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The Impact of Medical Technology on Health Care Finance

| The Impact of Medical Technology on Health Care Finance| Patricia Brewer| | | | | Health care costs have been rising for several years. United States health care Expenditures surpassed $2. 3 trillion in 2008, more than three times the $714 billion spent in 1990, and over eight times the $253 billion spent in 1980 (Kimbuende, 2010).

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Slowing this growth has become a major policy priority, as the government, employers, and consumers increasingly struggle to keep up with health care costs.

In 2008, U. S. health care spending was about $7,681 per resident and accounted for 16. 2% of the nation’s Gross Domestic Product. This is among the highest of all industrialized countries. Total health care expenditures grew at an annual rate of 4. 4 percent in 2008, a slower rate than recent years, yet still outpacing inflation and the growth in national income. There is a general agreement that health costs are likely to continue to rise in the near future.

Many analysts have cited controlling health care costs as a key for broader economic stability and growth, and President Obama has made cost control a focus of health reform efforts under way. By 2016, total health spending is projected to rise to $4. 2 trillion. Rising health care costs raise health insurance premiums, which are also growing at a much quicker pace than overall inflation or workers’ earnings. Health spending has been rising two and a half percent a year, faster than the gross domestic product over the past four decades (Covington, 2008).

Although Americans benefit from many of the investments in health care, the recent rapid cost growth, plus with an overall economic slowdown and rising federal deficit, is placing great strains on the systems used to finance health care, including private employer-sponsored health insurance coverage and public insurance programs such as Medicare and Medicaid. Since 1999, family premiums for employer-sponsored health coverage have increased by 131 percent, placing increasing cost burdens on employers and workers.

The average cost of a one-day stay in a hospital has now risen to over $500, the total cost of a coronary bypass operation and follow-up treatment has reached $37,300, and the average cost of delivering a baby now exceeds $2500. As costs have increased, fewer people have been able to afford the medical care they need. Over 37 million Americans, including over 12 million children, carry no health insurance at all and are unable to afford private health care, they must rely on a public health system that cannot deal with such a burden.

With workers’ wages growing at a much slower pace than health care costs, many face difficulty in affording out-of-pocket spending. Government programs, such as Medicare and Medicaid, also account for a significant share of health care spending, but they have increased at a slower rate than other private insurance. Medicare per capita spending has grown at a slightly lower rate, on average, than private health insurance spending, at about 6. 8 vs. 7. 1% annually between 1998 and 2008.

Medicaid expenditures, similarly, have grown at slower rate than private spending, though enrollment in the program has increased during the current economic recession, which may result in increased Medicaid spending figures in the near future (Kimbuende, 2010). A major cause of the rise in health care spending is due to advancements in medicine and technology. Both have improved and lengthened the lives of many Americans, but as most know they do not come without a cost. Newly rising procedures are often expensive to give and increase overall health care spending. According to the

Congressional Budget Office, “the bulk of increases in health care spending could be attributed to the development and dissemination of new technologies and medical services. ” Such advancements also lead to changes in practice, which together tend to increase spending. Consumer demand and increased utilization add to costs (“Changes in Medical Technology,” 2007). Ethics comes in at this point because medical technology is highly valued as a “beloved feature of American medicine. ” Patients expect up to date procedures, doctors are primarily trained to use it, and the medical industries make billions of dollars selling it.

The rising costs are seen as a major issue because many people in the United States aid from the new procedures and treatments produced each year. Medical technology refers to the procedures, equipment, and processes by which medical care is delivered (Barbash, 2008). Changes or advancements in technology would include new medical and surgical procedures, as well as new drugs and medical devices, such as scanners and defibrillators. Also the recent rise and interest in universalizing Electronic Medical Records and the use of preventive medicine has attributed to the growing costs.

Technological innovation has given us vaccines, antibiotics, advanced heart disease care, splendid surgical advances, and fine cancer treatments (Barbash, 2008). Most health policy analysts agree that the long- term increase in health care spending is principally the result of the health care system’s incorporation of these new services in clinical practice. A robotic surgical device is an example of how technology advancement can increase health care costs. These high tech procedures of becoming extremely popular and seem to be the future of surgery.

These robots allow surgeons to operate remote-controlled robotic arms, which may facilitate the performance of laparoscopic procedures. Laparoscopic surgery is associated with shorter hospital stays than open surgery, as well as with less postoperative pain and scarring, and lower risks of infection and need for blood transfusion. Robotic technology has been adopted rapidly over the past four years in both the United States and Europe. The number of robot-assisted procedures that are performed worldwide have nearly tripled since 2007, from 80,000 to 205,000. Robotic technology affects expenditures by increasing the cost per procedure.

Robotic surgical systems have high fixed costs, with prices ranging from $1 million to $2. 5 million for each unit. Surgeons must perform 150 to 250 procedures to become adept in their use (“Robotic Surgery Technology,” 2006). The systems also require costly maintenance and demand the use of additional consumables. The use of robotic systems may also require more operating time than alternatives. Robot- assisted procedures may contribute to shorter hospital stays, which will decrease costs, but at the same time require physicians to train on these instruments. Each instrument is a pricey expenditure for a hospital to pay for (Barbash, 2008).

To maintain these instruments and keep them up to date will be an added cost as well. These instruments perform miracles and may seem like a wonderful addition to the surgical world, but are not cheap. Advancements in scanner technology, such as CT’s, allows for greater visibility at a higher resolution than was possible before. Innovative scanners, advanced applications, and exciting breakthroughs in clinical procedures are driving an increased use of a CT as a primary diagnostic tool for procedures such as colonography, cancer detection and staging, lung analysis, cardiac studies and radiotherapy planning (“Diagnostic Imaging,” 2011).

Hospitals and other health care facilities are pressured to purchase such equipment to keep up with the public demand for these high-specialized tests. With out such machines and technology the public will turn elsewhere to receive the care that they so desire and need, which will end in a loss of profit for such hospitals and other facilities. Another technological advancement that has a great impact on healthcare finance is the emergence of the Electronic Medical Record. Electronic Medical Records is a computerized medical record created in an organization that delivers care, such as a hospital or physician’s office.

Electronic medical records tend to be a part of a local stand-alone health information system that allows storage, retrieval and modification of records. The 2003 IOM Patient Safety Report describes an EMR as, “a longitudinal collection of electronic health information for and about persons, immediate electronic access to person- and population-level information by authorized users, and provision of knowledge and decision-support systems that enhance the quality, safety, and efficiency of patient care (“Electronic Medical Records,”2011). ” The adoption of these records can be quite costly.

The price of an EMR system can range from a thousand dollars to ten thousand dollars, and in some cases they can cost even more. EMR costs increase as the system becomes more feature-rich. Huge facilities can buy complete EMR systems that cost around plus forty thousand dollars. Training and maintenance costs also have to be taken into account when purchasing EMR’s. All staff must be trained to operate the new machines, coming familiar with the new software and patient records. If you want to utilize the EMR product to its full potential, then you need hardware that perfectly complements the software.

Purchasing computers and up to date software that will last for the long term is also an added cost. These systems also require maintenance to keep them working sufficiently. A facility may also need to hire a networking professional to monitor and maintain the network in their facilities. A networking expert will ensure that the workstations remain connected to each other and seamlessly exchange data (“Electronic Medical Records,” 2011). The installation and upkeep of EMR’s is not a cheap process. Many hospitals and private facilities are hesitant to make the improvement.

The costly technology can improve the quality of care for patients by knowing ones medical history and prescription drugs they are on or allergic too. It can also decrease unnecessary testing in many cases. President Barack Obama, as part of the effort to revive the economy, has proposed a massive effort to modernize health care by making all health records standardized and electronic. His aim is to computerize all health records within five years. He believes the quality of health care for all Americans gets a big boost, and osts will decline. Independent studies from Harvard, RAND and the Commonwealth Fund have shown that such a plan could cost at least $75 billion to $100 billion over the ten years they think the hospitals would need to implement program. The healthcare initiative will be one of the priciest parts of the plan. Along with the high costs a major concern of the government is that lack of skilled workers to build and implement the necessary technology. The biggest cost will be paying and training the labor force needed to create the network.

The savings of such a plan could be substantial. The government estimates that a fully computerized health record system could save the industry $200 billion to $300 billion a year, and could ultimately slow the rapid rise of health care premiums, which have cut into Americans’ pay checks. There are many advantages that the Electronic Medical Records pose for both patients and physicians. The EMR can reduce errors in medical records. Handwritten records are subject to lots of human errors due to misspelling, illegibility, and differing terminologies.

On-screen or printed text is often far more legible than handwritten. This can help prevent patient’s receiving the wrong medication or procedures, saving doctors from medical malpractice suits (Molar, 2010). Clinical errors cause at least 44,000 deaths annually in the United States. These deaths largely result from process errors, or the failure to provide recommended treatments for patients with certain medical conditions. With direct medical costs estimated at $17 billion annually, these errors impose a substantial burden on both the health care system and society as a whole.

The real time paperless record include reducing the need for costly reproductions of laboratory findings and diagnostic reports, which in many health care facilities are still typed, copied, and physically carried to a hospital floor, clinic office, or medical records room to be placed in the patient’s chart (Hunt, 2009). Loss of reports, or delays, are common until this information reaches the chart and the providers. While wages are rising at a rate of around 3% a year, health care costs are growing at about three times that rate (Goldman, 2009).

Prescription drugs also play a role in Health Care finance. Advances in pharmaceuticals have transformed health care over the last several decades. Today, many health problems are prevented, cured, or managed effectively for years through the use of prescription drugs. In some cases, the use of prescription medicines keeps people from needing other expensive health care such as being hospitalized or having surgery. In 2007, 90% of seniors and 58% of non-elderly adults rely on a prescription medicine on a regular basis (Kimbuende, 2010).

Since the 1990s spending on prescription drugs has been a much more prominent component of growth in total spending. From 1995 to 2005, it grew by an average of about 10 percent per year and is still on the rise as the future of prescription drugs lies in the baby boomer generation (“Technological Change,” 2008). Increased Medical Technology has led to the use of defensive medicine by many health care physicians. Defensive Medicine refers to services that have little or no clinical value, but that physicians order or perform at least to avoid lawsuits (“Technological Change,”2008).

With high malpractice premiums, more physicians everyday are turning to this type of practice. It is raising health care costs by performing unnecessary tests and procedures on patients that may not need them. There is reason to believe that new technology can in fact reduce health care spending. Some vaccines may offer the potential for savings, and certain types of preventive medical care may help some patients avoid costly hospitalization for acute care. Future advances in molecular biology and genetics, may one day offer the possibility of savings if they make curative therapies available.

Continued advances in understanding the genetic origins of disease offer the credible possibility that future providers will accurately predict the health risks faced by individual patients and design therapies tailored specifically to them (Convington, 2008). Overall, examples of new treatments for which long-term savings have been clearly demonstrated are few. Many medical advances to date have increased spending because they made treatments available for conditions that were previously impossible to treat or were not aggressively treated.

Furthermore, improvements in medical care that decrease mortality by helping patients avoid or survive acute health problems paradoxically increase overall spending on health care because surviving patients live longer and therefore use health services for more years (“Technological Change,” 2008). With the baby boomers approaching retirement age and living past recent life expectancy age, health care costs are projected to rise even further. Technological advances and new medicines and prescription drugs are keeping people alive longer and putting a strain on our health care system.

In coming decades, the share of the population that is covered by Medicare will expand rapidly as members of the baby- boom generation become eligible for the program, and the share that uses long-term care services financed by Medicaid will also probably increase. According to the American Hospital Association, “the first boomers will reach 65 in 2011 and 37 million of them will be managing one chronic condition by 2030. ” Also 14 million Boomers will be living with diabetes, that’s one out of every four Boomers. Almost half of this generation will live with arthritis, and that number peaks to just over 26 million in 2020.

More than one out of three Boomers, over 21 million, will be considered obese. As these patients live with multiple chronic diseases, demand for services will increase. The number of physician visits has been increasing for all adults, up 34 percent over the last decade, and this trend is expected to continue. By 2020, Boomers will account for four in 10 office visits to physicians and over the next 20 years, Boomers will make up a greater proportion of hospitalizations as they live longer but with multiple complex conditions.

At the same time, the number of registered nurses, primary care and specialty physicians will not keep pace with demand. As the Boomer generation is more racially and ethnically diverse, there will also be a greater need for caregivers who reflect the diversity of and increase in this population (“How Boomers will change Health Care,”2007). With changing demands, expectations and new technology, care delivery will also change. Boomers have lived through an amazing array of medical advances, from polio vaccine to radical heart surgery, and that trend will continue over the next two decades.

Medical Advancements are taking place every day and are given rise to growing health care costs. Rising health care expenditures lead to the question of whether we are getting value for the money we spend. Compared to other high-income countries, the U. S. spends more, but this spending is not reflected in greater health care resources, such as hospital beds, physicians, nurses, MRIs, and CT scanners per capita or better measures of health. The United States needs to figure out a way to use these advancements to our benefit and reduce cost while maintaining good quality of care to every patient.

With the growing elderly population, medical technology is in high demand as many people over 65 are suffering with at least one chronic condition. The Untied States government and health care providers need to figure out a way to reduce the health care costs. The incorporation of preventive medicine and Electronic Medical Records can aid in cost reduction for the future. Unnecessary testing should be avoided to also help reduce costs. Hopefully, EMR’s can reduce the amount of tests being performed and duplicated.

Policies focusing on new and expanding technologies may have success in reducing the rate of growing health care costs but can be difficult to implement. In the long run, bringing health spending growth closer to the rate of overall economic growth would require finding ways to slow the development and diffusion of new healthcare technologies and practices, as well as developing ways to weigh the costs and benefits of new technologies (“Technological change,” 2008). References Barbash, G. (2010). New Technology and Health Care Costs. New England Journal of Medicine.

Retrieved from http://www. nejm. org/doi/full/10. 1056/NEJMp1006602 Convington, L. (2008). An Alliance for Health Reform. Retrieved From http://www. allhealth. org/publications/cost_of_health_care/health_care_costs_toolk Diagnostic Imaging. (2011). Hospital and Healthcare Management. Retrieved From http://www. asianhhm. com/medical_sciences/advances_CT_technology. htm Electronic Medical Records. (2011). Open Clinical. Retrieved From http://www. openclinical. org/emr. html Goldman, D. (2009). Obama’s big idea: Digital Health Records.

New York Times. Retrieved December 2, 2011, from http://www. nytimes. com/subscriptions/Multiproduct/lp3004. html? campaignId=384LY How Boomers Will Change Health Care. (2007). American Hospital Association. Retrieved From http://aha. org How Changes in Medical Technology affect Health Care Costs. (2007). Retrieved From http://www. kff. org/insurance/snapshot/chcm030807oth. cfm Johns Hopkins University (2006, November 28). Robotic Surgery Technology Gives Doctors ‘Sense Of Touch’. ScienceDaily. Retrieved December 6, 2011, from http://www. ciencedaily. com­ /releases/2006/11/061128121916. htm Kimbuende, E. (2010). Health Care Costs. Kaiser Family Foundation. Retrieved From http://www. kaiseredu. org/Issue-Modules/Prescription-Drug-Costs/Background-Brief Technological change and the Growth of Health Care Spending. (2008). Congressional Budge Office Retrieved From http://www. cbo. gov/ftpdocs/89xx/doc8947/01-31-TechHealth. pdf The Long Term Outlook for Health Care Spending. (2007). Congressional Budget Office Retrieved From http://www. cbo. gov/ftpdocs/87xx/doc8758/11-13-LT-Health. pdf