Healthcare Organization and Delivery
MT-371
Midterm Project by Stephanie Selvidge
In what two ways have each of the following impacted the cost of health care in the United States?
1. Health insurance
The assortment of components of health care cost increases are not independent but interact. But a main cause of the increased cost of medical care is clearly the growth of third-party payments, including private health insurance and various government programs, of which Medicare and Medicaid are the most important (Stewart, 1995). Third-party payments affect all the other causes of health care cost increases. In majority of cases, payment for healthcare services and products are provided by a third-party. Many of working-age persons have their healthcare services and products paid for by their employer.
Payments from third-party increase the amount of medical services demanded by consumers by making them insensitive to the prices. This increased demand in turn allows the physicians to increase the supply of services rendered and to also increase their fees and earnings, attracting malpractice lawyers and tempting dissatisfied customers. Pharmaceutical companies and suppliers of medical technical equipment are encouraged to increase their research spending, their advertising, prices, and sales also at the same time. Even if pharmaceutical drugs are not covered in many insurance contracts, the fact that other medical costs are covered makes the consumer more willing to pay high prices for the medicines. These effects are made worse by tax subsidies for health insurance obtained through employers that lead to the purchase of insurance that is excessive in quantity and inaccurate in coverage (Stewart, 1995).
Health insurance coverage is currently the primary means for access to medical services when unexpected medical crises arise and for everyday health concerns. The high costs of health insurance and medical services has led to reliance on (1) employer-provided health insurance coverage, and (2) federal- and state-funded Medicare and Medicaid programs (Hong & White-Means, 1999).
2. Advances in medical care
Rapid advancements in science and technology, along with investor dollars, have created major advances in medical care. These emerging technologies in medicine, which were increasingly housed in hospitals and physicians' offices, not only laid the groundwork for the coming shift in the way health care was delivered, but also increased healthcare costs.
Technology standards like electronic information and other tools have significantly increased healthcare costs. Strongly associated with technological advances is also the issue of how quickly new treatments are made available to the general public (Thomas, 1993). Although of course this is beneficial for the consumer, this would mean increased healthcare cost on their parts. Indeed all these advances have helped improve health care services for the consumers, but it also added extra payment or cost on their part.
Advances in medical care also made way for the provision of healthcare services to the financially less privileged. Hospitals began generating capital funds from paying patients who in the past had been treated at home. The importance of admitting privileges rose along with the criteria for receiving these privileges. Many physicians began making deals with the hospitals to admit their private patients. The hospitals in effect became the workshop for physicians where their private patients would pay the hospital charges and physician fees. In turn, this arrangement enabled both the physician and hospital to provide free care for the poor in the hospital dispensaries. Seriously ill poor patients were generally admitted to both municipal and private hospitals as "service cases," where they were supervised by attending and cared for by students and house officers (Marsh & Yarborough, 1990).
3. Aging demographics in the U.S.
The growing elderly population is largely the outcome of new technology, public health as well as medical technology, saving lives and postponing death. The introduction of Medicare and Medicaid in 1965 improved access to medical care for the poor and many of the elderly, contributing to life extension past age sixty-five (Stewart, 1995).
This age group uses an uneven share of medical resources. In the elderly group, the social and personal requirements of residents who need some assistance with daily activities and health care are emphasized. Its an important distinction, in that the design of housing, services, activities, employee training, and such is truly customer-centered, or in other words, suited to their age group/population. At present there are many institutions or organizations that are specifically for the elder populations in the United States.
For Americans aged over 65 years and certain disabled persons, the federal government program Medicare pays for the majority of hospital and physician services consumed.
The growth in the number of elderly, coupled with the previously-mentioned large increases in the cost of health care, are making long-term care for the elderly populations very expensive (Thomas, 1993). Although many of the most promising medical innovations will result in better health and longer life for the elderly populations, they will also increase--not decrease—healthcare costs and spending.
4. Government support for healthcare
Local government is a large portion of the overall health care safety net in the United States, providing direct-care services and funding such items as public hospitals, transportation, educational outreach, and housing subsidies (Ketchum, 2001).
As stated at the start of the paper, various government programs have contributed to the rising cost of health care in the US. The social awakening of the 1960s brought the introduction of Medicare and Medicaid as a means to give adequate healthcare to the poor. Its effect on the overall health care system in America was overwhelming (Marsh & Yarborough, 1990). Americans belonging to the low-income brackets can enroll in a state-administered Medicaid program that pays for select healthcare services.
The role of the government in regulating health care providers will be limited to ensuring that providers and payers do not engage in anticompetitive practices and that the safety of consumers and patients is protected (Hackey, 1998). This means that the government tries its best to reduce the healthcare costs at all levels for the consumer’s benefits.
5. Consumer expectations
Almost all healthcare consumers would want to go to the “best” hospital in town, see their own doctor, and have access to the same new medicines. When one falls ill, gets a certain level of medical care, and tells the neighbor about it, the other's expectations are raised accordingly (Kleinke, 2001). Each individual consumer shares a common need for health and a desire for the absence of illness through the demand for health care services and products. This in return affects the healthcare costs.
Since consumers expect so much of healthcare, the healthcare providers are pushed to offering consumers a range of choices. Consumer expectations are fueling demand for health information that they can understand and services that they want. Consumers would want to know what their care options are and what health plans are available to them. By offering consumers a choice of healthcare services and plans, various healthcare organizations encourage the development of price competition among competitors. Price competition among healthcare providers could generate in a cost reduction of a range of healthcare services.
The empowerment of the consumer is perhaps the most exciting and potentially the most threatening of all the developments in healthcare. In a consumer-empowered marketplace, once dominant, name-brand players compete on a level playing field with those with a fresh approach and a strong customer focus. In a consumer-empowered marketplace, information flows freely, facilitating comparisons of quality, value, and price. In a consumer-empowered marketplace, there is less reliance on "experts" to make decisions because consumers have the information to participate actively in those decisions (Clarke, 2000).
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