Healthcare accounts for a remarkably large slice of the United States (U. S. ) economic pie. In 2006, the National Health Expenditure (NHE) of the U. S. grew 6. 7% to $2. 1 trillion or $7,026 per person and accounted for 16% of Gross Domestic Product (U. S. Department of Health and Human Services). Each year health-related spending grows on average 2. 5 percentage points faster than U. S. GDP since 1970. These cost increases have a significant effect on the way households, businesses, and government agencies conduct their affairs.
Health inflation puts pressure on businesses who offer insurance coverage to their employees, inhibits individuals from purchasing their own coverage, can be a major financial burden to families, and takes an increasing share of government budgets and taxpayer dollars. According to the Census Bureau, around 84% of citizens have some form of health insurance either through their employer (60%), purchased individually (9%), or provided by government programs (27%). The health sector in the United States is diverse and is characterized by a mix of public and private funding and provision.
In this work, we first look at the various public programs, and second the private programs and thereafter we consider the criticisms facing the U. S. healthcare. Two public healthcare programs are dominant in the United States, Medicare and Medicaid, and both were created in 1965. Medicare is the federal government’s health program primarily serving Americans who are over age 65 while Medicaid is a joint federal-state program designed primarily to finance health care for the poor.
Medicare beneficiaries and Medicaid recipients are entitled to outpatient medical care from physicians and hospital care from the same medical professionals who provide health care to individuals with private health insurance. Medicare is funded in part by a flat payroll tax of 2. 9 percent on nearly every American worker and, beyond that, by general federal revenue. Most recipients pay a monthly premium that now stands at $88. 50 during their working years, which entitles them to participate in the Medicare hospitalization program when they reach age 65.
Medicare is very popular with pensioners and politicians, despite growing problems with the program’s benefit structure and looming funding shortfalls. Medicare beneficiaries are free to seek medical care wherever they choose. In 2006, Medicare spending grew 18. 7% to $401 billion or 19 percent of total NHE (U. S. Department of Health and Human Services). Medicaid spending fell 0. 9% to $309 billion in 2006, or 15 percent of total NHE. The costs of the Medicaid program are financed primarily through federal and state general revenue funds.
Accordingly, there is great variation across the country over who is eligible for Medicaid, what services are covered, and how much doctors and hospitals will be paid for treating Medicaid patients. While Medicaid recipients theoretically have access to a very rich package of health services and are entitled to receive healthcare services through the same public and private hospitals that serve the general public, their access to private physicians often is limited by Medicaid’s commonly very low payment rates to private physicians.
Seventy-two percent of Americans, or 200 million people, were covered by private health insurance in the year 2000. Until the 1990s, most private health insurance coverage was provided through a fee-for-service model that allowed patients to visit the doctor or hospital of their choice. As health insurance costs began to rise in the 1990s, many employers hired health plans to manage their employees’ health care by controlling access to care and lowering costs.
An ICR/Associated Press poll shows that 88 percent of Americans are satisfied with the quality of their health care, but they are dissatisfied with managed care and other bureaucratic barriers. In 2006, private spending grew 5. 4% to $1. 1 trillion and accounted for 54 percent of total NHE. Managed care puts administrators in charge of guiding patients through a health care network with a goal of managing costs. Nearly nine of out ten American workers or their dependents are in some type of managed health care plan (Employee Benefits Research Institute).
Health Maintenance Organizations (HMO’s) and Preferred Provider Organizations (PPO’s) are examples of such managed care arrangements. HMO’s generally provide care through hospitals and clinics that the plans own, with physicians, nurses, and other personnel employed by the HMO. While PPO’s involves networks of doctors and hospitals that have agreed to treat participants in these plans for reduced fees based upon pre-negotiated contracts.
While employers instituted managed care to control rising health costs, many Americans have become frustrated with a system that essentially places barriers between them and the medical care they want and/or need. Originally offered as a non-wage benefit to attract workers, employment-based health insurance is by far the dominant vehicle through which the majority of Americans receive health care. Americans receive a generous tax benefit if their employer purchases their health insurance policy for them.
The full value of the policy, which may be as much as $10,000 a year, is protected from income and payroll taxes. This subsidy creates a strong incentive for people to obtain private health insurance through the workplace in order to take advantage of this tax preference. The main problem with U. S. health care is affording coverage due to rising costs. In 2005, 46 million Americans including nearly 9 million children are uninsured or underinsured according to the Census Bureau. This is about 15.
9 percent of the population, which has been the general range now for more than a decade (Cohen and Levin, 2007). In the past six years, health insurance premiums are rising four times faster than wages. Also, the government spends too little on prevention and public health. The nation faces epidemics of obesity and chronic diseases as well as new threats of pandemic flu and bioterrorism. Yet despite all of this less than 4 cents of every health care dollar is spent on prevention and public health (Obama).
The book, Healthcare Costs: A Primer notes that almost half of health care spending is used to treat just 5 percent of the population. Moreover, prescription drug spending is 10 percent of total health spending, but contributes to14 percent of the growth in spending. According to the Institute of Medicine of the National Academy of Sciences, the U. S. is the only wealthy, industrialized nation that does not have a universal health care system. With regards to overall performance, the World Health Organization (WHO) in 2000 ranked the U.
S. health care system 37th among 191 member nations included in the study (World Health Organization). Another rising concern is the current employment-healthcare system that now covers roughly 180 million Americans. Although it works well for the vast majority of them, but the link it creates between ones job and ones health coverage, and the peculiar economic inefficiencies it yields, result in ever-mounting costs for employers and, in an age of high job mobility, leave many families anxious about future coverage even in good times.
U. S. Healthcare is the most expensive in the world and there are widespread concerns about its viability, especially as so many people remain uninsured. The U. S. health care system had failed to reach its full potential because it had failed to increase access, decrease costs, improve quality, enhance patient safety, and bolster public health communication to improve peoples lives (Sunil). Today’s U. S. health care system needs a lot of work.
Those who finance it, ran it, work in it, and benefit from it, are all calling for reform and many are coming to realize that pouring additional millions of dollars into malfunctioning systems only perpetuates their problems. U. S. healthcare is needs a fix and America should act now.
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S. Department of Health and Human Services. “NHE Fact Sheet”. Center for Medicare and Medicaid Services. 5 May 2008. <http://www. cms. hhs. gov/NationalHealthExpendData/25_NHE_Fact_Sheet. asp#Top Page>. U. S. Census Bureau. “Income, Poverty, and Health Insurance Coverage in the United States: 2006. ” Aug 2007. 4 May 2008. <http://www. census. gov/prod/2007pubs/p60 233. pdf>. World Health Organization. “World Health Organization assess the world’s health system” 21 June 2000. 4 May 2008. <http://www. photius. com/rankings/who_world_health_ranks. html>.