Apr 8, 2020 in Medicine

Impact of High Cost of Healthcare on Chronic Diseases

Abstract

The issue of the high cost of healthcare is important as it restricts the accessibility of healthcare for people with chronic diseases. Furthermore, a high cost of healthcare has left numerous families across the country with financial burdens as American families are estimated to be spending about $9,000 annually for healthcare. This has in turn led to the increased cases of chronic conditions and ultimately the reduced life expectancy in the country. The current paper attempts to provide a solution to the problem to reduce the cost of healthcare in the country and at the same time improve the quality of healthcare provided for citizens, especially those with chronic diseases. 

The research for this paper was conducted using the internet and the library, while the findings proved that the main reasons for the high costs of healthcare are the high costs of administrating the sector and the high prices of drugs and treatment programs. For this reason, reduction of the cost of drugs administration and the prices of medications will subsequently reduce the total expenditure in the sector and increase the accessibility of healthcare to individuals with chronic diseases. Costs in the sector can be reduced by automating the administrative functions of the health system and the intervention of the government in the negotiation on the prices of drugs and treatment programs. 

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Introduction

Currently, the cost of healthcare is the highest in America in comparison with other developed countries. In fact, healthcare costs are two times higher in the country than it in other developed nations. The USA is estimated to spend $3 trillion on healthcare alone every year.  According to consumer reports, this has left many households in the country struggling against financial hardships as each family is estimated to spend a minimum of $9,000 per year for health related costs. Despite having the highest costing healthcare on the planet, the U.S. is still ranked the last among the eleven most developed countries in terms of overall healthcare, and 37th in the world when pitted against all countries.

This means that life expectancy is notably shorter in the country compared to other developed nations. The decrease of life expectancy in America has partially occurred as a result of the increase in the spread of chronic diseases and their severity. This increase has in turn been brought about by the ever increasing costs of managing the chronic illnesses. It is widely known that chronic diseases are medical conditions which are long-term and progress in the body. The most common chronic diseases in America include high blood pressure, Alzheimer’s disease, heart disease, depression, arthritis, osteoporosis, diabetes, cancer, stroke, and chronic respiratory problems such as Chronic Obstructive Pulmonary Disease. 

The current paper will attempt to show how the high cost of healthcare in America contributes to the poor management of chronic diseases and ultimately results in reduced life expectancy. In addition, the paper will propose various ways through which the country can reduce the cost of healthcare and in the process help more people with chronic diseases access quality healthcare to manage the diseases and conditions, hence increasing their life expectancy. Lastly, the paper will investigate the drawbacks and benefits of reducing the cost of healthcare in America, specifically for people with chronic diseases.

Problem Statement

Quality and affordable healthcare should be accessible to everyone in America, especially those suffering from chronic conditions. However, this is not the case as the high cost of healthcare in the country has made it difficult for people with chronic diseases to effectively manage their conditions. This has subsequently led to an increase in the cases of chronic diseases in America and as a result, the life expectancy among American citizens has notably reduced. 

Literature Review

Chronic Diseases and Health Costs

Studies show that a huge portion of the American population is living with chronic conditions. The findings from the study indicate that roughly half of America is currently living with some form of chronic condition or disease. The same findings also suggest that even greater part of the population is likely to develop chronic diseases in the course of the next few years. What is more, people in America were found to be living with two or more chronic conditions or ailments at the same time. In fact, it is projected that one in four Americans will have been living with two or more chronic diseases or conditions by the year 2025. 

The government health insurance program for citizens over the age of 65, Medicare, has already been influenced by the effects of the increase in chronic diseases in the country. A huge percentage of the money spent on the program goes to the treatment of chronic illnesses. This is especially the case for citizens under Medicare who are living with five or more chronic conditions. As of 2002, 76% percent of all money spent under Medicare went to managing chronic illnesses. People living with chronic conditions, therefore, spend the most among Medicare beneficiaries. Diabetes in particular has been found to be more prevalent among the Medicare beneficiaries who spend the greatest amount of money. 

Reasons Why Healthcare Is Expensive in America

There are two main reasons that make healthcare in America this costly. The same reasons can be directly attributed to the difficulties of managing chronic diseases and ultimately the decrease in the life expectancy. The first reason is the high cost of administrating the health sector. According to Blumenthal, Stremikis, and Cutler, the cost of running America’s healthcare system is exorbitant. Roughly 25% of the costs in health care go to administration both directly and indirectly. These figures are unmatched when compared to the same figures in various other countries. America’s health system administration costs are much higher than the relevant costs in any other country in the world. For example, Duke University Hospital, a 900 patient bed hospital has employed 13,000 clerks responsible for billing. This is explained the existence of many insurers and hence the need for different clerks to handle bills from different insurers. The case is very different in countries with only one insurer or one system of payment since the number of clerks needed in such a case would be much lesser than in the America’s case. 

The second major factor contributing to the high costs of healthcare is the cost of drugs in the country. In comparison with other nations, America is once again at the top of the chart in terms of high cost of drugs. The availability and affordability of drugs is essential for any patient, especially those managing chronic ailments. Apart from the drugs, the cost of the mix of treatments prescribed by medical practitioners to patients, especially the ones with chronic conditions, is also very high. 

Other reasons include the wide use of technology, as well as new procedures which, despite being advanced, have not yet been proved better than the traditional methods which are cheaper and in some cases more effective. American patients are known to demand the most advanced of treatment methods and procedures which doctors eagerly provide to them at very high fees. For example, when compared to other developed nations, doctors in America use advanced technologies such as mammograms and Magnetic resonance imaging (MRI) three times more frequently. Moreover, advanced procedures such as Caesarean sections are used over 30% more frequently in America, than in other countries. Additionally, Americans continually prefer to be treated by specialists of their respected fields than ordinary doctors. This affects the cost of healthcare as specialists will normally charge a significantly higher fee than primary-care doctors.

Besides, insurers such as Medicare pay medical providers for their services, regardless of their efficiency. This means that each procedure, test and visit in general are paid for. This significantly contributes to the high cost of healthcare as most medical tests or procedures are usually repetitive, particularly for chronically ill patients, hence resulting in the high cost for their treatment.

Healthcare recipients, common American citizens, are not directly involved in making consumer decisions regarding the actual healthcare they receive. The coverage they receive is predetermined in terms of costs; therefore, they cannot pinpoint the specific aspects of the coverage that is responsible for the high costs. This is important as most citizens actually receive coverage packages that are not tailored to their individual needs. In such a situation, the person will pay out of pocket for what they actually need as the coverage package pays for what they do not need. 

Proposal for Change

Cut Administrative Costs

Administrative costs are the main reason behind the high cost of healthcare. Therefore, cutting down the administrative costs would significantly reduce the cost of healthcare in America. There are a number of ways through which costs incurred to administer the healthcare system in America can be reduced. The expenditure made on marketing contributes to a significant portion of the overall costs of administration incurred in the health system. A reduction in the marketing budget is among the most highly recommended methods as the reduction will affect the quality of healthcare the least. It is essential that the quality of healthcare received remains uncompromised by the changes or even improves with the cut down on administration costs. This is because the aim of reducing the cost of healthcare in the country is to improve the quality of healthcare for people with chronic conditions and also to increase their access to quality healthcare and ultimately life expectancy in the country. The aim of marketing is to reach the people in need of health care. For this reason the quality of the individual marketing strategies should be assessed against the actual number of people in need of medical attention. Such an assessment will justify the millions spent on marketing the healthcare system and pinpointing the strategies which, despite costing the sector an arm and a leg, fail to achieve their intended goals. Marketing strategies that do not result in the desired outcomes will subsequently be eradicated while the strategies actually reaching the patients will be retained. This will in turn save the healthcare system millions of dollars in funds thus reducing the cost of healthcare in America.

Furthermore, administrative costs can additionally be reduced by improving the quality of the service offered to the customers. This will be killing two birds with one stone as the services offered to people with chronic diseases will be notably improved and at the same time made more affordable. This can basically be done in two major ways. First, the customer service should be made more customer-centered and workable as opposed to the general and non-practical services that patients, especially with chronic conditions, receive. As previously mentioned, the majority of people living with chronic diseases are Medicare beneficiaries. This basically means that a large number of those patients are old. For this reason, the amount of information regarding health, which is dumped on them, should be limited. This means that the amount of information they receive should be reduced while its relevance and quality is to be enhanced. Cutting down the quantity of communications relayed in the system will also reduce the costs associated with generating the information and consequently reduce the administrative costs and the cost of healthcare respectively. 

Another approach that can see the reduction in administrative costs is the automation of healthcare related services. For example, moving the physical platforms patients with chronic conditions go through in an attempt to get medical attention online can significantly reduce the costs associated with labor in the administration of the healthcare system. It would be a good opportunity to use technology to cut costs due to its undoubted effectiveness, as in some cases, it contributes to high costs of healthcare. Carrying out most processes online will reduce not only the production costs associated with paper work but also the costs of distributing the same. 

The cost of healthcare can also be reduced along with the improvement of the conditions of people living with chronic illnesses by reducing the costs of drugs and treatment programs. Despite Medicare giving medical cover to almost all of the people living with chronic conditions, it remains the cover plan with the highest prices for drugs. The government of America fails to assist its citizens as far as the negotiations on drugs prices are concerned. The impact of high drug prices is especially felt by Medicare recipients as those covered by Medicaid and the veteran’s administration enjoy lesser drug price. This is mainly due to the provision of the two covers that enables them to directly negotiate the price of drugs. Findings by the Congressional Budget Office show that the government can save up to $116 million within a decade if the Medicare members get similar discounts on drugs as the ones enjoyed by their counterparts in Medicaid and veteran’s administration. 

Cost/Benefit Analysis

While cutting down the administrative costs associated with healthcare, there will be both tangible and intangible costs. The tangible costs will include the cost of transferring some of the administrative processes from the traditional paperwork system to an online system. Developing online computer systems for handling the processes will cost the government a significant amount of one-time costs. The cost for doing this is estimated to be about $500 billion one-time fee for implementing the system and around 1 billion for maintaining the system annually. Reduction of the marketing budget for healthcare administration will be associated with intangible costs as they will manifest in the number of people in need of healthcare services. The cost of drugs and treatment programs can be reduced by reducing their production costs. For instance, the packaging of the drugs can be made less fancy so as to cut down the costs. This may not present any tangible costs. However, the implementation of these reductions will also be associated with the financial costs on the human capital who currently work in the administrative department of the sector. For instance, automating the processes will result in the loss of jobs of numerous people in the sector. An average administrator in the health sector is paid an annual salary of $90,000. The U.S. has about 1000 public hospitals and 300,000 people working as administrators. An automated system will replace on average half of the personnel in every hospital. This, therefore, means that almost 150,000 people will be rendered jobless.

The benefits include the fact that implementing the automated system will save the sector over $1.5 trillion dollars annually in the long run as half of the administrative expenditures will be cut down. During the first year alone, the system will save a total of around $1 trillion as $500 billion will be used for its implementation. Besides, intangible benefits such as customer satisfaction due to lesser quest and paperwork will be as a result of the system. Enhanced accuracy in the storage and capture of data will also be another benefit of the system leading to the improved chronic condition management in America.   

The major costs for the implementation are therefore the $500 billion implementation fee and the 1 billion annual maintenance fees. When this is deducted from the $1.5 trillion dollars that the system is projected to save every year, it becomes evident that the benefits clearly outweigh the costs. 

Summary

To sum up, out of all the developed countries America spends the most on healthcare but does not enjoy the highest quality of healthcare. This is manifested in the increase of the chronic conditions rates in the country and the decrease in the life expectancy of its citizens. With an annual expenditure of more than $3 trillion in healthcare alone, the country spends most of this money on the administration of the sector. Moreover, the cost for drugs and the treatment programs are also very high for people with chronic conditions hence causing difficulties in their attempt to manage the diseases. 

In order to reduce the high healthcare costs in the country, the administration department of the sector should fully automated. The move will save at least half of the expenses incurred in administrating the country’s healthcare system. Besides, the government should intervene and help negotiate the prices for drugs, especially the ones used for the treatment and management of chronic diseases. This move will increase the ability of people living with chronic diseases to access the necessary healthcare to manage their conditions and prolong their lives, ultimately increasing the life expectancy in America. 

The initial cost of automating the administration of healthcare in America was estimated to be $500 billion as one-time cost, and an annual cost of $1 billion per year for maintenance. Compared to the over $1.5 trillion that the move will be saving the country annually, the move will be very beneficial for the entire sector and for people living with chronic conditions in particular. 

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