Rising Health Care Costs

1. Rising Health Care Costs • Kevin Byrne, Matt O’Brien, Kwan Lee

2. Societal Rights and Obligations in Health Care • Society has the duty to its members to allocate an adequate share of its total resources to health-related needs • Society has the duty to provide just allocation of different types of health services, taking into account the competing claims of different types of health needs. • Each person is entitled to a fair share of such services, where “fair share” includes an answer to the question – who should pay for the services?

3. 2 Main Schools of Thought in Medical Ethics • -Utilitarian – considers the balance of benefits and harms where outcome may justify the action (The ends justify the means, a focus on consequence/outcome) • -Deontological – considers duties and obligations and how best they may be met. Outcome may not be sufficient to justify action (Categorical imperatives) -Categorical imperatives – “ought and ought nots” – informed consent, confidentiality

4. Ethical Questions in Health Care Costs • Town of McAllen, TX. AVG Medicare cost, over $15,000 per person, per year. $3,000 higher than the average income of the town of $12,000. • 25% of all Medicare costs are for patients in their last year of life

5. Increasing cost proportion to the GDP • Insurance cost is increasing proportion to the GDP Debate over increase is high • Car accidents account for 4 percent of U.S. GDP and that the cost of an accident was the single largest component of the per-passenger-mile cost of driving.

6. Against - Rising life expectancy, and decreasing labor questions whether the increase should increase proportion to GDP - Debate over taxation among classes

7. For - Relatively low cost and government investment, in proportion of GPD, relative to other countries, Japan(27%) and South Korea(32%) • Decreasing budget of Social Security Benefit and OASDI may lead excessive burden to future generation

8. A typical economic estimate of the value of a human life in the USA is $5 million. If car accidents kill 43 thousand Americans every year, that’s a cost of $215 billion. So the lost human life alone costs around 1.6% of a $13.13 trillion GDP.

9. On Revising Our Health Care • “A redesigned system must create new incentives for those entities so their self-interested behavior leads to a better societal outcome.” – Harold Luft • “The greatest threat to America’s fiscal health is not Social Security, it’s not the investments that we’ve made to rescue our economy during this crisis. By a wide margin, the biggest threat to our nation’s balance sheet is the skyrocketing cost of health care. It’s not even close.” – President Barack Obama

10. Cost Drivers in Healthcare • According to PBS.org, there is no one main cause for why health care expenses are on the rise, but instead, PBS breaks down 7 different reasons that attribute to the surge in health care costs. • 1. We pay doctors and other medical providers in ways that reward doing more rather than efficiency. • 2. As a society, we are growing older and fatter, thus causing us to get sicker. • 3. We want more; new drugs, better technology and better services and procedures. • 4. Citizens get tax breaks on buying health insurance, and the cost for patients seeking care is often low. • 5. We often do not have the necessary information to make decisions on which healthcare is best. • 6. Hospitals and healthcare providers are gaining market share, thus making it possible for them to manipulate price control and demand higher prices. • 7. And finally, hospitals face legal issues such as malpractice and jury awards that complicate efforts to slow spending.

11. Malpractice and Healthcare Costs • In recent years, increases in medical malpractice premiums and their subsequent awards to plaintiffs and patients have gotten a considerable amount of attention. • So much so that the American Medical Association has declared 19 states to be in a medical-liability crisis. • Growth of medical malpractice liability costs can potentially greatly affect health care in the U.S. • Malpractice Insurance premium growth for doctors can affect the size and composition of the physician workforce; (causing some to choose other professional paths early on) • Increase in malpractice liability= increase in defensive medicine implemented by Doctors • Medical liability increases will be passed on to those receiving care in the forms of higher insurance premiums. • Along with insurance premiums, because many receive insurance through employers, an increase in premiums due to high malpractice liability may cause employers to cut back on things such as wages or other benefits such as 401K matching.

12. Potential risks • In a study held by medical researchers from Harvard University and Dartmouth University, they described the risks of increases in malpractice payments can come with significant increases in health insurance premiums. • The researchers found that the cost of these rising premiums would be primarily from workers who are faced with decreased wages who work for companies with employer-sponsored health coverage. • Effects of costs rising can move into full time vs part time workers as well, where employers will move people from full-time employment to part-time employment so as to not have to provide them with the health-insurance benefits. • In this scenario, a potential risk would be a great deal of workers losing their insurance and no longer having access or means of being covered.

13. Conclusion and study findings • In conclusion, several things were able to come from the studies of malpractice liability costs and their affect on health care coverage and costs. • Although definitely a factor that is driving increases in health care costs, malpractice liability is not the number one reason for U.S. increase in health care spending. • Increased malpractice liability costs have not seemed to hinder the growth in the physician workforce, but rather alter certain subsets of the field more severely. • That is, the number of physicians who are likely to face a greater number of malpractice suits (surgeons) have seen a decrease in numbers • This has not yet seemed to cause a decrease in quality of healthcare, however. • Evidence found that the strongest effect of increased malpractice costs comes in the increased use of low-risk services such a preventative tests and imaging • This in turn can affect health care costs due to the previously stated current practice that we as health care consumers pay for what is done rather than what is most efficient in practicing medicine.

14. References • Appleby, Julie. "Seven Factors Driving Up Your Health Care Costs." PBS. PBS, 24 Oct. 2012. Web. 14 Apr. 2014 • Baicker, Katherine and Amitabh Chandra. “Defensive Medicine and Disappearing Doctors.” Health and Medicine Regulation. 2005: pg 24-31. • "Health Reform Watch." Health Reform Watch RSS. N.p., n.d. Web. 18 Apr. 2014. • "McAllen, Texas and the High Cost of Health Care." The New Yorker. N.p., n.d. Web. 18 Apr. 2014.