An attainable paradox - reduce cost and improve quality of care

Posted by Health Entrepreneur 11/30/2016

Reducing Costs and Improving the Quality of Health Care 

With the signing into law, the Affordable Care Act in March 2010, the President helped usher in an act that helped millions of young adults take insurance coverage and thus made preventive services more affordable for Americans. When this is fully implemented, the law will be able to expand the coverage to an estimated 27 million uninsured Americans and will also ensure availability of affordable comprehensive coverage through additional employer-sponsored insurance along with the latest health insurance marketplaces or exchanges. There are inevitable signs that indicate that Affordable Care Act has begun to slow down the growth of costs and improve quality of care by the use of pay-for-performance programs, better and improved primary care and care coordination, and pioneering Medicare payment reforms. The provisions of the Affordable Care Act, and other such provisions will help in bending the cost curve and bringing it down while laying the foundation for moving health care to higher quality and efficient care. But we are still left with the question as to whether the reduction in cost will happen alongside the improvement in quality of care. In this article we examine the many factors that lead to increased health care costs and the many ways in which this can be brought to control. Can a decrease in cost lead to an increase in quality of health. What are the factors that act as prime drivers leading to higher spends in health care in the coming years. What are the reasons and sources for increase in health care spends and what are the many government initiatives that provide us with data around these many factors. These and a few connected issues are dealt with in this article.  

How does decrease in health care costs affect quality of health?

The impact that the decrease in health care costs has on the quality of health care is a paradoxical situation and one is given to wonder if these two can really go hand in hand.
On the other hand we take a look at the healthcare spending in the last few years and its impact on the GDP. Spends on healthcare have been on the increase and has been dramatic over the past several decades, in terms of the GDP as well as in absolute terms.
What is the increase in spending attributed to – could it be demographic changes making an impact, is it the indiscriminate spending on prescription drugs that’s causing increase in healthcare spends, is it the increase in office-based visits, hospitalizations, and other personal care areas since 1996 that is causing this unprecedented increase in medical care costs?
On the other hand we see that disease prevention reduces healthcare costs. Reduction in disease in turn increases life expectancy thereby increasing the demand for healthcare. Hence we are to once again examine if reduction in costs and improvement in quality of health care can go hand in hand. Earlier studies have been of the argument that preventing diseases that reduce longevity increases healthcare costs and preventing non-fatal diseases lead to health care savings. The question we have to address is whether disease prevention could lead to both increased longevity and lower lifetime health care costs. 

Factors that are to act as prime drivers leading to higher spends in healthcare in the coming years

1.Ageing population – by 2030 there will be one in every 5 Americans who will be over the age of 65, as compared to one in every eight today. This will lead to per capita medical costs in any given year increasing to 3 times higher for those above 65 and over, when compared to the younger population.
2.The increase in use of medical services due to the development of new technologies and increase in unit costs that far exceed the rate of inflation.
3.The long-term growth of healthcare wages which has not been followed by an equivalent labour saving technological improvement and progress.
4.There has been wage growth in many important parts of the economy while this has not been the case for workers and labour intensive sectors such as healthcare, performing arts and the education sector. These sectors should also raise the wages failing which there will be a relative cost of output in these labour intensive segments.
5.Intensive sectors and higher costs will be passed onto the consumers as increased prices.

Disease avoidance and its effect on healthcare costs and quality of care Belief:

Prevention of disease is seen as a way to reduce healthcare costs but this is not seen in practice. Prevention of mortal and fatal diseases increases life expectancy, thereby increasing the demand for health care. Studies also show that most health care expenditures are intense and maximised in the last years of life.

Conclusion thereof:

1.Disease elimination in the case of those that reduce life expectancy, to some extent, leads to increased healthcare costs.
2.Important cases as in the instance of neoplasms, which when eliminated increase both life expectancy as well as lifetime healthcare spending with a rough estimate of 5% for men and women.
3.When the prevention has a miniscule or small effect on the longevity as is the case with behavioural illnesses, diseases and mental illnesses, then cost savings will be seen.
4.Diseases related to circulatory system will be an exception and the elimination of these can show increase in life expectancy albeit with a reduction in healthcare spending.
5.Thus we can see that the stronger the negative impact of a disease on longevity, the higher the healthcare costs after elimination.
6. Treatment of lethal and fatal diseases leaves less room for longevity gains due to the effectiveness of prevention but will give more room for health care savings.

Inefficiencies in Health care Spending – What are the reasons and sources for the same

Not all medical spending and increases in spends are seen to be fruitful or productive. David M. Cutler and Mark McClellan have proven that improved treatment of heart attacks gave rise to significant increase in patient longevity between 1984 and 1998. In contrast we have known that Jonathan S. Skinner, Douglas O. Staiger, and Elliott S. Fisher have also examined Medicare Costs and survival gains in the case of acute myocardial infarction (AMI) in the years 1986 – 2002 and they have published in a series of papers [Health Affairs 25 (2006): w34–w47 (published online 7 February 2006; 10.1377/hlthaff.25.w34)] their findings. They believe that the overall gains and achievements in post AMI more than justified the increase in costs during the period.

As per their findings: 

1.Since 1996, there has been a steady decline in survival gains while health care spending has been on the rise.
2.When examining these gains region wise they had discovered that those regions experiencing the largest spending gains were not those realizing greatest improvements in survival.
3.Those aspects that yielded greater benefits to health care were not those that increased costs and vice versa.
4. David Cutler and Mark McClellan argued that benefits from technological innovations more than justify the increase in costs of health care. 

Learning from these findings for U.S healthcare system

1.Do not kill the golden goose in terms of medical advancements brought in by technology, for the sake of short term monetary savings.
2.From the research conducted by David Cutler and Mark
Mc Clellan, there was evidence pointing to rapid decline in mortality following heart attacks between the years 1984 and 1998 and the costs for treatment of heart attacks rose by $10,000.
3.Regions with the greatest increase in healthcare spends experienced the smallest gains in survival.
4.More than 20 percent of Medicare spends on heart attack treatment gives little health value.


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