The Current U.S. Healthcare Cost Milieu - Essay Example

Describe the current U.S. healthcare cost milieu and evaluate the need to ration the availability of healthcare services. Introduction The health care in the United States remains one of the most unsettled issues in the political and civil society. The theme of ‘health care for all’ which has been advocated for many years by various politicians and legislators has not found immediate and comprehensive coverage as yet. Various facets of the systems have yet to be set forth by the government authorities. The US health care cost milieu has largely been based on government, insurance, and individual coverage. Such milieu has proven to be insufficient in implementing a comprehensive and adequate health care system for all citizens. For which reason, other methods are being planned in order to ensure comprehensive coverage. One of these methods is the health care rationing approach which is meant to assist in the availability of health care services to as many individuals as possible. This paper shall describe the current US healthcare cost milieu and it shall evaluate the need to ration the availability of health services. Discussion Healthcare cost Healthcare spending in the US is supported through private and public sources combined (Duetsch Bank Research, p. 5). In the year 2008, about 52.7% of the national expenditures came from private shares and 47.3% came from public shares (Deutsch Bank Research, p. 5). This is considered low when compared with the OECD average; however, this has always been the trend in the US, with publicly supported health care consisting of less than the portion of the population. The publicly sponsored costs are those which cover the poor, the elderly, and the disabled (Deutsch Bank Research, p. 5). The main publicly sponsored programs are the Medicare for Americans 65 years and older and the Medicare for the poor and the disabled. Even as more than half of health care spending is actually financed by the public, a major part of the services is provided by private service providers (Deutsch Bank Research, p. 4). Private insurance covers about 66% of Americans and some 58% of these Americans are insured through their employers. The general cost of healthcare is significant due to the services and the health tools needed to secure quality health care. Health care costs have been driven up because of various factors. Among these factors include the introduction of technology and prescription drugs. For many years, health technologies have been introduced into the practice and these technologies are very expensive when actually used. Prescription drugs have also increased in number and frequency of use, driving up cost and availability of these medicines in the market (Kimbuende, et.al.). Chronic diseases have also increased in frequency in the US, with longer life spans and older people experiencing various health issues which often linger for longer periods of time. Due to advancement in medicine, people’s lives have been prolonged but their chronic treatment has also been increased in terms of interventions and costs (Kimbuende, et.al.). The aging population in general has also impacted on health expenses with baby boomers now in their middle years and a growing population raising costs of health care. This trend is likely to continue in the years to follow and many of the elderly would likely qualify for Medicare (Kimbuende, et.al.). Administrative costs are also likely to contribute to the increase in health care costs with about 7% atleast being set aside for these costs. These administrative costs are essential to the effective management of health care services (Kimbuende, et.al.). In an analysis by Reinhardt, he discusses that the administrative costs of health care in the US is unexplainably high. The US apparently spends about 40% of its health care per capita than its GDP per capita can afford. With this high costs, analysts have assessed that administrative overload seems to be higher than international standards (Reinhardt). Excess spending in health administration amounts to about 21% of estimated total spending. Analysts have also determined that the highly complex private health insurance has driven up the cost of administrative overload in the US. “Product design, underwriting, and marketing account for about two-thirds of that total” (Reinhardt). The other 15% was credited to public payers who are not burdened with the high cost of product design, medical underwriting and marketing. In the end, such burden is still borne by the government. Older people are also considered to be one of the main causes of high health care spending. Elderly individuals making up about 13% of the US population consume about 36% of the total US personal health care costs (AHRQ). The average health care cost in 2002 for each elderly was pegged at $11,000 annually for elderly individuals; and about $3,000 only per year for working-age adults. Differences in the age groups were also seen in the data based on the top 5 of the health care spenders. For elderly adults 80 years and older, they represent about 14% of the top five spenders. Within the age groups, spending is not concentrated on those aged 65 years and older as compared to those under the 65 population (AHRQ). Top 5 of the elderly spenders represented about 34% of all spenders by the elderly adults in 2002, with the top 5% of non-elderly spender representing about 49% of expenses by the non-elderly. The main reason for health care spending being more spread out among the elderly is that a higher proportion of the elderly than the non-elderly have higher incidents of chronic conditions and spending for chronic conditions (AHRQ). In effect, these costs amount to significant cumulative expenses to be shouldered by the government and the health care system. The elderly individuals often live on their retirement pay, but their health needs are covered by the Medicare. Under these conditions, it is therefore prudent for the government to conceptualize a system which would resolve these high health care costs. Without adequate measures, the system would be overwhelmed and would not adequately resolve health issues of the general population. Remedies In order to resolve the issues in relation to high health care costs in the US, several suggestions have been set forth. One of these suggestions involves the improvement in the efficiency of the health care delivery system. Such improvements relate to process improvement, whereby new models of medicine are applied in order to reduce complexity and to fashion baselines to individual cases (Social Security Advisory Board, p. 12). Providers have in fact already applied such improvements to the health services they offer and they have been successful in securing improved patient outcomes and improved quality at reduced costs (Social Security Advisory Board, p. 12). Another aspect which is also being emphasized in reducing health care costs relate to the implementation of the organized systems of care. These organized systems of care help provide leverage into practice regimens when necessary and appropriate. Integrated delivery system having common baselines of practice leads to better quality of patient life, while at the same time, lowering health costs. Integrated medical groups provide better use of health information technology and quality improvement programs as a clear demonstration of clinical performance at a reduced cost (Social Security Advisory Board, p. 12). In order to resolve issues in high health care costs, the coordination of care can also be implemented. Some patients often require multiple chronic care and these patients often require a great deal of spending. The coordination of care among chronic care patients helps to reduce duplicate testing, conflicts in treatment advice, and contraindications in prescriptions (Social Security Advisory Board, p. 12). Through these coordinated efforts, it may be possible for health care spending to be reduced to more acceptable and less costly levels. Through diagnostic and treatment tools, a reduction of health care costs may also be seen. New tools available in the current practice play a large role in increasing longevity and improving the quality of lives of patients. The current payment structures for these new tools have been focused on the payment of new protocols regardless of the value of such protocol (Social Security Advisory Board, p. 12). While these new protocols may also prove to be more expensive than previous treatment options, these treatments however are more specific and are more effective in relieving symptoms and in applying much needed variations in patient care. With better information and better treatment options being implemented, lesser overall cost may be acquired by the patient and the health care system in general. Informed patient choice and shared decision making is also an important and effective means of ensuring the reduction of health care costs. For some patients in the last days of their life, the choice for their care must always be based on their preferences (Social Security Advisory Board, p. 13). Studies were able to reveal that “implementing shared informed decision making could reduce health care expenditures by reducing utilization. Standards already exist for the development and evaluation of decision aids to be used in shared decision making” (Social Security Advisory Board, p. 13). In order to ensure that informed patient choices are included in the standards of care, state laws have to be revised to make room for informed consent and to secure the use of informed patient choice. The health programs must also place their emphasis on wellness. Various employers and health administrators have given much focus to wellness programs because they believe that this is the best way to reduce hospitalization and eventually reduce health care spending (Business Roundtable, p. 28). Surveys carried out to assess how businesses have implemented wellness programs have revealed that about 20% of the respondents have created these programs within the past 2 years and other companies have conceptualized plans to secure such wellness programs. These programs often merge with health insurance programs. The health risk assessments which are part of these programs help to identify the employees who need preventive care and chronic disease management under insurance programs (Business Roundtable, p. 28). Wellness programs which help reduce risks by ceasing tobacco use and reduce weight are common elements of these programs. Through such elements, the cost of health care can further be reduced. One of the most popular suggestions for the reduction of health care cost is health care rationing. Managed care systems set forth that in order to ration health care, several methods can be used, including primary care gatekeeping, financial incentives, utilization review, and capitation (Floyd, p. 1). Through the primary care gatekeeper method, different points of access to specialists and hospitalization can be provided. The primary care physicians would be given incentives to limit utilization or to ration care based on managed care’s guidelines (Floyd, p. 1). This incentive would then encourage the providers to opt for less expensive treatments or to opt for no treatment at all. For the nonroutine care, managed care organizations opt for oversight through different utilization reviews (Floyd, p. 1). If physicians opt to hospitalize patients or order expensive procedures, they must first obtain prior authorization. Some organizations have agreements with provider organizations through capitation, not traditional fee-for-service arrangements (Floyd, p. 1). Through capitation, the providers are given a per member monthly fee to secure all contracted services. The strict arrangements ensure that providers weigh the costs of care against its benefits before making recommendations (Rosenthal and Newhouse). Rationing can also be secured with the patients’ differential ability to pay, with patients being given consideration for their inability to pay high costs of healthcare. The price mechanism can actually be used in order to determine who and how much health services can be allocated for each patient (Floyd, p. 1). This kind of rationing can however be invisible in the healthcare industry. Whenever a person without health insurance gets sick, the cost of health care is often weighed against the benefits of health care. This however often creates bigger problems when major health issues manifest later from the original minor emergencies. In effect, rationing healthcare based on health prioritization can also cause its issues in the future. Bedside rationing is also manifest in some clinics and health care systems. This is when a health professional holds, withdraws, or does not recommend a health service in order to benefit someone other than the patient (Floyd, p. 1). For example, a physician may hold treating a 78 year old woman and prescribes a less expensive antibiotic because he knows that the patient would not buy a prescription for the latest antibiotic. This is an unavoidable aspect of health care rationing and has to be implemented with more institutions in order to ensure controlled health care costs. Conclusion There are various factors which give rise to high health care costs in the US. These factors involve an aging population, an increase in chronic care, high administrative costs, and new technologies. In order to address these issues, it is important to implement strong management of resources and to ration what health services are available. Only through such remedies can the health costs be adjusted accordingly to fit the needs of as many Americans as possible. Works Cited Business Roundtable (2007). Doing Well through Wellness: Survey of Wellness Programs at Business Roundtable Member Companies. Coverage vs. cost: The US health care reform in perspective (2010). Deutsch Bank Research. Retrieved 25 March 2011 from https://www.dws-investments.com/EN/docs/research/coverage_v_cost_us_healthcare.pdf Floyd, H. (2003). Healthcare reform through rationing. Entrepreneur. Retrieved 25 March 2011 from http://www.entrepreneur.com/tradejournals/article/106226722.html Kimbuende, E., Ranji, U., Lundy, J., & Salganicoff, A. (2010). US Healthcare costs. Kaiser Family Foundation. Retrieved 25 March 2011 from http://www.kaiseredu.org/Issue-Modules/US-Health-Care-Costs/Background-Brief.aspx Reinhardt, U. (2008) Why Does U.S. Health Care Cost So Much? (Part II: Indefensible Administrative Costs). Economix. 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