MEMORANDUM To: Rick Barnes, MD From: Sammy, Medical Student Date: August 12th, 2009 Subject: Rising Health Care

Costs I am sending this memo to express my interest in the current news issue on rising health care costs. The rising health care costs are one of the most serious problems facing the United States today. Many factors drive health care costs, and their interrelationships are so complex that most physicians and most of the public, do not understand them. Since understanding a problem is an essential step toward solving it, I will be making a proposal to reduce the health care costs by focusing on the consumer driven health care. One of the major problems that had hit this century is the decrease in acute illness and the proportional increase in chronic disease that has caused inflation in medical costs. By focusing and implementing on chronic illness, I believe it will benefit the consumers by making it a cost effective health care and being affordable to all consumers. Concern about health expenditures is not a new phenomenon. Health expenditures affect everyone from federal and state governments, to employees, and to the uninsured. This persistent rise in the health care costs is attributed to modifiable population risk factors such as obesity. I believe that chronic illness such as obesity is a single leading cause to the high expenditures since it links many interrelated complex factors that contribute to the high rise costs. These factors being innovations in medical treatment and visitation to the hospitals, which would be the role of health care providers. Hence, focusing on the disease prevalence by educating consumers on improving their lifestyle can reduce the morbidity, thus, resulting in a reduction in costs by reducing the interrelated factors that contribute to the high costs. Reducing the need and demand for medical services is theoretically plausible and practically documented, and there is a funding mechanism in place, through the savings accruing to the present payers. With this being said, I am making a proposal to reduce the rising health care costs by designing a health promotion program for consumers which might reflect changes in their lifestyles thus reducing the health expenditures on the behalf of consumers.

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Similar to this. By developing preventive care in medicine. but some money. industry. we can also provide health care to the ones who previously could not afford it. health technology assessment. The costs should be borne by those who will ultimately have the savings -. the rest of the problem such as an increase costs in technology innovation and the role of health care provider which are the cause of sedimentary lifestyles would be reduce. Hence. Rising health care costs is an important issue that needs to be taken into consideration for the benefit of the consumer. I believe that by changing a consumer¶s lifestyle. I believe it is important to educate the public and be informative in terms of what their actions will cost them in the future. those now paying the costs. it is upon us to educate them and to be informative. What is required is a widespread conviction that appropriately designed programs directed at reducing need and demand can actually save money Conclusions reached It is up to a consumer to bring changes in the lifestyle. not a great deal of money in comparison with overall health costs. and changes in fee per service. Insurers. Key ideas presented in this report The main idea presented in this proposal is to design a reform program by health professionals to educate the public and provide incentives to improve their quality of life as well as to reduce the burden of high expenditures. Time and Cost Overview Widespread dissemination of reform programs costs money. which belongs on top of the pyramid. Hence. the proposal is to develop the health promotion program to make consumers aware of how chronic illness link to the high costs expenditures.that is. Hence.Executive Summary Purpose of the proposal In this proposal. and government can pay out of their potential savings. Page 2 . in terms of what their decision will cost them in the future. I will be presenting a cause that affects all consumers nationally at an equal level. I believe we can reduce health care costs and benefit the consumer¶s in the long run. preventive care in medicine is the key to a change in consumer's lifestyle. But. This problem is similar to a pyramid model in which the most important issue goes on top and if a change has been made on top then rests that follow the top will be affected as well. this report presents the incentives to make changes on the high price set by the hospitals and insurance on the new technology and the physician¶s costs of service.

Page 3 .Recommendations made My recommendation is to develop a reform program. All of this will reduce the costs of health care. which will be provided by hospital personnel to design a health technology assessment and provide changes in a hospital fees.

.....6 II.«««««««««««««......1 Explanation of the Problem««««««««««««««««««««««..«««««««««««««««««««««««««««««««««................... Health Care Costs in 2006«....9 REFERENCE PAGE «««««««««««««««««««««««««««««11 Illustrations/Figures LIST OF ILLUSTRATIONS/FIGURES Figure 1-1 Comparison of an actual versus an expected expenditures of U.......7 Page 4 . BUDGET (TIME AND COST ESTIMATES)«««... 2 Statement of Objective ......«««2 EXECUTIVE SUMMARY ««««««««««««««««««««««««««..«««««««««««««««««««««««................Table of Contents MEMORANDUM ««««««««««.....8 IV...7 III....S......««««««««««...... STATEMENT OF NEED .......3 I.««««««««««««..««««««««««««««««...... 8 III.. BACKGROUND/EXISTING BASE OF KNOWLEDGE«..................... PROJECT DESCRIPTION ««««««««««««««««««««««««... CONCLUSION AND RECOMMENDATIONS ««.....8 III.9 IV..

One of the reasons are innovations require more capital. the role of the health care providers also plays a role in rising health care costs. How can we reduce the burden of illness and thus the need and demand for medical services? Ideally. As Kenneth Thorpe stated in his article. the main driver of rising expenditures? The advance of science is part of the answer. p. it also frequently brings benefits. along with innovations. BACKGROUND/EXISTING BASE OF KNOWLEDGE We know that consumers are the driving force behind the high expenditures in health care.I. but the financial incentives and constraints facing drug companies. eats wisely. including cultures. it still doesn't explain why it costs so much. Innovation has spread more widely and has commanded higher prices per unit of service in the United States compared with most other developed nations. What determines the pace and direction of technologic change in medicine. 2001). health care costs for a society would theoretically be zero. 2005). and sees that care at the end of life is humane (Thorpe. This rise reflects an expanded menu of medical treatments for patients with chronic illnesses linked to obesity. Even if we say that technology innovation is a good thing to human kind. a chronic illness such as obesity is link to a broad term known as a metabolic X. Although technologic change in medicine usually results in greater expenditures. in part because the fee-for service payments made to physicians and hospitals that use new diagnostic and therapeutic procedures are relatively generous" Page 5 . The Medicine and Public Issues article states that "Physicians in the United States expand the number of patients deemed eligible for new procedures more rapidly than do physicians in other nations. physicians. 1439). treats hypertension. does not consume alcohol to excess. Problem # 2: Role of a Health Care Provider As discussed in the above paragraph about innovative technology affecting the rising health care costs. and more expenses associated with spread of knowledge. a society of healthy people does not smoke. this would be an idealistic life. 5 June 2005). For instance. the reason behind this term is because it give rise to a multiple other illnesses such as Hypertension and Diabetic Mellitus. exercises regularly. Problem # 1: Technology Innovations Innovations in medical treatment have assumed a key role in the growth of treated disease prevalence. costs $130. Of course. uses seat belts. x-ray films. and others are also very important. more labor. Preventing chronic illness and approach taken to involve self-management would offer hope of a reduction in demand such as if a visit to the emergency department for a cold. Hence. What we do know is the consumer¶s impact on the health expenditures is a large number. then that amount is saved if the visit is not made (Gabel. "Most of the rise in spending per treated case identified in previous work is linked to innovations in pharmacologic treatment options as well as new treatment procedures" (Thorpe. all of which costs money (Bodenhelmer. such as extending life or improving the quality of life. hospital administrators. If there were no illness and no accidents. and antibiotics. provides other preventive health services.

The figure below demonstrates the consumers facing the high health care costs.S. advanced technology causing a high price tag is not only to be blamed on the providers Page 6 . p. Hence. II. These recognized providers market power allows lucrative reimbursement formulas for hospitals and physicians. the prices set for technology by the providers drive higher expenditures. The figure shows how much U. 997). As this figure illustrates the U. The actual cost of an inpatient care is greater than 100 percent higher versus an outpatient care is nearly half in comparison to the expected expenditures. health care is costing to the consumers. The result of historical domination of providers and suppliers over payers has been a price structure leading to a high health costs. As you can see that the actual expenditures of both the outpatient and inpatient care varies tremendously. the health insurance industry such as Blue Cross and Blue Shield has control the price tag for hospitals and physicians. I believe we can reach the expected value as it showed above.S. STATEMENT OF NEED It is important to fix this problem because as the consumer's need for innovative technology increases. In the United States. As mentioned earlier. This gives privileges to both the physicians and insurance to set the price and increase the demand as needed. health care expenditures in 2006. The value that is more outrageous is an ³investment in health´ such as research and technology.S. it compares the actual expenditures to the expected expenditures.(Bodenhelmer. 2009). if we develop the reform program as in preventive medicine. Figure 1: Shows the comparison of the actual versus the expected expenditures of the U. Health Care in 2006 (Iglehart.

Bodenhelmer mentions that "Health technology assessment can influence whether a technologic innovation for diagnosis or treatment will spread widely or wither away. It is good to know that health promotion program have been implemented in some public sectors such as schools and work places where the medical institution such as Centers for Disease Control and Prevention (CDC) and the Institute of Medicine (IOM) tries to inform the public on the better lifestyle. Part 2: Technologic Innovation. 932 ). Bodenhelmer in his article. ³Laparoscopic cholecystectomy provides a medical example of this phenomenon. Whereas the price of a laparoscopic procedure may be 25% less than the price of open cholecystectomy. which is the consumer's liability. Part 2: Technologic Innovation. We need to improvise in order to make the health care more affordable and efficient for all citizens. Hence. low-benefit medical technologies. The whole concept of reducing the health care costs is like a pyramid model. and to the uninsured. High and Rising Health Care Costs.1 Explanation of the Problem The problem is the rising health care costs in the United States that is affecting everyone from the federal and state governments. Such price tag is a serious issue in current society. The health reform program needs to be taken care of in the technology sector as well. the objective is to promote health for all consumers by educating each individual and providing them with knowledge on how a change in lifestyle has an effect on their spending. This reform has been developed and utilized in other developing countries but is lacked in United States.but on the research that involves in developing the technology as well. If you work on top and improvise on it then everything from there on will take its place in terms of changes. a reform program that is similar to what other developing nations have implemented needs to be enacted to lower the rising health care costs. PROJECT DESCRIPTION III. III. because Page 7 . is the leading cause behind the high costs within the health care system in this society. The objective here is to develop an appropriate investment in data management to at least know how much we spend. In the article. Hence. to employees. Nevertheless. III. For instance. it is important to realize the chronic illness. states the following on an instrument used for colonoscopy. how this varies by state. the rate of both types of cholecystectomy has increased by 60%" (Bodenhelmer. This reform should be targeting the rise in high-cost. The central goal remains improvement in health habits and ultimately the postponement and prevention of major chronic illnesses by reduction in risk factors. and what clinical conditions and practices are driving the growth (Gabel. p. 2001). High and Rising Health Care Costs.2 Statement of Objectives The objective is to improve the health care system by working on the consumer's health.

In the United States. The members of this group believe that reducing demand and need can have a substantial positive effect on health care costs. hospitals and insurance companies are given free rein to charge what they want to. government. We know that we cannot change every human being but what we can do is to play an informative role with our patients. we can improvise from our side by developing the health technology assessment so as we know the benefits. The Health Project is a voluntary consortium of business leaders. the Page 8 . BUDGET (TIME AND COST ESTIMATES) Much of the finance for the reform program needs to gain is through insurance. Consumer's current decisions are the driving force for the high rise costs. In the end. V. with representation from the Centers for Disease Control and Prevention. I believe that preventive care in medicine should be compulsory since not every person is aware of the damage they are doing to themselves and what this damage is costing them. Apart from this. and members of government. p. or private health plans. 2001). or volunteer program that is design to make changes within a consumer¶s health. I believe if we make an effort to develop a reform program which will be implemented by each hospital that teaches health care personnel to educate the consumer's to change their lifestyle we will reduce the high rising health care costs. whether Medicare. This reform is acknowledged as a Universal Health Plan in developing countries throughout the world. however. the Office of Health Promotion and Disease Prevention. Hence. may deny payment for innovations that are deemed to be ineffective or minimally effective" (Bodenhelmer. What I believe is there should be a reform where less power is given to the insurance companies and hospitals and more to private insurers and government (Gabel. policy scholars. IV. 933). as well as design a reform to give less power to hospitals and insurance companies and more to private insurers and government. Last objective is to work on the hospital payment since we know that high costs is driven mainly due to chronic illness which in part causes a hospital visitation to take place and the utilization of technology.payers. the only other cost that I asked of our hospital to invest is to have a private-public partnership with normal federal expenditure to promote reduce costs and improve health. Medicaid. health insurers. This would be a plus to a consumer since we cannot change the mind of a consumer but what we can do is change something that is tangible that is something you can put price to such as a technology and hospital fees. These objectives focus on the changes that will be made in the consumer's life and in turn will make the health care more affordable. harms and costeffectiveness of a new technology. Hence. Since we cannot change each individual. and present and past administrations (Thorpe. 2005). CONCLUSION AND RECOMMENDATIONS Consumers need education to make a decision to improve their lifestyle and lead healthier lives. I believe our hospital should work with the Health Project just because of their aim is to reduce the health care costs.

payers are consumers. Page 9 . who can learn to act in their own interests to control costs and who ultimately constitute the strongest interest group.

Annals of Internal Medicine. J. The Rise In Health Care Spending And What To Do About It. B. Budgeting for Change ² Obama's Down Payment on Health Care Reform. Ginsberg.pdf. 142(12) 996-1002.healthaffairs. Part 2: Technologic Innovation. Gabel. 24(6) 1436-1445. (5 June 2005). Annals of Internal Medicine. J. http://content. and Strunk. Iglehart.References Bodenhelmer. Part 3: The Role of Health Care Providers. (November/December 2005). P. High and Rising Health Care Costs. Page 10 .org/cgi/reprint/hlthaff.w1. K. Health Affairs. High and Rising Health Care Costs. Bodenhelmer. (21 June 2005). T MD. 360(14) 1381-1383. Thorpe. (2 April 2009). Health Affairs. T MD.39v1. 39-50. Tracking Health Care Costs. 142(11) 932-937. (26 September 2001). The New England Journal of Medicine.

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