Is Money Spent, Money Earned in Healthcare?

August 2, 2020

With the continued and active debates in healthcare concerning access, growing costs, Medicare for all, universal coverage, the United States population is still battling medical bankruptcy and out of control spending resulting from the complex pricing structure of the US healthcare system. The Patient Protection and Affordable Care Act, also known as the Affordable Care Act (ACA), did not specifically address pricing but did include some issues related to out-of-network cost-sharing for emergency service benefits. That was not enough. The purpose of this report is to shed some light on critical areas in spending and responsibility in which the US healthcare system must improve. The over-spend propagated by our current healthcare market system and the lack of responsibility of the US healthcare customers and consumers are the prime perpetrators in the ironical underachievement post-era ACA, possibly contributing to underperformance of increased access and cost-efficiency promised by this healthcare reform.

Missed the Mark

Continued Over-Spending

Growing healthcare costs at nearly six percent annually are expected through 2024 and will account for just under 20% of our US GDP. Prescription drug increases 12% yearly and is a significant contributor. However, a downturn in consumer wealth has slowed the cost inflation, some say by 70%. Changes in healthcare financing, along with organizational change occurring with healthcare reform, had a greater impact on Medicare than social, economic status (SES) of different low income and uninsured groups. (Custer, 2016). Specifically, there are particularly high-cost consumers, less control of the producers of services, and not enough public education, contributing to more spending.

High-Cost Users

Healthcare spending occurs disproportionately among a small portion of the population. Results of a cohort study of high-cost users (HCU) show that low-income significantly increased the odds of future HCU’s. However, HCU was not associated with food insecurity, personal income, and non-homeownership. Therefore, the authors concluded that interventions could be aimed to improve health and reduce costs by explicitly targeting the low-income population. (Fitzpatrick et al., 2015).
Value-based purchasing, incentivizing the delivery, and including clinical risk with payment reform are sensible. With the ACA, increased eligibility and scope of coverage was expected to increase the cost inflation of healthcare services but moderated by changes in plan design, integration, and delivery of care such as consolidating provider networks would attenuate the rise. However, Custer (2016) believed the increased price of healthcare would offset the declining rate, causing more healthcare spending, create complicated market structures, and consequently increase costs. This was correct.
The resultant is fewer buyers (insurers) facing fewer sellers (HCP) constraining the market, and Custer (2016) deems two predictive ways to resolve such market constraints. Brinkmanship-type aggressive negotiations that lead to either service prices or higher insurance premiums; or vertical integration that results in a trade-off between higher premiums and more efficient care. Increase price markets have led to more people utilizing fewer services per person at higher prices (Custer, 2016). Greater efficiency in healthcare delivery did not occur.

Limited cost-control by consumers and customers.

Patient expectations and physician responses in controlling healthcare spending mitigating those requests are necessary. Physicians are cost consciousness and reported making trade-offs between financial and nonfinancial resources while attentive to their practice success. Their trade-offs require resourcefulness in the clinical workflow. Strategies may provide insight into policy measures and the physician role in healthcare resource use. (Sabbatini, et al., 2014).
Although physicians arbitrate medical resources, unfortunately, 30% of medical expenditures end up as waste. With pay-for-performance, shared risk, and other models, encouragement of cost-efficiency is present. However, Sabbatini et al. (2014) showed that patient expectation comes mostly from the internet and family-friend medical experience first and heavily influence the requests. What is seen as patients not having skin in the game, the patient considers the skin as already put in the game via the increase in premium and legislation. Physician considerations and the trade-offs reconciled end up with a more frequent clinical decision on the side of a patient concern than on limiting costs, or basically, they both spend anyway. Examples are seen in MRI, CT, and lab testing, such as TSH or blood work, when not indicated. The physician role becomes cover-themselves, and cost-conscious is averse to business and less than satisfactory to patients.

Public education pitfall.

Accountable Care Organizations (ACO’s), patient-centered medical homes, and other models can award financial incentives for cost management. Education to the public about overuse testing or treatment has helped spread the word of cost-containment. Now the issues appear to be the physician consideration may not be the same as public support of responsibility, as in the example of MRI ordered when not needed, but instead to cover the liability of the provider (Sabbatini et al., 2014).
Fitzpatrick et al. (2015) concluded that HCU’s are often framed by cost-saving and access sustainability. The root of the problem stems from health disparities and social inequities. These factors are outside of the healthcare system. If the goal is to prevent those from becoming HCU, through education, the authors believe the answer lies in upstream population-based factors. They state a collaborative, intersectoral approach is needed, both inside and outside of the healthcare system, to align public and healthcare goals succinctly together. Although helpful with policy and interventions is difficult to achieve. Finally, educational interventions, especially for PCP, can make significant connections to patients, but more, the understanding of the concepts can help policymakers and those leaders in defining roles in the delivery of care. (Sabbatini, et al., 2014).