The United States Healthcare System: the Continuous Inputs Rise - Article Example

Qs1. In the U.S healthcare system the inputs continue to rise while the outputs such as life expectancy remain constant. Explain in economic terms what is happening. List some policy solutions that could impact both the input and output. How can those solutions be implemented? According to a famous quote by martin Luther king Jr., “Of all the forms of inequality, injustice in healthcare is the most shocking and inhumane”. This saying reflects on the fact that just as any other market, healthcare is also subject to market forces but it is due to its emotive nature the benefits it provides, that a kind of a balance has been maintained between the market forces and the social needs of the population. A groundbreaking report on the worldwide health system released by the World Health organization(WHO) in 2000 developed three basic objectives that a good health system should meet, they being ‘good health’, ‘responsiveness’ and ‘fairness in financing’. The real position of the U.S. healthcare system is understood only when international comparisons are made on these grounds. Spending approximately 15% of its GDP on the healthcare, U.S. accounts for most expensive healthcare system in the world. However, the high expenditure on the healthcare has not translated into better health of the citizens due to the inefficiencies and inaccessibility of the U.S. healthcare system. This is attributed to the fact that U.S. has high costs of medical technology and prescription drugs and high administrative costs. This is due to the reason that the healthcare providers are increasingly shifting from non-profit to for-profit professionals. Accessibility is an area of major concern as it has been found out that U.S. is the only developed country in the world except for South Africa which does not provide healthcare for all. Though there are healthcare services for the elderly, military, veterans , lack of a proper healthcare system for the general population leads to a hodgepodge system overall. Another reason for this is the high proportion of uninsured people in the U.S. In order to prevent or have an inexpensive treatment, situations often go out of hand and lead to a health crisis thereby leading to increased treatment costs. Owing to the growing disparities among the racial groups based on the economic differences, the infant mortality rate is twice as high amongst black children as compared to the white children. The most fundamental problem lies in the overall lack of fairness in financing by the U.S. healthcare system. This is clearly manifested in the WHO report where U.S. is placed lowest amongst the OECD countries in its fairness in cost of treatment. In order to understand why our healthcare inputs continue to rise as against the outputs such as life expectancy which remain constant, we should acknowledge the significance distinction between total and marginal contribution. On the other hand, economists and public administrator argue that an increase in inputs results in outputs improvements. For example, economic historian Robert Fogel stated that the decline in mortality rate since 1700 is one of the greatest events in human history. His work suggests that about 40 percent of the historical decline in mortality rates was due to improved nutrition. This demand for medical care converted into a demand for health insurance. In other words, the interesting part of healthcare is the way money is allocated, as well as private insurance there are sources of funds from social welfare schemes such as Medicaid, these are not as subject to the laws of supply and demand as the in putter of the funds caps. Similarly in the case of insurance companies and managed care set up, many of these will limit the level of expenditure for different services and in totality limit the income with suppliers then choosing to supply at that price or not supply that buyer. As against the nature of the services, the healthcare system is a profit making system where when there is a demand in excess of supply the prices increase, and where there is a supply that is above the level of demand there will be price cutting or modification of service. Likewise the medical facilities will have only a limited amount of use and medical administrators will want to pursue the services which are the most profitable. This is the reason hospitals specialize only in certain procedures and why there are networks to gain referrals in an industry where there is a high level of competition such that specialization can lead to superior profits. Several solutions at small levels can be incorporated to deal with this ever growing problem however to find a permanent solution for the same, a holistic perception of the problem is required. One possible solution is to reduce the administrative costs of the U.S. healthcare system which constitutes for approximately 25% of the total costs incurred. This approach was adopted in Medicare for the elderly; however it should be expanded to the general population. Attempts should be made to reduce the economic inequalities that exist in the U.S. it has been noticed that the states which record for the highest levels of income inequality also record for the highest mortality rate. Hence the gap that exists between the economy of the U.S. citizens should be narrowed down and thus make the healthcare system accessible to all. There are two sets of beliefs that exist within the society in general to find solutions for this problem. One set of people view health care as an economic commodity, and the health care system as merely another industry, and hence looks for market-based solutions. Their suggestions include increasing level of competition in carrying out the business of ensuring and delivering medical care and more involvement from the consumer in sharing costs and thus making health care choices. They also feel that extra government expenditures will be required to cover the poor. The second set of people who feel that market forces do or can control the health care system have a different solution to this problem. They encourage a universal and united not-for-profit insurance system. Some feel that this system can be funded entirely through taxes while others feel this can be done through a combination of employer and individual contributions and taxes. Bu the core of this solution is that nearly all the payment should go directly to the health care providers rather than to the middlemen. A consolidated insurance system is also called a single-payer system will help in eliminating many of the problems that exist in today's mishmash system. On a more general view, government should introduce policies to encourage the usage of generic drugs and also liberalize the pharmaceutical industry in order to encourage competition from firms globally and locally. Though seemingly utopian as of now, this reform may eventually gain world wide support as the collapse of market-based health care services in meeting the public's need is surfacing increasingly, and as the and as the ethical values of the medical system wear away in the rising tide of commercialism. Qs2. What is a cost benefit analysis? How does it differ from a Cost Effectiveness Analysis and a Cost Utility analysis? What are the benefits and drawback to each method? How do they deal with the issues of externalities, discounting, and placing a value on human life? Based on what we have learned about the impact of stress, diet, exercise, race, income, education, gender, age and marital status using a CBA, why and where should we focus our healthcare budget? Cost-benefit analysis is a significant technique for project appraisal which involves the process of weighing the total expected costs as against the total expected benefits accrued from one or more actions in order to choose most profitable or the best option. It can be used when one is trying to measure the costs of a practical project or treatment, decision or action over a specific period of time. The process includes monetary calculations of initial and ongoing expenses as against the expected return. Cost-benefit analysis helps in putting all the relevant costs and benefits accrued on a common temporal footing. This technique finds its origins in the feasibility studies for public sector expenditure, and has been ever more popular since the 1970's This technique is used by economists to evaluate collective costs, a calculation which will need input that is representative of the physical results of a current action, or even a current inaction. This result is then compared to the costs that would be incurred in creating the positive effects required or avoiding the negative actions or to creating the positive effects required. This technique is also used by the government to decide whether to introduce a business regulation, to build a new road or to offer a new drug on the state healthcare. The accuracy of the result of a cost-benefit analysis is dependent on how accurately the costs and benefits have been estimated. A recent study of the accuracy of cost estimates in transportation infrastructure planning showed that for rail projects the actual costs were on an average 44.7% higher than estimated costs. Other such comparative studies signify that alike inaccuracies can apply to other fields than transportation. Hence these studies indicate that the results of cost-benefit analyses should be treated with caution, as they can be highly inaccurate which could lead to a substantial risk in planning. Another challenge involved in the CBA is in determining which costs are to be included in an analysis. This is a controversial debate as various organizations may feel that while some costs should be included as they are important, some need not be included. In CBA It is sometimes necessary to evaluate the benefit of saving human lives. There is considerable opposition in the general public against the idea of placing a dollar value on human life. Large number of economists recognize that it is impossible to fund every project which promises to save a human life and that it is necessary to have some rational basis for selecting which projects are to be approved and which are to be turned down. This controversy is resolved once it is recognized that the benefit accrued from such projects is that in reducing the risk of death. In case of healthcare, with the help of the CBA tool one can improve the social welfare if the benefits associated with it exceed the costs. These benefits and costs that are counted must not only include the direct benefits, but also the indirect ones through externalities to which CBA is related anyway. For example, dieting would eventually mean eating healthy food like vegetables which would eventually lead to more consumption of grocery goods. Thus, there is an external benefit to the grocery stores since higher consumption would generate money or profits. Hence this requires a longer term approach, as in the short term it may also be a difficult decision to make, as the campaign will require immediate funding. Cost-utility analysis is another type of economic analysis which is used to guide procurement decisions, especially health technology assessments (HTA). Unlike cost-benefit analysis, this technique does not have to be in monetary terms. For example in HTA it is usually expressed in quality-adjusted life years (QALYs).Cost-effectiveness analysis (CEA) on the other hand is one of the tools of economic evaluation which is designed to compare the costs and benefits of a healthcare involvement in order to assess whether it is worth doing or not. The choice of the technique is dependant on the nature of the benefits specified. As under CEA the benefits are expressed in non-monetary terms related to health effects, such as the number of life-years gained or number of symptom-free days. Whereas in the case of cost utility analysis they are expressed as QALYs and in cost benefit analysis they are expressed in monetary terms. Just as all other economic evaluation techniques, the aim of CEA is to maximize the level of benefits as against the resources available. There are many uses for CBA in the healthcare system, but its application is best suited in case of structuring preventative measures. Taking a case where there may be a preventative campaign which aims at reduction of stress and improved diet. One might argue if the cost involved in treatment for the related diseases and conditions or the cost of running such a campaign may cost less. However one also has to take into consideration the issue of immediate costs and future costs. While looking at choosing a method of evaluation it is most important to focus on the costs that are present today, although if only the cost of prevention is considered then it is found to be usually much lower than the cost of treatment even if the analysis is undertaken discounting the future costs into today’s terms with discounting factors. Finally one must understand that future costs that are incurred can be reduced with increased expenditure on measures to increase the quality of diets by increasing knowledge and education on how to have a balanced diet and reduce stress. Only a range of preventative measures will require less funding in reaching more people, making the campaign cost effective and thereby helping it to achieve its goals. The major area of concern is to find the money also maintaining a balance with all other social needs. Read More