Page 56 - DMGT521_PROJECT_MANAGEMENT

Unit 4: Project Analysis and Selection

Notes
Example: A community receives a gift of $100,000 from a wealthy donor to spend on
healthcare, education and housing. The funds can be distributed among the three areas or
dedicated to a single area, such as healthcare.
Level 1: At this level, community members consider how to distribute the funds among one, two
or three of the competing programs.

Example: For example, should the funding be split in three equal portions or should one
program, possibly under-funded in the past, get all or most of the money?

Level 2: Assuming that healthcare gets a portion of the $100,000, the next decision community
members face is how best to direct the spending among competing healthcare interests. Should
most or all of the funds go to hospital care and medical equipment? What about the public
education program that promotes healthy lifestyles and behaviors (like exercise or
immunizations) that prevent disease? Or, community members could decide to spend the money
to purchase health insurance for those who can’t afford it.
Level 3: The next level of decision making involves distributing the financial resources among
individuals. Most communities have policies and guidelines to insure fairness in these situations.
Decisions at this level include: Who gets the next available heart for transplant? And, who sees
the doctor first when there are many people waiting in an emergency room?

Did u know? The wants and needs of a project or business are unlimited but the resources
to satisfy these wants are limited. Thus, resource allocation is a mandatory activity.

4.3 Why is Resource Allocation Needed?

Because of increasing demand for healthcare services and rising costs to provide those services,
Americans must choose how to allocate healthcare dollars.

4.3.1 Rising Cost of Healthcare

Resources spent on healthcare have increased over the last century. Americans are spending far
more resources on healthcare than do citizens of any other industrialized nation. Why?
1. Continued medical advances have lead to more accurate diagnoses and better treatments,
but also have increased the cost of healthcare.

2. The aging population is growing. Nearly 36 million Americans (more than the entire
population of Canada) are age 65 or older and account for a majority of healthcare
expenditures.
3. More people are living with chronic disease and disabilities, including AIDS.

4.3.2 Healthcare Rationing

Rationing refers to the conscious decision to exclude certain people from a service or treatment
that they need. Rationing takes many forms. Rationing occurs when a state determines who is
eligible for Medical Assistance insurance. It also occurs when deciding which patient on the
waiting list gets an organ transplant. Rationing is also utilized when prices are set for health
insurance and health services that some people cannot afford.

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