Consumer & Provider Costs

According to PBS News Hour (2015), there are seven factors that drive up health care costs: We pay healthcare providers in ways that reward utilization rather than efficiency; We are a population growing older and sicker; We want new drugs and technology; the tax breaks on buying health insurance benefits the ones seeking the most care; We don’t have enough information to make the best medical care decisions; Healthcare facilities and medical providers are gaining the market share; and lastly, Supply and demand interfere with efforts to slow the spending down.

The health insurance marketplaces increased the likelihood of entry because it was intended to foster competition amongst the payers. However, consumers will only reap the benefits of less expensive health care services if the lower insurance premiums are passed through to them, L.S. Dafny (2015). This advantage must be carefully considered because when large buyers (consumers) drive prices down, lower input prices are achieved by reducing the quantity or quality of services below the level that is socially optimal, L.S. Dafny (2015).

Paying for Performance Based health care services, as opposed to quantity of service, will require a significant shift in the delivery and payment of such organized care. Some insurers go so far as to promote an enhanced ability to develop and implement this new value-based payment agreements based on the merge of consolidated data. Reporting tools must be developed for reporting required measures such as insurance enrollment, plan coverage, premiums, and out of pocket expenses paid out for every health plan offered on the market. With this data, policymakers, regulators and analysts would be able to monitor market developments in real time and to be able to respond, if necessary, based on more accurate and timelier information, L.S. Dafny (2015).

Each time the federal government administers new regulations for an industry, there are numerous consequences impeded upon both consumers and suppliers. Many times operating within compliance of these regulations is extremely costly for organizations so these costs are usually passed through into consumers in the form of higher prices. These higher costs impact the low-income and high-income households differently because of the varying spending habits. One group may be impacted more than the other such as the low-income because the spend more of their income goods and services that are heavily regulated and subject to both high and volatile prices, D. Chambers, C. Collins (2016).