Introduction
The cost of health care in US has been rising for the past several years. According to Medicare report (2010), government budget on expenditures in the last two years has tripled compared with the amount spent in 1990s. In 2008 the government spending on health care was about $2.3 trillion which represents 16.2 percent of the country’s gross domestic product (GDP). According to this report, the percent is the highest among all the industrialized countries in the world. The annual rate of growth of government expenditure on health care is 4.4 percent and it is predicted to increase in the near future due to inflation and other factors. Thus controlling these costs is one of the key policies that can help to stabilize the US economy especially the recent global financial crises. In regard to this, health care reform is an agenda that has dominated many forums for policy makers from the government as well as other stakeholders in the health care sector.
Some of the reforms proposed in health care sector include: government regulation, disease prevention measures, adjusting compensation from the providers, improving quality and efficiency of health care among other proposals. One of the government regulation proposals is to reduce the cost of health care given to the elderly as a way of cutting the overall expenditure on health care. According to congressional budget report (2008), government through congress is considering to lower the budgetary funds that are allocated to elderly health care provision in the near future. This is expected to raise a hot debate among the politicians, medical care economists and other policy makers since it will expose elderly people to more health problems as many cannot afford to finance their health care expenses. This paper will look at this proposal from both the perspective of the government as well as from the perspective the elderly citizens who will be affected by this reform.
Impacts on the Government
One of the dilemmas the US government today is now facing is how to convince the elderly people that the government needs to spend lesser funds on their health care provision. According to statistics from medicare and Medicaid services, government spending on the elderly is increasing year after the other making it difficult for the government to continue providing quality health care to them (CMMSR, 2011). There are several reasons health care researchers have cited for the increasing spending on the elderly, chief among them increasing number of the elderly people in the country, the recent economic turn down, high cost of prescription drugs among others. There are also increased administration costs that account for about 7 percent of the total health care spending (CMMSR, 2011). The government may not be a position to bear the burden of providing large proportion of the elderly health care cost as it has been doing. The cost is also expected to skyrocket in this year as the baby boomers start to enter in Medicare beneficiary bracket. Thus the government has no option but to reduce the cost of health care to the elderly as a way of sustaining economic growth and stability.
If the government do not cut its spending on the health care of the elderly, then it has to raise taxation to almost double of what it collects each year. Callahan (2008) asserts that increasing tax to cater for the health cost of the elderly will increase the tax burden for the young who may not be able to cater for it due to increased cost of living. Young employees are not willing to be taxed more to cater for health insurance for everyone, in fact, they are more concerned with increasing insurance premium for their health. They are worried that they may lose their own health protection if they happen to change or lose their jobs. This means that they may not be able to cater for any other additional cost to cater for the health insurance of the elderly. Reducing health care benefits to the elderly seems to be the most viable solution to this dilemma though it may harm the elderly in many ways.
Reducing these benefits will be a way of cost-sharing where the government and the beneficiaries of health care services pay a certain percent of the costs. Stanton(2002) claims that reducing health care funding will also make people to be more sensitive on the cost of health care as they feel burden of financing their health care needs. This may force them to control their health care spending thus contributing positively to the goal of the government. At the present, a large proportion of health care cost is paid by the third party (insurers, employers or the government) and consumers are left to cater just for a small proportion of the total costs. Cost-sharing will therefore mean that the proportion that third party pays will reduce and what individual consumers pay will increase. In their research, crystal et al. (2002) found that even with current cost-sharing between individual consumers and third party, out-of- pocket expenses are still high and on average, many consumers spend about 19 percent of their benefits on it. These funds are spent in purchasing dental services, prescription drugs among other medical services. Thus the government move to reduce its spending on the elderly will increase individual consumer’s spending.
Medical expenses for the elderly people are very high compared with those of any other age bracket. Many chronic illnesses deteriorate at that age as the body of the person becomes weak thus requiring frequent medication. Conrad (1993) supports this view in his argument that the last year of an elderly person is where the largest proportion of health expenses accumulates. In his research Conrad found that Medicare incur the highest cost in the last two months of the patient’s life. These health care expenses far exceed those of the middle class who are the main contributors to the health care schemes. Thus by cutting its cost on health care of the elderly, the government saves a significant percentage of its income.
Impacts to the elderly
Medicare is the health insurance provider for the elderly and it has provided them with insurance cover since its establishment in 1965. However, it only covers some health expenses forcing people to use their own money to cater for the other medical expenses. The legislators’ decision to cut the health care funding to the elderly will hit them hardly as they dig more into their pocket to cater for their health care needs (Crystal et al., 2000). Though the government may attain its objective of reducing its health expenditure and hence promote economic stability and growth, it will be doing so at the expense of the poor and the elderly in the society who may not be in a position to undertake comprehensive health insurance cover and other medical expenses. This policy will require patients to pay more costs inform of deductibles and copayments as a way inducing them to spend less on health care.
One possible effect of this health policy is that it is likely to force many elderly people who may not afford quality health care to skip some of the necessary preventive care (Crystal et al., 2000). These would result to serious illness which may require expensive hospitalization thus increasing the total health care for the government. Most of the prescription drugs elderly people takes are meant to reduce the effects of chronic and life-threatening conditions and when the patients reduce their usage as a result of increased drug prices their health will stands at a risk. The health of many patients may weaken forcing them to seek additional medical treatment.
Himmelstein et al. (2008) noted that Americans are already feeling the impacts of rising health care costs and more so the elderly and the poor. In order to cater for the increased out-of-pocket expenses, many elderly and poor people have been forced to cut their spending on heating and food expenses. Many cases of bankruptcy which have been reported in the recent past show that those people have insurance covers which they are struggling to finance. Thus cutting the health costs for the elderly will increase cases of bankruptcy as more and more people fail to meet their health expenses. Many elderly people will have no option but to cut their spending on other basic needs such as food in order to cater for their deteriorating health care. For example some may opt to go without food in order to afford health care services thus worsening their health status forcing them to look for more expensive hospitalization services (Crystal et al., 2000). All these problems may be avoided if the government looks for another alternative to cut its health care expenditures rather than compromising the health care of the poor and the elderly in the society.
Recommendations
As we have seen in this study, the government spending on the health care of the elderly has increased and it is necessary to come up with strategies of minimizing it without compromising the quality of health care. One strategy may not give the expected results and therefore it is necessary to combine a number of strategies in order to address this problem. One of the best options that the government has is to increase the tax of the middle class by a small margin and also reduce health care benefits of the elderly. This combination will ensure that the quality of health care is not compromised and again the economic growth and stability is maintained. This is likely to receive much opposition from the middle class taxpayers who may not be willing to pay more tax to cater for health care of the elderly and also from the elderly people who may not be willing to dig deeper in their pocket to finance their increased health care expenses. However, this is the most viable solution for now to reduce health care expenditures of the government.
Secondly, the government may also look for others ways that are likely to reduce its spending on the health care of the elderly. As Joyce et al. (2005) suggest, much of the health care expenses on the elderly are related to chronic illness and if their prevalence is reduced, a lot of fund will be saved. Chronic diseases such as heart failure, cancer, mental illness among others may be controlled at an early age and their prevalence reduced using different practices such as eating well, frequent medical checkup and exercises among other ways to reduce their effects at old age. This ensures that Medicare beneficiaries are only concentrating on their general health care rather than to cater for other expensive and complicated treatment. Health care research has shown that about 70 percent of illness that increases health care costs among the elderly people are preventable (Stanton, 2002). Thus it is possible for the government, individuals and other stakeholders in health care sector to come up with the necessary measures to minimize prevalence of all preventable illness.
Another way to reduce health care costs among the elderly is to provide them with house help to assist them in their daily chores such as bathing and dressing. From the past research, elderly people who do not receive assistance they need at their home have shown more cases of being hospitalized for various illnesses compared to those who are assisted at their home. Again, about thirty percent of the elderly adults have different disabilities which make it more difficult for them even to move. At times, they may fall and get hurt thus requiring more hospitalization. Thus if elderly people are provided with house help, the costs of hospitalizing them will go down thus reducing their health care spending.
Finally, new technology may also be used to reduce health costs among the elderly. As a result of various chronic illnesses, elderly people are hospitalized for longtime which increases their health care expenses. Adoption of modern techniques such as body’s wireless sensor will reduces the time patients stay in hospital since it enable them to be treated at their homes. Bluetooth will enable patients’ data to be transferred to other medical facilities reducing the use of communication systems that are more specialized but expensive. This will make health care services to be more affordable.
Conclusion
Reducing government health care expenditures is important for stable economic growth and development. This calls for the government to address all the factors that are driving health care expenditures such as aging population, inflationary pressure, new technology, prevalence chronic diseases among other causes. Health care expenditures for the elderly population contribute a large proportion of the total government health care expenditures and its control is therefore crucial to the government. However, it should not be controlled at the expense of compromising health care. The congress proposal to reduce government spending on health care of the elderly is expected to do more harm than good especially to the elderly people. Though the government on one hand will reduce its health care expenditures, the move is expected to increase the hospitalization expenses as the elderly people skip to take prescribed drugs since they may not afford them. This in the long term will raise health spending again. The best option for the government is to reduce these benefits partially and at the same time increasing the tax of the middle class employees.
References
Centres for Medicare and Medicaid Services report (2010). Office of the Actuary, National Health Statistics Group. National Health Care Expenditures Data,5.
Congress of the United States, Congressional Budget Office, (2008). Technological Change and the Growth of Health Care Spending.
Conrad, M. (1993). Pursuing a futile policy for health care reform. Best's Review,94(4),8.
Crystal, S., Johnson, J., Harman, J. et al. (2000). Out-of-pocket health care costs among older Americans. Gerontol, 55 (1), 51-62.
Himmelstein, D., Warren, E., Thorne, D. & Woolhander, S. (2005). Illness and Injury as Contributors to Bankruptcy. Health Affairs Web Exclusive W5-63.
Stanton, M. (2002). Reducing Costs in the Health Care System: Learning From What Has Been Done. Research in Action, 9(2), 46.
