Health Economics (6200431)

LECTURE 1
Dr. Butheina Surkhi
Faculty Of General Medicine
Al-Quds University
2023
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Health Economics

Rising costs of Healthcare

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Outline
• The Healthcare Cost Crisis
• Why Healthcare Costs Are Rising
• The Impact on Patients
• The Impact on Providers
• Potential Solutions
• The Future of Healthcare Costs

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The Healthcare Cost Crisis
• Healthcare costs in the United States have been rising at an alarming rate.
• U.S. health care costs currently exceed 17% of GDP and continue to rise.
• Did you know that healthcare spending in the US is now over $3 trillion
per year? That's more than any other country in the world, and it's
projected to keep growing.
• But what does this mean for patients and providers? The impact of rising
healthcare costs can be devastating, leading to financial hardship, limited
access to care, and lower quality of care.
• The remedy to the cost crisis simply requires a new way to accurately
measure costs and compare them with outcomes.
• It's a crisis that we must address.
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Why Healthcare Costs Are Rising
• One of the main reasons behind the rising healthcare costs is the increasing demand for
healthcare services.
1. Advanced Medical Technologies: While modern medical technologies have improved patient
care and outcomes, they have also driven up costs due to their high development and
maintenance expenses, overuse and misuse.
2. Prescription Drug Prices: The cost of prescription drugs, particularly for specialty medications
and brand-name drugs without generic alternatives, has been a major contributor to rising
healthcare costs.
3. Aging Population: As the population ages, there is an increased demand for healthcare
services, which can strain the healthcare system and lead to higher costs.
4. Chronic Diseases: The prevalence of chronic diseases such as diabetes, obesity, and heart
disease has increased, requiring ongoing and expensive medical treatments.
5. Administrative Costs: The complexity of healthcare billing and insurance systems can lead to
significant administrative overhead, adding to the overall costs.
6. Lack of Price Transparency: In many healthcare systems, there is a lack of transparency in
pricing, making it difficult for patients to compare costs and make informed decisions.
7. Fee-for-Service Model: In some healthcare systems, a fee-for-service payment model
incentivizes providing more services, which can drive up costs without necessarily improving
patient outcomes
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The Impact on Patients
• Rising healthcare costs have had a profound impact on patients across the
country.
1. Affordability of Care: As healthcare costs rise, patients may find it increasingly difficult
to afford essential medical services, medications, and treatments. High deductibles,
copayments, and out-of-pocket expenses can create financial burdens, leading some
individuals to delay or forgo necessary medical care altogether.
2. Access to Healthcare: Increased costs may reduce access to healthcare services,
especially for vulnerable populations with limited financial resources. Patients without
adequate insurance coverage or those living in areas with limited healthcare facilities
may face barriers to receiving timely and quality care.
3. Medical Debt: Skyrocketing healthcare costs can contribute to medical debt, which can
have long-lasting effects on patients' financial stability and credit scores. Accumulating
medical debt can cause stress and anxiety for patients and their families.
4. Adherence to Treatment: Higher costs of prescription medications or treatments may
lead some patients to skip doses or not complete their treatment regimens,
potentially compromising their health outcomes and leading to more severe medical
conditions.
5. Health Insurance Coverage: Rising healthcare costs can result in higher premiums and
reduced coverage in health insurance plans. Patients may need to choose plans with
higher deductibles or narrower networks, limiting their options .
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The Impact on Patients-cont.
6. Impact on Chronic Conditions: Patients with chronic health conditions
often require ongoing medical attention and prescription medications.
Rising costs can place an extra burden on these individuals, making it
challenging to manage their conditions effectively.
7. Delayed Diagnosis: Financial concerns may cause patients to delay
seeking medical attention, leading to delayed diagnoses and potentially
more advanced stages of illnesses or diseases.
8. Mental Health Impact: The stress and anxiety resulting from financial
strain due to healthcare costs can have adverse effects on patients'
mental health and overall well-being.
9. Medical Rationing: In extreme cases, patients may be forced to make
difficult decisions about which healthcare services to prioritize due to
financial constraints, leading to potential medical rationing.
10. Health Disparities: Rising healthcare costs can exacerbate existing health
disparities, disproportionately affecting low-income individuals, racial
and ethnic minorities, and underserved populations. 11
The Impact on Providers
• The rising healthcare costs have a significant impact on healthcare
providers, including hospitals and physicians.
• As the cost of healthcare continues to rise, hospital administrators
and physicians are facing increasing financial pressure. Many hospitals
are struggling to stay afloat(balance) as they try to provide high-
quality care while keeping costs under control.
• Physicians are also feeling the squeeze as they try to balance the
needs of their patients with the financial realities of running a
practice. Rising healthcare costs mean that physicians are often
forced to make difficult decisions about which treatments to offer,
which tests to order, and which medications to prescribe. This can
lead to patient dissatisfaction and even lawsuits in some cases.
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Potential Solutions
• One potential solution to the healthcare cost crisis is healthcare reform.
1. Cost-cutting measures: Implementing cost-cutting strategies can be an
immediate solution. This may involve optimizing operations, streamlining
processes, reducing waste, and renegotiating contracts with suppliers to secure
better deals.
2. Increased efficiency through technology: Embracing technological
advancements can lead to increased productivity and efficiency in various
sectors. Automation, digitalization, and artificial intelligence can help
streamline processes and reduce labor costs.
3. Government intervention: Governments can implement policies to control
rising costs. For example, they can regulate price increases in critical sectors
like healthcare or energy. Additionally, providing subsidies or tax incentives to
industries facing cost pressures can help alleviate financial burdens.
4. Investment in infrastructure: Upgrading and maintaining infrastructure can
lead to long-term cost savings. Improved transportation systems, energy-
efficient buildings, and advanced communication networks can positively
impact both businesses and consumers.
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Potential Solutions-cont.
5. Promoting competition: Encouraging healthy competition among businesses can lead to lower
prices for consumers. Antitrust laws and regulations can prevent monopolistic practices and
foster a more competitive marketplace.
6. Education and skill development: Investing in education and skill development can lead to a
more qualified workforce. A skilled workforce can increase productivity and innovation,
potentially reducing costs for businesses in the long run.
7. Sustainable practices: Embracing sustainable practices can not only reduce costs but also
attract environmentally conscious consumers. Energy-efficient technologies, waste reduction,
and responsible sourcing can help companies lower expenses and improve their public image.
8. Negotiating with suppliers: Businesses can negotiate with their suppliers for better terms, bulk
discounts, or alternative sourcing options. Establishing strong supplier relationships can lead to
cost savings.
9. Consumer awareness and choice: Educating consumers about their purchasing choices and
providing transparency in pricing can influence demand patterns. Informed consumers may
choose more cost-effective options, encouraging businesses to remain competitive.
10. Long-term planning and risk management: Companies and governments should engage in
long-term planning and risk management to anticipate and prepare for potential cost
increases. Developing contingency plans can help mitigate the impact of rising costs.

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The Future of Healthcare Costs

• As we look to the future of healthcare costs, it's clear that something

needs to change. With an aging population and increasing demand
for healthcare services, costs are only going to continue to rise.
• One potential solution is increased investment in preventative care.
By catching health issues early on, we can avoid costly treatments
down the line.
• Additionally, increased transparency around healthcare pricing and
insurance coverage could help patients make more informed
decisions about their care.

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