Health care spending in USA has been reported to be high than most nations in the world. A greater percentage of the nation’s total income is spent on health care even though some people are not insured. It is the third largest public health care expenditure per capita due to the current high cost of medical care and utilization
The level of current health care expenditures
Health care costs have been increasing for many years. In 2008, health care expenditures surpassed $ 2.3 trillion which was more than the expenditure in 1990 that stood at $714 billion. In 1980 the nation spent $253 billion. The increase in health care spending has been made a major policy priority as the US government, citizens, and the employers and the general consumers have increasingly struggled to keep up with the increasing health care costs.
The health care spending in US is among the highest of all the industrialized countries. For instance in 2008, the health care spending was about $7,681 per resident. This accounted for about 16.2% of the nation’s Gross Domestic Product (GDP), estimated to be 4.4% growth rate. However, this was a slower rate than other recent years but still outpaced inflation and growth rate in national income.
It is predicted that health care spending is likely to increase in the recent future and needs to be controlled because it is a requirement for a broader economic stability and growth. The US president has called for reforms in the health care sector which was a priority issue during his 2008 campaign.
Many Americans are not insured making the costs to keep on rising at an annual growth rate of 6.7%. According to the forecast by the centers of Medicare and Medicaid Services, the nation will be spending 2017, about $ 13,000 per person.
Citizens benefit from many of the investments in health care. The increase in cost coupled with economic slowdown and the rising federal deficit has put pressure on the systems that are used to finance health care. In addition, the slow growth rate of the workers wages has increased the cost burdens on the employers and workers resulting into a difficulty to afford the health care facilities.
The programs by the government such as the Medicare and Medicaid account for a significant amount in health care spending but they have a slow growth rate than private insurance. The spending per capita of Medicare has grown slightly at a slow rate on average compared to the private health care spending at about 6.8% and 7.1% respectively between 1998 and 2008, despite the increased enrollment in the program during the current session and may result in an increased figures of Medicaid spending. Congress of the United States, Congressional Budget Office. Technological Change and the Growth of Health Care Spending, (2008)
Factors that determine the health care costs should be understood in order to control the health care expenditures. For instance, expenses on technology and prescription drugs have contributed to an increase in health care spending. However, in recent years the spending on prescription drugs has reduced. It has been stated that the availability of more expensive drugs and state of the art technological services increased the health care spending because the cost of developing these drugs must be recouped by the industry and also, the generation of consumer demand for an intensive more costly services which may not be necessarily cost-effective.
Chronic diseases have also made health care spending in US to change dramatically in the past years due to greater prevalence and longer life spans of chronic illness. This made the healthcare demands to increase to the increased need in treating the chronic diseases, and the need for long-term care services like nursing homes. It had been estimated that the health care costs for treating chronic diseases account for over 75% of the US health care expenditures.
Another factor is the aging of the population has contributed to the high growth rate of the national health care spending. The health care expenses rise with age as the baby boomers get into their middle years. Giving care to the growing population has increased the health care which is projected to increase s the baby boomers begins to qualify for Medicare in coming years (2011), making many costs to be shifted to the public sector.
It is also estimated that 7% of health care expenditures are for administrative expenses such as marketing and billing. This is a much lower portion in the Medicare program which is less than 2% and operated by the federal government. In addition, there has been arguments that a mixed public-private system creates overhead costs and larger profits that increases the health care spending
The new administration and economic recession in US has provided for an opportunity for health care reform in US. The advent of managed care has presented a shift towards a greater control in the utilization of health care services. Among the proposals to cut the health care spending costs include; the huge investment in IT. This has been vital for an efficient information sharing and reduced overhead costs. According to President Obama’s administration’s health reform plan, $19 billion in federal funding that has been allocated to upgrade the health Information Technology has gained positive impacts to the health care spending. Centers for Medicare and Medical Services, Office of the Actuary, National Health Statistics Group (January 2010)
A number of initiatives had been put in place to improve the quality and efficiency of the health care system and more cost effective such as decreasing unnecessary differences in medical practices and unnecessary care. For instance, some geographical areas do not produce better health outcomes. There is need to streamline the health care system in order to cut costs in unnecessary health care spending.
The success of Medicare services in the control of per capita spending providing warning that market based approaches coupled with individual financial responsibility is disadvantageous to individuals with limited financial resources and is an obstacle to the provision of the needed health care. Government regulation can stifle innovation hence market based approaches are very important and are more cost effective.
Preventive measures are important in reducing health care spending. Providing financial incentives to people to engage in wellness and enhance the prevention of chronic diseases which are very expensive to treat for a longer period of time and, to avoid incurring long-term costs of treatment. The other factor is increasing the consumer involvement in purchasing. Great price transparency can enable consumers to be more sensitive on the price and become informed purchasers. This can make both consumers and employers to spend less hence making savings.
Finally, there should be an alteration of the tax preferences for the employer sponsored insurance. The employees should pay income or payroll tax on money that the employers spend on their health insurance. According to some current health reform proposals, the elimination or tax exclusion for the sponsored health care by the employers can assist in financing the cost of expanding coverage and also the reduction of the incentives for those who are generous and therefore expensive health plans.
In conclusion, health care spending in US tops that of other countries with higher populations due to the higher US per capita Gross Domestic Product coupled with a fragmented payment system that has weakened the demand side of the health care sector and requiring high administrative costs. Health care spending has impacted negatively on the economic burden in the US economy.
The general health care cost is a central element of the national health reform effort and policy makers should incorporate plans that are viable to enact a comprehensive health reform. The new administration aims at improving health outcomes, as well as, reducing the overall health care costs by initiating incentives that encourages wellness and prevention, management of the chronic diseases and maintaining strong incentives for a proper medical innovation that can meet the costly health care needs.
US health care system has failed Americans; a call by the current administration to have health care reforms is a significant step to improve the health care system and the health of American citizens through the expansion of health insurance, improvements in primary care and holding health care organizations accountable for the health of their patients.
