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144 unit 2 | Working Within the Organization CikguOnline
3. Individuals want different services or have
different preferences. Some people choose Factors Increasing Costs
alternative treatment modalities such as
acupuncture, herbal therapy, or massage therapy • Expansion of national economy
rather than traditional health care. Health-care • General inflation
services are marketed extensively. • Aging population
• Growth of third-party payments
• Employer-provided health insurance
Regulation and Competition
• Tax deduction for medical expenses
During the past three decades, federal and state
• Increased costs of labor and equipment
governments have attempted to restrain the cost of
• Expansion of medical technology
health care by focusing. Regulation attempts to and products
control cost through government actions; competi- • Malpractice insurance and litigation
tion uses market forces. Competition can drive
aspects of health care through consumers,
providers, and suppliers. Among the attempts to
control cost were: Factors Containing Costs
1. Medicare Prospective Payment System (PPS). • Federal economic stabilization program
In 1983 the federal government changed its • Voluntary effort hospital regulation program
method of paying hospitals for treating • State-level health-care payment programs
Medicare patients. Instead of paying for actual • Medicare prospective payment system (PPS)
costs, the PPS pays hospitals a fixed, predeter- with payments of fixed amount per admission
mined sum for a particular admission. If a hos- • Diagnostic-related groups (DRGs) for
pital can provide the service at a cost below the hospital payments
fixed amount, it pockets the difference. If more • Resource-based relative value scale (RBRVS)
resources and money are used than the prede- for physician payments
termined amount, the hospital incurs a loss. • Managed care plans
2. DRGs. Tied to the PPS, DRGs are the patient
classification systems by which the Medicare Figure 10.2 Factors affecting the cost of health care.
PPS determines payment. Each of the (From Chang, C.F., Price, S.A., & Pfoutz, S.K. [2001].
495 DRGs represents a particular case type. Economics and Nursing: Critical Professional Issues.
Philadelphia: FA Davis, p. 79.)
3. Managed care. Managed care is a system of
health care that combines the financing and
delivery of health services into a single entity. 5. Medical savings accounts (MSA). As a regula-
Currently, more than 75% of people with pri- tory tool, MSAs are a cost-sharing method for
vate health insurance are enrolled in managed incentivizing consumers to plan and share in
care plans. Managed care plans are seen as cost- the cost of their own health-care expenditures.
saving alternatives to traditional fee-for-service Money that would normally be spent on
delivery systems. Through provider networks health-care premiums by the employer-
and selective provider contracting, they attempt consumer is deposited into an MSA. Accounts
to control resource use and health-care costs created under the Medicare Modernization
(Chang, Price, & Pfoutz, 2001). Figure 10.2 Act of 2003 are the property of the employee-
depicts the current factors increasing and consumer, giving more choice into how and
containing health-care costs. where the money is spent. The account is tax-
4. Cost sharing. With rising health-care costs, deferred until it is used for allowable health-
employers purchasing health plans have begun related spending as in high-deductable health
to shift some of the increase cost in premiums, plans and tax-deferred plans. Other types of
prescriptions, and specialty services to employ- consumer-directed plans exist, such as the
ees. Higher cost for consumers and shifting flexible spending account, health reimburse-
financial burdens have left more Americans ment account, and medical saving accounts, all
without health-care coverage. of which have stipulations for use.