HCM 320 Module 7 Project Two Example

Project Two: Slowing Health Care Cost Growth Without Cutting Care

[Student Name]

Southern New Hampshire University

HCM 320: Healthcare Economics

Project Two

[Instructor Name]

[Date]

The organization, setting and figures below are a composite written as a model document. No real employer, client, colleague or patient is described.

Project Two: Slowing Health Care Cost Growth Without Cutting Care

The state's new Health Care Cost Growth Commission has set a goal of holding total health spending growth to 3.5% a year, below its recent 6%, and invited public comment on how to get there. As someone who sees daily how costs affect uninsured and Medicaid patients, the writer prepared this analysis comparing four approaches using the economic concepts from this course.

Why Costs Keep Rising

Fuchs (2018) diagnosed the core problem: the country spends far more per person than other wealthy nations without better population health, mainly because of higher prices for services, drugs and labor and heavy administrative costs, rather than because Americans use much more care. Earlier modules showed the same forces locally: administered prices that do not clear markets, cost-sharing that cuts necessary care and uncompensated care shifted to other payers.

Criteria

Four yardsticks apply to every option: potential savings, effect on access and quality, effect on equity, especially for low-income patients, and political and administrative feasibility. An option that saves money by cutting needed care or shifting costs to the poor would fail the second and third tests.

Option One: Reduce Low-Value Care

Low-value care consists of services that provide little or no benefit for the patient receiving them, such as imaging for uncomplicated low back pain or routine preoperative tests before low-risk surgery. Schwartz et al. (2014) measured low-value services among Medicare beneficiaries using claims-based measures and found that between a quarter and two-fifths received at least one such service in a year, depending on how strictly the measures were defined. The spending involved was modest as a share of the total but concentrated in services that could be avoided without harm.

Assessing Option One

Reducing low-value care improves quality by sparing patients unnecessary tests and their risks, and it does not reduce access to beneficial care. Tools include clinician feedback on low-value ordering, prior authorization targeted to specific services and public reporting. Savings are real but limited, and the approach requires clinicians' cooperation.

Option Two: Hospital Global Budgets

Rajkumar et al. (2014) described Maryland's all-payer model, in which the state sets hospital rates for all payers and, under an agreement with the federal government, limits growth in hospital spending per resident. Hospitals receive global budgets, fixed annual revenue that does not rise with volume, giving them reason to reduce avoidable admissions and invest in care outside the hospital. The model directly targets the price and volume growth that drive hospital spending.

Assessing Option Two

Global budgets offer large potential savings because hospitals account for the biggest share of spending. They can improve incentives for prevention. But they require strong state capacity, cooperation from hospitals and, for Medicare participation, federal approval. Hospitals may resist, and poorly designed budgets could reduce access in growing communities.

Option Three: Invest in Primary Care

Strengthening primary care, including community health centers, can reduce costly emergency and hospital use. Earlier modules showed that Medicaid patients using health centers had lower total spending than similar patients elsewhere. Investment could take the form of higher primary care payment rates, loan repayment for clinicians and support for team-based care. Savings take years to appear, but gains in access and equity are immediate.

Option Four: Simplify Administration

Much of the U.S. cost gap reflects administrative complexity: many payers with different rules, forms and prior authorization requirements. States can standardize claim forms, credentialing and prior authorization processes across insurers they regulate. The approach saves money for both payers and providers without reducing care, although much of the complexity lies beyond state control.

Comparing the Options

The table summarizes the assessment. No single option reaches the commission's goal alone.

Table 1. Cost Containment Options Compared

Note. Author's assessment based on cited evidence.

What Not to Do

The analysis also rules out approaches that save money by shifting costs to patients, such as broad increases in cost-sharing, which earlier modules showed reduce needed care and can raise hospital costs through offset effects. Cutting Medicaid eligibility would increase uninsurance and uncompensated care rather than reduce total spending.

Measuring Progress

A cost growth target needs measurement. The commission should track total health spending per resident each year, broken down by payer and by major category such as hospital care, physician services and prescription drugs. It should also track measures that would reveal harm from cost containment, including the uninsured rate, emergency visits for conditions treatable in primary care and wait times at safety-net clinics. Publishing these figures by region would show whether savings are coming at the expense of access in poorer areas.

What This Means for Health Centers

For community health centers like Valley, the choice of approach matters. Global budgets and administrative simplification leave health center funding largely unchanged, while primary care investment could raise Medicaid rates and fund more clinicians. Reducing low-value care may lower some specialty referrals but should not reduce primary care visits. Health centers should therefore support a package that includes primary care investment, since cost containment focused only on cutting payments would fall hardest on the providers who serve the poorest patients.

Recommendation

The commission should combine a phased study of hospital global budgets, the largest lever, with immediate steps to reduce low-value care, standardize administrative processes and raise investment in primary care. The primary care investment should be funded partly from savings in the other areas, so that slowing growth does not come at the expense of access for low-income residents.

Conclusion

Containing costs means targeting the real drivers, prices, hospital spending, low-value services and administrative complexity, rather than making care harder to reach. A combination of approaches, judged on savings, quality, equity and feasibility, offers the best chance of slowing cost growth while protecting the patients who can least afford higher prices. The commission's own goal makes that balance essential.

References

Fuchs, V. R. (2018). Is US medical care inefficient? JAMA, 320(10), 971-972. https://doi.org/10.1001/jama.2018.10779

Rajkumar, R., Patel, A., Murphy, K., Colmers, J. M., Blum, J. D., Conway, P. H., & Sharfstein, J. M. (2014). Maryland's all-payer approach to delivery-system reform. New England Journal of Medicine, 370(6), 493-495. https://doi.org/10.1056/NEJMp1314868

Schwartz, A. L., Landon, B. E., Elshaug, A. G., Chernew, M. E., & McWilliams, J. M. (2014). Measuring low-value care in Medicare. JAMA Internal Medicine, 174(7), 1067-1076. https://doi.org/10.1001/jamainternmed.2014.1541