Health Care Spending
HCS/440 Economics: The Financing of Health Care
Today, health care costs are rising significantly faster than the national income. Kellerman (2012) states, “The U.S. spends far more on health care per capita and as a percentage of GDP than any other nation on earth, according to the Organization for Economic Cooperation and Development” (para. 3). Furthermore, health care spending has become a paramount issue that is overshadowing other important affairs, such as education. The level of current national health expenditures, why spending is too much, evaluation of where the nation should cut or add spending, examination of financing of health care, and a forecast of future economic needs of the health care system will be explored. Level of Current National Health Care Expenditures
National health care spending has significantly impacted the economy; however, overall growth has remained slow and steady at 17.9% of the gross domestic product since 2009 (Hartman, 2013). Over the last decade, changes in the economy affected the growth in health spending. For example, from 2004 to 2008, national health spending growth per capita was at 5.1 %; whereas, from 2009 to 2010, the growth decreased to 3.1% (Hartman, 2013). The slower growth is attributed to the decline in intensity and use of health services because of insurance coverage losses, declines in insurance enrollment, and declines in investments of equipment and structures (Hartman, 2010). Funding for health care in the United States is derived from three major sources: individual payers, private health insurance, and government-run programs. In 2007, individuals paid 11%, private health insurance paid 35%, government programs, such as Medicare and Medicaid paid 47%, and other private payers paid 7% (Getzen, 2007). Unlike, nearly a century ago, the majority source of financing health care shifted from individual payers to third-party payers, including corporate, private, and government insurance plans. Nevertheless, the drivers of health care costs are from inpatient care and physician and clinical services, which account for half of the United States health expenditures (Kaiser Family Foundation, 2013). Health care expenditures are mostly derived from hospitals, health care providers, medical products, and pharmacies. For example, in 2007, $709 billion was spent on inpatient care, which was 31% of health care spending (Getzen, 2007). Furthermore, technology, prescription drugs, administrative costs, and rise in chronic diseases are the major contributions to health care expenditures growth (Kaiser Family Foundation, 2013). Innovative technology has changed the health care delivery system as well as increased financial burdens for health institutions. Kaiser Family Foundation (2013) states, ” Some analysts state that the availability of more expensive, state-of-the-art medical technologies and drugs fuels health care spending for development costs and because they generate demand for more intense, costly services even if they are not necessarily cost-effective” (para. 5). Additionally, administrative costs toward supporting public and private insurance programs account for 7% of health expenditures in 2010, which further fuels health care spending (Martin, 2012). Despite of the slow growths, high health spending remains problematic. Furthermore, health care cost varies, depending on the care provided and the type of service rendered. The patient-centered 2007 Medical Expenditure Panel Survey (MEPS) revealed that inpatient treatment comprised a large portion of health care expenditures at 31.3% and prescription medications for patients with chronic conditions ranked the highest in spending at 34.8% (Conway, 2011). Other studies produced by the National Health Expenditure Accounts and Centers for Medicare & Medicaid Services also found that the major drivers of costs are chronic conditions. Increases in chronic diseases...
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