N502 Module 6 assignment: health care costs and financing paper, a full sample

Why the Bill Keeps Growing: Technology, Prices, and the Limits of Cost Sharing in U.S. Health Care Spending

Student Name

Master of Science in Nursing Program, Aspen University

N502: Health Care Systems

Instructor Name

Month Day, Year

Why the Bill Keeps Growing: Technology, Prices, and the Limits of Cost Sharing in U.S. Health Care Spending

Few facts about U.S. health care are as persistent as its rising cost. Health spending has grown faster than the overall economy for most of the past six decades, consuming a larger share of national income and squeezing wages, public budgets, and household finances. The course asks graduate nursing students to understand not only how much is spent but why, and how the relationship between costs and benefits should guide the allocation of resources. This paper examines three explanations for rising spending: medical technology, prices, and the structure of insurance and cost sharing. It then considers what these explanations mean for nurses who manage budgets and make decisions about care.

Technology as a Driver of Growth

Health economists broadly agree that new medical technology, meaning new drugs, devices, procedures, and the expanded use of existing ones, is the leading driver of long-term spending growth. Technology does not operate alone, however. An analysis of spending growth since 1960 estimated that technology explains between 27 and 48 percent of that growth, a smaller share than earlier estimates, and emphasized that rising national income and the way insurance and provider payment work are what allow new technology to spread (Smith et al., 2009). In other words, the United States buys new technology because it can afford to and because its payment systems reward using it.

Technology is not simply a cost problem. Many innovations, such as treatments for heart attacks, new cancer therapies, and joint replacement, have produced gains in survival and quality of life that are worth their cost. The difficulty is that new technologies often spread beyond the patients who benefit most, into groups for whom the benefit is small, and that the U.S. system has few mechanisms for asking whether a new service is worth its price before it becomes standard.

Prices as the Distinctive U.S. Problem

Technology drives spending growth everywhere in the developed world, yet the United States spends far more than other countries. A widely cited analysis concluded that the main difference is not that Americans use more health care but that they pay higher prices for it, captured in its title, "It's the prices, stupid" (Anderson et al., 2003). Hospital stays, physician services, drugs, and devices all cost more in the United States than in comparable countries, largely because prices are set through negotiations between many private insurers and increasingly consolidated provider systems rather than by a single public payer or a regulated fee schedule.

Consolidation adds to the problem. When hospitals merge or acquire physician practices, their bargaining power with insurers grows, and prices tend to rise. Administrative complexity, including billing and negotiating with many payers, adds further costs that other countries largely avoid. Prices explain why the U.S. bill is so large; technology explains why it keeps growing.

Cost Sharing and Its Limits

One response to rising costs has been to make patients pay more of them through deductibles, copayments, and coinsurance, on the theory that patients who pay more will use care more carefully and shop for lower prices. Evidence from a large employer that moved all of its workers into a high-deductible plan tests that theory. Spending fell substantially, but the reduction came from people using less care rather than from finding cheaper providers, and it included reductions in potentially valuable care, such as some preventive services, as well as low-value care (Brot-Goldberg et al., 2017). Patients did not become effective price shoppers.

The finding matters because cost sharing shifts the burden of the system's high prices onto patients, especially those with chronic illness, without solving the underlying problem. Nurses see the results when patients ration insulin, delay imaging, or skip follow-up visits to avoid a deductible, and then return sicker.

A Composite Example: One Unit's Supply Budget

Cost decisions reach nursing directly. Consider a composite 30-bed surgical unit whose manager is asked to reduce supply costs by 5 percent. The largest supply expense is a premium wound dressing used routinely after every abdominal surgery. The manager convenes the unit's practice council and the wound care nurse, who reviews the evidence and finds that the premium dressing offers clear benefits for patients at high risk of wound complications, such as those with obesity or diabetes, but little benefit for low-risk patients. The unit adopts a simple risk-based protocol that reserves the premium dressing for high-risk patients and uses a standard dressing for others, and tracks surgical site infections to make sure outcomes do not worsen.

The example illustrates the principle behind value-based decisions: spending is justified by measurable benefit, and the goal is not to cut costs uniformly but to direct resources where they produce the most benefit. That is the same logic, applied to a unit budget, that the course applies to the national system.

Implications for Nurse Leaders

Nurse leaders influence costs in several ways. They sit on value analysis committees that decide which products and technologies a hospital adopts, where clinical evidence and cost must be weighed together. They manage staffing, which is both the largest nursing expense and, as research on staffing and patient outcomes shows, a determinant of complications that are themselves costly. They lead programs, such as transitional care and infection prevention, that reduce the waste of avoidable readmissions and complications. And they can advocate for policies that address prices and protect patients from cost sharing that discourages necessary care.

Cost-consciousness does not mean choosing the cheapest option. It means asking, for each decision, what benefit the spending buys and for whom, and being willing to redirect resources when the answer is "not much."

Conclusion

U.S. health spending keeps growing because new technology, supported by rising income and generous payment, expands what medicine can do, and it is uniquely high because Americans pay higher prices than people in other countries. Shifting costs to patients through high deductibles reduces spending mainly by reducing care, including care that has value. The more promising path is to connect spending to measurable benefit at every level, from national policy to the choice of a wound dressing, and nurse leaders are well placed to apply that principle where care is delivered.

References

Anderson, G. F., Reinhardt, U. E., Hussey, P. S., & Petrosyan, V. (2003). It's the prices, stupid: Why the United States is so different from other countries. Health Affairs, 22(3), 89-105. https://doi.org/10.1377/hlthaff.22.3.89

Brot-Goldberg, Z. C., Chandra, A., Handel, B. R., & Kolstad, J. T. (2017). What does a deductible do? The impact of cost-sharing on health care prices, quantities, and spending dynamics. The Quarterly Journal of Economics, 132(3), 1261-1318. https://doi.org/10.1093/qje/qjx013

Smith, S., Newhouse, J. P., & Freeland, M. S. (2009). Income, insurance, and technology: Why does health spending outpace economic growth? Health Affairs, 28(5), 1276-1284. https://doi.org/10.1377/hlthaff.28.5.1276