Health

Cutting back on the costs of health care is always possible

April 3, 2014

The Netherlands spends over 90 billion on the health care and welfare sectors every year. That is a huge amount: more than 15 percent of the gross national product and more than 5,500 euro per head of the population. Just think of all the fun and useful things you could do with all that money. And who wouldn't want to pay less on medical insurance premiums, the hospital, family doctor and domestic care. But is that even an option?

Image: © Nationale Beeldbank

A ‘genuine’ free market system in the health care sector

In order to assess whether costs are high, one must also consider the returns of the costs. That is one of the problems in the health care sector. The health care sector is seen as a company where costs are concerned, but not where the returns are concerned. Things work differently in the profit sector. In addition to calculating the costs, companies also calculate the profit and with that, they claim a significant part of the market value of their products and the services that they provide. And the profit margins are often considerable. Imagine that the health care sector, in addition to the costs based on DOTs, DBCs, ZZPs and the like, was to also pass on part of the market value of the services provided and the treatments (the ‘consumer premium’). That would be the beginning of a ‘genuine’ free market system. After all, a fee (profit) for the risk of a free market system would be part of the deal. The health care sector would have solved one problem and society would gain a problem. In my opinion, the unilateral way in which health care is considered is not fair. I agree with colleague Theo Poiesz that it is a shame that the health care sector is so modest. This also goes in the sphere of financing, certainly compared to various other sectors.

Cash is quick

But, of course, things don't always go well. One should always stay alert and keep an eye on wastage. One must watch one's pennies and the costs of health care must be reduced. But this should be done in a sensible manner. Preferably not like what we often see in governments and a part of the profit sector. Governments cut back on costs based on cashbook accounts, allowing them to be successful in the short-term relatively easy. But by reducing expenditures today, one may see more expenditures and less takings tomorrow. And this may lead, taking into account the time value of money, to a huge destruction of value. This is not evident from the cashbook data. They give a favorable impression of the short-term, but do not show the loss of valuable aspects in the long term. To come to an adequate impression of the costs and long-term effects, it is important to adequately attribute (matching) the expenses.

Human capital

The most important expenses in the health care sector involve personnel. Human capital is often the most valuable asset of an institution, but the expenses for the personnel are not seen as an investment. In financial documents, such as annual accounts and estimates, these are expenses that diminish the result. If one wishes to score financially in the short term, then cutting back on personnel is a relatively easy way to go. This has a favorable effect on the cash expenses. But what will this mean in the long-term?

People who are passionate about wanting to mean something to others are scarce and valuable. And the same thing that can be said of trust, can be said of motivation of this kind: it builds up slowly and can vanish in a second. By placing well-motivated personnel along the sidelines, losses are generated and costs increase.

Socially responsible

Cutting back of the costs of health care is necessary. But this should be done in a socially responsible way. With a adequate financial foundation based on an adequate attribution of expenses and taking into account the effects on the desired quality. The future health care costs will otherwise rocket sky-high.
This contribution was written under personal title and was also published on Skipr.nl

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