Escalating Health Care Costs & Rationing

The American health care system is expensive and getting more so; by 1993 expenditures climbed to approximately 14 percent of the gross national product. The system consumes resources disproportionate to the value it delivers; about 20 percent is spent on administrative costs and about one third of Medicare dollars are spent on those in the last year of life. The availability of new effective and expensive technology such as magnetic resonance imaging, has helped to increase costs. Insurance systems that encourage overuse and malpractice that encourages the practice of defensive medicine have also raised costs. An aging population adds to health care. The system is faced with cutting costs and continuing to provide access to quality care; the focus is on rationing (Wachter, 1995).

The rising costs of health care result in increased taxes, higher insurance premiums, and decreased business profits. Cost concerns strain the physician-patient relationship; willingness to care for the indigent is lost creating barriers for the poor. The American health care system receives the most a

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versus demand within health care is only an issue because economists became interested in health care. It is argued that calculations of health care requirements for the population with the effective use of resources to meet these requirements would end rationing. Reinhardt (1996) defends economics and reports that many American economists scrupulously apply scientific methods to identify trade-offs requiring moral choice for policy-makers. They are mindful to the term efficiency, understanding its limitations for practical application. It is also known that all benefit-cost analyses are suspect if the benefits and costs do not accrue to the same persons. Economists are aware that their offering of normative pronouncements on health policy are more limited than seems to be known among policymakers. Eddy (1994) states that rationing is inevitable and the only question remaining is how to do it. Inefficiencies need to be noted. Administrative and operational waste needs to be trimmed with improvements in processes. The excess in increased medical costs must also be addressed; difficult negotiations with drug companies, device manufacturers, suppliers, and labor (administrators, physicians, nurses, personnel, consultants)
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Approximate Word count = 1537
Approximate Pages = 6 (250 words per page)

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