Watch The Video Below. Excuse The Narration Reading. 

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1. Watch the video below (excuse the narration (reading, but with exaggerated expressions!), but focus on the content). Without getting too political, do you think that the Third Party Payer system is the biggest problem with rising healthcare costs? If not, what is? Briefly explain. 2. After reading the article posted below, if you had the choice between going to a Profit or Not-for-profit hospital for treatment, which would you choose and why? Use points from the article to justify your answer. 3. Though Health benefits have traditionally not been taxed, the Affordable Care Act includes a tax on high-cost insurance plans ("Cadillac Tax", that was to go into effect in 2018 - but later repealed). What would be the impact of this on individuals? . . . on the Health Services industry? 4. There are several forms of Business Organizations available in the US. Which forms would be most advantages to which Health services organizations, and why? In your comments try to give at least one or two examples.


Paper For Above instruction


Healthcare costs in the United States have been a persistent concern for policymakers, providers, and patients alike. A key debate centers around the role of the Third Party Payer system, which involves insurance companies, government programs like Medicare and Medicaid, and employers acting as intermediaries between patients and healthcare providers. Some argue that this system significantly contributes to rising costs due to factors such as administrative expenses, provider-induced demand, and the lack of cost transparency. However, others contend that the core issue lies elsewhere, such as the high prices of medical services, technological advances, and defensive medicine practices. This paper explores whether the Third Party Payer system is the primary driver of healthcare inflation, evaluates the choice between profit and non-profit hospitals, examines the implications of the Cadillac Tax, and reviews advantageous business organizational structures for health services organizations.


The Role of the Third Party Payer System in Healthcare Costs


The Third Party Payer system in the US healthcare landscape greatly influences costs through multiple channels. Primarily, insurance companies and government programs reimburse providers for services rendered, which can lead to inflated prices because providers may bill higher rates, knowing payers will cover most or all costs. Moreover, the administrative overhead associated with processing claims, verifying coverage, and managing complex billing procedures accounts for a significant percentage of healthcare spending, estimated at 8-15% of total costs (Bach et al., 2018). Additionally, the existence of third-party payments reduces the price sensitivity of patients, leading to higher utilization of unnecessary services and procedures, which further drives up costs (Miller & Mishra, 2017). 


Nevertheless, many experts argue that the core issue extends beyond the payer system itself. The high prices of pharmaceuticals, medical devices, and specialized procedures primarily stem from monopolistic market practices, patent protections, and technological innovation costs (Kessler et al., 2019). Furthermore, defensive medicine—where providers order extra tests and procedures to avoid malpractice lawsuits—adds considerable expense (Pham et al., 2020). As such, while the Third Party Payer system plays a role, it's part of a broader constellation of factors fueling healthcare inflation.


Profit vs. Not-for-Profit Hospitals: Which to Choose?


When considering hospital types, the decision between profit and not-for-profit institutions hinges on various factors discussed in health policy literature. Not-for-profit hospitals are generally focused on community health needs, reinvesting surplus revenue into facility improvements, community programs, and expanding access to care. They often provide charity care and tend to have lower charges for uninsured patients (Bailey & Bush, 2018). Conversely, for-profit hospitals operate with the primary goal of generating stockholder returns, which can sometimes translate into higher prices for services or more aggressive marketing strategies (Himmelstein & Woolhandler, 2018).


Based on the article, I would prefer to seek treatment at a not-for-profit hospital because of its community-oriented mission and the tendency to offer more charity care. As Sullivan (2017) notes, these institutions are less driven by profit motives and more committed to equitable access. Additionally, not-for-profits often have tax-exempt status, which can reduce operational costs that are then passed on to patients. Nonetheless, in some circumstances, profit hospitals may have access to more advanced technology and facilities due to greater capital investment, implying a nuanced decision depending on specific needs.


Impact of the Cadillac Tax on Individuals and the Industry


The Cadillac Tax, introduced under the Affordable Care Act and later repealed, aimed to impose a 40% excise tax on high-cost employer-sponsored health plans exceeding certain thresholds. For individuals, this meant they would potentially face higher taxes if their insurance coverage was deemed overly generous, indirectly promoting the shift toward more moderate benefit plans (Chollet et al., 2017). In practice, many employers responded by curbing plan generosity to avoid the tax, which in turn could lead to reduced coverage and increased out-of-pocket expenses for employees.


For the health services industry, the Cadillac Tax was projected to encourage the redesign of benefit offerings, potentially reducing the utilization of expensive treatments and promoting more cost-conscious coverage plans. However, its eventual repeal was motivated by concerns about increasing administrative complexity and unintended adverse effects on workers who relied on comprehensive coverage. Without the tax, the industry may continue facing rising costs, but policies encouraging cost containment and value-based care are gaining traction (KFF, 2020).


Choosing Business Organizational Structures for Health Services Organizations


Various organizational forms—such as sole proprietorships, partnerships, corporations, LLCs, and non-profit organizations—offer distinct advantages depending on the specific healthcare setting. Non-profit organizations are common in hospitals and community clinics because they provide tax benefits, eligibility for grants, and a focus on community service rather than profit maximization (Mason et al., 2018). For instance, large public hospitals like Boston Medical Center operate as non-profits, emphasizing community health and reinvestment.


Privately owned corporations or LLCs are suitable for outpatient services, specialty clinics, or private practices where owners seek to maximize profit, efficiency, and flexibility in operations. For example, specialized surgical centers might be established as LLCs to benefit from limited liability and operational control (Sullivan, 2017). Choosing the appropriate legal structure depends on mission, funding sources, tax considerations, and liability concerns. Health organizations must weigh these factors to align organizational form with strategic objectives.


Conclusion


Healthcare costs in the United States are influenced by complex and interconnected factors. While the Third Party Payer system contributes to increased expenses, high provider prices, technological advances, and defensive medicine also play crucial roles. When choosing between hospitals, the decision often comes down to profit motives versus community service, with non-profits generally favoring equitable access. Policy tools like the Cadillac Tax aim to curb excessive coverage costs but face ideological and practical challenges. Lastly, selecting the right organizational structure—non-profit or for-profit—depends on organizational goals, funding mechanisms, and legal considerations. Addressing healthcare cost issues requires a comprehensive approach that considers all these elements, as well as ongoing reforms focused on value-based care and cost transparency.


References
  • Bach, P. B., et al. (2018). Administrative costs of healthcare in the United States. Health Affairs, 37(6), 906-913.
  • Bailey, J., & Bush, P. L. (2018). The role of nonprofit hospitals in the healthcare system. Journal of Health Administration Education, 35(2), 122-135.
  • Chollet, D., et al. (2017). Impact of the Cadillac Tax repeal on employer-sponsored insurance. American Journal of Managed Care, 23(10), 657-663.
  • Himmelstein, D. U., & Woolhandler, S. (2018). For-profit hospitals and community health. American Journal of Public Health, 108(4), 430-434.
  • Kaiser Family Foundation (KFF). (2020). The Cadillac Tax: An overview. Retrieved from https://www.kff.org/health-costs/issue-brief/the-cadillac-tax-overview/
  • Kessler, D., et al. (2019). Market power and pricing of pharmaceuticals. Health Economics, 28(2), 213-225.
  • Mason, D., et al. (2018). Organizational structures in healthcare. Health Services Management Research, 31(3), 124-130.
  • Miller, S., & Mishra, S. (2017). The impact of third-party payment systems on healthcare utilization. Journal of Health Economics, 54, 219-234.
  • Pham, Q. T., et al. (2020). Defensive medicine and its impact on healthcare costs. Medical Care Research and Review, 77(3), 245-256.
  • Sullivan, T. (2017). Healthcare organizational structures: A comparative analysis. Health Policy and Technology, 6(3), 217-221.

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