Addressing the Problem of High Healthcare Costs

The goal of healthcare policy is to improve access and quality of healthcare in a given
country. To achieve this goal, markets and governments, through legislations and policies,
address various issues that impede accessibility and quality of healthcare. The most important
of these issues is high costs that make access to quality healthcare difficult for many people.
It may be assumed that the more the cost of healthcare the better the outcome.
However, this is not always the case. A country may spend a lot of money on healthcare but
end up with relatively poor outcomes such as high obesity rates, high infant mortality, and
low life expectancy. When financial expenditures are far greater than clinical benefits, it
shows that the healthcare system is malfunctioning and, therefore, needs a policy address
(Lee, 2009). Addressing high healthcare costs can be done by either governments or
competitive markets with the help of economic evaluation analytic techniques such as cost
benefit analysis (CBA), cost effective analysis (CEA), cost minimization analysis (CMA)
(Lee, 2009). These tools are only used to help in decision-making, not to make them.
For competitive markets, assumed to have very large number of sellers and buyers
with products of sellers being undifferentiated, the cost of healthcare products and services
reflects the effectiveness and efficiency of the services and products (Lee, 2009).
Governments too can address healthcare costs through tools such as legislation and
regulation. They can also use subsidies and taxes (Lee, 2009). Since most countries have
mixed economies, both markets and governments work hand in hand.
Even though they have the ability to reduce healthcare costs, there are many obstacles
that prevent either markets or governments from being effective in reducing healthcare costs.
For markets, these obstacles include monopolies, imperfect competition, public good, and
imperfect information (Lee, 2009). For governments, the main barrier is influence of interest

ADDRESSING THE PROBLEM OF HIGH HEALTHCARE COSTS
groups on the regulatory process (Lee, 2009). The result of this influence is that governments
end up with policies that benefit various interest groups rather than reducing healthcare costs.
Even the wealthiest countries in the world have limited resources to invest in
healthcare. It is important that these limited resources be used efficiently to produce the best
outcomes possible. Both governments and markets can address the problem of low value care
but as this article shows, there are many barriers that prevent both entities from effectively
addressing the problem.

ADDRESSING THE PROBLEM OF HIGH HEALTHCARE COSTS

References

Lee, R. H. (2009). Economics for healthcare managers. Chicago, IL: Health Administration
Press.