Healthcare sector in U.S - Essay Example

?Running Head: FINAL PAPER Final Paper of the of the of the College INTRODUCTION The significance of this report has come about after the spending has been cut by the U.S government on the healthcare sector. This action by the government has stressed the insurance companies because the government is cutting the amount by 40% that was given to the insurance companies for the protection of the human health. After confronting with this situation the board of directors of an insurance company has asked the chief operating officer to submit a report that would include ways of meeting with the impact of this spending cut by the government while still being sensitive to the needs and health of the patients and the community. At first the research objective has been clearly defined in the report after that, issues have been highlighted in the report regarding the result of the spending cut by the government. Then the solutions to meet these challenges have also been discussed using different models. In the conclusion section of the report, the results are discussed in a summarized form. The thesis statement of the report is to assess the implications of reduction in U.S medical insurance reimbursement of 40%”. RESEARCH OBJECTIVES: The objective of research study is to provide recommendations to the insurance company about how company can meet the challenges of spending cut by the U.S. government in the medical insurance sector by 40%. The main objective of the report is to provide the solutions through the financial, legal and alternative healthcare models. ISSUES INVOLVED IN A POTENTIAL REDUCTION IN U.S. MEDICAL INSURANCE REIMBURSEMENT: It has been a trend in the U.S for a long time that the government increase its budget or spending on the healthcare sector with the passage of time. The government always has taken serious measures to protect the health of the people and has ensured that the government cares about the people and their health (Chua, 2006). The increasing rate of expenditure on the healthcare sector by the government has become the cause of stress for the government because it was consuming a large amount in the budget. By continuous increment in the percentage of this amount, government was cutting the expenditures of some different sectors to meet the demand of the healthcare sector. But now government has realized that the expenditures should be reduce from the healthcare sector and expand it to some other sectors to meet their demand. Regular reimbursement through government funding allowed the hospitals and other institution to expand its operations or encourages the growth in structure, capital and capacity. The reduction in the reimbursement will affect on many institutions, but the focus of the report is on the insurance sector. Government pays reimbursement to the insurance companies for a long time at some specific percentage for protecting the health of the people in the country (Bryant, 2012). The spending cuts in this sector will force many hospitals and physicians out of this market. This will create a serious problem of the shortage of the hospitals and physicians with in the country. The expansion plans of healthcare services will also affected badly. THE IMPACT OF REIMBURSEMENT CUTS BY THE GOVERNMENT ON THE INSURANCE COMPANIES Insurance companies are extremely highly affected by the spending cut program of the U.S government on the healthcare sector. Insurance companies are affected by many ways: 1- The reduction in funds of the insurance company: The reduction in the fund of the insurance company will have a greater impact on the performance of the company. Financial planning of the company will be paused if the sufficient funds would not be provided to the company. 2- Insurance services will be provided to the lesser people than before: Large number of people will be affected by the spending cuts program. Most of the lower class population is depending on the government expenditures on the healthcare sector. This class of people cannot afford the life insurance therefore they are completely reliable on the government aid that is provided to the insurance companies. In this way, the spending cut would have a serious impact on the lower class people health (Casto, and Layman, 2006). 3- Expansion of the insurance company will be stopped: The insurance companies of U.S have the expansion plans every year, and it expands its services in many areas. The plan includes providing the healthcare services to more people in more areas. There is a huge fund is required for the expansion of business. The U.S government provides a sufficient amount to the insurance companies to support its expansion with the purpose of delivering healthcare services to more people, but with spending cut in reimbursement by 40% could become the reason of totally stopped expansion programs of insurance companies. The rate of the population is increasing every year, so the insurance companies needs to expand its services as accordingly, but the reduction by 40% will have a detrimental impact on the healthcare services of people. 4- The cost of the company could be higher than its revenue: The insurance companies are responsible for its customer in both cases either they customer is paying his/her self or government is paying on his/her behalf. So the company is not allowed to reduce the number of customers. This has created a serious issue on the financial performance of the company. Company will have to survive in a extremely challenging environment, but it will undoubtedly disturb the company’s performance and services. STAKEHOLDERS OF HEALTHCARE SPENDING OF THE U.S BUDGET There are many stakeholders that are bearing a risk of the government variations in the percentage of spending of the healthcare sector. The major stakeholders in this healthcare issue are the federal government, politicians, physicians, Medicare recipients, hospitals and the third part payers like insurance companies. 1- Federal government: The federal government is in a position to win by moderating the uncontrolled growth in the healthcare program. Healthcare expenses are increasing with a high rate and are becoming the cause of lack of spending on the other sectors. To the reform healthcare and keep the expenses in the controllable boundaries, it is in the best interest of the federal government to take charge (Best Healthcare Rates, 2009). 2- Politicians: Reimbursement cut policies are affecting another group that is the group of politicians. The role of politicians is fairly involved as their responsibilities and functions are reflective of the interest of different groups and political parties. The constituents are affected in several ways by the cutback of expenses and reimbursement cuts. The role of healthcare reimbursement cuts depends on how these groups are affected (Best Healthcare Rates, 2009). 3- Physicians and hospitals: 40% cuts in the reimbursement will affect the hospitals and physicians very badly. The community of healthcare or the healthcare services provider is not agreed with the 40% reimbursement cuts program. The community believes that further reduction in the expenses of the healthcare sector will significantly cut down revenues. In this case, many of physicians and hospitals who depends on the government compensation will be closed. 4- Medicare recipients: A group of healthcare recipients is the most important that is affected by the reimbursement cuts. The hospitals adopted the latest technological equipments to cure the patients. In the reduction of expenses on the healthcare sector by the government may become the cause of not adapting the latest equipments for the care of patients in hospitals. Lack of technology adaptation will decrease the efficiency of services of hospitals that are provided to patients in the U.S. This would have a serious impact on the health of people of U.S (Best Healthcare Rates, 2009) PROPOSALS TO MEET THE IMPACTS OF THE PROPOSED FUNDING CUTS AND MEET THE NEEDS AND HEALTH OF COMMUNITY AND YOUR PATIENTS: Alternative Healthcare model by facing the challenge of reimbursement cuts: Dimension Possible options Remarks Public, paid for by tax and custom revenue The dominant model (at least in terms of aspirations) in most countries that are colonized in the mid of 20th century. Its universal goal is only in few fairly wealthy and well managed sectors free coverage materialized. Public, paid for by international aid Another way to finance company is to call for the international aid through media. Public/private, paid through compulsory health insurance by employers for employees This approach covers a wide segment of life insurance, in which employees of the company pay the amount for insurance in behalf of the employees, but this approach will cover only the segment of employed people. Private, in rich countries it is paid voluntary contributions, in the form of charity by rich people This contribution is made by large organizations, NGOs and rich people etc. Financing Private, channeled through the aid program for community In this approach, the rich people in the community are asked to pay some aid for the middle class and lower class people of the community. Every community is targeted individually in this approach. Increased in the tax rate of businesses In this approach, the government increase the tax rate of businesses and compensate the additional amount to the insurance companies instead of providing the subsidiary from its own pocket. Ask the government to implement the policy of compulsory social insurance In this approach insurance Company requests the government to implement the policy of compulsory social insurance, in this policy all wage income earners are asked to pay regular contribution or to pay a specific amount to the compulsory social insurance. Contribution of non-wage earners will be paid by the government from the tax revenue of the country. The reimbursement cut of40%will be compensated or paid by the user (patient) to the provider (insurance company) In this approach, the users are asked to pay the amount that has reduced by the government in the budget. For example, the government announced reimbursement cuts by 40% in the healthcare sector than this 40% amount will be compensated by the users to the insurance company or third party. Direct payment by the users (patients) to the providers (hospitals, clinics etc) In this approach, the users are asked to pay the amount that has reduced by the government in the budget. For example, the government announced reimbursement cuts by 40% in the healthcare sector than this 40% amount will be paid by the user to the service provider i.e. hospitals and clinics etc. (WHO, n.d.) FINANCIAL MODELS: There are four alternative methods of financing healthcare that are discussed below: 1- Out of pocket payment: In this model consumer pays the complete amount to the service providers. The application of this model can be seen in developing countries. This model is not accepted in developed countries. According to the WHO out-of-pocket payment is the most regressive method of financing the healthcare which will not be sustainable for the people of any country. (Balasubramaniam, 2001) 2- Separation of payment and treatment: In this model at the point of delivery of services user do not need to pay any charges so no one would be denied by the service provider. Payment of the insurance will be paid regularly by the user irrespective of whether services are utilized or not. (Balasubramaniam, 2001) 3- General taxation: The government collects a certain amount in tax from the general public, and the government pays a limited amount from the tax collection to the service providers. The consumer gets free services at the time of delivery or pays a very little amount as fees. (Balasubramaniam, 2001) 4- Mandated social health insurance: Government implements the policy of compulsory social insurance, in this policy all wage income earners are asked to pay regular contribution or to pay a specific amount to the compulsory social insurance. Contribution of non-wage earners will be paid by the government from the tax revenue of the country. (Balasubramaniam, 2001) CONCLUSION Some ways have been identified in this report to meet the challenge of reimbursement cuts by the government of US. With the implementation of this announcement of spending cuts by the government most of the insurance companies started searching the solutions to meet the challenges. In the first section of the report, the problems faced by the insurance company in the result of reimbursement cuts are discussed in detail. To understand the complete environment of reimbursement cuts all the stakeholders of reimbursement by the government are mentioned in the report. Many alternative strategies have been discussed in this report by representing it through different financial models. Alternative healthcare models in the light of finance have also been discussed in the table. It has been identified that there are many ways to meet the challenge of reimbursement cuts by the government, the matter is that how the insurance company manages this threat and implement the alternative strategy in the most effective time. This report will be helpful for the insurance companies because there are many alternatives are discussed in the report in case of the reimbursement cuts by the government. The report will especially assist the chief operating officers of the insurance companies. References Balasubramaniam, K. (2001). Health financing. National Workshop on Food & Health, Retrieved August 24, 2013 from http://www.google.com.pk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&ved=0CEkQFjAD&url=http%3A%2F%2Fwww.ciroap.org%2Fhealth%2Fhealth_4.doc&ei=eksUUpG9LIKEhQfLvIHgCw&usg=AFQjCNEUE7wj558pbdzuNW15KEKD_aoOWg&sig2=XUmPLEn_TkeWqALjftiX3Q&bvm=bv.50952593,d.d2k Best Healthcare Rates. (2009). A Policy View of Medicare medical insurance Reimbursement Cuts. Retrieved August 24, 2013 from http://www.besthealthcarerates.com/medical_insurance_Blog/bid/27885/A-Policy-View-of-Medicare-medical-insurance-Reimbursement-Cuts Bryant, D. (2012). Healthcare reimbursement will change dramatically in the future. Kevin MD, Retrieved August 24, 2013 from http://www.kevinmd.com/blog/2012/04/healthcare-reimbursement-change-dramatically-future.html Casto, A., and Layman, E. (2006). Principles of Healthcare Reimbursement. American Health Information Management Association, Retrieved August 24, 2013 from http://www.bilozix.com/hcreimburesement.pdf Chua, K. (2006). Overview of the U.S. Health Care System. AMSA, Retrieved August 24, 2013 from http://www.amsa.org/AMSA/Libraries/Committee_Docs/HealthCareSystemOverview.sflb.ashx WHO. (n.d.). Alternative health care delivery models deserving consideration. Retrieved August 24, 2013 from http://www.who.int/hac/techguidance/tools/disrupted_sectors/module_07.pdf Read More