Assignment:
To prepare for this discussion make sure you watch Steven Brill 3-minute video on rising medical costs. Then, explore the related infographic What Makes Health Care So Expensive. Finally, review the section on Cost Containment in the Summary of the Affordable Care Act prepared by the Kaiser Family Foundation.
For your first post, choose one of the possible solutions to rising health care costs or describe a solution that you would suggest and, based on the information below The possible solutions cited in the infographic include:
Control prescription drug costs (save $94 billion)
Regulate hospital costs and/or tax their profits (save $84 billion)
Reduce duplicate or excessive tests and procedures (save $74 billion)
Regulate fees and/or tax the profits of outpatient clinics and labs owned by doctors (save $50 billion)
Bring gross margins of medical device makers down to 50% (save $30 billion)
Use comparative-effectiveness evaluations to guide decision-making for prescription drugs, tests and medical devices (save $28 billion)
As the provisions of the Affordable Care Act (ACA) are gradually put into place, the economics of the program are a subject of great debate. Some of the debate seems driven by political philosophy (should the U.S. be a nation of big government or small government?) or by ethical considerations (is affordable health care a basic human right?). Regardless of your own opinions on the matter, it clear that the economics of the ACA look quite different from the perspectives of the patient, the employer, and the provider.
Patient Perspective
Health care analysts estimate that 30 million U.S. citizens who currently don't have health insurance will be covered by the ACA; some of these citizens will be eligible for federal subsidies to help cover the cost of their health insurance premiums. In addition, a baseline of coverage will be required for all health insurance policies, avoiding today phenomenon of under-insurance.
Surely this means the demand for health insurance policies will increase, and to a certain extent the price to consumers will be moderated by federal spending. However, for those who have previously chosen not to purchase health insurance, the ACA will require them to join the pool of insured citizens, and a certain amount of their disposable income will no longer be available for other purchases. Will spending on food, clothing, shelter, transportation, or even savings drop as a result?
Another economic impact may relate to personal bankruptcy. Currently, 62% of U.S. bankruptcies are due to illness or medical bills, and 69% of those who have experienced medical bankruptcies were insured at the time. If medical bankruptcies are reduced, how will that affect nationwide levels of household spending?
Employer Perspective
Employers with 50 or more employees will be required to offer health insurance policies with at least baseline coverage to employees working 30 or more hours per week. This may represent a significant additional expense of doing business for firms who have not previously offered this benefit. What other company expenses may be scaled back to offset new health care costs? Hiring, research and development, and capital investments are just a few possibilities.
In addition, employers with a significant number of part-time employees may scale back work hours for individuals, resulting in smaller paychecks but a larger number of employees. Will this create additional employment opportunities, or will it result in more workers who are under-employed?
Provider Perspective
Cost control in Medicare and Medicaid spending is an important feature of the ACA. Through a combination of changes in Medicare payment structure, slowing of inflation-related price increases, and incentives for improved performance (such as reducing repeat hospital visits and minimizing hospital-acquired illnesses), the federal government intends to reduce the rate of growth in health care costs as a share of the U.S. economy. In the last 50 years, U.S. health care costs have increased roughly 800%, while the nation economy has only grown about 150%. It is reported that U.S. spends $750 billion more each year for health care than other developed nations, even when relative incomes and costs of living are considered. How might an additional $750 billion a year help to resolve ongoing issues of debt reduction, infrastructure spending, and investments in education or research at the federal level?
An important element of cost control is increased transparency for health care charges. The so-called chargemaster rates, or standard prices charged by hospitals for specific services are now available to the public for comparison purposes. For instance, government data shows that one hospital in Dallas, Texas charged $14,610 to treat pneumonia, while another Dallas hospital charged $38,000 for the same care. It is hoped that better-informed consumers will make smarter choices among providers, through access to this cost data.
Not Merely Supply and Demand
As a heavily regulated industry, health care certainly does not operate simply on the principles of supply and demand. In the U.S., demand is strong and getting stronger (almost 25% of the population will be over 64 years old by 2030), while supply seems easily able to keep pace in most communities. The question then becomes health care, but at what cost? As both a patient and a provider, you have a responsibility to become better informed on the factors of ACA that may either increase or decrease those costs.