Controlling healthcare costs is an imperative aspect of the delivery of healthcare services, policy formulation, and the economy. It can advance opportunities for healthier lives for all people. The rate at which healthcare costs are rising is a threat to sustainable economic growth and the health wellbeing of the people. United States’ public health policymakers continue to struggle in finding means to restrain the rapidly increasing healthcare costs and at the same time promote opportunities for better, healthier lives for all people. For too long, the healthcare sector focused on increasing volume, revenue, and growth. Besides, the hospitals wasted billions of dollars on service duplication, variation, suboptimal labor management, and inefficiencies in supply chain management. Meanwhile, the rising healthcare cost, largely driven by steadily increasing prices, is squeezing private and public resources that could be used in other pressing priorities. It has constrained local and state spending for infrastructure, education, and other essential services. While different stakeholders play varying roles in the healthcare field, stringent policy measures should be formulated to control the escalating healthcare costs to promote the health and economic wellbeing of the people.
Topic
Traditionally, economic markets allocate services in line with market forces with a clear reflection on consumers’ incomes and preferences, cost of capital and labor, and technological possibilities in the production sector. Usually, markets connect supply and demand using prices. They further allocate labor, capitals, and services in a manner that maximizes the welfare of the community. However, the healthcare market operates differently from conventional markets in other industries. According to Liaropoulos and Goranitis (2015), the high cost of healthcare has become the single most significant element undermining the long-term fiscal growth of many countries, including the United States. Apparently, increasing pressure on the control of healthcare costs demands that healthcare resources are utilized in a judicious and equitable framework. As Iuga and McGuire (2014) argue, expenditure in healthcare should match high efficiency and quality in the delivery of services to foster health outcomes.
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This topic explores potential policy measures that could promote improved service delivery in the healthcare sector. The pressure to limit the rising costs of healthcare is intensifying because of the ageing population, current economic and fiscal constraints, and many other factors (Detsky, 2012). The discussion explored under the control of healthcare costs is crucial in advancing knowledge on how to reduce unnecessary, duplicate services. The topic focuses on ensuring reduction in administrative costs, administrative burden, medical malpractice, but at the same time promote the determination of medical necessities. Furthermore, controlling healthcare costs, as a concept is integral in exploring potential means for enhancing chronic care management, prevention, wellness, healthy behaviors, and cost-consciousness in the delivery of healthcare services. This topic highlights the importance of recognizing the effectiveness and benefits of medical procedures, understanding the factors that drive healthcare costs, and noting possible ways that could be used to achieve savings.
Stakeholders
The healthcare sector has multiple stakeholders working incoordination to deliver quality healthcare services. The input of all stakeholders is imperative for informing diverse policy initiatives. It is, therefore, imperative to involve all stakeholders in the policymaking process and have their opinions. Healthcare providers, healthcare consumers, insurance companies, employers, and government policy experts are among the critical stakeholders in the sector.
Healthcare Providers
Healthcare providers include hospitals and clinics. While they may have minimal control over the generation of their revenue, they can regulate their operative expenses that properly and effectively comprise the costs involved in caring for patients: equipment, property, labor, capital, supplies, buildings, and utilities. Some of these categories of expenses are responsible for the rising cost of healthcare. Statistics indicate that labor costs constitute the biggest chunk of healthcare expenses incurred by hospitals and clinics. According to Brook (2011), Healthcare providers have lost their focus on labor costs perhaps due to their concentration on access to healthcare, patient experience, and quality aspects (Liaropoulos & Goranitis, 2015). Failure to focus on the rising cost of healthcare reduces healthcare providers to one of the key perpetrators of the costly healthcare services. Could they identify, monitor, and reduce resource wastage, the cost of healthcare services would reduce considerably.
Healthcare Consumers
While consumers look for affordable health care, they resist government and regulators’ restraints on access to highly costly services and providers. Iuga and McGuire (2014) opine that consumer groups push back the government recommended quality and level of access offered by some provider networks that provide higher-value medical services and lower prices. This aspect reduces consumer efficacy in shopping for more effective, quality, but cheaper healthcare services. Ultimately, they end up securing premium payment plans that affect both the consumers, their employers, as well as the government.
Insurance companies
The cost burden of healthcare risk and reimbursement is a major contributor to the rising cost of healthcare services. Insurers charge premium prices to risky medical services that could discriminatively escalate the prices of healthcare services. Additionally, health systems and plans pursue capitated payment plans, slowly setting a higher risk component against providers (Tilburt et al., 2013). Nevertheless, the high cost of premium plans contributes to the increasing cost of healthcare as the costs are passed to the patients.
Employers
Employers bear a huge portion of medical care costs due to commercial prices. Failure by most employers to reward their employees on selecting cost-effective plans contributes to the high cost of healthcare services (Porter & Lee, 2013). Partly, employers suffer the high cost as they have to contribute to their employees’ care plans. While the government losses tax on the tax relief offered to the medical care plans, the employers also suffer since the high cost of the plans affects their operating costs.
Government Policy Experts
Policymakers have a clear role in formulating measures that could curtail the ballooning cost of healthcare costs. However, while policymakers have embraced a dynamic array of solutions to regulate the rising costs of healthcare including consumer-oriented healthcare, managed care, and in more recent days the reforms in the healthcare delivery system, it has all been wishful thinking (Detsky, 2012). Mostly, the policymakers’ moves at stimulating control of healthcare costs have failed. Although policymakers are tasked with this noble task to pass policies aligned with the national budget, little has been realized from their efforts (Detsky, 2012). The amount of money spent by the federal, state, and local governments to cover the escalating costs of medical care is rising faster relative to the gross domestic product (GDP), thus increasing the government deficit (Tilburt et al., 2013). Realistically, policymakers have failed in their work, leaving the cost of healthcare to increase beyond the reach of many patients.
Discussion
Efficiency in Resource Management
Healthcare providers’ inefficiency in resource management is partly to blame for rising healthcare costs. However, hospitals and clinics could improve on efficient resource management to minimize operating expenses, which are mostly transferred to the patients (Brook, 2011). Healthcare providers should redesign their working formulae to be more effective in terms of service and delivery. For instance, to ensure efficient management of labor resources, hospitals could focus on service orientation by adjusting hours for outpatient services and providing flexible services by opening early and closing late including on weekends to accommodate the working class of patients. It would be a balancing act for synchronizing quality service delivery, access, cost components, and satisfaction.
Accurate Pricing of Healthcare Services
Proper pricing of healthcare services could reduce the high cost of healthcare delivery. However, the government has a role to play in ensuring the success of this strategic approach. Tilburt et al. (2013) present that the government should utilize its purchasing power on behalf of the healthcare consumers to obtain the best prices for drugs in all pharmaceutical companies covered by plans funded by the public. Nonetheless, ensuring patient safety and quality, and support for research and innovation on service delivery and drugs that can advance healthcare should remain a top priority of all initiatives directed on reducing the cost of prescription drugs (Porter & Lee, 2013). Therefore, to reduce the price of prescription drugs, the government could promote increased competition among drug manufacturers, negotiate volume discounts, and encourage drug manufacturers to formulate drug discounts and patient education.
Adoption of Patient-Centered Medical Home and Appropriate Pay for Care Services
Government-supported insurance covers, as well as other payers, should adopt the patient-centred medical home (PCMH) model. Paustian et al. (2014) state that adoption of the PCMH model could be attained if payers transition to coverage and an effective payment structure designed in line with qualifying practices. A monthly bundle containing performance-based payment determined by evidence-based quality service, efficiency measures, and patient satisfaction, fee-for-service payments, and projected payments per qualifying patient should be formulated. However, Paustian et al. (2014) posit that the fee-for-service payment offered to the primary care medical professionals should be uniform across the medical field to endure a sufficient supply of physicians to help save the cost of health care.
Impact
Implementation of the discussed potential initiatives towards the reduction of healthcare costs has both short-term and long-term impacts to the public. Increased efficiency in resource management would be beneficial to not only the consumers of healthcare services but also the healthcare providers. Proper resource management eliminates wastage thereby creating the much-needed funds for other hospital-related activities including an expansion of services, technological innovation, and acquisition of effective equipment for quality service delivery (Tilburt et al., 2013).
These initiatives, including government engagement with pharmaceuticals, could have an immediate impact on the nation. Negotiations would bear reduced prices of prescription drugs and therefore minimize the cost of healthcare services (Porter & Lee, 2013). Notably, with reduced healthcare costs, the local, state, and the federal government would realize budgetary savings that could be directed to other essential services, including education and infrastructure development. In the long run, formulation and extension of patient education by the pharmaceutical manufacturers would create an informed public that can differentiate the necessity of certain prescription drugs as well as alternative, quality, and cheap drugs.
Adoption of the PHMC model would ultimately enhance quality healthcare services because it establishes a competitive pay structure. Furthermore, it ensures an adequate supply of physicians, thereby driving the cost of healthcare downwards in line with the forces of demand and supply.
Conclusion
While healthcare services are essential to boost the overall wellbeing of the people, the escalating cost of the medical services is creating a huge burden to consumers, employers, and the government. Stringent policy measures should be formulated to control the escalating healthcare costs to promote the health and economic wellbeing of the people. All stakeholders, including providers, consumers, insurers, and the government, have a role to play. Engaging stakeholders is a best practice that ensures the success of every program. Efficient resource management, adoption of PCMH, and accurate pricing of services could reduce the cost of healthcare services.
References
Brook, R. H. (2011). The role of physicians in controlling medical care costs and reducing waste. JAMA , 306 (6), 650-651.
Detsky, A. S. (2012). How to control health care costs. Journal of Gen Intern Med , 27 (9): 1095–1096.
Iuga, A. O., & McGuire, M. J. (2014). Adherence and health care costs. Risk Management and Healthcare Policy , 7 , 35.
Liaropoulos, L., & Goranitis, I. (2015). Health care financing and the sustainability of health systems. International Journal for Equity in Health , 14 (1), 80.
Paustian, M. L., Alexander, J. A., El Reda, D. K., Wise, C. G., Green, L. A., & Fetters, M. D. (2014). Partial and incremental PCMH practice transformation: implications for quality and costs. Health Services Research , 49 (1), 52-74.
Porter, M. E., & Lee, T. H. (2013). The strategy that will fix health care. Harvard Business Review , 91 (10), 1-19.
Tilburt, J. C., Wynia, M. K., Sheeler, R. D., Thorsteinsdottir, B., James, K. M., Egginton, J. S., & Goold, S. D. (2013). Views of US physicians about controlling health care costs. JAMA , 310 (4), 380-389.
