization, Prices, and Quality. Issues in International Health Policy, 2012. Print.
Jim, Gee, Mark Button and Graham Brooks. The Financial Cost of Healthcare Fraud what Data from Around the World Shows. World Health Organization Report, 2012. Print.
Jules, Delaune and Wendy Everett. Waste and Inefficiency in the U.S. Health Care System- Clinical Care: A Comprehensive Analysis in Support of System-wide Improvements. The New England Healthcare Institute (NEHI), 2008. Print.
Martin, Anne. Growth in U.S. Health Spending Remained Slow In 2010; Health Share of Gross Domestic Product was Unchanged from 2009. Health Affairs, 31(1), 208-219, 2012. Print.
Organization for Economic Co-operation and Development (OECD). Health at a Glance 2011: Why is Health Spending in the United States so High? Organization for Economic Co-operation and Development, Health Data Indicators, 2011. Print.