The Cost Of Health Care

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Health care costs currently exceed around twenty percent and continue to rise where other countries spend less of their funding on health care but have the same increasing trend. An aging population and the development of new treatments are cause for some of the increase. Unrealistic incentives also contribute: third-party insurance companies and governments who reimburse for procedures performed rather than outcomes achieved, and patients bear little responsibility for the cost of the health care services they demand. However, few acknowledge a more fundamental source of increasing costs: the system by which those costs are measured. Honestly, there is almost a complete lack of understanding of how much it costs to deliver patient care,…show more content…
Although, imposing random spending limits on discrete components of care, or on specific line-item expense categories, achieves only small savings that often lead to higher total systems costs and less than ideal outcomes. Poor cost measurement is leading to huge cross subsidies and across services. Providers are generously reimbursed for little of their services and see losses on others. These cross-subsidies introduce major distortions in the supply and efficiency of care. The inability to properly measure cost and compare cost with outcomes is at the root of the incentive problem in health care and has severely shifted to more effective reimbursement approaches. Also, poor measurement of cost and outcomes also means that effective and efficient providers go unrewarded, while inefficient ones have little incentive to improve. Organizations may be penalized when the improvements they make in treatments and processes reduce the need for highly reimbursed services. Without proper measurement and the healthy dynamic of competition in which the high value providers expand and prosper eventually breaks down. The current health care reform initiatives will make the situation worse by increasing access to an inefficient system without addressing the fundamental value problem: how to deliver improved outcomes at a lower total cost and understanding the value of health care. Consumers can help lower the cost

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