How to Reduce Health Care Costs

By Riczo, Steven | USA TODAY, January 1994 | Go to article overview

How to Reduce Health Care Costs


Riczo, Steven, USA TODAY


THE U.S. health care system rapidly is absorbing an ever-increasing share of the gross national product, rising from 5.3%o in 1960 to 13% in 1993, with projections to 18% in the next seven years. Hospital care accounts for approximately 40%; physicians, 19%; drugs, eight percent; nursing homes, eight percent; and the remainder is divided among dental, personal health needs, vision, home health, public health, and miscellaneous. The payment system through insurance undoubtedly is a major contributing factor for health care costs today. Aging of the population and high-technology care often are cited as contributing factors as well. However, the population does not age enough in a single year to cause double-digit inflation, and technology overuse is a result of health insurance reimbursement that pays for it.

It long has been recognized that if a physician is going to order a test and the patient is responsible for none or very little of the cost thanks to insurance coverage, there is a strong tendency to treat resources as if they are free. Health insurance initially evolved as a means to pay for expensive hospitalization and catastrophic care, but now frequently compensates for small items such as office visits, inexpensive tests, etc. Patients pay a mere four percent of hospital costs and 18% of physician out-of-pocket charges. This discourages efficiency and produces high administrative expenses for filing claims. As a result, price all too often becomes an insignificant factor and an ineffective regulator of supply and demand, which become distorted. Health insurance obviously is a requirement for expensive, high-tech care, but specific reimbursement formulas must encourage efficiency.

Current methods of reimbursement result in numerous market distortions. For instance, payments to doctors have been skewed heavily toward procedures by specialists, with lower fees going to primary care physicians who provide general medical care. Communities with a higher percentage of primary care physicians have been shown to have lower health costs.

Recent studies demonstrate that specialists order more expensive tests, and a number of others found significant unnecessary testing. The Rand Corporation has documented certain types of unnecessary surgeries, including 14% of heart bypass operations and more than 30% of those to remove atherosclerotic plaque from the carotid artery. Medical journals have reported numerous unwarranted hysterectomies, and 50% of coronary angiograms may be uncalled for. Studies in Florida indicate that physicians who own clinical laboratories and imaging centers order more tests, including 54% more magnetic resonance imaging (MRI) exams.

The reasons for unnecessary testing undoubtedly have their roots in the current reimbursement system and include residency training emphasizing high-tech care in teaching institutions; too many specialists, with insurance reimbursement geared to specialized procedures; disregard for diminishing returns, often obtaining very little clinically useful information at a very high cost; consumers demanding procedures or tests they hear or read about; malpractice / defensive medicine; financial gain/fraud; lack of established practice standards; and tests performed out of the mainstream of medicine that circumvent normal technology assessment.

There are economies of scale in health care just as there are in other businesses whereby large volumes drive down the unit cost of production. Insurance props up many small, inefficient, and high-cost health providers. For instance, large national clinical laboratories that conduct blood and other tests for patients can perform such tests at a much lower unit cost than small facilities. Yet, there are over 80,000 clinical laboratories in physicians' offices, according to the Health Care Finance Administration. Arguments by physicians of quality and convenience of their patients frequently serve to obscure issues of financial gain. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

How to Reduce Health Care Costs
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.