IMPACT OF THE COST OF HEALTH CARE ON THE U.S ECONOMY Health care in the U.S. is a subject of heated debate in Congress because the federal government is spending trillions to insure Americans and regulating private health insurance companies and the Gross Domestic Product (GDP) is a big factor in this debate. As America becomes richer, Americans are growing poorer due to the rise of health care. According to Kovner and Knickman (2010), the Gross Domestic Product is “the measure of monetary value of all the finished goods and services produced in the country over some fixed area of time usually annually” (p. 68). The health care portion of the GDP has been growing at a rapid pace; the …show more content…
share in 2010 was at 16%, compared to 8.7% in the United Kingdom and 11.2% in France. From 1960 to 2008, the yearly U.S. health care spending went up from $27 billion to $2.3 trillion. During that time period, the U.S. population increased from 186 million to 304 million. Health care spending grew at a much faster pace during this time than did the population. Astonishly, per capita spending on health care rose from $148 per person in 1960 to a whopping $7,681 per capita in 2008, twice what is paid in Canada per capita. In 1960, health care spending was only 5.1% of the GDP and by 2008 it has risen to 16.2%. Federal estimates are that U.S. health care spending will more than double by the year 2014 (which we are almost there), and by 2015 will consume 20% of the GDP (Kovner & Knickman,2010, p.258). In the next seven years, spending on health care is expected to grow at a rate of 5.8% per year. The federal government’s portion is expected to grow from 27% to 31% in 2020. The funding that comes from local, state and federal governments is also expected to jump by four percentage points, going from 45% to 49% of the total bill. In the past ten years, the rise in health care spending has been more than 2 percentage points greater than the GDP increases. In the New Scientist (2009), Michael Chernow and his colleagues at Harvard Medical School in Boston have calculated what the long-term impact of this increase will do over time, “If health care costs continue to grow at this rate, they will consume 150% of the extra wealth that Americans would expect to gain as the economy grows between now and 2050” (p.6). At this increasing rate every year, health care spending is going to take an even larger portion of the GDP which takes away spending for other goods and services such as economic development, housing, and education. This is what economists call the “opportunity cost”, because one dollar spent on health care is taken away from some other expenditure. The question that Americans now have to ask themselves is how we can find a more cost-effective and acceptable means to maintain our current level of health care services, be able to provide greater access to these services and improve quality of care. To summarize, international data on spending shows that the U.S. health care system is the most costly per capita in the world. It is growing at a pace faster than any other country and we spend the highest percentage of our GDP on health care than any other country.
AREAS IMPACTED BY HEALTH CARE LEGISLATION Currently, there are many areas of health care that are and will be impacted by the new health care legislation. Hospitals and insurance companies will be some of the hardest hit industries hit by this new legislation. “Some hospitals will be winners and some will be losers”, according to Tom Jones, President and CEO of the West Virginia United Health System. The question is, is it going to better for the patient or worse and that is going to vary from hospital to hospital. Jones has stated that there are pros and cons to the new legislation one being is the closing of the “doughnut hole” gap for seniors and the insuring of 32 million Americans (as cited in Shaner, C.,2010, p.14). Another pro of the new legislation will have on hospitals according to Melissa Lockwood, CEO of Preston Memorial Hospital in Kingwood, West Virginia “is that additional insurance coverage will have the greatest impact on the critical access facility, which is reimbursed 101% of reasonable Medicare costs and 100% of reasonable Medicaid costs. This will provide payments to hospitals for the uninsured that we now have to write off as bad debt or charity care. Medicaid will be expanded so people who do not qualify now will receive Medicaid benefits in the future, and others will purchase insurance through other means” ( as cited in Shaner, C., 2010, p. 14). As many pros as there are to the new legislation there are cons as well and one is the revenue that comes into hospitals. The new legislation is forecasted to cost $940 billion over the next ten years, which will be paid through increased taxes and through insurance requirements. The new bill eliminates increases due to inflation in hospital charges and reduces disproportionate share payments made to hospitals that treat large numbers of patients with federal insurance and the uninsured. What cannot be forecasted is if income from private health insurance companies will offset the decrease in the disproportionate share payments. Another con to this legislation is that it may cause some facilities a decrease in funding and they may have to cut back on services and make patients’ waits longer. With everyone having a form of health insurance this could create problems by encouraging more people to seek medical treatment. The question that many medical facilities are asking is “Will there be an adequate number of doctors and health care workers to treat everyone?” Health insurance companies will be affected by this new legislation as well. Under the Affordable Care Act (HR 3962) it provides $1 billion in resources to each state to oversee and rein in on price gouging by insurance companies. The plan proposes to end discrimination by insurance companies against the sick and put a cap on what Americans pay out-of-pocket for health care. The legislation will put stricter regulations on insurers who place profit over patients and strengthen competition between companies; therefore bringing down the costs for Americans. Lastly, it will provide an expansion to prevent further waste, fraud and abuse.
ARGUMENT IN SUPPORT OF THE AFFORDABLE CARE ACT A subject that is in support of the Affordable Care Act is that the reform bill will include a way to pay for long-term care if needed. The bill also will place tougher penalties on long-term facilities that fail to provide adequate care to their patients and fail to provide training to employees to increase the quality of care given. The provision is called the Community Living Assistance Services and Support (CLASS) Act (HR 3001). This act will give Americans a payment option for long-term care and supports they do not need to become impoverished and have to sell of everything that they own in order to be covered by Medicare/Medicaid. It will work like this, Americans that are working will be automatically enrolled in the plan (they can opt out if so choose). Employees of companies that choose not to participate can enroll by another means set up by the federal government, such as a mail-in coupon. Payments will then be placed in a “life independence account” on behalf on each enrollee which will be managed by the Department of Health and Human Services (HHS). Benefits will then be paid out of a trust account of their premiums and the interest earned. Monthly premiums will be decided by HHS with the objective of maintaining it for 75 years. Americans below poverty level and full-time students will only have to pay a nominal premium. Benefits qualify for those 18 years or older and have contributed to their account for at least five years. Eligibility will only be for those individuals that are not able to perform two or more activities of daily living such as eating, bathing, and dressing and individuals that have a cognitive disability that require supervision and hands on assistance such as brain injuries, Alzheimer’s, multiple sclerosis, and mental retardation. Benefits will be then paid out when the condition is expected to last for 90 days or more. Individuals will also receive a cash benefit based on the severity of their condition (Gatty, B., 2009, p. 16-36). This provision will work together with Medicare and other long-term services. It is intended to be a supplement of coverage by providing a way to allow a person with a sickness or disability to remain independent.
FLAWS OF THE AFFORDABLE CARE ACT As there are pros for the Affordable Care Act, there are flaws as well which is a hot topic in politics and for people in the health care industry. The con about it is that on paper it is about 4,000 pages long and is estimated to cost a trillion dollars to be successful. A flaw is that in order for it to work it depends on a combination of taxation, fines, penalties cost savings, reallocation of resources within the current health care system, and a willingness of doctors and patients to be a part of new government regulations which most of the time does not sit well with Americans who like little to none government intervention. In the U.S. News Digital Weekly (2010), Bernadine Healy states in her article “Fatal Flaws in Health Reform Resuscitation” that they are two flaws to the new regulation. The first one being, is the Affordable Care Act relies heavily on the ability to drain money from Medicare (which by the administration’s own accounting professionals is expected to go bankrupt in the soon to be future). She calls it “voodoo economics” and to expect with the financial need it will cost because of the aging baby boomers does not have the possibility to be able to cough up a trillion dollars to pay for health reform. Much debate has been argued in ending fraud and abuse, but it cannot be successful without a hike in Medicare payroll taxes on Americans (who will not be happy), higher Medicare premiums and a big bit out of care our elderly receive now. Health reform proposes to save the government money by keeping the seriously and chronically ill elderly from being readmitted to a hospital on a frequent basis which is a major source of Medicare expenditure. This all sounds great, but it is easier said than done, both medically and ethically. Patients who can be “fixed” up within a few days and return home are not candidates for hospice. So, where are they supposed to go? The new health care plan threatens to cut reimbursements to doctors and hospitals with high readmission rates or they will get labeled as a poor performer without any of the circumstances being analyzed (p. 17). Another flaw is that a source of funding is to come from ending Medicare Advantage, which is a costlier option that covers 10 million elderly in private health care facilities. Yes, it will save money but elderly Americans will suffer, especially when millions of those elderly Americans in Florida are exempt. Another cause of concern is that the new plan is to put many of the uninsured on Medicaid which will force each state to pay for 50% of the cost. The problem is that Medicaid is bankrupting many states, which unlike our federal government cannot print money. This in return, will mean higher state income taxes which will hit the middle class the hardest. Fixing these flaws will take time but it needs to be a bipartisan effort. This may be able to be executed by targeting insurance companies and providing Americans a system with no denials to access, no picking of the healthy over the sick, and have an open market where Americans can search anywhere in the country to find the best policy at the best price instead of one-size-fits all coverage.
TYPES OF HEALTH INSURANCE AND THEIR SOLVENCY There are three main types of health insurance they are employer-sponsored group health insurance, individual health insurance and state-sponsored health insurance
I.
Employer-sponsored group health insurance- This type is the most preferred type of insurance since an employee pays only a portion of the premium while the employer pays the other portion. It provides a better kind of services and coverage and it cannot exclude recipients based on age or a pre-existing condition. The solvency of this type depends on the increase rate over the next thirty years. Since the costs of insurance are increasing yearly, the number of Americans with this type is decreasing. According to Kovner and Knickman (2010), by the end of 2002, more than 64% of Americans were covered by this type. Since then, that number has decreased reaching 61% in 2008 (p.56). If unemployment continues to stay at double figures that 61% will continue to decline as people are not able to afford this type due to not having employment and causing many more to go on …show more content…
Medicaid.
II. Individual health insurance- This type covers COBRA and Medicare Part D and is the most costly since the individual has to pay the full price of the premium. You can customize this type to your needs and lifestyle. This type goes where you go, whereas, with group insurance you may be switched to another company and pay either less or more according to what the employer decides to do. I see this type of insurance phasing out or being only for the wealthy in the next thirty years because of the aging population. The premiums for this type increase as you age and with the aging population increasing people will not be able to afford this type because of their strict guidelines and penalties for pre-existing guidelines. Even under the Affordable Care Act, insurers will still be able to vary their rates based on age.
III. State-sponsored health insurance-This type consists of Medicare and Medicaid and is valuable to low-income families, the unemployed, employees that cannot afford group insurance, and senior citizens. The benefits of this type are that care can be free or very cheap. It does not deny anyone because of a pre-existing condition. The solvency of this type has been under fire recently because of the state of the economy The Congressional Budget Office (CBO) predicts that by 2050 these programs will consume 20% of the economy. Medicaid pays out more in benefits than it collects and if this trend continues, the money will be gone by 2017. The only way to save these programs is massive tax increases and serious cuts in defense spending. The government has been borrowing from other funds to finance these programs.
PRIVATE HEALTH INSURANCE AND THE PRINCIPLES OF INSURANCE There are two basic principles of insurance which are it is a means of transferring risk from an individual to a group and losses are to be shared on some equitable basis by all members of a group.
According to Williams and Torrens (2009), health insurance has violated these principles because when health insurance started it was bought to protect a person from a catastrophic loss requiring hospital care. Over time, private health insurance has violated these principles because the loss is supposed to be out of the ordinary, but now they cover events that are common and the loss that is insured is not one that is catastrophic or dreaded. Also, losses are supposed to independent events (i.e. person to person, event to event) so insuring against infectious diseases is a violation because it implies a great deal on dependency on insured losses. Lastly, the loss should be of an unimaginable magnitude that there is no way one could budget for it but insurance pays out for vision and dental care
(p.110).
EVOLUTION & PROMOTION OF HEALTH AND DISEASE PREVENTION The evolution of health and disease prevention started in the eighteenth century, where it was limited to certain cities. This was when institutions came about to contain and quarantine people who were suspected of being contagious. In the nineteenth century the “the great sanitary awakening” came about and health focused on the improvement of social and environmental conditions such as housing, water supply, and sewage disposal. In both centuries, health prevention was carried out by cities and the local governments. In the twentieth century, health and disease prevention turned to the individual such as immunization of children. This is when the states and federal government starting taking control by implementing the Social Security Act which gave aid to local and state health departments. It was not until 1953, that a cabinet-level department was established to oversee the country’s health which was the Department of Health and Human Services. Then in the 1960’s, Medicare and Medicaid came about which has had the greatest impact on the U.S. health care system because it gave people the accessibility for health and disease prevention.(Williams & Torrens ,2009, p.146-147).
REFERENCES
Gatty, B. (2009). House healthcare reform bill includes LTC provisions. Long-Term Living: For the Continuing Care Professional, 58 (12), 16-36.
Healy, B. (2010). Fatal Flaws in Healthcare Reform Rescuitation. U.S. News Digital Weekly, 2 (6), 17.
Kovner, A.R., & Knickman J.R. (2010). Health Care Delivery in the United States. New York, NY: Springer Publishing Company.
Shaner, C. (2010, March 28). Hospitals Cautious on Reform: Officials: Impact Will Vary Between Facilities. Dominion Post, The (Morgantown, WV).
Williams, S. J. , & Torrens, P.R. (2009), Introduction to Health Services. Mason, OH: Cengage Learning.
Health care costs. (2009). New Scientist, 203(2726), 6.