The Pressure to Reduce Costs
The Pressure to Reduce Costs The economics of high healthcare costs is far simpler than the politics of high healthcare costs. To reduce costs, managers must reallocate resources from low-productivity uses to high-productivity uses, increase productivity wherever feasible, and reduce prices paid to suppliers and sectors that have excess supply. They also must recognize that cost cutting is politically diffi- cult. Reallocating resources and increasing productivity will cost some people their jobs. Reducing prices will lower some people’s incomes. These steps are difficult for any government to take, and many of those who will be affected (physicians, nurses, and hospital employees) are politically well organized.
Why Is the Pressure to Reduce Healthcare Costs So Strong?
The United States spends far more than other wealthy industrial countries but has poorer outcomes. Spending per person is more than double the spending per person in Canada, France, and the United Kingdom. Differences this large should be reflected in the outcomes of care.
