Thursday, April 14, 2011

Why Health Costs are Increasing and How they can be Contained

Health costs are increasing for the United States because our population is aging and older people have more health problems that are more expensive to treat. They are also increasing because we have an increasingly unhealthy way of living, They are also increasing because medical science is advancing, and new diagnostic and curative services are being developed to deal with formerly unmet needs, Finally, as the demand for health services grows more rapidly than the supply, there is inflation of health service costs.

Costs can be contained by providing more cost-effective preventive health services, especially health education to encourage people to live healthier lives. They can be reduced by providing service guidelines to reduce the prescription of services that have little value in improving health (which is why I belong to Kaiser Permanent, which has good procedures to assure that only useful, cost-effective services are provided). They can be somewhat reduced by installing good administrative procedures (such as purchasing and inventory control measures to reduce drug costs, and effective ICT systems to reduce information processing costs).

Price control mechanisms can be useful to reduce run away inflation in medical costs when the demand for services is increased by subsidies faster than services can be expanded. On the other hand, something might be done by delegation of medical functions and increase in the numbers of service providers (overcoming rigidities in professionalization systems).

It is not a good idea to reduce costs by keeping people from affording medical treatment that they need.

It is not a saving to put the costs on individuals or states rather than the U.S. Government!

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