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    Financing Healthcare and Healthcare Providers

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    Consider the notion of cost containment. How has Healthcare Providers addressed issues of cost control. Include a discussion of how technology has played, and will continue to play, a role in cost control. What do you believe will be the long-term impact of these cost-control efforts.

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    Please see response attached (also below), including two highly relevant articles. I hope this helps and take care.


    1. Consider the notion of cost containment. How has Healthcare Providers addressed issues of cost control?

    From one source (see http://www.ahcpr.gov/research/costsria/costsria.pdf, p. 2), the author lists a number of cost control strategies, and each are discussed in some detail throughout the article. Cost containment and cost control mechanisms took many forms:

    A. Employer contribution methods - Quite noticeable were actions that increased the worker's share of health care costs. For example, a number of the plans were redesigned to eliminate basic coverage for certain types of care and transfer payment arrangements entirely under a major medical plan. Basic plans, applying to an individual category of care--hospital, surgical, or medical --typically provide "first-dollar' coverage; that is, an insured individual is not required to make an initial payment for care. Some employers also modified their approach to funding benefits. They substituted, either completely or partially, self-funding for the purchase of a health insurance policy from a commercial insurance company, such as Aetna, or an association of hospitals or physicians (Blue Cross-Blue Shield). Employers who insure their own benefits have greater control over plan design and, therefore, can control costs more directly http://www.findarticles.com/p/articles/mi_m1153/is_v109/ai_4459838/print.

    B. HMOS and competitions - For example, spurred by the passage of the Health Maintenance Organization Act of 1973, more employers have offered the choice of an HMO as an alternative to other health insurance benefits.5 Usually providing comprehensive health care at a fixed fee, Health Maintenance Organizations have been viewed as a possible lower cost alternative to other health care. These organizations encourage preventative medicine and have lower hospitalization rates for their members. There were 11 HMOs among the 209 plans in both 1979 and 1984 (http://www.findarticles.com/p/articles/mi_m1153/is_v109/ai_4459838/print).

    For example, HMOs cut costs through the use of fewer supplies, fewer workers per patients, fewer days in the hospital, etc. This has serious negative implications for quality care.

    Physicians, under HMO, are taking more patients per day, which has potential negative implications for the doctor-patient relationship. They do not have time for relationship building because in order to make a living (wages have been cut by HMO legislature) they need to see more patients.

    C. Managed Care and a state mental health mandate - lower wages for all health providers

    The managed care companies' initial effort to control costs was to pay lower fees to all levels of providers. They were successful in squeezing two generations of providers who began under the Altruism, Decision control and Income stability system. With these generations, altruism and the lack of other options kept them working. In most instances they worked harder to attempt to overcome the squeeze. The caregivers learned to live with concepts of "write-offs" and "adjustments". For example, the early proponents of managed care attacked physician incomes and made them the whipping boys for cost control. However, physician costs are only a small portion of the entire healthcare dollar. Physicians seldom have a huge income. The average salary for the CEO of any large for-profit HMO is $350,000 per year or more. Personally I never made that much in any one year even though I was working more than 100 hours per week. One should note that in 1995 the healthcare dollar cost remained the same but the amount to providers of care went down by 17% and the amount to administrative costs went up by 17%. (http://www.findarticles.com/p/articles/mi_m1153/is_v109/ai_4459838/print).

    Managed health care, system of health-care delivery that aims to control costs by assigning set fees for services, monitoring the need for procedures such as tests and surgical operations, and stressing preventive care. Managed health-care systems include health maintenance organizations; preferred provider organizations (PPOs), networks of doctors and hospitals that adhere to given guidelines and fees in return for receiving a certain number of patients; and point of service (POS) plans, which are similar to PPOs but allow patients to go outside the network for treatment, usually at a higher cost. The term is also used to describe more traditional health-insurance plans that require that more expensive procedures be reviewed and approved by a plan official before they are performed. In managed care, the doctor is often paid a set fee or is paid a set amount monthly for each patient, a scheme called capitation. Many physicians criticize managed care systems, saying that they take away their freedom to make treatment decisions, that they are motivated mainly by economics, and that they do not consider patients as individuals. Managed health-care systems also limit doctors' incomes and what many people consider to be the abuses of the older fee-for-service system that rewarded doctors financially for doing more procedures. See also health insurance. http://www.answers.com/main/ntquery?method=4&dsid=2040&dekey=manag&gwp=8&curtab=2040_1

    E. Flexible Spending Accounts (FSAs) - see http://www.ahcpr.gov/research/costsria/costsria.pdf

    F. Cost sharing - major medical plans--which cover several categories of expenses--eliminate "first-dollar' coverage and require cost-sharing by the employee through deductibles and coinsurance provisions. A deductible is a specified amount an insured individual must pay toward health care expenses before any benefits are provided by the plan. Slightly more than one-fifth of the plans increased the size of the deductible in existing major medical insurance policies between 1979 and 1984. Expenses in excess of the deductible are shared by the individual and the insurance plan on the basis of a specified coinsurance rate; plans typically pay 80 percent of covered charges, ...

    Solution Summary

    In reference to financing healthcare and cost containment, this solution considers the notion of cost containment and how Healthcare Providers have addressed issues of cost control. It includes a discussion of how technology has and will continue to play a role in cost control. It then discusses the long-term impact of these cost-control efforts. Supplemented with two articles on hospital cuts and the problems facing hospitals.