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The Costs, Benefits, and History of Government Regulation on the Health Care Industry, Research Paper Example

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Research Paper

Health care, and the regulations that govern it, have come a long way in the last century. Amazing advances in technology and medicine are allowing people to live healthier, longer lives than ever before. At the same time, the cost of health care is growing exponentially, putting access out of reach for millions of Americans. There is a confluence of factors driving this upward trend in prices; one such factor is the impact of regulation and oversight on the health care industry. While most agree that the practice of medicine is worthy of regulation to ensure that the highest health care standards are met, it is also true that regulations also put pressure on the costs of health care. A significant component of this pressure is created by the ad hoc nature of health care regulations. Regulatory bodies and agencies evolved over time, often with competing interests. Because of the tension among different regulatory and governmental bodies, regulations do not always function in the best interests of the health care industry or of consumers. The history and possible future of health care regulations offers some insight into why costs are going up and whether they may ever go down.

The current system of health care regulation in the U.S. is rooted in the nature of the U.S. system of government and industry. The Constitution of the United States delineates various areas of legislative oversight to the states and to the federal government. The states generally have oversight where day-to-day operations of the health care industry are concerned; doctors, hospitals, and insurance companies, for example, are licensed and regulated at the state level. The federal government can intervene in or override state actions, of course, and it does provide national health care regulations to which all states must adhere. This sets up a system where the tension between state and federal regulations can and sometimes does create conflict (Field, 2008).

The third leg of the regulatory table comes from the private sector. As with virtually all other industries, health care is a function of private enterprises that are subject to a measure of governmental control. Beginning in the 20th century, the private sector involved in health care began to establish its own set of mandates, regulations, and licensure structures (Field). The American Medical Association, for example, brought doctors together to agree on standards of care and other issues relating to the field of medicine and health care. It was from the private sector that licensing and standards for physicians and other health care agents arose, and these standards continue to serve as the basis for medical training and licensing (Field).

Along with the regulatory oversight of doctors, nurses, hospitals, and other components of the health care industry, insurance companies that provide health insurance are strictly regulated at the state and local level. One of the most significant regulatory actions taken by the federal government in the 20th century was the establishment of the Health Insurance Portability and Accountability Act (HIPAA) of 1996. HIPAA mandated that workers and covered family members can maintain their health insurance coverage, and established a nationwide system of electronic databases and electronic transfer capabilities in order to assure that patient’s medical records could be easily transferred when they switched insurance providers or health care providers. Another fundamental component of HIPAA was the establishment of guidelines to protect patient privacy and the security of electronic patient records.

HIPAA had its roots in the Consolidated Omnibus Budget Reconciliation Act (COBRA), a legislative effort that ensured workers could continue to purchase the same health insurance if they left or were laid off from work (Conn, 2009). It also established guidelines for insurance companies that restricted how insurers could reject coverage for pre-existing conditions. The specifics of the HIPAA legislation were intended to build on the basic provisions of COBRA, providing standards for the “portability” of insurance coverage for workers leaving their jobs and ensuring that the portability of patient’s medical records adhered to the new paradigm of the burgeoning Internet Age (Conn).

The effects of HIPAA on the costs of health care have been varied, and difficult to fully assess in objective terms. Some HIPAA provisions have led to increased costs for health care providers, while others have streamlined certain processes in ways that save time and money for providers and patients. While it was not necessarily the most intentionally significant component of HIPAA when the legislation was written, the privacy protection guidelines established in HIPAA have become what many people are most familiar with where the legislation is concerned (Conn). The need to maintain strict privacy of medical records ended up informing many of the ways in which HIPAA was implemented in the real world, serving as a core concern during the development of the electronic systems used to create and transfer patient records (Conn).

The privacy concerns raised by HIPAA have manifested as cost increases in some areas of the health care industry. In order to comply with the overall mandates of HIPAA, doctors, hospitals, insurance providers, and other health care agents had to make significant investments in computer infrastructure and software, and have had to provide IT training and staffing for the use of such equipment (Conn). HIPAA’s privacy regulations have also led to increased costs for the health care industry, as health care providers and insurers must undergo rigorous and ongoing education, training, and testing to ensure that they are familiar and compliant with privacy regulations (Field).

Despite these and other increased costs, HIPAA mandates have also helped to streamline the provision of health care in ways that can save time and money. Because patient records and insurance information are available almost instantly, data that health care providers need to make informed decisions and recommendations are no longer difficult to compile. Providers are able to save time by determining the particulars of coverage for certain treatments or procedures, for example, cutting down on the number of denials and making it easier to determine courses of treatment that align well with patients’ coverage (Field; Conn). By knowing what is and what is not covered immediately, health care providers can shorten wait times and administer effective care that can help to avoid costly future treatments arising from delayed coverage.

HIPAA had a larger effect on the overall system by which electronic transfer and security has been administered and conducted in the U.S. by encouraging government investment in IT infrastructure (Conn0. The speed with which the Internet grew and developed in the U.S. is due, in part, to such investment, as federal dollars were poured into its structural backbone. The rapid rise of the Internet Age, and the effect it had on commerce and the economy in the U.S. and the world is not solely because of HIPAA, of course, but there is no question that the legislation helped the process along. It is nearly impossible to calculate with any specificity the ways that this economic boon saved -or cost- money for the health care industry, but it must be considered as significant factor when attempting to determine whether HIPAA has been a drain or a benefit for the health care industry. Overall, it must most likely be seen as a benefit; with electronic data storage and transfer now seen as something that was inevitable, HIPAA and its guidelines can be seen to have sped the adaptation of such processes along, while also providing larger benefits to the rest of society.

The most significant regulatory action in our current health care since Medicare and Medicaid has been the establishment of the Patient Protection and Affordable Care Act (PPACA), also known as the Affordable Care Act (ACA) and less formally as “Obamacare,” named for the legislation’s chief promoter, President Barack Obama. The primary purpose of the ACA is to lower the number of uninsured Americans and to place greater limits and controls on the ways in which insurers can deny coverage for preexisting conditions (healthcare.gov). It also allows insured consumers to extend coverage to adult children up to the age of 26, and is intended to reduce overall health care costs through a complicated system of tax incentives, subsidies, and other mechanisms. One of the most controversial components of ACA is the “individual mandate,” which requires all of those who do not have coverage from their employer or through some other means to purchase health insurance or face a financial penalty. Opponents of ACA fought the legislation on these grounds, asserting that the requirement to purchase health insurance was unconstitutional (Clabough, 2012). The U.S. Supreme Court recently upheld the individual mandate, asserting that the penalty associated with not purchasing insurance fell under the purview of the federal government’s ability to levy taxes.

The ACA has had, and will continue to have, significant effects on the health care industry, as many of its provisions will begin taking effect in stages over the coming years. Along with the requirement for insurance companies to extend coverage to those with pre-existing conditions, they must also offer the same rates to all insured within the geographic and demographic regions that determine price, regardless of gender (one notable exemption is that smoking and other tobacco use is grounds for insurance carriers to demand higher individual rates).

As was the case with HIPAA, the exact costs and benefits of ACAA are difficult to determine. The Congressional Budget Office (CBO) initially estimated that approximately 30 million of the nation’s 55 million uninsured would receive coverage under ACA; that number has increased in part due to changes in ACA that have expanded Medicaid coverage for  some people (Dylan, 2012). The CBO projected that for those not covered by group plans, premiums would go up by as much as 15%, but that these costs would in many cases be offset by subsidies for low-income and other eligible consumers (Dylan).

As with the costs to individual, the costs to the nation as a whole are difficult to determine. With health care costs soaring, and the portion of the U.S. economy going to pay health care costs at the individual and national levels, the ACA was promoted by supporters as a means of significantly reducing the U.S. budget deficit. The CBO has offered various 10- and 20-year projections as to how large this deficit reduction may be; the data are subject to change with changes to the legislation as the ACA roll-out continues over the coming years. By some projections, the ACA will reduce the U.S. deficit by over $1 trillion dollars in the next two decades as costs are contained and the number of people paying into the pool of coverage continues to grow (Dylan).

While the ACA has met with significant political opposition, many of its components, considered individually, are quite popular with the American people. Polls indicate that the mandates against refusing coverage for preexisting conditions, for example, have received near-total support, though the question of the individual mandate has been unpopular (Clabough). A recent news story about ACA was published, wherein the founder of the Papa John’s Pizza chain decried the ACA and indicated that the costs of adding coverage for thousands of employees would mean a hike in the price of its pizzas; this increased cost, however, was estimated to be between 11 and 13 cents per pizza, rather negligible cost (Clabough).

Because health care costs in the U.S. are so high, and are growing all the time, it is understandable why people are leery of new regulations that may raise the costs of their insurance premiums. Taken in total, however, it seems that the benefits of regulatory legislation such as HIPAA and the ACA offer some positive steps towards reigning in those costs. If the ACA does not live up to its initial promise it can always be amended or eliminated in years to come. Without it, however, it appears that health care costs would continue to careen towards the cliff, threatening to burden all of us and pressure the economy in unforeseeable ways. The ACA may not be perfect, but in our less-than-perfect system, it may be the best possible solution available.

Bibliography

Clabough, Raven. Small businesses bemoan Obamacare costs. The New American. 09 August 2012.  http://www.thenewamerican.com/economy/item/12395-small-businesses-bemoan-obamacare-costs

Conn, Joseph. HIPAA ten years after. Modern Healthcare. 36(31). 7 August 2008.

Dylan, Scott. CBO: Supreme Court decision will reduce cost of ACA. McClatchy-Tribune Business News (Washington). 25 July 2012.

Field, Robert I. Why is health care regulation so complex? Pharmacy & Therapeutics. 33(10). October 2008.

HealthCare.gov. The health care law and you. http://www.healthcare.gov/law/index.html

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