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Current issues with health care costs essay

Focus on health care cost containment Incentivize states to develop health care cost strategies Incorporate potential health care savings into FY 2018 budget Use health care spending programs to drive reforms Encourage consumers to select high-value care By Raymond C. Scheppach In 2014, health care spending in the United States rose 5.

  • Applying Social Research Experimental Evidence on the Importance of Health Insurance As the text discusses, studies show that Americans without health insurance are at greater risk for a variety of illnesses and life-threatening conditions;
  • Other practices are legal but ethically questionable;
  • Growing deficits and increases in the public debt may put the domestic economy at higher risk of recessions due to volatility in international financial markets.

Growing interest payments on this debt limit federal spending on existing and new programs and unfairly burden future generations. Growing deficits and increases in the public debt may put the domestic economy at higher risk of recessions due to volatility in international financial markets.

Reductions in public investment will eventually lead to lower domestic economic growth, slower growth in real wages and incomes, and higher rates of long-term unemployment.

This is not a new problem. Such above-average growth is likely to continue over the next decade. Most federal health care spending is in four programs: This total does not include billions of other federal health care dollars spent current issues with health care costs essay the U.

Department of Veterans Affairs, federal employees, and active-duty personnel in the Armed Forces. Similarly, state Medicaid spending is projected to increase by 6. Medicare is one of the four programs that account for most of the federal health care spending. Ultimately, an intergovernmental compact between federal and state governments can encourage state policymakers to make needed changes that reduce health care costs and improve overall economic health, which ultimately benefits the American people.

During the first year in office the new president should: Focus on health care cost containment, as this is the only way to avoid making major cuts in Medicare, Medicaid, and other federal health care programs or making major increases in taxes to reduce growing budget deficits.

Incentivize State Health Care Cost Containment It is not politically feasible for the next president or Congress to set hospital and physician rates directly or for them to broadly preempt state authority to control health care costs.

Rather, the best approach to cost containment is for the federal government to incentivize states to take the lead. Most health care policy levers currently reside at the state level. From insurance regulation to scope of practice to malpractice policies, the existing legal authority rests with state governments. Supreme Court Justice Louis Brandeis. States can tailor their approach to their respective health care markets and cultures. If a state finds that a policy is ineffective, it can quickly change strategies.

When the more innovative states determine best practices, other, similar states will quickly adopt them.

Numerous such historical examples exist, such as in welfare reform, where state-to-state adoption was rapid. The rate of return from such an approach is high: Every health care dollar saved generates an additional 30 cents in savings for the federal government.

As shown by the recent signing into law of the Every Student Succeeds Act, which shifts responsibility for elementary and secondary education back to the states, such a federalism-based approach can often gain substantial bipartisan support. All states would be provided strong incentives to negotiate voluntary shared savings agreements, receiving yearly performance bonuses based on their ability to slow the rate of health care spending relative to an agreed-upon baseline.

These bonuses would be funded by an increase in the federal match rate for state Medicaid spending. All states would be required to use the same metrics and data sources specified in the legislation to measure total health care spending in the state and the potential savings to federal and state governments.

Health Care Outcomes: When the More Effective Choice Costs More

Quality metrics would have to be included in all agreements to ensure that states do not sacrifice quality for savings. In addition to the bonuses from the federal government, states would also accrue savings directly through their own Medicaid, SCHIP, and heath plans for state workers.

Individuals and businesses also would reap savings, although they would not participate in the agreements. Another potential benefit of this approach is that it may reduce incentives for cost shifting between states and the federal government.

For example, the federal government and states today often shift Medicaid costs back and forth in an attempt to reduce their own government costs. States try to move as much of their health care costs as possible to Medicaid so that the federal government pays a share, and the federal government makes states pay Medicare premiums for their low-income individuals.

A final benefit under this new approach is that most governors will work with the health care stakeholders in their state to attain a consensus for developing cost-control strategies. This means there will be ownership and thus the new policy should be sustainable.

Potential State Strategies to Contain Costs Currently, states have robust tools to help them comprehensively reduce the rate of increase in health care costs. In addition, states clearly influence how individuals and businesses purchase health care through the state exchanges. States oversee current issues with health care costs essay scope-of-practice regulations for a broad spectrum of non-physician health care workers, such as physician assistants and nurse practitioners.

They also enact medical malpractice laws and are responsible for overseeing health insurance companies. Many states do not exercise their full authority over approval of health insurance rate increases, but this could change with proper incentives.

Some states could enhance competiveness by requiring all providers to produce timely information about price and quality and by providing greater antitrust enforcement.

Bend the health care cost curve

For example, Maryland sets hospital rates for all purchasers, including Medicare. States can strongly influence how the delivery system is organized and operated. They can use the spending programs that they administer—Medicaid, SCHIP, and health care purchased for state employees and by individuals through state insurance exchanges—to support the formation of high-performing coordinated care organizations that accept risk-based fixed fees.

Most states will likely start by creating a state definition of an ACO. To date, nine states have already done this, and another 10 are in the process. States have already increased their use of managed care, particularly for women and children, in the Medicaid program. Each state will then urge its Medicaid managed care plans to upgrade their care to meet its definition of ACO so that it can transition its women and children to the new plans.

Simultaneously, each state can transition its employees to these plans. Finally, states can encourage risk-based coordinated providers to offer their plans through state exchanges. Encourage Consumers to Select High-Value Care States can adopt policies to ensure that plans and providers make available consumer-friendly, accurate, and timely data on prices and quality.

Consumers need this information to make more informed health care choices. It is also important for states to use state action and their antitrust powers to promote beneficial consolidation, which increases efficiency but blocks consolidation if it would increase market prices and reduce competition. Specify Fees Charged by Hospitals and Physicians States can use education to promote wellness programs and to encourage individuals to take personal responsibility for their health care decisions.

Although most states will likely pursue strategies that involve enhancing competition in the health care marketplace, others may current issues with health care costs essay to follow a more regulated approach similar to that adopted by Maryland. There, a state agency—the Health Services Cost Review Commission—establishes the rates that hospitals can charge.

Seven volunteer commissioners appointed by the governor run the commission, which is legally and politically independent. The staff consists of 30 individuals who have expertise in hospital finance, accounting, and public policy.

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  • Impact of physician self-referral status.

The system focuses on costs, not profits, and requires that hospitals and payers provide timely, accurate information so that the commission can develop payment methodologies that are consistent with market principles. In addition, this regulated approach limits cost shifting and allows prices to approximate costs, which helps maintain the correct incentives.

Furthermore, the cost of uncompensated care is recognized prospectively in payments to hospitals. By pooling uncompensated care costs, hospitals that have large pools are not disadvantaged in the system.

The Maryland system is dynamic and constantly adjusting to innovations and changes in the health care system. Recently, the commission moved toward bundled payments for outpatient services and away from fee for service.

It has also been experimenting with pay for performance, including incentives to reduce preventable hospital readmissions. Maryland has a waiver from CMS so that Medicare is fully integrated into the system. Reform Health Care Regulations to Promote System Efficiency States can review and streamline all the state health care requirements and mandates that insurance departments enforce, including contractual rules between plans and providers, rules for provider access, and essential benefits.

The review could examine whether the rules and mandates unnecessarily add to the cost of health care services or inhibit the expansion of risk-based, coordinated care.

Although states have continued to revise their malpractice laws, they could accelerate those reviews and modify the provisions that add substantial direct and indirect costs to the system. The drive toward greater care coordination and a growing population will strain the supply of skilled providers in many areas, particularly those involved in primary care. To help meet this demand, states can allow skilled non-physician practitioners at all levels to use the full range of their competencies.

  1. Finally, states can encourage risk-based coordinated providers to offer their plans through state exchanges. It is estimated that 45,000 people die each year because they do not have health insurance Wilper et al.
  2. If the United States spends far more than its peer nations on health care yet still lags behind them in many indicators, an inescapable conclusion is that the United States is spending much more than it should be spending.
  3. Continuity and Change by a publisher who has requested that they and the original author not receive attribution, which was originally released and is used under CC BY-NC-SA. Despite implementation issues, it should lead to universal care over time.

States could also grant reciprocity to providers licensed in other states. In addition, they can educate citizens about the importance of lifestyle choices and assist schools and community organizations in adopting more aggressive policies for healthy living.

Supreme Court made that expansion optional. The ACA did less to control the cost of health care, although it took several steps in this direction.

  • HMOs often restrict the types of medical exams and procedures patients may undergo, a problem called denial of care, and limit their choice of prescription drugs to those approved by the HMO, even if their physicians think that another, typically more expensive drug would be more effective;
  • Impact of physician self-referral status;
  • Health insurance and mortality in US adults;
  • Health Services Research, 46 5 , 1362—1381;
  • Data from US Census Bureau.

One provision that could have a major long-term impact on costs was the funding of ACO pilots. An ACO is a new type of provider that delivers more integrated, coordinated care and is based on value purchasing rather than fee for service, which incentivizes providers based on the volume of health services they supply.

The ACO model also creates the potential for shared savings between the provider and consumer by current issues with health care costs essay 33 quality standards that providers must meet and benchmarks to measure shared savings.

Payments are capitated, so risks are shared. To date, although the results of this model are mixed, more than 700 Medicare, Medicaid, and private ACOs have been created, and they are restructuring the delivery system.

There is considerable hope that this model will bring down the rate of health care cost increases over time. Clearly this is the next step in health care legislation for two reasons. First, the ACA was primarily about expanding access, not reducing costs.

Despite implementation issues, it should lead to universal care over time. Second, after a few years of slower growth, the rate of increase in federal health spending is back on an unsustainable growth trend.

Essentially, it is time to focus on costs as it was not an integral part of the ACA and it is the major health care problem now. Most importantly, it is the type of proposal that could gain substantial bipartisan support for a new president in the first year. Put another way, it is likely to become law. He is a Professor of Public Policy at the Frank Batten School of Leadership and Public Policy at the University of Virginia, where he teaches courses on the role of the states in public policy and on government budgeting.

Before joining the National Governors Association, Scheppach was first assistant director, and then deputy director, of the Congressional Budget Office, which gave him an understanding of a comparably broad range of issues at the federal level. He has authored or co-authored four books on economics, including the 1984 book New Directions in Economic Policy: An Agenda for the 1980s.