Healthcare Cost vs. Health Outcomes

posted on: September 21, 2018    |    by: Julia Beam

The American healthcare paradox is based on the idea that increased spending on healthcare does not result in better health outcomes. The United States is raked poorly in key health indicators compared to other developed countries for life expectancy, infant mortality, low birth weight, sexually transmitted diseases, obesity, diabetes, heart disease, chronic lung disease and disabilities (Bradley & Taylor, 2013). However, the U.S. spends more than double on healthcare per capita than other developed countries.

The iron triangle of healthcare is used to further explain this phenomenon. It’s a model that helps us understand the cause and effect relationship between three categories, cost, quality and access to healthcare (Lehman, 2015). The iron triangle is the reason why it has been difficult for healthcare leaders and policy makers to fix the current issues with regards to rising healthcare costs and poor health outcomes. In this phenomenon, when the cost of care goes down or access to care goes up, quality goes down; similarly, when quality goes up, cost goes up and access goes down. Within the traditional healthcare system of the United States, nobody has come up with a way to improve all three vertices of the iron triangle at the same time.

One of the most talked about issues related to the iron triangle is that the cost of care continues to rise, but at a certain point the quality of care plateaus. If quality did not eventually stop going up with increased cost, the United States would have the healthiest people in all the world. Instead, the United States has low quality of care and more than 100,000 deaths caused by medical errors every year (Healthcare Organizational Management, n.d.). Life expectancy is also a good indicator of quality. The United States spends a significant amount more on healthcare per capita, yet the life expectancy is lower than many other developed countries (Munro, 2013).

The issues surrounding rising costs and poor health outcomes present challenges for managers in healthcare for many reasons. Some of the sickest people that health systems serves have Medicare and although Medicare and Medicaid are the top payers for most facilities, the government is continually lowering reimbursements. In addition to the struggle with lowered government funded reimbursements, hospitals have to absorb a lot of unpaid medical bill expenses. For instance, people that cannot afford health insurance will wait until their illnesses are so severe that they just go to the nearest emergency room. Emergency care is exponentially costlier than treating ailments early-on. Under these circumstances, the patient generally does not pay for their emergency medical bill and the hospital ends up absorbing the costs. 

In addition to emergency care costs, chronic disease management makes up for 21 percent of healthcare expenditures every year (Bresnick, 2015). This is a huge issue considering that the United States has high rates of chronic disease compared to other developed countries (Bradley & Taylor, 2013). This is a challenge for healthcare leaders to find effective ways to continue chronic disease management while mitigating costs. Although there are many issues around high healthcare costs and challenges with access to quality care, there is some hope in developing new healthcare delivery models.  

Wellness clinics and retail medical clinics are a game changer because they focus on preventive care and cost less than going to a traditional urgent care. For instance, WellNow is a retail medical clinic that offers high quality, affordable medical care for 90% of healthcare issues that your family practice doctor can do at a fraction of the cost. With an option like this, patients can get the care they need at a reasonable price to prevent issues before they get so bad that they end up with an expensive ER visit.  



Bradley, Elizabeth. Taylor, Lauren. The American Health Care Paradox: Why Spending More is Getting Us Less. PublicAffairs. 2013. Accessed August 19, 2017. Web.

Lehman, Elmer Philip. The Health Care ‘Iron Triangle’ and the Patient Protection and Affordable Care Act. February, 2015. Accessed August 19, 2017. Web.

Healthcare Organizational Management. MHA501_eLesson 1. Concordia University, Irvine. N.d. Accessed August 17, 2017. Video.

Munro, Dan. The Two Obamacare Charts That no One’s Talking About. Forbes Media LLC. November, 7, 2013. Accessed August 19, 2017. Web.

Bresnick, Jennifer. Chronic Disease Management Costs 17 Times More than Average. HealthIT Analytics: Population Health News. April 22, 2015. Accessed August 19, 2017. Web.

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