Health Care Spending

HealthCare Spending

HealthCare Spending

Healthcare spending is one of the most debated issues in the United States. Due to the increased cost of health care services and medicine, theAmerican health care insurance is likely to experience major economiccrisis in the near future. This is when the fact that the massivebaby boomers generation which has a major contribution to the healthcare insurance system, both public and private, reach retirement age.Additionally, since the baby boomers are the largest generation inthe country, the American population is generally aging. This meansthat terminal diseases associated with old age will be more prevalentin the American health care system. This will increase the demand forhealth care services. The recent economic crisis that hit the UnitedStates economy, and the world at large, has also affected the healthcare sector significantly. As a result, it is estimated that over thenext decades, the health care spending in the United States willincrease faster compared to economic growth, reducing accessibilityto basic health care services. The increased cost of health care willhave an impact on all aspects of life including the quality of life,business activities and the local and national government. Thus, arobust health care system is a major political, social and economicissue in the modern America (Kant &amp Mark, 2014).

Thepublic health care needs in the United States are financed from twomajor sources. These major sources includes the government managedpublic programs and the private health insurance programs, managed byprivate and profit making organizations. The largest program, publichealth care insurance program is known as the Medicare program.Medicaid is also a major public health care insurance program in theUnited States. Although both are very different and target differentmembers of the population, they are both administered by the Centerfor Medicare and Medicaid Services, within the United StatesDepartment of Health and Human Services. (Elizabeth &amp Lauren,2013) It is estimated that as at 2008, the Medicare program providescoverage to more than forty four million Americans and cost about 3.2percent of the gross domestic product. Within the same period, theMedicaid program covered over forty million Americans and cost about2.4 percent of the gross domestic product. These figures have changedsignificantly due to the recent changes in the federal laws relatedto public and private health care programs introduced by PresidentObama’s administration. These changes have been aimed at expandingthe medical coverage in the American population. The Medicaid programis a public program that covers individuals with low income. Althoughit is administered at the state level, the primary oversight is doneat the federal level. Medicare program on the other covers the oldermembers of the society, people aged 65 years and above. It is anentitlement program providing medical coverage for individuals withdiminishing economic power due to old age (Elizabeth &amp Lauren,2013).

Theother source from where health care funds are obtained from is theprivate sector. Most business firms in the United States offer totheir employees’ health insurance as a form of additional benefit.In this regard, the company or the firm pays part of the insurancepremiums while the employee tops up to the insurance company. Theprivate sector is the highest payer of health care spending payingfor 46 percent of all the physician costs, and 35 percent of thehospital bill. Medicare is the second highest payer after the privateinsurance paying for 22 percent of the physicians cost and 28 percentof the hospital costs. The “other” source of health care fundingcomes from payments made directly by the patients out of theirpockets without any financial support from the government or privateinsurance firms. Its important to understand that while Medicaregets moneys from taxes paid to the government, the private insurancefirms gets their money from the premiums and other fees that theirclients pay either monthly or annually (Elizabeth &amp Lauren,2013).

In2010, the patient protection and affordable care act, together withthe health care and education reconciliation act was signed into law.The new laws were aimed at providing an overhaul in the Americanpublic and private health care system and health care funding ingeneral. In addition to lowering the cost of health insurance andthus the number of uninsured Americans, increasing the quality ofhealth care services and cutting the ever increasing health carecosts. It is estimated that over 10 million more Americans have beenable to access medical coverage since the enactment of the new laws.Although it is estimated that health insurance premiums will continueto increase, the subsidies provided for in the health insuranceregulation will ensure that majority of people are able to accesscoverage. Nonetheless, the general consensus in the last few yearshas been the health care spending, at the individual, state orfederal level, is and will continue to exert pressure on the budget. The changes in the health care system have not significantly reducedthe pressure. The high rate of unemployment which has reduced thedisposable income, changes in the health care spending structure andout of pocket payments has resulted into changed in health carestatistics, relative to the GDP. It is important to note thatdespite the effects of the new law being below expectation it maypositively influence the health care spending and the American healthcare system in general (Elizabeth &amp Lauren, 2013).

Althoughthere are many changes in the health care system, more need to bedone to reduce the burden of escalating health care spending in theAmerican economy. The future economic need of the United Stateshealth care system is to have a mechanism which can be used tocontrol the rising cost of health care. The health care cost isincreasing at an unsustainable rate and already it has caused crisisin the Medicare program which pays for the health care of the agedAmericans (Kant &amp Mark, 2014). With the rapidly increased numberof aged members of the society, the crisis may cripple the system.Economic and policy analysts have had different views on the recentchanges in federal laws as well as how best can the escalating healthcare spending can be reduced. While any viable program is essential,shifting the health care spending from the federal govern to stategovernment, employers or individuals does not effectively address theproblem. The only sustainable solution is developing a program thatwill control the increase in health care cost. This includespromoting private negotiated programs that fit to the globalstandards, promotion of fee for services payment system and a marketbased and competitive prices. Simplification of highly bureaucraticfederal health program is also essential in cost reduction (Kant &ampMark, 2014).


Elizabeth,H. B. &amp Lauren, A. T. (2013). TheAmerican health care paradox: why spending more is getting us less,New York: Public Affairs.

KantP. &amp Mark E. R. (2014). HealthcarePolitics and Policy in America,New York, M.E. Sharpe.