Healthcare Expenditure in the United States - Essay Example

Healthcare in the US Statistics on healthcare expenditure in the United s indicate a consistent pattern of exponential increase over the past four decades. Between 1970 and 2010, the United States experienced a rise in expenditure from 7.2% to 17.9 % of the Gross Domestic Product (The Henry J. Kaiser Family Foundation Web). The figure means that the current rate of expenditure on healthcare is more than double the amount that was spent in the past four decades. Official figures show that the total amount of expenditure in the year 2010 reached 2.6 trillion dollars. Policy issues, adverse economic conditions, and other trends and practices have been cited as some of the fundamental causes of the rise in healthcare costs both in the state, federal, and local governments. The sharp increases in healthcare expenditure have had various negative consequences to other sectors of the economy and the average livelihood of the American citizens. Financial pressure on families, challenges on the part of the employers, and a reduction in spending on other important sectors of the economy are some of the negative consequences of increased healthcare spending. Recent figures show that the rate of healthcare spending is significantly higher than average economic growth. The implication, according to economists, is that the rate of spending on healthcare is much faster than the rate of economic activities in other sectors of the economy. The imbalance in economic activities and healthcare expenditure shows that the levels may not be sustainable in the end (The Henry J. Kaiser Family Foundation Web). Usually, economic activities are determined by the manner in which countries devote significant amounts of money to certain sectors with the intention of improving the conditions of trade and the balance of economic systems. The statistics show that healthcare spending has grown by over 3.0 percentage points higher than the nominal GDP. It is necessary to establish some of the intervention measures that the federal, state, and local governments have undertaken in order to reduce the adverse impact of expenditure on the economy. The impact of negative economic growth manifests itself in terms of the various issues that connect with the specifics of economic growth. The question regarding the need to control the healthcare industry continues to polarize the health debate in the United States due to various factors that connect with costs, protection of the citizens, affordability, and quality. Among the objectives raised by the proponents of increased government regulation of the sector is the matter of checking of rising costs of healthcare and the laxity of employers to meet the costs of employees’ medical insurance premium (The Henry J. Kaiser Family Foundation Web). A related concern is the adverse impact of increased spending on healthcare on other important sectors of the economy. Projected increase in healthcare expenditure implies that the government would not be able to cater appropriately for other matters of priority. Proponents of control argue that the general intention of controlling government expenditure aligns with the need to stabilize economic growth. On the other hand, those opposed to the government’s regulatory practices argue that increased regulation would slacken private initiative and discourage investment into the healthcare industry. In line with this argument, critics of government regulation contend that the practice contravenes the letter and spirit of a free market economy for which the United States is famed (Boscheck 75). Those who hold onto this view argue in favor of uncontrolled regulation point towards the need to develop alternative structures of stability as one of the ways through which stability of the healthcare industry and other related aspects of the economy can be controlled. The common impression in the perspectives of critics who challenge the free market healthcare model is that the system has failed. Exorbitant costs of healthcare and the inequality in the distribution of resources have often been used to illustrate the weaknesses of the system. However, such perspectives fail to consider certain pertinent factors that connect with the potentials of the markets to regulate themselves. The idea of a free market healthcare industry is premised on the fact that the stakeholders in the healthcare industry believe they can manage their business without support from the outside. The sharp rise in healthcare spending poses a significant level of threat to other sectors of the economy. Projections indicate that healthcare spending is likely to grow to the about 20% of the GDP by the year 2010. The rising cost of living and the high prevalence of lifestyle diseases have been mentioned as factors that contribute towards a surge in healthcare spending. The US is one of the countries that report high prevalence levels in diabetes, cancer, high blood pressure, hepatitis B, and other healthcare conditions that affect the state of healthcare in the country. Such a growth will have far-reaching ramifications on the general growth on the economy. Population growth and environmental pollution impact negatively on the status of health in the sense that they create conditions that promote the drastic decline of health standards in the country. It might be necessary to determine the level of healthcare expenditure from the perspective of a range of factors that determine the growth of other related sectors of the economy. The rise of healthcare expenditure has had a direct adverse impact on the insurance industry. The cost of medical insurance has increased tremendously in response to the challenge posed by the rising cost of healthcare. Employers that provide insurance cover for their employees have had to contend with increased expenditure as the healthcare industry becomes increasingly expensive. The situation often worsens at times when the financial markets become unpredictable or hostile to the corporate world. In the recent global financial crisis, many employers were forced to lay off staff citing the difficulties in maintaining the high costs of medical insurance among other obligations that they are required by law to extend towards the employers. Millions of Americans have lost their jobs because of the layoffs occasioned by the inability of companies to finance the rising insurance costs (Arnold and Terrie 313). Joblessness in the United States is a key indicator of the state of the economy. Economic growth is determined by the factors of employment in the sense that the high rate of unemployment implies a drastic decline in economic growth. Because of the sharp rises in the levels of expenditure, many families have experienced drastic reductions in their disposal incomes. The most affected families belong to the middle class category. The resultant pressure from the increased cost of healthcare has caused an increase in the cost and quality of living. For instance, families that owned homes have struggled to raise mortgages while others have lost their homes because of loss of jobs and other financial pressures that attend to the rise in healthcare matters (Cebul 93). The determination of the general impact of the high costs of healthcare would require the ascertaining of the level of influence the inflated costs bear on education, investment, and general development. As compared to other countries in the world, the US healthcare expenditure ranks high with grim impacts on the general stability on the markets. The relative affordable healthcare services in countries such as Canada and Britain have given them sufficient control over the general pace of economic activities. Regulatory mechanisms have had some positive results on the state of the economy as understood from the perspective of genera economic growth. In this regard, it might be argued that some of the issues that connect to the general economic growth have to be established in line with the attendant implications on various aspects of the economy. Generally, the determination of the level of economic growth requires an assessment of the weaknesses and threats as well as the available opportunities on the market. The United States geopolitical position and economic growth depends to some extent on the manner in which it will balance its systems of economic growth to respond to certain changes and structural activities on the markets. Analysts have argued that the challenges facing the United States economy concerning the high costs of healthcare might give competitors like China some significant advantages. Much of the money that has been directed towards the meeting of healthcare costs could have been channeled towards investment or in the generation of domestic capital to enhance the growth and development of some sensitive sectors of the economy. The sluggish growth of the US economy has been blamed on the high rates of expenditure in the healthcare sector. Another notable challenge that attends to the increase in healthcare spending is that it might affect other sensitive programs such as homeland security and other processes that require significant amounts of financial support. On this matter, the government must find ways of collaborating with multiple stakeholders within the healthcare industry in order to reduce the high costs of healthcare expenditure. Healthcare expenditure has gone up especially due to the high prevalence of lifestyle diseases. A key economic advantage envisioned by the drafters of the reform bill is the reduction of the government deficit by a figure of 143 billion dollars over a period of 10 years. This advantage will free the government from the constraints created by the bill and open up opportunities for alternative economic activities that would influence positively on the growth of the GDP. Further projections indicate that the overall budget deficit will reduce significantly to about one percent of the GDP. The reforms involved proposals of multiple approaches for reducing healthcare expenditure through drastic changes in the Medicare and Medicaid. Funding of research on cheaper medication and improved terms of service for medical personnel are some of the key advantages that have been envisioned in the passage of the bill. Analysts argue that the bill will have some significant positive effects on salaries. It is estimated that businesses will reciprocate the cuts in premium expenditure in terms of salary increment for their employers. This follows the findings of various research works that have connected salary stagnation with high rates of premium. An increase in the salaries, according to the supporters of the reforms, will affect positively on the job market and other indicators of growth as understood within a range of factors general economic growth. It might be argued that part of the accruing benefits of the healthcare reforms are related to a range of key benefits that attend to the development of certain aspects of GDP growth. It is believed that some of the issues that relate to economic growth are connected to the ability of the government to reduce the levels of expenditure on healthcare related matters. However, critics of government control argue that some hidden or unpredictable forces on the markets might hold the projected benefits back. Those who hold onto this view argue that some employers will not necessarily embrace the synergies provided in the reforms in terms of increased salaries for the workers. The employers, according to these critics, will make use of the advantages made possible by the bill to increase the levels of expenditure on other issues that connect with the expansion of capital and increase in revenue flows. Past studies and case reviews indicate that employers do not necessarily pass over the benefits of regulatory incentives to the clientele. For instance, many companies that have received tax cuts in the past have not increased the remunerations of their employees. These critics hold that a free economy would provide more lucrative services to the markets because firms will seek opportunities of increasing the quality of work and the working conditions of the employees. Free market economies have some key advantages that connect with the need to increase certain advantages on the markets. It might be argued that the level of expenditure of some issues connected with the economy have to be determined in terms of the manner in which they assist in the enabling of a free operating atmosphere within the job market. On this score, it might be argued that the key benefits of employment must relate to the various issues that connect with the necessities of commerce. Innovation and progress are more likely to occur in free market economies as opposed to healthcare markets that feature a strong element of control and regulation. The need for controlling the rate of spending on healthcare connects with the necessity of controlling government borrowing. It is estimated that the government will encounter challenges related to maintaining its spending ceiling if structural changes are not put in place to control the high rates of healthcare expenditure. Healthcare reforms were predicated on, among other things, the need to reduce the rate of government borrowing, which has often led to the stagnation of the economy in various aspects. The signing of the comprehensive health reform, the Patient Protection and Affordable Care Act signaled major changes in the US healthcare spending patterns. The comprehensive reforms were aimed at bringing most US citizens and legal residents under insurance cover. The reforms had far-reaching positive impacts for the employees in the sense that they were allowed to enjoy tax credits and other incentives, which would allow them to provide insurance cover for their employees. The reforms spelt out a tax credit of 35% of the total amount of money contributed by the employer towards the health insurance premium of the employees. This particular aspect of reform was specifically tailored for the small businesses. From an economic point of view, it might be argued that the tax credits were meant to address the concerns of job layoffs, which were significantly connected to the inability of the employers to afford their employee’s insurance premiums. The reforms were meant to take place in phases. This strategy was intended to reduce the possibility of any adverse effects on the economy. It might be argued that some of the issues that attend to the employees’ tax benefit scheme are directly related to the stability of the markets. Small businesses were the most vulnerable in the wake of rising costs of healthcare. This is because their relative small capital reserves and revenue base could not allow them to retain workers at a time of high insurance requirements. On this matter, it might be argued that the impact of the health reforms had some positive effects on the insurance world in the sense that they enabled the creation of stable operational systems that would guarantee the recovery of the markets from the adverse effects of the high healthcare costs. Another important element of the reforms was the prohibition to insurers from the practice of rescinding coverage of clients for various reasons. The new reforms only permitted the insurers to consider rescinding coverage only in cases that involve some level of fraud. On this matter, it might be argued that the reforms sought to streamline the insurance industry by eliminating unethical practices in which many patients suffered after abrupt stoppage of their insurance cover. As a result, this method ensured the determination of cases basing on aspects of merit. The other reason the proponents of this idea have is that the government does not really care about their particular needs. They are of the opinion that the government is concerned with their sole purpose, which is pro-profit. An insurance firm for instance, may not really care for the sufferings or the illnesses of the people they insure but will mainly focus on the financial aspect whereby they look to sell insurance packages to the same people. The opposing side has often been quoted saying that they would not want the authorities determining their way of doing business. The government enacts very tough laws that attract hefty penalties for failure to comply. The laws in place to govern the way firms start and do business for instance comes with stringent measures ensuring that the laid down procedures are followed to the letter. A free market on the other hand seeks to relax the rules a bit to create a friendly destination and therefore attract more business from markets that would have otherwise moved out of the country or location. Regulation of the healthcare sector would limit the level of competition between the various stakeholders and industry players in ways that align with the demands of the markets. In normal practice, healthy competition results in the improvement of services and the enhancement of conditions in ways that make it appropriate for the industry to thrive to within the competitive nature of the markets. Research has shown that self-regulation works efficiently in systems that are based on ethics and professional standards. Failure of existing players on the market to put in place self-regulatory mechanisms has resulted in a range of challenges that often manifest in terms of unfair competition. On this matter, it would be appropriate for the state, federal, and local governments, to develop the most workable strategies that would aid in the fostering of a free but quality healthcare system, which would help enhance the provision of quality services to the citizenry. In essence, the determination of matters of health has to be considered in line with a range of concerns that promote the general health of the citizenry. Some of the issues that connect with healthcare practices must be determined alongside the various issues that connect with strategies, outcomes, challenges, and obstacles. The creation of conducive working environments require the appropriation of the synergies on the market that assist in the creation of firm structures and other values that connect with the market environment. Government regulation narrows the condition of doing business in ways that make it problematic for new investors to enter the market. In essence, the restrictions imposed on new investors are very rigid and cause the cost of investments to go up. This in turn forces the investors to find ways of counteracting the same because of the increased production cost. They do this by increasing prices of goods and this is in turn passed on to the consumer who is mainly the common citizen. The government will only deploy the top management in areas it controls, and they are well paid leaving the bulk of the working staff underpaid. Obviously, the majority of the working staff will often feel left out because the top brass of management will also be well compensated which usually is not the case for the rest. Medical cover for the top office holders is usually a higher percentage than that of the staff that also does most of the work as well as long hours. A free market is better in that, junior employees are well looked after and motivated. This is done private companies to better their services and match up with their competitors. Those opposing the idea of controlled economies by the government argue that junior employees’ compensation is low. This disinterests many would-be workers who opt to venture into other sectors. This makes many to hold the government controlled sector in low regard as opposed to the free market. The merits of unregulated health market have to be understood from the perspective of government expenditure. The government would invest its money in alternative ventures instead of channeling significant sums of money to shore up the strength of weak healthcare systems. The role of government should be limited to providing incentives for industry players in order to encourage private participation in the healthcare industry. The current levels of expenditure as spelt out in the healthcare reforms may not be sustainable in the event of a recurrence of another global financial crisis. The impact of increased spending will be felt in terms of increased taxation on the citizenry. Competition in an unregulated market will have a long-term impact of reducing the cost of medication since many companies will seek to embrace the element of affordability as a determining factor of their quality of service. Another important feature of competition in an unregulated market is that companies will find ways of breaking into new market segments in order to shore up their revenue streams and enhance profitability. Lack of competition in government controlled healthcare systems often discourages competition, which lessens the quality of service delivery within the industry. On this score, it might be important to consider the fact that unregulated markets impact favorably on the markets and the citizenry as compared to government-controlled systems. Works Cited Arnold, Patricia J., and Terrie C. Reeves. International Trade and Health Policy: Implications of the GATS for US Healthcare Reform. Journal of Business Ethics 63 (4) (2006), 313 Boscheck, Ralf. Healthcare Reforms and Governance Concerns: The Cases of the United States, the United Kingdom, and Germany. Intereconomics, 40 (2), 75-88, 2005. Cebul, Randall D., et al. Organizational Fragmentation and Care Quality in the U.S. Healthcare System. The Journal of Economic Perspectives 22 (4) (2008), 93-113. The Henry J. Kaiser Family Foundation. Healthcare Costs: Key Information on Healthcare Costs and their Impact. Kaiser Family Foundation. 2012, PDF The Henry J. Kaiser Family Foundation. Summary of New Health Reform Law. Focus on Health Reform. 2012, PDF Read More