US Healthcare Costs and Lessons for Rapidly Developing Countries - Essay Example

US Healthcare Costs and Lessons for Rapidly Developing Countries The United s has one of the most superior healthcare systems in the world, particularly due to its heavy investment in healthcare R&D. However, its healthcare system is beset with various challenges, especially costs that have rapidly escalated. This is starkly evidenced by the difference in health care costs the US spending 8,508 for every citizen, while Canada and the UK spend $ 4,522 and $ 3,405 respectively. Healthcare facilities in the US are mainly private owned with only 20% owned by the government (Neumann 49). About 65% of spending and provisions for healthcare come from Medicaid, Medicare, Children’s Health Insurance Program, and other related programs. Majority of the population is aged under 67 and either rely on their employer or that of a family member, while the rest are either uninsured or pay for their own insurance. For employees in the public sector, the government provides primary insurance. The WHO reported that the government spent more health care as a GDP percentage and on healthcare per capita in 2012 than any other country in the world (Neumann 50). For this reason, it is essential that the federal government seeks to reduce these healthcare costs. This paper will provide recommendations for containing the high costs of health care, as well as lessons that other rapidly developing economies can learn from the situation in the US. Containing Rising Healthcare Costs Costs related to administration in the healthcare system are estimated at $361 billion each year, accounting for 14% of the country’s expenditure on healthcare, of which 50% can be considered wasteful spending (Neumann 53). At a time when the government is looking to contain government expenditure, tackling these excessive costs of expenditure gives a good opportunity for the government to improve healthcare, while reducing its associated costs. Complexity of administration occurs at all levels of the system, which causes inefficiency in healthcare spending. In order to get rid of this burden, there first needs to be an increase in outcome and price transparency. For example, they could require that hospital and doctor prices be available to the public to allow patients shop for the best healthcare price. Currently, US pricing is opaque with consumers unable to tell procedure, service, and pharmaceutical costs, which allows the industry to charge what is bearable to the market, grossly inflating the pricing (Neumann 54). In addition, data related to medical outcomes is also opaque. Transparency of outcomes and pricing will reduce arbitrary pricing and allow consumers to shop for friendly prices and charge less to the government, lowering costs of healthcare. The government could also seek to institute higher co-pays, which are paid each time that patients visit a hospital, pick prescriptions, or visit physicians. These fees are representative of a small portion of accessed healthcare and ensure that people will become more careful about accessing health services, as they have to pay a significant amount of their bills (Halvorson 56). They can also make it possible for their citizens to pay via giving an individual the mandate to join the saving program, which is akin to the current 401K plan in the US. Part of these savings can be utilized to pay for the person’s own needs for health care and that of the extended family, including children, parents, and spouses. For the United States, the co-payments can be indexed to a person’s income (Halvorson 56), which would result in higher co-payments for those with higher income. This would ensure that only those unable to make these payments would be exempted from making them. Another proposal to contain high costs would be to make payments by outcome and capitation, rather than charging fees for services. Currently, most hospitals and doctors charge for performed medical and diagnostic procedures. This has resulted in escalating numbers of procedures, as well as tests, increasing costs. A mixed plan of payment that considers outcomes and includes capitation should be considered (Halvorson 57). This plan would begin with a capitation base, in which health care providers would be presented with a specific amount to spend on every patient with adjustments made for patients’ age. This capitation, to avoid the failure of the earlier capitation plan in the mid-90s, needs to be supported by additional payments made to providers, hospitals, and doctors. Specific and reasonable reimbursements to health care providers would be given for diagnosis associated with the given medical treatment, which is referred to as episode-based or bundled payment. Treating a heart patient would require a different reimbursement level than treating a patient with a fractured arm. In addition, reimbursements would be adjusted according to regions. This hybrid system would enable health care providers to have a measure of predictable income and compensate for patient loads that are not anticipated (Halvorson 58). Each provider would also be allowed to propose specific capitation mixes, compete on preferred outcome and price, and propose bundled payments. The US government could also offer differentiated services as a way to contain health care costs. Public hospitals could offer different service categories that allow them for access to similar procedures and doctors (Halvorson 61). In this case, the difference arises in their amenities. Patients who fill up for the lowest category, for example, are housed in wards with other patients, while those who go for the highest category of service are housed in rooms that are fully private. The difference in prices will prove quite significant. By offering differential services for the health care providers, the hospitals and health care facilities, can significantly reduce costs and enhance the ability of those who can afford it to receive increased levels of amenities (Halvorson 61). This will avoid the blanket offering of the best amenities to patients to get more from the government health care expenditure. The US government can also offer catastrophic health care insurance, which would cover catastrophic events that need prolonged or extensive treatment. For this plan, the deductibles will be significantly high, and those insured under it would pay for 20% of their health care costs (Halvorson 68). By using a safety net, the US government would aid those citizens whom most need health care. This especially when the costs that have been added onto the primary cost are too much for them to pay. This catastrophic health insurance would cost significantly less than if citizens were to take out low-deductible and comprehensive health insurance, especially as taken out in the United States (Halvorson 68). If the government shifts to catastrophic health insurance, it will allow them to control costs and patients would pay less insurance premiums. Finally, with the dramatic shift in demography occurring in the US, as well as other western nations, future healthcare needs will need to transition from hospital care to community care (Monheit et al 44). The increasingly aging population will put pressure on health care costs in hospitals, which will necessitate a move to community-based care. The costs in health care are increasing partially because there are more aging patients using multi-specialty and high-tech facilities. For this reason, the government should seek to deliver quality care in the home, as well as through community health centers using increased technology and expanded nursing training. The future of the American health care system must be shaped by the strengths that identify American business. American businesses are excellent in competition and innovation as they seek to provide the best quality of services and goods. With the correct incentives, these capabilities should provide for the best outcomes in any system at the lowest costs (Monheit et al 44). However, the current course will cause longer waiting times, lower outcome qualities, fewer services available, lower access to new medications and technologies. Lessons for Developing Nations from the US Situation The US government’s healthcare plans, including Medicare and Medicaid, have been successful for more than forty years through essential universal coverage to all American citizens of all ages. However, the experiences of America’s health care system give various negative and positive lessons that can aid rapidly developing nations to provide health care efficiently for its citizens (Lemco 61). These nations can build on the failures and successes of the health care system in the US and its associated costs. One lesson is that it is better to offer a standard benefit package that is adequately comprehensive to allow citizens forego supplemental coverage. Where this latter coverage is available, it should be coupled to the basic, standard package. Another lesson is that they should make it easier to obtain cost-sharing and premium subsidies, which should be sufficient to give sufficient financial protection. They should ensure that they contain administrative enrollment barriers and eligibility rules that are restrictive and limit the citizens’ access to health care and increase costs of those who can afford (Lemco 61). Rapidly developing nations should also note the effect on costs by administrative and legal barriers that undercut assistance for low-income citizens. Medicare has attempted various approaches to subsidize beneficiaries with low incomes who face barriers from coverage gaps and cost-sharing (Lemco 63). The Medicaid program that was started alongside Medicare was expected to be the answer in filling Medicare gaps. However, the mandate for Medicaid lies with states, which maintain processes for enrollment that are intimidating and have low eligibility asset and income eligibility thresholds. Coupled to the costs of health care, most people who are eligible for membership to Medicaid do not enroll. In addition, these protections do not include eligibility for majority of those who are faced with high costs to the share of their income (Lemco 63), which are not covered by cost sharing and premiums. The United State’s health care system also shows that standard benefits do not mean uniform use with data available about the use of Medicare and Medicaid and its cost by hospital service, county, and state area indicative of significant variations (Lemco 65). Variations in data from the traditional service fee for Medicare and Medicaid are relevant because, across the entire country, the benefit package stays the same. The price consumers pay for services or the patient mix cannot address these differences adequately. There is a variance in the use of both Medicare and Medicaid in different regions, leading to the pertinent question on what the correct spending level is (Lemco 65). Therefore, rapidly developing nations should try to reach a consensus on what the best practices for different regions are with regards to high and low spending areas. The US government should also allow its citizens more choice, especially on health plans. For developing nations, this will require government commitment to oversight and regulation (Neumann 102), including reasonable marketing effort rules for the health care plans, appropriate standardization and comparability degrees across plans and investment in plans for informing the consumer. In addition, they should also require strong data reporting for the various health care plans. This will allow them to understand vital dynamics in the system of health care, which makes it possible to adjust spending levels according to where the funding is, required more and reduce others. Finally, the governments should learn from the US government’s failure to help adequately the consumer in navigating the system (Neumann 102), and getting information to the consumer to help their decision making on the best price for them. One of the most important lesson that rapidly developing nations can take from the American situation has to do with innovation. They should increase their attention to innovation in their public health care programs (Neumann 106). This should be supported by research investment on the working aspects, which can cause the entire health care system towards better quality and efficiency. They should also encourage flexibility within the correct boundaries. Both public and private health care plans need to develop innovative systems of payment, although they should ensure that this is not at the patients’ or providers’ expense. Works Cited Halvorson, George C. Health Care Will Not Reform Itself: A User's Guide to Refocusing and Reforming American Health Care. New York: CRC Press, 2009. Print. Lemco, Jonathan. National Health Care: Lessons for the United States and Canada. Ann Arbor: Univ. of Michigan Press, 2012. Print. Monheit, Alan. Wilson, Renate. & Arnett, Ross. H. Transforming American Health Care Policy: The Dynamics of Medical Expenditure and Insurance Surveys, 1977-1996. San Francisco: Jossey-Bass, 2009. Print. Neumann, Peter. J. Using Cost-Effectiveness Analysis to Improve Health Care: Opportunities and Barriers. Oxford: Oxford University Press, 2005. Print. Read More