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HCA 827 TOPIC 5 Discussion Question Two

HCA 827 TOPIC 5 Discussion Question Two

 

Economic downturn commonly means less time in the hospital and greater demand for other services. How might health care leaders best create steady revenue streams amidst changing service requirements created by fluctuating economic conditions? Why? Can steady and sustainable revenue ever be fully achieved? Why or why not? To what extent does the notion of universal health care coverage influence the stability and sustainability of revenue streams for health care organizations? Why?

Understanding the challenge of financial sustainability
in health
Health system sustainability is frequently debated in policy circles and the
media. Yet debate is rarely, if ever, accompanied by a clear idea of what it
means for a health system to be financially sustainable or how we might assess
a health system’s financial sustainability or, indeed, what the policy implications

HCA 827 TOPIC 5 Discussion Question Two

HCA 827 TOPIC 5 Discussion Question Two

of the problem are. The likely reason for this is that the meaning of financial
sustainability is taken to be self-evident: the presence of an imbalance between
the obligations that a health system has in respect of entitlements and
instituted rights on the one hand, and its ability to meet those obligations on a
continuing basis on the other (3). Although this formulation is accurate, it is
inadequate.

 

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It tells us only how the problem of financial sustainability manifests
itself – namely as a problem in accounting. As such, it tells us that expenditure
and revenue must be aligned. But it does not tell us anything about the nature
of the problem itself – that is, about what causes the imbalance between
expenditure and revenue. Nor does it tell us anything about the problem’s
policy implications; and in particular, it does not tell us anything about the level
at which expenditure and revenue should be aligned.
The problem of financial sustainability can be broadly characterized in three
ways.
Policy summary
2
• First, increases in health spending due to factors affecting demand for and
supply of health services – among them, technological progress,
demographic change and consumer expectations.
• Second, resource constraints relating to government inability or
unwillingness to generate sufficient resources to meet its health system
obligations – an issue which takes on particular relevance in the current
context of financial crisis. This is the issue of fiscal sustainability or fiscal
balance.
• Third, health spending is rising as a proportion of gross domestic product
(GDP). If this spending grows at a faster rate than spending in other parts
of the economy, and therefore consumes an ever greater share of GDP,
there is a concern that at some point it will eventually ‘crowd out’
expenditures on other goods and services that provide welfare gain. This is
the issue of economic sustainability.
The challenge in each case relates to the ability and willingness to pay for
health care in the face of rising costs and resource constraints. Whether or not
the economy can sustain higher levels of spending on health care, and how
much a country can or should spend, is an issue we discuss in more detail in
Section 3. First, however, we look briefly at why health care costs rise, before
focusing on fiscal sustainability, which is often put forward as a central
objective guiding policy development.

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