There are several measures being taken to combat the growing cost of healthcare. These measures include the following: Identifying the biggest contributors to healthcare costs; Protecting consumers from healthcare inflation; Measuring and monitoring total cost of care; and Managing costs within the premium dollar.
Identifying major contributors to healthcare costs
In addition to health insurance coverage, a number of other factors can influence how much consumers spend on healthcare. These include the number of family members, their age, the onset of chronic conditions, and the availability of healthcare facilities.
Health care spending has grown significantly over the past few decades. Approximately half of all spending occurs at the personal level, including physician services, dentists, hospitals, and prescription drugs. The remainder is paid for by nonprofits and businesses.
While the total amount spent on health care increased nearly 290 percent between 1980 and 2018, the rate of growth has slowed in recent years. However, the cost of medical care continues to be a significant challenge for the U.S. Moreover, the costs of medical care have a direct impact on the economy.
As a result, health care has become a larger part of the United States economy. In 2017, the health care sector accounted for 17.1 percent of GDP. It was the largest consumer expenditure category. Compared to the OECD average of 13.2 percent, the share of U.S. government spending on health care has doubled in the last 30 years.
According to the Centers for Medicare & Medicaid Services, health care spending in the United States has steadily increased since 1980, from $2,900 per person in 1980 to $11,200 per person in 2018. From 2005 to 2018, health care spending grew at an annualized rate of 3.6 percent.
Despite the increase in overall spending, the average dollar spent by a family on medical care decreased 13 percent in April 2020. This is due to a decrease in the total number of families incurred by healthcare spending.
Measuring and monitoring total cost of care
The challenge of measuring and monitoring total cost of healthcare is a critical one, particularly as health care costs continue to rise. The increased spending leads to higher premiums and out-of-pocket expenses. In addition, millions of Americans suffer the consequences of unneeded medical care. Some patients are unable to shop for low-cost, high-quality care because of limits on consumer choice in consolidated markets.
There are a variety of ways to measure and monitor total cost of healthcare. These strategies include implementing alternative payment models that reward cost-effective care and hold accountable entities for their spending.
A broad set of measures must be developed to effectively communicate to consumers what is happening with their health. This requires that measures have proven validity and are appropriate for different populations and conditions.
Health measures must also be useful for individuals of different ages. Some of the most common problems with measurement include underuse and misuse. They can result in unnecessary hospital visits and medication.
As spending on health care increases, there are fewer resources available for other priorities. Developing and implementing policies to control spending is an important task for state policy makers. State health policy commissions can play a central role in this effort.
Several states have developed comparative performance information. These reports can inform purchasers and patients about the quality of care. However, many consumers do not know how to use these data. Educating them is difficult.
Health policy commissions can also promote publicizing and interpreting state measurement activities. Commissions can also develop aggressive strategies to reduce low-value care. For example, state commissions may establish penalties to discourage low-value care.
States also need to understand the potential consequences of their measurement activities. When a state’s spending targets are exceeded, it may be able to apply soft sanctions, such as financial penalties or performance improvement plans.
Impact of measuring “total cost of care” on hospitals and health systems
Measuring total cost of care in health care is a challenge. Many providers underestimate the value of their care and do not have the knowledge or ability to link cost to outcomes. As a result, providers often resort to simple methods to cut costs, such as reducing headcount and departmental cuts. This can lead to inferior patient care and increased costs for everyone else.
Accurate measurement of cost is important because it allows providers to identify opportunities for process improvement. In addition, it gives managers a valuable tool for consolidating care. Without this measure, they would be unable to make accurate comparisons, which can lead to the wrong decisions regarding spending and the allocation of scarce resources.
A more accurate measure of costs requires knowing the processes, equipment, and resources used in each process. If a provider does not understand these, it will be impossible to identify savings opportunities or target them for reduction.
When measuring total cost of care, it is also important to consider the cost of managing that information. By combining an accurate costing system with systematic measurement of outcomes, healthcare providers can gain the most out of their investments in both.
One source of escalating costs is the current system of reimbursement. Reimbursement rates are typically based on historical charges. Although this method has introduced massive cross subsidies across services, it does not address the root of the problem: the inability to link reimbursements with actual costs.
Another source of escalating costs is the use of arbitrary spending limits. This can have dire consequences for both patients and health care systems. The most effective strategies to control spending growth are likely to be at the state level.
Managing costs within the premium dollar
When it comes to managing costs for healthcare within the premium dollar, insurers and health systems alike are constantly looking for ways to improve efficiency and effectiveness. While many people may think that cost cutting is the name of the game, that isn’t necessarily the case. Using the total-cost-of-care framework can help providers to understand how their budgets are being spent. This will enable them to make better and more informed choices about which services to provide and how much to spend on them.
For example, there are several key metrics that you can use to measure your total-cost-of-care, from quality improvement to medical loss ratio. You can also use a multi-factor model that incorporates data from your provider network to get a more accurate picture of your overall healthcare spending. If you aren’t already using a total-cost-of-care model, you should consider integrating one into your existing business strategy. It’s no secret that healthcare costs are escalating, and you’ll want to make sure you’re getting your money’s worth in return for the investment.
Using a total-cost-of-care strategy will not only allow you to better manage your budget, but also give you a clearer picture of how your cost-effectiveness translates across your entire network. With the right tools, you’ll be able to make smarter decisions and improve the quality of care that your customers receive. Keeping your healthcare costs within the premium dollar is a worthy pursuit and should be a top priority for your business.
Protecting consumers from healthcare inflation
In the past decade, there have been a number of policy changes that have influenced the evolution of health care services inflation. Some of these changes were one-time shocks, while others were long-term downward pressures on prices. While this is not a definitive list of policy changes, it should provide a general overview of some of the most significant policy changes that have affected health care services pricing.
The Affordable Care Act (ACA) enacted a number of cuts to Medicare hospital payment updates. These cuts remain in place to this day, and are expected to continue indefinitely. This is an important restraining force on overall health care inflation. But some of the ACA cuts will eventually expire, and the 21st Century Cures Act, signed into law in December 2016, may signal a change in policy.
Another policy that may be affecting health care prices is the Inflation Reduction Act, passed into law in 2009. The act lowers out-of-pocket costs for recommended vaccines in Medicare and Medicaid, and expands coverage of certain health care services to make them more affordable. Specifically, the act covers the ACIP-recommended vaccines, limiting increases in drug prices and making improvements to health care programs that save money.
Another important policy that impacts health care service prices is the No Surprises Act, a federal law that extends protections for consumers from surprise bills. It is a critical piece of policy because many state dispute resolution systems favor providers, which could lead to higher awards and increased inflation. There are also other state laws that can help protect consumers from unexpected bills. However, these measures may not apply to all insurance markets.
Overall, health care service prices have increased over the past two years, but remain near their lowest levels in a decade. Despite some recent headlines about a rise in healthcare prices, these are still very low compared to historical standards.
