Impact of Cost of Health Care on the US Economy - Assignment Example

? Impacts of cost of health care on the US economy Impacts of cost of health care on the US economy Impacts of cost and the rate of growth in health care spending, in the United States, have increased. The increase has been to extents of outpacing the growth rate in population, inflation, and gross domestic product. From 1940 to 1960, the annual rate of growth in actual health spending per capita averaged 3.6%. In the 1960s, the annual rate of growth in actual health spending per capita was 3.6%. In the 1990s, the figures were 6.5%. The fraction of GDP accounted for by health care spending increased from 4.5% in 1940 to 12.2% in 1990. A look into the year 2005, expenditure on health care was about $2 trillion or $6,697 per capita, which correspond to 16% of the GDP. The continued rise in health spending over the last four decades is going to go higher, and the expenditure will reach $4trillion, which is 20% of the GDP, by the year 2015. For many years, the continued increase in health care expenditure has been the center of heated debate in the US for many years. Research work and anecdotal reports influence further concerns. This points out that the rise in the health care expenditure is likely to harm the US economy. Expenditures on health care have the potential to affect an economy in a number of diverse and complex ways. In addition, the emerging effects may vary across all sectors of an economy as well as across population groups. One notable impact of increased expenditure on health care is the decline in the general economic growth. However, the same effect has the potential to boost economic growth in some sectors of an economy. Therefore, gaining an understanding of how increased expenditure on health care affects the economy requires an evaluation through various dimensions (Eaton et al, 2002). The state, Federal, and the local governments have the duty to collect taxes from households and business premises. The tax collections help to finance public health insurance programs as well as providing direct health care to households. On the other hand, the businesses are responsible for providing employment to households and health insurance to their employees. Therefore, the households emerge as the final consumers of the health care and at the same time bear some costs on health care (Eaton et al, 2002). It is worth noting that the impacts of health care on a single sector are likely to affect results from other sectors. An example is a situation where the government reduces its expenditure on health care by reducing the eligibility for public health insurance. This action by the government leads to an increase in un-insurance rates among households. At the same time, an increase in health care expenditure in also likely to cause an increase in taxes, reduction on investments on other critical sectors or increased government borrowing. It is also likely that companies will cut down employment and investment as a result of increased expenditures on health care (Eaton et al, 2002). The other likely effect of increased health care expenditures is inflation on the US economy. This will cause goods and services from the US to be less competitive in the international market because increased expenditures on health care will lead to an increase in product prices. Finally, increased expenditure on health care is likely to make health care inaccessible to many, produce bankrupt consumers, and reduce peoples’ retirement savings (Pauly et al, 2009). Impacts of the affordable health care for America Act HR 3962 On November, 2009, the House of representatives passed the Affordable Health Care for America Act with a vote of 220 to 215. The aim of this Act is to offer affordable, quality health care to all Americans. The bill is a multifaceted one and addresses diverse issues concerning the improvement of the health care system. Improvements on the health system include expansion of health insurance coverage, amending Medicare payments regulations in both traditional and advantage plans. Other improvements include removal of the coverage gap for prescription drug coverage, initiating pilot projects that will improve primary care capacity as well as evaluating on new care delivery models. The bill also focuses on funding research, fighting fraud and abuse, investing on health care personnel, investing in public health, and establishing prevention and wellness trust fund (Pauly et al, 2009). Impacts of H.R. 3962 on coverage The bill will reduce the number of un-insured people to about 24 million by the year 2019. It will take about two years to establish the Exchange and get companies prepared to provide approved products into the market. In a situation where the implementation of the H. R. 3962 takes 2 years, the number of un-insured people will reduce each year from 2013 t0 2015. The decline in the number of the un-insured will be about 56% in relation to estimates of the un-insured in a country without new policies. Impacts of H. R. 3962 on spending The expenditure on personal health will go up. This is likely to occur because people who were un-insured before will get insured and consume more health care services. On the other hand, people insured before will look for more friendly plans in response to subsidies. The increase in personal health care expenditure will amount to $753 billion from year 2013 to 2019. At the same time, the national health expenditure from Medicaid services and Centers for Medicare estimates that the US personal health care expenditure will amount to $22.5 trillion. In general, expenditure on personal health care will increase by 3.3% from 2013 to 2019. Impacts of H.R. 3962 on government spending The new government expenditure on providing coverage will amount to $1 trillion from 2013 to 2019. This will be as a result of cumulative high federal and Medicaid expenditures linked with the eligibility expansion. The other cause will be federal payments of affordability credits for eligible participants in the Exchange. Other factors likely to cause an increase in the new government expenditure include wellness grants, temporary high risk insurances, Health Insurance Exchange administration, and the public health investment fund (Pauly et al, 2009). Three main types of health insurance in the US Preferred Provider Organization (PPOs) In this health insurance, there is a contract between PPOs and health care providers. The contract is to offer medical care at discounted prices. Benefit programs motivate members to use PPO providers through high reimbursement rates and reduced deductibles, out of pocket maximums, and co-payments. Members can seek services from providers who are not part of PPO network, but face increased out of pocket costs. The program offer people the freedom to go to network and non network providers. The other advantage is that it offers a set level of initial and progressing review in relation to the quality of network and the care delivered by network providers. In addition, the network provides medical care at reduced cost compared to traditional indemnity plans. The other advantage is that the networks have spread widely and are available in many national locations. In 2010, the average cost for a monthly premium was $427 for an employee and $1,169 for a family (Pauly et al, 2009). Health maintenance organization This is an alternative to free-for-service medical care. The program combines a range of health care services within a single organization. HMOs are responsible for giving health services to their subscribers, and they receive fixed monthly or annual payments from their subscribers. HMO consists of well established prototypes that have been present for as long as 40 years. HMOs defines organizations that offer primary health care to their subscribers and supplemental health care when given additional payments. One requirement is that prepaid registration fee for both primary and supplemental health care should be set uniformly based on a community rating system (Murphy and Topel, 2006). Free-for-service The original free-for-service came into play in 1965. Later, the Medicare FFS came in, whereby the federal government issues the insurance plan through contractors. In doing so, the government sets the terms of payment for health care providers. This approach has helped the federal government to establish direct financial relationships with every key category of health care providers. This form of relationship has immensely impacted on the organization of the health sector for many years (Murphy and Topel, 2006). The evolution of promotion of health and disease prevention in the US The contemporary societal interest in promoting health and preventing diseases draws from three main factors. The first factor that causes such influence is the epidemiological transition from infectious to chronic medical conditions. This period produced significant impacts on birthrates, mortality, number of the aged in a population, and proportion of people over the age of 65, and resulting healthcare costs. Secondly, is the significant evidence supporting the impacts of behavioral factors on major chronic medical conditions such as cancer, heart diseases, and stroke (Murphy and Topel, 2006). The third factor was the growing proportion of documentation that supported the fact that disease prevention interventions would reduce the amount of risk factors within a population. This would in turn reduce mortality and morbidity from chronic diseases. One thing that remained unclear is the extent to which promoting health and preventing diseases would reduce expenditure on healthcare and social costs. The other view regarding promoting health and preventing diseases was that it represented a historic shift in peoples’ understanding of diseases and disease processes (Eaton et al, 2002). The realization of the importance of behavioral change has played a key role in learning how behaviors link with disease onset. This has boosted the acceptance of social scientists as essential partners in health promotion. Modifying social environment helps promote change of behavior. This change is acceptable in the society. There is the need to understand the need to address social factors that affect the health. This can be done through appropriate health promotion models. This might be the next move in the evolution of health promotion (Eaton et al, 2002). Private health insurance The American health insurance market comprises of two main submarkets; the employer group coverage market and the individual insurance market. The employer plans accounts for about 90% of the private health insurance coverage while the individual market takes the remaining 10%. Persons obtaining individual insurance coverage obtain it directly from commercial health insurers. On the other hand, employers issuing group coverage obtain commercial insurer or self insures their plans. These two distinctions make it clear that there are varying regulations in each submarket of the private health insurance. The primary rule is that individual or employer group policies should be regulated by state insurance laws, but it appears that the private health insurance market regulates its self to certain extents (Murphy and Topel, 2006). References Eaton, S. B. et al (2002). An Evolutionary Health Promotion. Preventive Medicine 34, 109-118. Murphy, K. M. and Topel, R. H. (2006). The value of health and longevity. Journal of Political Economy 114(5). Pauly, M. V., Herring B. J, and Song, D. (2009). “Tax Credits, the Distribution of Subsidized Health Insurance Premiums, and the Uninsured.” Forum for Health Economics and Policy 5(5). Read More