Posted: March 24th, 2023
To: System’s Board Of Directors
From: Chief Executive Officer
Date: 31st July 2016.
Subject: Growth in Health Care Spending, Healthcare Models, and Containing Costs
Healthcare is a significantly essential social service in any society across the world regardless the increased cost of health care services over the last fifty years. As a result, stakeholders, particularly the funders would be interested to know the factors contributing to the increase. Therefore, the in-depth knowledge about the dynamics enhancing the cost can assist the system board of directors in coming up with the appropriate course of action to contain the charges at a manageable rate.
Historical or Contextual Information
The increase in health care expenditure is highly evident. For instance, between 1960 and 2014, the average expenditure per year grew from $ 146 to $9,532 for every person, which was an increment by 65 times. From another perspective, this is a growth from 5% to 17.5% of the gross domestic products (Just Facts, n.d.). The changes in costs policy arise out of some factors, including greater demand, new technology, prescription drugs, under-funded public programs, and medical malpractice liability.
The need for the services has increased over the years. The dual pressure on the health care system as a result of growing population, increasing the numbers of the elderly and children has exerted remarkable stress on the existing health care facilities (Peden, 2014). Indeed, the increase in the number of people served implies that the total spending in the sector has grown respectively. Additionally, the increase in demand at a relatively lower growth in supply assumes that the market forces lead to an upward growth of the cost charged per patient.
Significantly, new technology is a key tool used in improving the quality and efficiency of health services. In essence, putting in place the state of art equipment for treatment comes with a significant initial, operational, and maintenance cost (Peden, 2014). However, hospitals are increasingly adopting the technology to revolutionize operations and lower risk while attending to patients.
In addition, the medicine prescribed forms a significant portion of health care spending. The cost of producing drugs today is higher compared to fifty years ago. Indeed, the frequency of drug use has risen substantially leading to more expenditure as access to healthcare improves; hence, implying that more people are required to consume the drugs on prescription.
The under-funded public program is the other cause of the increased cost in the health care sector. Consequently, the government has limited resources to cater for all the public needs. Under those circumstances, the available funds are allocated among the many social services, making it hard to provide for the actual expenditure on public health. As a result, the private sector and, in particular, insurers come in to fill in the shortfall. However, the private organizations are profit-oriented and hence offer their services at premium prices.
Last but not least, medical malpractice liability has increased as jury award compensation to victims. Thereupon, the health care providers have taken caution by insuring their services against such occurrences (Peden, 2014). On the other hand, insurance companies have increased the premium charged due to the high level of risk. In essence, the practitioners shift part or the entire expenditure on insurance while treating the patients, thus, leading to rising costs of health care.
Healthcare Payment and Delivery Models
Health care payment and delivery models transform and promote greater accountability for cost and enhance quality in the health care system. For this reason, the stakeholders are striving to adopt innovative payment systems to enjoy the benefits of the traditional system and model. The shift, in this case, assists in enhancing accountability among the individuals responsible for receiving payments and undertaking cash management (Peden, 2014). By and large, the new approach allows for check and balances, making it easy to identify misappropriation and malpractices while handling cash in a health facility. Therefore, the organizations save resources and continue offering quality care.
Secondly, it is clear that the new system and model advocate for separation of duties and responsibilities. Notably, the practitioners concentrate on treating the patients while the administration wing provides the managerial functions (Michener et al. 2016). For instance, physicians’ responsibilities are to attend the patients, diagnose, and provide prescriptions. In effect, the reduced workload decreases stress and fatigue levels, hence providing improved quality services.
Thirdly, the updated approaches and model assist in bringing in different contributors. The system makes it easy for the differentiation of cost items to be paid out of patient’s pocket as well as private insurers (Michener et al., 2016). In addition, attracting the different funders will assist in making healthcare more affordable and accessible.
Last but not the least, the new system and model help the practitioners in adopting evidence and patient-based care. In this regard, the model in which patient’s information is collected, saved, and retrieved in the electronic system is applied. Particularly, the physicians can acquire the information at ease while attending each patient, making it easy to have a consistent health service for better outcomes.
Call for Action: Recommended Approaches for Constraining Cost Growth
The growth in the cost of health care services is increasingly becoming a concern because it decreases their accessibility to many people, particularly the poor. In the bid to reduce the cost, the government should increase its funding through Medicare insurance and aid to insure the poor. Secondly, alternative medicine including traditional methods and the herbal remedy should be highly upheld. In addition, practitioners must be encouraged to undertake research and identify the illnesses that are treatable using the method. As a result, the demand for contemporary medicine will be considerably reduced. Thirdly, more young people should be encouraged to join careers in healthcare as nurses or physicians (LaFond, 2013). Consequently, the ratio of practitioners to nurses will improve, therefore enhancing accessibility while reducing the cost of hiring. Lastly, practitioners, including the medical and administrative staff should be trained on the appropriate and acceptable practices which will reduce or avoid professional liabilities. As a result, the premium paid in insuring the practitioners will be reduced as the cases of spending reduce considerably.
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