Healthcare Spending Essay

1289 words - 6 pages

One of the issues that is widely discussed and debated concerning the United States economy is healthcare system. Unlike in the majority of developed and developing countries, the healthcare system in the United States is not public, meaning that the state does not provide free or cheap healthcare services. In Canada or Great Britain, for example, the government funds healthcare providers through taxes, and such a system is called social. The United States, on the other hand, being a profoundly capitalistic country, opted for another route and passed the burden of healthcare spending on private consumers as well as other institutions such as employers, insurers, etc. Everything would have ...view middle of the document...

But it is important to note that the increase in healthcare spending directly influences the economy of the United States and its economic development. It is a well-known fact that healthcare expenditures on employees is the employers’ hot issue for these healthcare costs are much higher than labor, litigation, or even energy. As healthcare prices increase, employers, those who carry a significant portion of the burden, attempt to pass healthcare spending to their employees. As a result, employees are less attracted to join such companies, which in turn results in decreased productivity. The result of this chain is obvious: a slowdown of overall nation’s economic growth.

Healthcare spending growth rate trends show astounding estimates. Since 1960, spending has risen from $27 billion ($143 per capita; 5.1% pf GDP) to amazing $1,678.9 billion ($5,670 per capita; 15.3% of GDP; 2003 data) (HHS, 2005). Recent research estimated that by 2013, healthcare spending will be as high as 18.4% of the GDP. It is important to note that the gradual move from hospital to ambulatory setting has resulted in much higher spending on outpatient hospital services and prescription drugs. The spending growth for these two trends is much higher than the overall healthcare cost growth, which, in fact, increases faster than such important economic indicators as GDP growth, inflation growth, and population growth rates.

Although there is a belief that great proportion of healthcare funding comes from out-of-pocket money, in reality private insurance is the major source. Generally, private and public sectors almost split the overall funding evenly, public sector accounting for 55% and public – for 45% respectively (HHC, 2005). The table below illustrates the sources of funding in 2003:

Sector Source Spending ($ b) Spending in %

Private Insurance 600 36%

Out-of-pocket 230 14%

Other private ~83 5%

Subtotal 913 55%

Public Medicare 283 17%

Medicaid & SCHP 267 16%

Other public ~200 12%

Subtotal 750 45%

Total ~1,679 100%

The nation’s health dollar; sources of funding; data taken from HHC website. Numbers rounded.

Other private includes privately funded construction, non-patient revenues, and industrial in-plant. Other public means worker’s compensations, public health activity, hospital subsidies and school health, as well as several governmental departments such as Department of Defense and Department of Veteran Affairs.

Such a dramatic increase in out-of-pocket spending is caused by the increase of spending on prescription drugs, greater utilization, increases in price, new medicines, and most importantly the fact that almost 100% of consumers of prescription drugs – the seniors – pay out-of-pocket nowadays.

It is important to note that the proportion of public spending has increased as compared to year 1990 when it was 41% of total healthcare expenditures. Public spending continues to grow relative to the overall spending. ...

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