Rising Health Care Expenses - Research Paper Example

Cost Benefit Analysis and US Health Care Article Review ‘Cost Benefit Analysis and US Health Care Article Review Introduction Rising health care expenses is an ever existing problem in the US healthcare industry as this issue significantly affects the quality of the care delivery and the percentage of the population covered. Despite a series of health care initiatives taken by the Federal government, growing health care expenses are still found to be a serious issue troubling US policymakers. In order to bring a permanent solution to this problem, a major reform called the Patient Protection and Affordable Care Act (PPACA) was enacted in 2010. However, health care is still unaffordable to a notable percent of the US population. This paper will describe how Cost Benefit Analysis (CBA) and Cost Effectiveness Analysis (CEA) can assist the US healthcare to address the issue of rising costs. Article Summary ‘Cost-Effectiveness Analysis’ and U.S. Health Care is an article written by Uwe E. Reinhardt and published in the Today’s Economist blog. In the first part of the article, Reinhardt particularly says about the current significance of ‘comparative effectiveness analysis’ in the US healthcare. The author suggests that clinical practice guidelines promulgated by medical specialty societies must be based on a well structured comparative effectiveness analysis so as to deliver better outcomes to patients as well as the Federal government. He also recommends the introduction of a ‘comparative cost-effectiveness analysis’ with intent to establish least-cost therapeutic strategies capable of achieving a given therapeutic goal. Reinhardt clearly tells that two distinct groups oppose cost-effectiveness analysis in the US healthcare. According to the author, the manufacturers of pharmaceutical and biotechnology products or of medical devices often constitute the first group whereas the second group is comprised of “individuals who sincerely believe that health and life are priceless” (Reinhardt, 2009). Comparison of Strengths and Weaknesses In the article, Reinhardt mainly describes two interconnected approaches, such as comparative effectiveness analysis and comparative cost-effectiveness analysis to improve the overall health benefits delivered to patients and to trim down the cost of health products and services. Comparative effectiveness analysis is a better tool to compare and evaluate two potential choices and to identify the most feasible one. Under this method, positive and negative consequences of different choices under consideration are scrutinized, and finally the most effective choice is identified. The major strength of the comparative effectiveness analysis is that it can assist healthcare experts to identify the most effective prevention and intervention strategies that would best promote quality care and patient safety. As found in Velengtas and Messner (2012), this tool is effective to meet the real-world needs of decision makers and to enhance the quality of the decisions made. However, it is important to note that comparative effectiveness research will be a failure unless it is structured properly and performed by experienced professionals. Similarly, comparative cost-effectiveness analysis has also its own strengths and weaknesses. Since estimating the costs of a policy is easier than identifying its benefits, most economists prefer cost effectiveness analysis (CEA) to cost benefit analysis (CBA). While analyzing the key strengths of comparative CEA, it is clear that this approach is potential to identify the most cost effective choice (Jamison, Breman, & Measham, et al., 2006). One of the major weaknesses of the comparative cost-effectiveness analysis is that it often needs to deal with a range of complex issues. For instance, if the particular policy has multiple objectives, it would be really difficult for analysts to perform the quantification of the effectiveness. Another weakness of this approach is that it may not be beneficial to compare choices with different benefit streams because this technique cannot convert those benefits into a common unit of measurement. Value of CBA and CEA for Informed Healthcare Decisions The cost benefit analysis (CBA) and cost effectiveness analysis (CEA) are really valuable to promote informed decision-making in health care. Traditionally, the tool of cost benefit analysis is used by the US healthcare experts to obtain a clear view of the overall costs and benefits associated with the given health policy. According to Guo, Wade, Pan & Keller (Sept 2010), this approach greatly assists healthcare experts to understand whether the intended benefits can outweigh the costs expected and thereby take sound decisions about the feasibility of the proposed policy. Experts suggest that cost benefit analysis is really helpful for setting priorities in the healthcare when policymakers are forced to make decisions in the face of limited resources (McIntosh, Clarke, Frew & Louviere, 2012). In other words, this approach can benefit the healthcare to enhance optimum utilization of resources and use valuable resources in a way that would yield the best outcomes. This technique is really useful to determine the degree of access or the range of benefits the healthcare must deliver to meet the minimum requirements. Obviously, today healthcare practitioners use different treatment methods to treat the same disease in several cases. If there is a single proven method that can minimize health costs, it is meaningless to waste money following resource-intensive practices. In this context, the cost benefit analysis can play a significant role to eliminate unwanted healthcare spending. Many public sector decision-makers opine that it is relevant to consider cost benefit analysis in establishing healthcare policies because economic factors can notably affect the value offered to health stakeholders such as patients, doctors, insurance companies, and public health agencies. It is important to see that insurance companies have been successfully using cost benefit analysis for years to set policies and determine whether or not to approve a specific claim. Similarly, the cost effectiveness analysis is also a useful approach for public sector decision makers to form well informed decisions relating to the delivery of better healthcare. In his article, Reinhardt has clearly outlined the potential features of this evaluation tool. Referring to some recent research results, Ronald Winslow states in a science report published on The Wall Street Journal that only 11 percent of over 2,700 recommendations approved by cardiologists are supported by advanced scientific testing methods. Pointing to this, Reinhardt (2009) claims that the US healthcare wastes billions of dollars by investing in unproved treating methods. The author argues that this wastage of money could have avoided if the healthcare had used cost effectiveness analysis to support its health expenditures. Evidently the cost effectiveness analysis relies on the tools of economics to deliver best quality outcomes at the minimal cost possible. This approach seems to be a sensible form of analysis in the US healthcare where health costs are mounting uncontrollably. Many industrialized nations and the US private sector insurers have already begun to practice this type of analysis to make sure that their health budget meets the targeted outcomes. Although pharmaceutical companies and manufacturers of medical devices oppose the application of cost effectiveness analysis in the healthcare, this evaluation tool actually benefits them to market their health products/services in some circumstances via the greater economic transparency provided by CEA. Researchers claim that CEA is a potential tool to avoid highly resource-intensive medical treatments that would deliver only marginal clinical benefits, but are widely used by greedy physicians. According to the supporters of the use of cost effectiveness analysis in the healthcare, the claim that cost should not be allowed to influence clinical decisions under any circumstance is a silly thought as it does not make sense. They add that no healthcare system can consistently operate based on such a health philosophy in the context of mounting health care expenses. Conclusion From the above discussion it is clear that comparative effectiveness analysis and comparative cost-effectiveness analysis are the two major approaches used by Reinhardt in his article. In addition, evaluation models like cost benefit analysis and cost effectiveness analysis can better assist health policymakers to make well informed health decisions and set comprehensive health policies that can benefit the audience in the long term. References Guo, J. J., Wade, T. J., Pan, W & Keller, K. N. (Sept 2010). School-Based Health Centers: Cost–Benefit Analysis and Impact on Health Care Disparities. Am J Public Health. 100(9): 1617–1623. Jamison, DT,, Breman, J. G & Measham, A. R, et al., (Eds.). (2006). Priorities in Health. Washington (DC): World Bank; 2006. Chapter 3, Cost-Effectiveness Analysis. Retrieved from: http://www.ncbi.nlm.nih.gov/books/NBK10253/ McIntosh, E., Clarke, P. M., Frew, E. J & Louviere, J. J. (Eds.). (2012). Applied Methods of Cost–Benefit Analysis in Health Care. Journal of Public Health, 34 (2): 317. Reinhardt, U. E. (March 13, 2009). ‘Cost-Effectiveness Analysis’ and U.S. Health Care. The New York Times. Velengtas, P & Messner, M. P. (Eds.). (Feb 2012). Making Informed Decisions: Assessing the Strengths and Weaknesses of Study Designs and Analytic Methods for Comparative Effectiveness Research. National Pharmaceutical Council. Retrieved from http://www.npcnow.org/publication/making-informed-decisions-assessing-strengths-and-weaknesses-study-designs-and-analytic Read More