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Solutions to Rising Healthcare Costs

Info: 3705 words (15 pages) Nursing Essay
Published: 11th Feb 2020

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Rising cost in health care & its solution

  • Tahmina Ali

The study relates to the causes in rising costs in health care and possible means of reducing such costs


Executive Summary

Reasons for high cost in health care

Solutions to the rising cost of health care

Implementation of Universal Health care model

The Beveridge Model

The famous Bismark Model

The National Health Insurance Model

The Out-of-Pocket Model

Procedure to implement Workplace Health Model



Executive Summary

Undoubtedly, health care costs has emerged as a severe issue these days, especially when the budget is appreciably high. The present financial situation of the world today reveals comparatively high cost in medical and health care. Day by day, the cost of insurance premiums and medical claims for employees is rising at an all-time high and is continuously following an upward trend. In such critical situation, business leaders are being called upon to make changes at workplaces and to implement models which can help in curbing rising costs. Many of them are turning to workplace health programs to help employees so that they can adopt healthier lifestyles. This also will help in lowering the risk of developing costly chronic diseases. A coordinated move toward the workplace’s health promotion results in a planned, prearranged, and comprehensive set of curriculum, policies, benefits, and ecological supports designed to meet the health and safety needs of all employees. Programs relating to workplace health care tend to be more successful when both occupation and health is considered in the design and execution of the workplace. In fact, a mounting body of evidence indicates that workplace-based interventions that take coordinated, planned and integrated approaches towards reducing health threats to workers both in and out of work are more effective than traditional isolated programs. (Prevention, 2013)

(Figure 1: Health care expenditure)

(Source: Forbes, 2013)

Reasons for high cost in health care

This decade has alarmingly witnessed an appreciable increment in health care costs. Whether it is ever-increasing health indemnity premiums, growing drug costs, or escalating hospital prices, it is an agreeable fact that these costs need to be constrained, or even lowered. For many years and in immeasurable articles, physicians have been the scapegoat for rising healthcare costs in thewhole world. On the other hand, it has been seen that something else is exposed by digging deeper into the key mechanism in healthcare spending as technology and know-how, various administrative expenses, hospital costs, lifestyle substitute and chronic disease conditions have all had superior impacts on rising overall healthcare costs than medical doctors. The bulk of medical payments go to hospitals and device manufactures. It has been suggested by critics that the incomes of physicians is directed by most spending of healthcare. Despite the fact, it is not necessary that the primary beneficiaries of health care spending are physicians. The medical procedure payment in bulk goes in hospitals and in manufacturing the devices. But this does not mean that majority of benefits are gained by physicians and they have caused a rise in the health care settings. This becomes an extremely wrong notion. The five main factors responsible for the increase in health care costs have been discussed below:

Unnecessary Care in various occasions

Out of many reasons, overuse and needless care, accounts one-third to one-half of all health care expenditure and this equals to hundreds of billions of dollars, in addition to the half-a-trillion spent per year.

Preventable Harm to Patients

This is one of most common problems of health care. The information is astounding. This is a surprising fact that early elective delivery harms both women and newborns. Children born at 37-39 finished week growth are at much elevated risk of death. They are also at a distant higher risk for evils like respiratory problems and right of entry to theNICU.

Wastage of Billions of Dollars

A report submitted by the Institute of Medicine Health suggests that a third or more of health expenditure are pointless. The cost of these pointless, injurious and early hours elective deliveries account to nearly $1 billion per year as was predicted in a study by the American Journal of Obstetrics and Gynecology.

Vicious inducement in how we pay for Care?

By tradition, people pay providers for various health plans, Medicare and other Medicaid no matter what services they provide. This is regardless of whether the overhaul truly reimburses the patient or not, as the tremendous new book called The Incentive Cure points out.

Deficient in Transparency

There must be proper requirement for medical expenditure made. Transparency stimulates change like nothing else. Cases like early elective deliveries demonstrate that, despite of warnings over the years from medical societies and various organizations and highly appreciated national organizations, the rates of these deliveries have been going up for decades.(Forbes, 2013)

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Solutions to the rising cost of health care

Cost in health care all over the world is rising at a rapid rate. The health care spending is increasing faster than the overall economy in US too. As per the National Health Expenditure Accounts data from 2008, it is shown that, people of US spend more than $2 trillion every year on health care which is 16.2 percent of gross domestic product. The amount spent per person comes out to be approximately equal to $7,681. Going up health care costs are inextricably linked to the enlargement in the number of uninsured, making it imperative that the subsequent step in health system improvement include efforts to address growing costs.

The American Medical Association (AMA) has recognized four broad policies to maintain the health care expenses and get good benefits for the amount spend after health care:

  • Diminish the burden of avertable disease
  • Make health care delivery more efficient
  • Diminish nonclinical health scheme costs that do not add to patient concern
  • Uphold value-based administration at all levels

Here is an elaborate discussion on the above four strategies:

Diminish the burden of avertable disease

The policy to diminish the risk factors for ailing and preventing the commencement of chronic diseases will definitely improve the patient’s fulfillment with medications and precautionary care recommendations. This policy will also encourage enhanced nutrition and physical movement with prevention in injury due to accidents and violence. This policy will also give enhancement in carrying out more public health campaigns.

Formulate health care delivery more efficient

The policy of formulating a better health care delivery is always needed to reduce the rising expenses in health care. This will not only improve coordination of care but will also help in reducing unnecessary use of services. This particular strategy is helpful in increasing use of services with optimistic return on investment i.e. in terms of future disease and cost. Here we can get increased accessibility of information on the usefulness of different treatments; advance management of chronic diseases. This will in turn reduce the medical errors and shift care to cost-effective sites of service.

Diminish nonclinical health scheme costs that do not add to patient concern

This particular strategy will help in eliminating unwarranted spending that does not make an addition to the value of patient concern, such as administrative expenses, profit making, etc.

Uphold value-based administration at all levels.

This successful strategy tends to improve the processes by which assessment are made so that both cost and benefit can be taken into consideration. Again particularly clinical outcomes are considered in this strategy. Both information and incentives are needed to be improved a lot for host of resolutions. Assessment can be increasingly incorporated into such assessments as physicians and patients decide among medicinal therapies, as insurers plan health chart features, and as legislators settle on budgets or authorization coverage of meticulous benefits. (Association, 2013)

The ultimate solution to the ongoing rise in healthcare expenses cannot lie in shifting responsibilities, generating hostility among workers, and contracting the managerial screws on the system. Such solution must lie in dealing with healthcare in a truly fundamental way.

Implementation of Universal Health care model

Rising costs in Health care is definitely a serious problem. There is a need that every company in the world formulates some strategic and universal plan for appropriate healthcare treatment of its human resources. They must put into practice such plans, which will not only be advantageous to the employees, but also will help that organization to curb the large expenditure in health care. A sound deliberate plan sets the long-term course for a healthcare system in any organization. This will identify the key initiatives and define answerability for results. Various healthcare strategic planning solutions of various organizations in reality guarantee improved presentation through establishing:

  • A fixed accountability for results by human being and date
  • A trouble-free tool to use with which management can manage day-to-day outcomes
  • There must be fast start for one to start on accomplishment of plans
  • Arrangement and promise from all stakeholders
  • An exclusive explanation specific to one’s capability and needs (System, 2005-2013)

Health care is the economic black hole of every country. Legislation and rules can only go so far as setting up the system and paving way for new technology but can’t do a great deal on their own. For a genuine combat with health care’s cost challenges, the focal point must budge to disruptive business models as searching innovative ways of delivering accessible treatments at a much lower cost. While new business models are looked-for across the spectrum of healthcare, many impediments put off new ideas from captivating root. There are barriers, which possibly will stem from the fact that health care in various countries do not function like the free market. For example, customers rarely compensate directly for their own care, so there is modest incentive for making trade-offs such as preferring something cheaper that they can get in lesser cost. The regulatory atmosphere often does not allow reasonably priced solutions to make it to marketplace. Finally, there are incompatible incentives and hospitals want patients to get that operation, but insurance companies do not want such. (Eyring, 2012)

As the expenditure of healthcare has risen, companies have tried to apply many cost-containment stratagems. However, all of which are likely to be only in part effective and only for a little while. More imperative, the new strategy make enemies, cause workers to be disbelieving of the company’s goodwill and intentions, subvert constructive attitudes on the part of the workforce, and harshly degrade the attitude and esprit of retirees with regard to the corporation. The contemporary approaches all amount to cutting benefits and variable costs. The most widespread practice is to push up the workers’ assistance while, at the identical time, reducing the obtainable benefits in the company’s insurance plan.

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If we take a corporate point of view, we can notice that implementation of a universal health care system is relatively easy and clear-cut. Corporations would make a permanent annual contribution to the national health care system as a percentage of the salary and wages of all workers. For example, it may be only as a talking point, 7.5 percentages of all salary and wages. (Coates, 2004)

For implementation of a Universal Health care system, there are four basic models, which can be applied for an appropriate health care system within an organization.

Countries all across the globe are following the map of complex legal, economic, and political landscapes to settle on the best path towards worldwide health coverage (UHC). Below we can illustratefour basic models for health care systems.

The Beveridge Model

In the Beveridge Model, the facility of health care is provided and financed by the government through tax expenditure, comparable to the public library. Many, but not all, hospitals and health centers are owned by the government and some doctors are employees under government, but there are also personal doctors who accumulate their fees from the government. These schemes tend to have low costs per capita, because the government, as the one and only payer, is in charge of what doctors can do and what they can charge. The countries, which are using the Beveridge Model or a variation include:

The famous Bismark Model

Despite of being most popular in all around the various European countries, this system of providing health care would look comparatively recognizable to Americans. It uses an insurance system and here the insurers are called sickness funds. They are usually financed in cooperation by employers and employees through payroll deduction.

Unlike the U.S. indemnity industry, though, Bismarck-type health insurance plans have to wrap everybody, and they do not make a profit. Doctors and hospitals tend to be personal in Bismarck countries. Although this is a multi-payer model and the country, Germany has about 240 different funds but this tight regulation gives government comparable cost-controls as single-payer Beveridge Models.

Countries those are familiar in using the Bismarck Model or a variation comprise of;

  • Germany
  • France
  • Belgium
  • the Netherlands
  • Japan
  • Switzerland

The National Health Insurance Model

These systems have elements in combination of both Beveridge and Bismarck models. It uses private-sector providers, but imbursement comes from a government-run insurance plan that each citizen pays into. Since there is no need for advertising, no financial reason to deny claims and no profit, these universal insurance plans tend to be cheaper and much simpler managerially than American-style for-profit insurance.

The single-payer is inclined to have substantial market power to consult for subordinate prices. The classic National Health Insurance system is found in Canada, but some recently industrialized countries like Taiwan and South Korea. These are some newly developed countries, which have also considered the NHI model. (Forward, 2011)

The Out-of-Pocket Model

Researches state that only some developed, industrialized countries, perhaps 40 of the world’s 200 countries in the world have established health care systems. Most of the countries on the planet are too deprived and too incompetent to provide any kind of mass health checkup facilities and proper medical care. The essential rule in such countries is that the rich get medical care but unfortunately, the people who cannot afford the cost, stay sick, or die.

Almost hundreds of millions of people go past their whole lives without ever seeing a doctor in rural regions of Africa, India, China, and South America. They may have right of entry, although, to a village healer using home-brewed medication that may or not be of use against very disease.

In the world under poverty, patients can from time to time scratch together enough money to pay a physician bill but if they cannot, then they pay it otherwise like they pay in potatoes or goat’s milk or child care or anything else they may have to provide. If they have nothing, they remain deprived of health checking facility.

The above mentioned four models are moderately easy for Americans to understand because the Government and people of the country have all these elements in their fragmented national health care equipment’s (RESOURCES, 2010)

(Figure 2: Health care systems)

(Source: Resources, 2010)

  • Countries in blue have some type of universal health care.
  • Countries in green are currently attempting to implement some type of universal health care.
  • Orange countries have universal health coverage provided by United States war funding. (Glow, 2007)

Procedure to implement Workplace Health Model


(Source: (Prevention, 2013)

Any organization before implementation must look into the procedure to be followed for implementing an appropriate health care model. There may be four steps to follow:

Step 1: Assessment

A proper assessment process must be carried on relating to individual, organizational and community. For individual assessment on health risks and use of services needed to be taken. Current practices and infrastructure of the organization must be assessed.

Step 2: Planning or Workplace Governance

In the next step, planning and workplace governance needed to be considered. This starts with leadership support and management and continues with various workplace health improvement plans and dedicated resources.

Step 3: Implementation

In the third stage, there require proper implementation of various rules and regulations. There must be proper programs and policies with regard to various health benefits and environmental supports.

Step 4: Evaluation

After implementation of workplace health care model, evaluation on such polices must be taken. Evaluation is needed on workers’ productivity and health care costs. Management should look into whether implementation of health model helps in cost curbing or not. Assessment also needs to be taken on improved health outcomes and organizational changes (Glow, 2007)


We all are aware of rising cost of health care and thus, workplaces are suggested to implement such a health care plan that will not only prove to be beneficial to the employees but will also help in curbing the cost within the organization. For having a reasonable health care opportunity, an organization must take into consideration some ideas including of implementing an automated prior authorization program, having a therapeutic consultation programs, transformation of electronic health records and various health information in exchange of e-prescribing. Policies also can be taken on simplification in administration of home and community based services, taking proper information on pharmacy claims, proper review on payment methods etc.

(Moeller, 2013)

As evident from this report, there is a significant issue with regard to health disparities that exists in the countries. This issue leads to high costs in healthcare. Especially in between 2003 and 2006, it was estimated by Joint center for political and economic studies that health inequity costs that are either total direct or total indirect affect the minority populations (racially or ethnically inclusive of low wage and low productions)

In order to achieve truly the costs of savings in the systems of healthcare, it is advised by experts to look at every factor that drives the costs of healthcare over the GDP, growth of population and inflation. Also, analysis of literature and data does not simply point out that physicians are the main cause of rising health care costs. The factors are several as discussed in the report with respect to life style of people and chronic status of individuals (Coates, 2004).


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