Healthcare Cost

Abstract

Health care is a fundamental service that touches millions of people at significant and vulnerable times such as illness, birth and death. In the recent past, advancements in medical technology and pharmaceuticals have significantly improved the prospects for recovery because of how care is delivered. In spite of these achievements, the quality, accessibility and cost of American health care have become a major policy and legislative issues. Extensive increases in the cost of health care have placed significant stress on household, state and federal budgets, as well as the employer-sponsored health insurance system. Consequently, the quality of health care varies widely, even after managing the cost, patient preferences and source of payment. Many Americans are uninsured. The costs of providing uncompensated health care are a significant burden for many health care consumers, providers and other tax payers. With the proposed plan, patients would benefit from guaranteed coverage access, improved care and personal choice. Any feasible healthcare plan for the future must be founded on the principle of universal coverage. Public-private partnership would also encourage healthy competition in terms of cost and quality. There should also be alternatives to employer-based healthcare insurance. The proposal also advocates for administrative simplification. An electronic based medical care system coupled with high security would ease premium payments, billing and report generation for physician and patients. Moreover, the quality of healthcare will improve by emphasizing on the patient- physician relationship. In addition, physicians must be engaged in the efforts to help the patients recognize the true quality of healthcare.

Introduction

The United States has a complex, massive and unique health care delivery system. The system consists of processes and components that enable people to receive quality and affordable healthcare delivery and services delivery. The GDP spent on healthcare rose significantly during the 1970s and 1980s. However, it evened out during most of the 1990s. Since 1999, the health insurance costs have risen rapidly, straining the budgets of American families and businesses. In 2010, health care expenditures in the US were approximately 2.6 trillion US dollars, which was above ten times more than the 256 billion US dollars spent in 1980 (CMS, 2012). According to the Centers for Medicare & Medicaid Services, as of December 2010, the health insurance premiums for family coverage had risen to 131 percent (CMS, 2010). This increases forced many poor American families to spend more money for less health coverage. Moreover, the insurance providers could raise rates without a clear explanation of their actions or a justification for their high premiums. In reference to the increasing costs of healthcare in the United State, this paper develops a proposal to invoke a transformation of the U.S. healthcare. This proposal outlines the major problems related to healthcare and the history of the costs of healthcare. It also outlines principles for addressing them and the potential solutions.

The Major Developments in the Evolution of This Problem in the US

The United States Healthcare system is at its current state as a result of a series of Congressional acts that coupled employment with health insurance. As a result of tax incentives, wage controls adopted during the Second World War, and the influence of labor unions after the war, employer-sponsored healthcare insurance coverage increased considerably over the period (Shadunsky, 2009). Additionally, a mix of federal and state regulations implemented since the days of Franklin D. Roosevelt has created a healthcare system that is both unique and inefficient. It is clear that the perverse regulations on health insurance should be the focus of the healthcare costs problems allegedly caused by the markets.

Some of the specific legislative causes of the problem are the tax code, the Employee Retirement Income Security Act (ERISA) and the McCarran-Ferguson Act (Shadunsky, 2009). The tax code rewarded Americans who received employer-sponsored healthcare coverage with a considerable tax benefit. This mostly benefited the upper middle class at the cost of the poorer individuals. The federal government also failed to enact enough regulations to address the employer’s self-funded plans. Additionally, it has engaged in little regulation, giving room for insurance providers to create health insurance plans with fewer benefits. The other cause of the problem is variation of different state legislation that primarily consists of mandatory coverage of certain treatments. Healthcare insurance providers heighten the cost of mandates so that they can profit on them.

The need to address this burden has become the major legislative and policy issue for the Congress and any incumbent administration. The goals of the health reforms include controlling the rising health care costs, expansion of the insurance coverage, improve coverage for those with health insurance and improve access to and quality care. Moreover, the United States is still reviving from the global financial crisis of 2009, which resulted in higher unemployment and lower incomes for many Americans. These problems have put even more focus on health care affordability and spending. According to a 2012, Employer Benefits Survey by the Kaiser Family Foundation, employer sponsored health cover for family premiums increased by almost 100% since 2002. (KFF, 2012). In 2011, the employer-sponsored premiums went up on average about 9 % (Matthews, 2011). Consequently, cost burdens were placed on both employers and employees. In the public sector, Medicare provided coverage for the elderly and the physically challenged. On the other hand, Medicaid covered low income families. According to Mathews (2011), the enrollment grew in Medicare with the aging and in Medicaid because of the recession. This implies that the net government spending on health care is increasing significantly, straining state and federal budgets. Physician/clinical services and hospital care combined account for 51% of the United State’s health expenditures (Martin, 2012).

The International Context

With respect to the International context, the United States spends more than two and half times the OECD healthcare cost average (Kane, 2012). That is, over two times more than most developed nations in the world, including China, Sweden, Germany France and the United Kingdom. In other words, the United States healthcare costs consume 17.6% of Gross Domestic Product (Kane, 2012). In the United States, expenditures on almost every area of health care are higher than in other countries. This is subject to the fact that the U.S. has fewer physicians relative to its population. Consequently, they cost more due to the less competition for patients. The United States needs good policies in addressing lifestyles that result in poor health. This would reduce the cost of subsidies and state-sponsored insurance coverage. For example, more states should make more efforts to encourage preventative care and reduce smoking. More policies should also be formulated and implemented to address the harmful use of alcohol, such as higher taxes on alcohol. Additionally, it could certainly focus more on obesity, which is a critical risk factor for poor health in the United States.

The Stakeholders and Their Efforts

The major stakeholders in the problem include the government, the health care industry, and health care consumers. In an effort to address this problem, reforms have been carried out. The Affordable Care Act was enacted to curb the premium increases by health cover providers (CMS, 2010). The Act requires insurance companies to clearly explain and justify any high insurance premium rate hikes. For instance, the Patient Protection and Affordable Care Act (PPACA) was signed into law on March 23, 2010. Other federal laws have also been enacted to address the increasing healthcare cost in the United States. PPACA includes several measures that were fundamentally designed to transform he health care system in the United States. The law requires that most of the United States citizens and legal residents have access to health coverage by 2014. It also involves the expansion of the Medicaid program to cater for the nation’s poorest citizens. The Patient Protection and Affordable Care Act also require employers to provide health covers for their employees or pay penalties, with exceptions to small businesses. In addition, regulations on health plans in the private market require them to cover all employees, irrespective of their conditions. The Act is expansive and was to be implemented over several years. The major provisions were to take effect by January 2014. The government has also increased support for wellness, prevention care and public health activities. It has also increased funding for the basic care services.

A decade ago, the Unite States healthcare system experienced failures and has not improved since then. The measures undertaken through managed care did not materialize. Medical insurance premiums have risen. Hassles for physicians and patients abound. Approximately 45 million Americans are uninsured (Matthews, 2011). It is projected that over the next decade these healthcare problems will be pervasive and new challenges will emerge. Although technological advancements, as well as, the intensive investment in Research and Development will increase the efficiency, the cost of healthcare is projected to outweigh the savings. As physicians advance at treating problems, patients’ lives will lengthen. In addition, the demand for healthcare services will increase.

Moreover, as the healthcare costs continue to rise, the status quo has not been acceptable with the economically challenged employers. It is probable that some will eliminate or minimize the benefits of new employees. Some will get out of the insurance industry completely, contributing some funds to the coverage but no longer providing insurance coverage themselves. The impact will be an increasingly disenfranchised middle class. Consequently, the middle class and employees will advocate for radical change.

The Policy

The proposed plan seeks to minimize healthcare costs as well as expand the health coverage by building on the existing public-private healthcare system for providing healthcare cover and filling the gaps in the current system. This is achieved by expanding the eligibility for Medicaid, which is the current safety net health insurance program for the poor. It advocates for new exchanges or marketplaces where people can purchase coverage depending on their income, and receive premium subsidies to help them afford the coverage. It also proposes for new penalties for employers that do not provide health cover for their employees. The proposed plan also considers the provision of tax credits to small employers.

The critical area addressed by this proposal is the containment of healthcare costs. One of the provisions in the proposed plan targets the health care prices, particularly the premiums insurers charge. The other provisions addresses, administrative costs, provider payment methodologies and the way in which the whole health care system can be organized to contribute to resourceful and efficient delivery of care. In reference to prices, states should review premium rates requested by insurance providers to identify and eliminate unreasonable or excessive premium increases. Insurers should also spend a portion of the premium received on patient care as opposed on the traditional administrative costs to profits. Standardized health care plans in the marketplace or through the exchanges will facilitate the ease in which people can compare plans. This should spur healthy competition and probably lower premiums.

In the other areas, the proposals call for reforming payment policies in medical care including reduction to the payment of to the Medicare managed care plans and slowing annual payment increases for other healthcare cover providers, as well as, minimizing payments to other providers for avoidable complications such as readmissions and hospital acquired infections. The author also outlines the implementation of electronic delivery system to provide high quality care more efficiently.

The Problems and Recommendations

The first major problem linked to the healthcare system is the un-insured (Conklin, 2002). For this problem to be solved, any viable plan designed for the future healthcare system must be founded on a universal coverage. The desired plan should guarantee every American enrollment in the basic health plan of his or her choice. This should not be necessarily a health maintenance organization. Family members should be in a position to change plans annually, as well as use, different health coverage plans. In addition, the previously uninsured citizens should receive income-related payments, for example, vouchers to cover the cost of their enrollment in basic plans.

The second problem is the unacceptable pure government system. This proposal presents a hybrid of private and public healthcare system, which would be preferred by the general American population. The model of the Federal Employees Health Benefits can be adopted. This will ensure that regional agencies use cost effective and quality data to produce catalogs of approved plans. Physicians in the private sector can belong to various plans and deliver care. In this respect, the private healthcare plans would compete on cost and quality.

The other problem affecting the United States healthcare system is the administrative hurdles for physician and patients (Conklin, 2002). This problem can be solved through simplification of the of the bureaucratic process involved. The access to the past offices to the doctors should be simplified. The proposed plan advocates for an affordable electronic based distributed medical record system. The medical records would have a state-of-the art security. It would also incorporate physicians written or dictated notes into the patients’ electronic records. In this respect, the speed and cost of access or retrieval of patients’ information will be optimized. By implementing such a system, the stakeholders involved would concentrate on core functions rather than waste resources handling the same problems. An electronic based system would also automatically bill and generate reports for physicians. The guidelines used would incorporate guidelines from each plan and other evidence based plans as models. Payments to plans would also be simplified in terms of paperwork and the costs involved.

Americans are also restricted in the choice of job opportunities and healthcare. The current employer-based insurance system limits an individual’s choice of insurance. Moreover, many citizens are locked into their jobs due to the fear of losing coverage. This proposal provides avenues for alternatives. Employees can either accept job-based insurance or request their employers to send a percentage of their premiums to regional agencies regularly. The regional agencies should be providing an array of plans. The remainder of their premium should be covered with the income-adjusted federal tax subsidies. Families under 100% of the poverty level would receive full subsidy. Citizens would arrange on how to pay their premiums in a fashion similar to the automobile insurance. Employers with more than 5 employees would be required to pay the regional agency or provide coverage for each employee. Further, employers would be sidelined from the insurance business completely. This would allow them to concentrate on their core businesses by paying the regional agencies the premiums.

Financing also ails the United States healthcare system. The stakeholders involved should consider the expense of the uninsured citizens by redirecting current revenue or new revenue. New revenue includes individual and employer penalty payment, Medicare tax, Health Industry fees and high-cost insurance tax. Federal savings come from Independent Payment Advisory Board, Medicare advantage reductions and other revenues. They should also improve the efficiency of revenue collection, thereby minimizing the losses incurred in revenue collection. A universal coverage would be expensive; hence potential sources should be identified to cover the paid costs. These include increased efficiency in the non-Medicaid services to the uninsured, reduction in the bad debt and charity care spent on the uninsured. Employers with more than 5 employers that presently do not provide health care can fund the universal coverage by paying insurance premiums. Increased billing efficiencies can minimize costs through restriction of preapproval requirement, automation and other innovations.

Inconsistency in the measured, understood and reported quality of health care is also a problem in the healthcare system. This plan advocates for synchronization of the outcomes of similar conditions across plans. Consequently, healthcare plans will compete on the basis of innovations in preventive and actual care. In addition, quality would be in both ways. Moreover, insurers would lower the premiums due to the good health behavior. Therefore, the cost of premiums will be affordable.

Conclusion

With the proposed plan, patients would benefit from guaranteed coverage access, improved care and personal choice. Preventive care will ensure that, for example, Americans with potential heart disease benefit, particularly from universal coverage. Any feasible healthcare plan for the future must be founded on the principle of universal coverage. This would guarantee every American enrollment in a basic healthcare plan of personal choice. Enterprise firms would concentrate on core business operations, not benefits. Even the entities that contribute towards employees’ coverage for the first time benefit due to healthier employees. The insurance companies would only benefit from the payment received, and based on the severity of the patients’ conditions. Public-private partnership would also encourage healthy competition in terms of cost and quality. There should also be alternatives to employer-based healthcare insurance. That is, employees should be at liberty to choose their own health coverage scheme. Consequently, citizens would not be restricted in choice of job opportunities subject to the fear of losing coverage. The proposal also advocates for administrative simplification. An electronic based medical care system coupled with high security would ease premium payments, billing and report generation for physician and patients. This will ensure that physicians concentrate on patient care rather than the administrative tasks. The quality of healthcare will improve by emphasizing on the patient- physician relationship. Moreover, we can highlight the need for change in the healthcare system. Physicians must be engaged in the efforts to help the patients recognize the true quality of healthcare.

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