Fee For Service Model Essay

The study also concluded that there was no correlation between the administrative costs and quality, so the U.S. did not perform better than other nations even though it has spent more (Himmelstein et al 2014). Moreover, the fee-for-service model gives health care professionals an incentive to conduct extensive tests and unnecessary services in order to get extra payments. According to the Bipartisan Policy report, FFS incorporates high technology to medical practices whether or not they are significantly beneficial to the treatment process (Ginsburg 2012). Therefore, the administrative costs and the FFS model in the US drives costs higher comparing to other countries. Furthermore, differences in drug prices can be used to explain high prices. A study recorded the average price of twenty-nine drugs in Europe and the US. It was statistically significant that the average drug prices in the US was ten percent higher than European countries (Cohen et al. 2013). Another article on Health Affairs discussed that European countries are more effective in obtaining low drug prices because of the single-payer system. However, the authors argued that the European governments use their market power on the demand side to drive the costs of drugs lower than the efficient level, and the US carries the costly research and development burden of it (Reinhardt et al 2004). For instance, Japan has the lowest health spending per capita because of strict price regulations; however, the pharmaceutical companies claim that they don`t raise enough revenue from foreign markets, so they heavily depend on the US market. In addition, the US utilizes high technology tools more than any other OECD country, which translates into higher costs. Even though the advanced use of technology may contribute to higher cancer survival rates, every single procedure adds up to be more expensive than other high-income countries. For instance, another paper by Common Wealth Fund found out that Denmark had 394 per 100,000 population hip and knee replacement surgeries, and the number of procedures was 397 per 100,000 in the US. Even though the number of surgeries in Denmark and the US were about the same, the utilization rate of technological tools were about three times more in the US (Squires 2012). Another key point is the effects of changing demographic dynamics. Aging is a common concern discussed by many researchers. Since advancement in health care elevates the life expectancy, an increasing portion …show more content…
The asymmetric information and lack of coverage in the health market cause problems on understanding the demand side while increasing costs of technology and mispricing cause supply related issues (“Cost Drivers in Health Care” 2012). One may argue that lack of free market structure in health care increases the costs, and following a less aggressive regulatory approach may not be enough to achieve efficiency. The main difference in legal environment is that the government is highly active in other OECD countries and follow strict regulations to cut costs. In addition, medical malpractice cases in the US make risk-averse people go through extra tests and scans, also known as “defensive medicine” (Ginsburg 2012: 19). The costs of insurance premiums against the malpractice and lawsuits are already a great weight on health expenses, and the defensive medicine costs also contributed to it. Moreover, fraud cases in Medicare and Medicaid cause an extra spending and waste each year (Ginsburg