Tag Archives: medicare

Healthcare Delivery System – Supply & Impact

12 Aug

There are numerous factors that may impact the future supply of healthcare providers (physicians/hospitals) – Here are few possible factors that impact supply and impact on the US delivery system.

Healthcare reform will provide insurance to roughly 36 million uninsured Americans, which is expected to increase the demand for healthcare services. The population of older adults is growing radically due to greater longevity as a result of better nutrition, safety, and medical care. Older adults have different health care needs compared to younger age groups, and this has an impact on the demand placed on the health care system. Older population is more likely to suffer from chronic illnesses, have greater physical vulnerability, and consume more emergency care, hospital services, nursing home services, and home health care services than younger population. Also, older population has a smaller pool of family caregivers than younger adults.

Although many older adults have some sort of accompanying coverage, majority of them use Medicare reimbursement. Medicare and Medicaid reimbursement policies can affect both supply of health care and demand for services. The percentage of reimbursement for the hospitals and doctors by Medicare and Medicaid is very low compared to what private insurance companies reimburse and settle claims. Since, aging population who use Medicare services is on rise, it is resulting in lower profits and higher operating costs for the hospitals and is acting as disincentive for the businesses and providers. As a result many doctors have dropped out, few have started specialty hospitals, and many hospitals have shut their high cost – low profit departments such as maternity ward, etc.; because of lower reimbursement rates.

Large numbers of health care workers are retiring at the same time the demand for health care is on the rise due to aging population. Also, educational requirements are playing a greater role in supply of the doctors. Relatively new occupations and specialty degrees that didn’t exist 50 years ago are attracting more people. Some health professions are more attractive to young people than others, and these new professions will be better able to survive large numbers of retirements, as the retirees will be speedily replaced.

Misdistribution of physicians i.e. less interest by medical school graduates in primary care and lack of work/life balance,  (long hours, night and weekend calls) are the additional deterrents which are resulting in poor supply of health care providers such as doctors. Burnout due to sudden increase in demand of services due to ACA and the stringent legal requirements under the Obama Care is also a cause of concern. Also, the residency slots may not keep up with growth in medical school graduates. Licensing provides guarantee of quality, but it also limits entry into the profession. Money is also one of the major causes of shortages of primary care physicians. According to National Council of Behavioral Health, mental health in physicians in public sector work twice as those physicians in private organisations but on average public workers earn about $25,000 less than those in private sectors. 

The health care reform has resulted in the increased demand because the people enrolling are those with the greatest needs for medical services as now there’s no limit to coverage, its compulsory for all to buy insurance, it’s subsidized and anyone can buy insurance without limitations on pre-existing conditions. So, people who will need extensive service have access to insurance now and will likely consume more services resulting in increased demand for medical services. According to the U.S. Census Bureau, The supply of physician is increasing at 7% compared to the number of Americans over 65 years of age which is growing at 36%, resulting in demand and supply mismatch, causing supply shortage.

When demand rises but supply cannot increase at the same pace, prices go up.   Hospitals and clinics may increase the wages of nurses, technicians, and doctors because they are more often reimbursed for their services by insurance companies and also because few numbers of doctors and nurses will be handling the increased demand i.e. more workload. This will also cause waiting times for appointments and procedures to increase. 

Also, there has been increasing pressure on doctors, nurses and hospitals to provide improve quality, reduce cost and improve customer experience, resulting in lower supply of healthcare providers. Thus, the above mentioned factors are the cause of concern and will impact the supply and the US delivery system.


Center for Health Workforce Studies School of Public Health, University at Albany (2006, March). The Impact of the Aging Population on the Health Workforce in the United States: Summary of Key Findings. Retrieved January 30, 2014, from http://www.albany.edu/news/pdf_files/impact_of_aging_excerpt.pdf

Robert J. Stonebraker, Winthrop University (2013, October 17). The Joy of Economics: Making Sense out of Life. Retrieved January 30, 2014, from http://faculty.winthrop.edu/stonebrakerr/book/medicalcare.htm


Impact of PPACA (insurers, healthcare providers, employers)

12 Aug

The US Supreme Court ruling upholding the 2010 healthcare law will dramatically transform the US healthcare system.  Components of the law will significantly impact insurers, healthcare providers, and employers.  Here are few ways PPACA will impact or likely impact all 3 elements (insurers, healthcare providers, employers) of the US healthcare system.

Impact on healthcare providers:

  • Doctors are nervous about the new law and how it will affect their incomes, their access to technologies, and professional decision making.
  • Physicians also believe that this law will shift decision-making authority from doctors to government.
  • The Affordable Care Act requires all Americans to purchase health insurance, so doctors need to be prepared for an inflow of patients as 36 million newly insured will be added in the system. Also, considering the current burnout rate and doctors dropping out, there will be tremendous mismatch between demand and supply resulting in shortages of doctors and increase in prices and longer wait period.

Impact on employers:

  • Employers with 50 or more workers are responsible to offer employees health coverage. If they don’t, they may face penalty. So they have started to send their workers to exchanges and if they have earnings low enough to qualify for federal subsidies they can get insurance with extensive coverage at lower rate. Small stores and restaurants are likely to be most affected. There are no responsibilities for small employers with fewer than 50 workers. Also, numbers of employers have been restricting the health benefits they offer to employees, expecting higher costs.
  • In trying to control their own spending, employers often are shifting health costs to employees. So the average annual deductible for an individual has nearly doubled in the past few years. The idea is not just to make workers’ pay more but make employees think more about health related expenses and behavior. Whenever you are shielded from the cost, you tend to spend more. Companies want patients to shop around for the best prices and use healthcare system wisely and effectively.
  • Few employers such as Trader Joe’s, Target and Home Depot, have dropped coverage for part time employees on the grounds that those workers can now find coverage through the insurance exchanges. As a result three things can happen, few may choose to keep the money that the company is contributing say $250 to buy from exchanges and not but any insurance, few may get a better deal at subsidized rate or may be even free and can pocket contribution from the company, whereas few employees may see their premiums go up based on their income.  
  • There have been reports of employers holding back on hiring in order to stay under the 50-employee threshold that triggers health insurance responsibilities. There also have been reports of employers cutting workers’ hours to below 30 per week so that they don’t count as full-time.

Impact on insurers:

  • ACA has made insurance accessible and affordable to millions of people. Those who were already insured but used to pay higher premiums will see their premiums go down and their plans will get more comprehensive. But at the same time, the law will make several million people worse off, by driving their premiums up, pushing them into plans that are less comprehensive.
  • Premiums will rise because plans will have to be more comprehensive with no minimum limits than they used to be.
  • Premium costs will be shifted away from the old and sick and toward the young and healthy.Currently, insurance companies charge people more or less based on gender, health conditions, age, habits, etc. Under the ACA, insurers won’t be able to vary premiums on the basis of these factors. This means lower premiums for old and sick, and higher premiums for people who are young and healthy. 
  • Premiums will rise overall because of the adverse selection i.e. the aging population and the average individual will be sicker than before.To maintain a balance, what insurance companies need is a good mix of healthy and sick population but because of ACA senior citizens, near retirement population, people with preexisting conditions and population that is expensive to insure and treat and those with chronic illness are running to exchanges and utilizing the insurance benefits. This may result in higher premiums for the healthier population who make fewer claims and thereby more dropouts from the insurance plan causing further increase in premiums. Also, though insurance is mandatory, fines are not sufficient to discourage people from not buying insurance. So, many younger and healthier populations chose not to purchase insurance.



FAQ: How Obamacare Affects Employers And How They’re Responding : NPR. (2013, October 11). Retrieved February 1, 2014, from http://www.npr.org/2013/10/11/231103865/faq-how-obamacare-affects-employers-and-how-they-re-responding

Josh Barro (2013, November 5). Here Are The Five Big Reasons Obamacare Changes Insurance Premiums – Business Insider. Retrieved February 1, 2014, from http://www.businessinsider.com/here-are-the-five-big-reasons-obamacare-changes-insurance-premiums-2013-11

Kimberly Leonard (2013, December 13). 3 Things Doctors Should Know About Obamacare. Retrieved February 1, 2014, from health.usnews.com/health-news/hospital-of-tomorrow/articles/2013/12/13/3-things-doctors-should-know-about-obamacare-how-doctors-can-prepare-for-obamacare

Tevi Troy (n.d.). How The Affordable Care Act Will Affect Doctors | The Health Care Blog. Retrieved February 1, 2014, from http://thehealthcareblog.com/blog/2012/06/15/how-the-affordable-care-act-will-affect-doctors/

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