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Financial Issues in Health Care

Financial Issues in Health Care

Healthcare is among the essential services in a person’s life. Healthcare spending has been significantly increasing over the years, leading to strained federal, local, and state budgets, national debt, stagnant wages, and high financial insecurity. The rise in healthcare costs continues to affect many individuals, particularly the uninsured low and middle-income households, resulting in an avoidance of healthcare due to costs. This was evident during the COVID-19 pandemic, when many people died because they could not afford treatment. People with chronic illnesses also face a challenge in meeting healthcare costs due to the high cost of treatment and medicine. Therefore, it is important to review the factors leading to reduced healthcare affordability and actions that can be taken to address the issue.

The Economic Trends of the Health Care Payment System

The cost of operations in many healthcare facilities continues to increase because staff payroll, supplies, information services, equipment and other basic operations costs are rising faster due to inflation. This has created a greater strain on the resources in healthcare facilities and generally increased the cost of healthcare services. In some instances, healthcare insurance companies have revised their terms to eliminate covering diseases that are costly to treat, thus shifting the healthcare payment burden to patients and their families. There has also been an increase in the cost of medication, prompting some healthcare insurance companies to withdraw coverage for medication costs. Thus further straining patients, particularly those with chronic illnesses. There has also been an increase in hospital claims denials. The denials are classified into technicalities involving missing authorizations or codes and medical denials that involve treatment being considered experimental. Therefore, patients are forced to check with their healthcare insurer where their treatment is covered before deciding where and when to get healthcare services.

The Supply and Demand Challenges for Health Care Services

The supply of healthcare services is generally high due to the rise of different healthcare facilities, but the demand is average, mainly due to the high cost of healthcare. However, the overall demand for healthcare services relating to chronic illnesses has increased due to the increase in the number of people requiring those services. According to Barker (2013), the demand for healthcare services can be predicted based on the prevalence of specific illnesses and the availability of healthcare providers to treat the illness. During the COVID-19 pandemic, there was a spark in demand for healthcare services, and in some places, hospitals were overcrowded, creating a shortage of healthcare providers. However, the demand is gradually reducing as people opt for telehealth services to avoid physical doctor visits, following the trend developed during the pandemic where people were advised to avoid physical doctor visits because they could get exposed to the virus.

Why Costs Are Increasing In the Health Care System

According to Zelman et al. (2014), one of the factors contributing to the increasing cost of healthcare systems is an increase in the aging population. The aging population mainly demands inpatient services that require a lot of resources, thus increasing healthcare costs. The second factor is technology. Zelman et al. (2014) argue that the advancement in technology has increased spending in healthcare facilities because the technology is expensive to acquire and maintain. For example, the technological equipment required to diagnose and treat chronic illnesses such as cancer is expensive, but healthcare facilities cannot operate efficiently without it because it contributes to the quality of healthcare offered. The high cost of care in treating chronic illnesses has also contributed to the increase in the cost of the healthcare system. For instance, chronic illnesses require expensive drugs and health monitoring.

Regulatory Issues Affecting, Or Will Affect, the Health Care Industry

One of the regulatory issues affecting the healthcare industry is the telehealth law. Telehealth law has expanded and is currently offering measures to protect patients, waivers to decrease the barriers to telehealth payment, and audits to reduce fraud. The changes to the Health Insurance Portability and Accountability Act will also affect the healthcare industry. The changes include allowing patients to inspect their protected health information in person and take photographs and notes of the information. The changes have also reduced the time a provider can respond to a patient’s request for their medical records. Other proposed changes that will affect the healthcare industry include the reduction of certain burdens in identity verification regarding personal health information in an electronic health record, the exclusion of case management uses and care coordination and disclosures from the minimum necessary standard, and the expansion of the ability to disclose the personal health information to avert a threat to safety or health.

Strategy to Address the Issue

Expanding insurance coverage is one of the strategies that can be used to address the issue of healthcare affordability. According to Odomirok (2018), many people cannot afford healthcare services because they are uninsured and have no money to pay for them. Therefore, expanding insurance coverage will increase the number of insured individuals, thus enabling them to meet necessary healthcare costs. Expanding insurance coverage should also include expanding the healthcare services that can be paid for through insurance coverage. For instance, some vital experimental treatments may be included in insurance coverage, particularly for hereditary chronic illnesses affecting young people.

Current Strategies Being Used or Presented For Improving the Issue

One of the current strategies being used to increase healthcare affordability is the use of cheaper generic drugs. According to Zelman et al. (2020), medication increases the cost of healthcare, especially for individuals with chronic illnesses. Therefore, generic drugs can reduce medication costs because they are cheaper. Another strategy is overriding healthcare providers’ preferences in medical supplies. Zelman et al. (2020) argue that medical supplies can contribute to 40% of healthcare costs. Therefore, overriding the preferences for medical supplies can create economies of scale by buying bulk supplies, thus reducing healthcare costs. Healthcare facilities are also using group purchasing to reduce the cost of supplies, thus reducing healthcare costs even for patients.

The Outcome of These Recommendations, If Implemented

The best outcome of expanding insurance coverage is guaranteeing access to quality healthcare for low and middle-income households that cannot afford healthcare services out of their pockets. The best outcome for using generic drugs will be a reduced mortality rate, particularly among people with chronic illnesses because they will be able to afford the drugs they need to stay healthy. The best outcome for group purchasing and overriding healthcare providers’ preferences will be reduced operational costs in hospitals, which will reduce healthcare charges, thus increasing healthcare affordability.


The issue of healthcare affordability is a global concern that requires implementing cost reduction measures in healthcare facilities and creating policies relating to healthcare insurance coverage and the cost of drugs. It is also important to review the factors contributing to the increase in healthcare costs and what can be done to mitigate their impact on healthcare costs because factors such as chronic illnesses and the increase in the aging population cannot be eliminated or prevented.


Barker, R. (2013). Healthcare demand— insatiable? Oxford Medicine Online.

Odomirok, P. W. (2018). Healthcare affordability is defined. Healthcare Affordability, 15-24.

Zelman, W. N., McCue, M. J., Glick, N. D., & Thomas, M. S. (2014). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications. John Wiley & Sons.

Zelman, W. N., McCue, M. J., Glick, N. D., & Thomas, M. (2020). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications. John Wiley & Sons.


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Select 1 current financial or economic issue in the healthcare industry that you want to address.

Assignment Directions
Write a 700- to 1,050-word paper about the financial or economic issue you selected in which you:

Financial Reporting Review of the Federal Government

Financial Reporting Review of the Federal Government

Analyze the financial impact of this issue on the healthcare industry. Consider the following:
What are the economic trends of the healthcare payment system?
What are the supply and demand challenges for health care services?
Why are costs increasing in the healthcare system?
What regulatory issues are affecting, or will affect, the healthcare industry?
Recommend at least 1 strategy to address the issue.
Consider current strategies being used or presented for improving the issue.
Discuss what you believe would be the outcome of these recommendations if implemented.

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