Free «The Cost of Healthcare» Essay

The Cost of Healthcare

Nowadays healthcare plays an important role in humans’ everyday lives. The cost of it depends on the quality one would be cured. The recent years the popular discourse about the high cost of healthcare has captured the attention of citizens. The fact that it corresponds to reality is beyond any possible doubts, and we cannot help but claim it to be the obvious thing. American’s healthcare costs will continue to rise, as long as we fail to improve the value delivered to the patients. This paper examines this situation in order to provide several recommendations on what should be done in future.

As private sector health care costs have grown, employers have faced double increase in their health insurance spending over the last four years. As with all other countries, there are both private and public insurances in the US health care system. What is unique about the US insurance health care system in the world is the dominance of the private element over the public element. The United States is the only industrialized country in the world without a universal health insurance system.

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For example, the article Measuring the Health of Nations by Nolte, Ellen and C. Martin McKee (2008) presents the information that approximately 15 percent of Americans have no health insurance; therefore, have limited access to the best care and services. In 2006, the U.S. census reported that 46 million Americans have no health insurance. According to the statistics of Human Development Report, over a third (36%) of families, living below the poverty line, are uninsured (2005). Studying The Families USA Publications, more than 9 million children lack health insurance in America (2007). What is more tragic, eighteen thousand people die each year because they are uninsured, presents the Reports of the Institute of Medicine (Board on Health Care Services, 2004). According to the UN Human Development Report,

“The uninsured are less likely to have regular outpatient care, so they are more likely to be hospitalized for avoidable health problems. Once in hospital, they receive fewer services and are more likely to die in the hospital than are insured patients. They also receive less preventive care. Over 40% of the uninsured do not have a regular place to go when they are sick and over a third of the uninsured say that they or someone in their family went without needed care, including recommended treatments or prescription drugs in the last year, because of cost” (2005).

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The Human Development Report also mentions that the mortality rate in the USA is now higher than in many other industrial countries (2005).

Ninety percent of Americans believe the American health care system needs fundamental changes or needs to be completely rebuilt. Two-thirds of Americans believe the federal government should guarantee universal health care for all citizens. The lack of insurance for so many citizens is a national problem that this far has eluded a comprehensive solution. For those, who have insurance and access, the costs are very high. The United States has the highest per capita spending on healthcare, as well as the highest percentage of Gross National Product dedicated to this sector.

David Squires, et al. (2011) gives important information concerning the cost of the healthcare that in comparison with most other sectors of the economy, a large share of health care is publicly funded. In all industrialized countries, with the exception of the United States, health care affordability is ensured through universal insurance-based or tax financed systems.

In the U.S., public funds contribute to health care through insurance programs like Medicare and Medicaid, as well as through tax policy that supports employer-sponsored health insurance, delivery systems, like the Veterans Health Administration, and research by the National Institutes of Health.

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Moreover, we can expect that the federal government will continue to play a predominant role in the financing of health care. Together, Medicare and Medicaid, account for more than 60 percent of the total health care expenditures for those, aged 65 and over. Private insurance accounts for only 14 percent for those, under 65 years old; the payment pattern is nearly a mirror image. Private insurance accounts for 54 percent of the total, while Medicaid and Medicare constitute only 16 percent.

According to the statistics of Kaiser Family Foundation (2009), the U.S. spends about $7,400 per person on health care each year. Sixteen percent of the U.S. economy is devoted to health care. The U.S. spent about $7,000 per capita in 2008 on health care. The U.K. spent about half that amount and achieved equally good results, for example, in life expectancy at birth (Shieber, 2009).

Americans spent an estimated $8000 per person on health care in 2011. In comparison with 1980, $256 billion was used to the healthcare. Taking into consideration other countries, we may see that Norway spent only $5352 per person.

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Neighbor from the north, Canada, spent $4363. The figure is expected to reach $4.6 trillion in 2020, at which point per-capita spending on healthcare will exceed $13,000 a year. In 2002, the Institute of Medicine reported that lack of health insurance contributed to the deaths of approximately 18,000 Americans a year (Board on Health Care Services, 2004). The number is probably higher today.

In 2010, Medicare accounted for 28 percent of spending on hospital care, 22 percent of physician and clinical services, 45 percent of home health services, 22 percent of nursing home care, 20 percent of durable medical equipment, and 23 percent of prescription drugs.

According to the researches of the Hasting Center, due to the medical technology healthcare costs are increasing at the annual rate of 7 percent per year. It means that health care costs will increase by more than 70 percent over the next ten years, and will continue to consume an increasingly greater portion of personal income.

According to the Sylvester J. Schieber (2009), it is useful to take the history of the cost spending on healthcare in order to find and propose recommendations and resolutions. Spending on health care is rising more rapidly than earnings for workers and their families. For the roughly 60 percent of workers, who receive some form of health care coverage from their employers, the cost of their health insurance premiums and out-of-pocket expenses have increased significantly faster than their own wages.

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Between 1999 and 2008, both aver­age health insurance premiums and out-of-pocket costs for deductibles, co-payments for medica­tions, and co-insurance for physician and hospital visits have more than doubled. During the same period, worker’s wages increased by only 34 percent. As a consequence, health care expenses for workers and their families are rising as a share of income.

The cost trend for a day in the hospital illustrates the steady increase in the price of health care services in the United States over the past four decades. In 1965, the real cost per hospital day was about $128. In 2002, the cost had risen to $1,289 - a tenfold increase. Much of this increase reflects that we are delivering more technologically advanced care in the hospital. The patients, who could be more sensitive to price changes, are those, who are taking medications, but are not receiving regular care for their conditions.

U.S. prices for the 30 most-commonly prescribed drugs are one-third higher than in Canada and Germany, and more than double the prices in Australia, France, Netherlands, New Zealand, and the UK (Kaiser Family Foundation, 2009).

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Averaging across all ages, increases in medical spending between 1960 and 2000 pro­vided reasonably good value, with an average cost per life-year gained of $19,900.12 for individu­als age 65 and over; however, the average cost of adding one more year of life had increased from the 1970s to the 1990s from $46,800 to $145,000. The authors note that their estimates for the 1990s would fail many cost-benefit criteria. Other studies suggest that at current high levels of spending, additional dollars are not improving outcomes (Thomson, et al., 2011).

Henry J. Kaiser admitted that several approaches regarding the dealing with health care costs may reduce the level of spending, but not the rate of growth. For example, medical errors and other quality lapses will very likely increase the amount that we pay for health care, but will not influence long-term cost growth (2009).

Studying the Government Issue about the cost of the healthcare, it is said that the problem with U.S. healthcare costs is a labor problem with medical professionals.

Doing the researches, we found out several problems, why the cost of healthcare raises. The first one is the changes of prices of medical goods and services. The Institute of Medicine has calculated that in 2009, $765 billion were wasted through the unnecessary services, such as defensive medicine and unnecessary use of high-cost services (Board on Health Care Services, 2004). Such amount of money was also spent on the administrative waste, such as duplicative costs of documents. Another problem of wasting medical money is inefficiently delivered services, such as medical errors and inefficient medical operations.

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Furthermore, the most frequent cause of growth of the health care costs is the development of new medical technology. It should be added that some technology may provide value, while other is more expensive to produce similar outcomes. Most researches on the effect of aging on health care spending have found relatively small effect. From 1940 to 1990 population aging only accounted for about 2 percent of overall health care growth cost.

As it has been shown, the high costs of health care plays a large and growing burden for today’s workers, employers, and retirees. The problem is that it continues to grow faster than incomes. Studying the researches, it is useful to propose the recommendations in order to help health care to become more efficient, affordable, and effective.

Firstly, it has to be proposed the improving quality. For example, adopting different payment models, which may better coordinate care, improve patient outcomes, reward quality, and promote wellness. Secondly, in 2014 subsidies will help those, with lower incomes, to get publicly funded coverage, and private insurers must accept everyone, who applies. Furthermore, government has to make the efforts to impose cost control mechanisms, and policymakers have to take actions to restrain the rising cost of health care in the ways that will also lead to better quality of care.

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Tufts Managed Care Institute proposes several alternative strategies for controlling health care costs. The first one is the orientation of the patients and consumers. Furthermore, they propose that a government provides high quality care, while controlling its costs. Government sets a budget and regulates the entire system. Moreover, it is important to control the flow of dollars to providers. It would be useful to create the public sector programs. The last strategy is that clinicians and providers should take responsibility and determine the best ways to reduce costs.

Care should be provided safety, if it is not 100 percent safe, it is considered as medical error. Care should also be provided in a timely manner, which means that patients do no experience unreasonable and unacceptable delays.

RAND’s national study found that failure to deliver needed services (underuse) occurred more often than delivering services that were not needed or harmful (overuse). It is a good example of spending medical budget on Health. Moreover, patients failed to receive needed services 46 percent of time. Patients received services they did not need 11 percent of time. This rate of overuse is consistent with previous findings about the rates of use for surgical procedures that were clearly inappropriate, but may underrepresent the total rates of overuse in the population.











As the purchaser of health care services, United States should first seek to understand the drivers of Medicaid and other health programs. It also has to examine the best ways to integrate support services with delivery of health care services. In addition, it is possible that states decrease the mandates and taxes in the system. This cost reduction may be real and may produce at least some short-term cost relief.

Another option is to provide the same amount of healthcare, but pay less for it. More promising option is to cut administrative and clinical waste, and focus on delivering the most highly effective care. The aim is to motivate doctors to make wise choices for the patients, and encourage patients to become informed healthcare consumers.

According to the studies which have been done, we also found out the solution to add a therapeutic consultation program. This program may reduce costs by improving outcomes for the patients with chronic conditions. It ensures that those patients take their prescribed medication correctly, and makes sure that the unnecessary medications are not being prescribed. Ultimately, this oversight works to reduce doctor and hospital visits caused by adverse drug interactions. Electronic Health Records and Health Information Exchanges with e-Prescribing reduce costs, while adding an additional layer of patient safety monitoring and improving the quality of patient care overall.

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It will record the data that includes information on medical procedures, diagnoses, lab results, and vaccinations providing a total electronic view of a patient’s medical life. When you implement e-Prescribing, you can increase both efficiencies and patient satisfaction. Instead of handing patients a piece of paper, which can be lost, misread or stolen, prescribers send accurate, error-free and understandable electronic prescriptions directly from the point of care to the pharmacy.

It can save as much as 70 to 80 percent of the costs per participant each year by diverting them from institutions through the implementation of Home- and Community-based Service programs, and provide participants an opportunity to get better in the comfort of their own homes.

To summarize, rapidly rising health care spending could harm the economy by lowering the employment and increasing inflation. Medicaid continues its transformation with greatly expanding eligibility and capabilities that will reduce costs and take healthcare into a new era. But waiting for these changes to happen will not deliver the cost savings program needs. The time to take action for the states, reduce waste, and conserve much-needed resources is now. The technology helps the US to improve patient care and bring the cost savings. All the recommendations, which were presented above, were studied and proposed in order to help health care to become more efficient, affordable and effective.

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