Drivers of Healthcare Costs

In the XXI century, medicine and science offer new technologies, medical devices, medicines, and tools to the practitioners. This process has a great effect on the final indicators of public health – disability, morbidity, and mortality. From year to year, many states around the world increase healthcare costs while providing medical care to the population and improving public health management system. The introduction of new medical technologies is considered the most essential driver of the growth of healthcare expenses.

Discussion of the Driver

The cost of healthcare management in the United States as a share of GDP has been rising constantly over the past 50 years. The major drivers of this process include factors connected with the demand for and supply of medical services (Patel & Rushefsky, 2015). The rise in demand for this kind of services can be observed due to the growth of welfare level, the simplification of access to medical care, the aging of population, the expansion of coverage of health insurance system as well as the appearance of new diseases and modifications in the morbidity structure (Patel & Rushefsky, 2015). What is more, increased healthcare spending greatly influences healthcare costs. Particularly, it includes the improvement and the introduction of medical technologies. This factor is regarded the main driver of the increase in healthcare costs.

It is necessary to state that the application of modern medical tools and techniques may be both appropriate and impractical. A vivid example of the relevant but expensive treatment is the use of angioplasty or fibrinolysis for the treatment of myocardial infarction. Before doctors started using these methods frequently, the treatment of myocardial infarction was less costly and not so effective (Karuppan, Waldrum & Dunlap, 2016). Contrariwise, many expensive and new methods of treatment including the popular ones are ineffective. They can provide only insignificant advantages or are unlikely to have a positive effect on the patients if misused. The application of spinal fusion of the lower lumbar spine for the treatment of chronic low back pain is a bright example of these methods. Many scientists believe that it is ineffective, and its usage is exorbitantly abused (Karuppan, Waldrum & Dunlap, 2016). The ineffectiveness of the above-mentioned technique is mainly connected with the fact that diagnostic tests and studies cannot localize a source of pain exactly. Nevertheless, it is necessary to mention that in both cases healthcare costs rise.

Significance

One of the most important goals of any country is to take care of the citizens’ health. Due to technical and scientific progress, new medical technologies constantly appear. Their major aim is to improve health with the help of more efficient methods of treatment. The main task of public healthcare sector of all countries is to provide effective and qualitative medical care for patients for the lowest material costs. There is a need to define methods, which can improve the provision of medical care. These days, many treatment techniques fail to produce the expected effects and even make harm. What is more, the realization of technologies, the efficiency of which has been proven, is always a complicated task since their usage requires additional financial and human resources.

Despite an increase in healthcare costs that the introduction of new medical technologies causes, this factor is of the great importance to medicine. The application of modern medical technologies reduces the necessity of inpatient treatment, hospitalization, and emergency medical care. Despite the fact that it is rather costly, the implementation of new tools can diminish time and financial costs needed for outpatient and inpatient care. For the last 20 years, each extra dollar expended on healthcare needs has had a useful effect, the economic equivalent of which constituted $1.55 (Patel & Rushefsky, 2014). For instance, the therapy with the use of beta-adrenoceptor blockers for the treatment of people with heart failure promotes rise in life expectancy and decrease in expenses in the healthcare system. It is mainly associated with the reduction of the number of days spent in a hospital. New technologies offer the possibilities to increase greatly the effectiveness of identifying individual risk factors for diseases, their early diagnosis, and the reduction of inpatient care cases through the development of telemedicine, minimally invasive outpatient surgery, and remote monitoring of the person’s state of health (Patel & Rushefsky, 2014). The introduction of new technologies promotes structural modifications in the system of medical care, the growth of the population needs for new medical services, and the rise of expectations concerning the state ensuring of their accessibility. Therefore, the application of new medical devices leads to various positive effects.

Analysis and Changes

In connection with the constant introduction of new medical technologies, the cost of healthcare will only grow. It is projected that in untill 2020, the healthcare costs will rise from 2.4% to 7.5% due to this driver (Karuppan, Waldrum & Dunlap, 2016). Despite the above-mentioned fact, the result will be satisfying since medical technologies will bring many positive effects to the patients. Therefore, the healthcare costs will increase greatly in the future but it is still possible to reduce them through certain methods. 

Parties concerned continue to develop the measures of cost containment, and their main purpose consists in the reduction of unnecessary administrative and medical costs and the provision of increase in operational efficiency. For example, it is possible to apply the procurement model of Peter Kraljic. It is necessary to choose the best supply strategy, which the strategic value of the product conditions. It is used to define appropriate procurement strategy for a service or product that allows optimizing the ratio of risks and costs (Russill, 2016). Thus, it is possible to receive helpful recommendations on how to manage relationships with various suppliers (Russill, 2016). This solution can assist in reducing administrative costs of healthcare. It can be extremely useful in lowering the sum of money needed for the introduction of new medical technologies.

Another way to reduce the costs is pricing control in healthcare. In this case, it is important to apply reference pricing. It is connected with the international comparison of prices (Cleverley & Cleverley, 2017). One has to mention that it is a widely used mechanism of controlling the prices worldwide. This method allows  saving the prices in all states at relatively the same level (Cleverley & Cleverley, 2017). This mechanism can be greatly important since the range of prices is large. In the United States, the prices for application of new medical technologies vary by 60% (Cleverley & Cleverley, 2017). The application of external reference pricing makes lowering the administrative healthcare costs possible. There are also certain approaches to direct costs control. They usually include the setting of border prices and the provision of discounts on the part of manufacturers or distributors. Appropriate pricing practice should be accurate, reliable, consistent, predictable, transparent, trustworthy, honest, long-term, and understandable to the public. It should take into account the opinion of patients and the needs of small groups of population. It is called to reduce healthcare costs in the future.

Conclusion

New medical technologies can solve many medical problems, increase life expectancy, and improve the health status of the population. The only disadvantage lies in the fact that their introduction is usually rather expensive. It leads to the increase in healthcare costs due to new technologies use. In this way, one of the most significant tasks of public healthcare today consists in the assessment of modern medical technologies, which should be clinically efficient, safe for the patients, and cost-effective. These criteria allow their immediate implementation.