Health Care Costs Impact on Economy

Health Care Costs Impact on Economy

Some experts disagree that the high cost of health care is not a serious problem, but the high and rising costs are a major issue. The high cost of new technologies and the aging population all play a role in the rising costs of health care. The rising health care costs have become a huge concern for almost everyone, including the general public, federal and state governments, and employers who purchase health care for their employees. Employee sponsored insurance, Medicare, and Medicaid programs all effect the health spending growth. In 2014, the Affordable Care Act (ACA) will take effect to provide low and middle income people with buying coverage through the healthcare market. With the growing numbers of uninsured Americans, the ACA may help financing system in the United States improve in the future. The health care industry is the largest service employer in the country. The health care industry ranks second after total durable and nondurable goods manufacturing according to the United States Census Bureau, 2004-2005. In 2004, $1.878 trillion was spent by Americans on health care, comprising 16 percent of the gross domestic product (GDP) and amounting to $6,280 per capita (Williams & Torrens, 2010). The United States spend far more on health care than other countries. For example, Japan and the United Kingdom spent only about 7.6 percent of their respective GDPs on health care in 2000-2001. Canada, France, Germany, and Switzerland used similarities as the U.S. with percentages such as 9.7, 9.5, 10.7, and 10.9 respectively of their GDP limits on health (Williams & Torrens, 2010). Only 4 percent of the GDP was dedicated to health care prior to World War II. That number increase by another 12 percentage points by 2004 (Williams & Torrens, 2010). The increase in the number is from excess medical inflation and the aging of the U.S. population. Health care has continually grown as the economy has slowed down. There are several factors that may have contributed to disproportionate growth of health care spending relative to the growth of GDP. These factors include (1) rapid development and dissemination of medical technology that expanded the treatment of disease, (2) rising expectations about the value of health care services, (3) government financing of health care services, (4) the nature of third-party reimbursement, (5) the growth in the proportion of elderly, (6) the lack of competitive forces in the health care system to increase efficiency and productivity in the delivery of services, and (7) the misdistribution of physicians and other providers of health services (Williams & Torrens, 2010). As the economy recovers, health spending is likely to trend upwards while growth rates are unlikely to return to the double digit levels that were seen in the past. Spending on health care in the United States has been growing faster than the economy for many years, representing a challenge not only for the government's two major health insurance programs- Medicare and Medicaid- but also for the private sector. As health care spending consumes a greater and greater share of the nation's economic output in the future, Americans will be faced with increasingly difficult choices between health care and other priorities. However, a variety of evidence suggests that opportunities exist to constrain health care costs without adverse health consequences. If underinsured or uninsured population does increase, we will see a tremendous increase in health care costs. According to the United States government and correspondence from the White House, "we estimate that slowing the annual growth rate of health care costs by 1.5 percentage points would increase real gross domestic product (GDP), relative to the no-reform baseline, by over 2% in 2020 and nearly 8% in 2030. For a typical family of four, this implies that income in 2020 would be approximately $2,600 higher than it would have been without reform (in 2009 dollars), and that in 2030 it would be almost $10,000 higher (www.whitehouse.gov, 2014). Under more conservative estimates of the reduction in the growth rate of health care costs, the income gains are smaller, but still substantial. Expanding health insurance coverage to the uninsured would increase net economic well-being by roughly $100 billion a year, which is roughly two thirds of a percent of GDP (www.whitehouse.gov, 2014).

Impacts from Health Care Legislation

The Affordable Health Care for America Act, H.R. 3962 is expected to provide health coverage to nearly 96% of legal residents under the age of 65, at a net, fully offset cost of $894 billion over ten years. The legislation makes significant insurance reforms, expands the Medicaid program to more needy individuals, provides assistance to individuals and small businesses, and creates a Health Insurance Exchange containing a public option wherein individuals, small businesses and eventually large businesses could purchase health coverage. The legislation contains many provisions that would impact the physical and mental health of vulnerable children, youth, and families (www.cwla.org, 2014). The ACA leaves in place the so-called individual mandate -- the requirement on Americans to have or buy health insurance beginning in 2014 or face a penalty -- although many are exempt from that provision. In 2014, the penalty will be $285 per family or 1% of income, whichever is greater. By 2016, it goes up to $2,085 per family or 2.5% of income (http://www.cnn.com/2012/06/28/politics/supreme-court-health-effects/, 2014). Uninsured young adults would have the option to stay on their parent's health insurance until age 26. About 2.5 million young adults from age 19 to 25 obtained health coverage as a result of the Affordable Care Act, according to the U.S. Department of Health and Human Services. Before the absolute prohibition on discriminating based on pre- existing conditions, starting January 1, 2010, plans could only look back for pre-existing conditions for 30 days (rather than the current 6 months) and could only exclude benefits for 3 months (as opposed to 12) (www.cwla.org , 2014).

There are a few factors that this author supports for the health care act. The fact that health insurers can no longer impose lifetime limits on benefits is a huge plus for some individuals. Individuals who have been uninsured for several months or denied coverage due to a pre-existing condition could receive coverage through a new $5 billion program. The program will end when funds are exhausted or when the Exchange is created (www.cwla.org , 2014). Starting in 2014, the law makes it illegal for any health insurance plan to use pre-existing conditions to exclude, limit or set unrealistic rates on coverage. The pre-existing condition clause is a plus