Why are Costs So High?

1. Why are Costs So High? Chapter 12 Code Blue Health Science Edition 4

2. Chapter 12 • In chapter 12, David Brannan is struggling with a reversal in the family’s financial situation. • Financial problems are not unusual in the United States. Each year thousands of people declare bankruptcy.

3. Financial Difficulties • Individuals facing financial difficulties have one of two choices: • Increase income, or • Decrease expenses

4. Financial Difficulties • Individuals should figure out what decisions and actions have got them into difficulties they are facing.

5. Brannan Community Hospital • Brannan Community Hospital is also suffering from financial difficulties.

6. Brannan Community Hospital • Unless the situations changes, the hospital will close, throwing over a hundred employees out of work and decreasing access to hospital care in the community.

7. Brannan Community Hospital • Initially Wes Douglas realizes that he has three options: increase revenues, decrease costs, or both. • Before he decides whether he should tackle the problem of revenues or costs first, he realizes that he needs to understand a little more about the industry.

8. Healthcare Costs • In the next four chapters, we are going to discuss a crisis in the healthcare delivery system caused by out of control costs. • We will look at the cause of the problem, and some solutions being offered—solutions that will dramatically impact the lives of future healthcare professionals.

9. Major National Problem • Increasing healthcare costs are a major problem for most companies and their employees.

10. Per Capita Costs for Healthcare in Countries

11. Major National Problem • Many companies are finding that they can no longer afford to provide coverage for their employees. • Some are dropping health insurance as a benefit. • Others are moving jobs overseas where healthcare costs are less.

12. Major National Problem • This has led to the enactment by Congress of the Patient Protection and Affordable Care Act • We will be discussing this further later.

13. Health Expenditures • In 2013 it is estimated that the country will spend $3 trillion on healthcare. • It is estimated this expenditure will double in the next seven to ten years. • If this occurs, many Americans will be unable to afford the cost of basic care.

14. US Health Expenditures 1992-2012 Expenditures add nine (000,000,000) zeros Year

15. Chapters 13 through 16 • Why are healthcare costs so high? • Technology • Unreimbursed care • An aging American population • Lack of adequate incentives for cost control

16. Technology • Technology has provided the ability to save lives that would have been lost just a decade ago. • No one wants to return to 1990s medicine, but few are willing to pay the cost.

17. Unreimbursed Care • Much of the care hospitals provide is not paid for by the individuals receiving it. • Some hospitals collect less than 50% of billed charges. • These costs must be paid by those patients who do pay.

18. Unreimbursed Care • Reasons for Unreimbursed Care • Underpayment by government programs such as Medicare and Medicaid • Discounts negotiated by large insurance companies • Uninsured patients who receive care, but cannot or do not pay for the services they received • Charity care

19. An Aging American Population • When American soldiers returned from World War II, many started families.

20. An Aging American Population • The children of these soldiers were known as the “baby boomers,” due to a rapid increase in births in the late 1940s and early 1950s. • These baby boomers are now becoming senior citizens. • Older people have significantly higher healthcare costs per year than younger people.

21. An Aging American Population • In addition, people are living longer!

22. Lack of Incentives for Cost Control • To be discussed in the next chapter

23. The End