Health Care Spending Case Study

American health care system is one of the most complicated and expensive health care systems in the world. It has unique model of planning and management for providing medical services for different social groups. In contrast with other countries where health care is generally provided by government only, the United States of America presents another slant on the question.

Traditionally, medical establishments and institutions are managed by businesses of private sector. Americans get their health insurance not only directly from the government, as it is, for example, done for employees who work in public sector, but also through several social insurance programs, such as Medicaid, Medicare etc., which are established and administered by the U.S. federal government. Although medical services in the United States are defined as of high quality, they still remain expensive and not available for everyone. Moreover, there are many other issues presented in the system which need immediate solving, and one of them is health care spending.

In recent years the level of health care spending in the US has significantly slowed down. In 2010 the sum of more than $2,6 trillion was spent on health care as compared to $724 billion spent in 1990 (National Health Statistics Group, 2012). This is a big step towards reducing medical costs for American nation. But in spite of such tendency, health care expenditures are expected to grow due to the economic situation the country is in at these days.

Since 2001 the increase of health coverage for family premiums sponsored by employers was about 96 per cent. The U.S. national health insurance programs, such as Medicaid and Medicare, got many people enrolled because of unstable economic situation which caused low incomes and high rate of unemployment. It led to unexpected increases of spending and put a new burden on the federal and state budgets. But generally, the statistical data presented above stated the decrease of health care spending in 2010. Anyway, the U.S. spending on health care remains the highest in the world, even if to take into consideration such countries as Germany, United Kingdom or Japan.

Currently, the level of national health care expenditures continues to grow slowly.  More than 31 per cent is spent on the hospital care. 20 per cent is spent on physician and clinical services. 14 per cent is spent on the health care administration, 10 per cent on the drugs retail, 6 per cent on the investment and 19 per cent on other professional services (Martin, 2012). The given statistical data have shown that there are three major segments which all together cover more than 50 per cent of total health care expenditures. These are hospital care, physician and clinical services and health care administration. Analyse each of them separately, we can define whether the spending on them is rational or no, and whether the nation should cut any costs in order to stabilize the situation.

In 2012, 65 per cent of American hospitals have significantly increased their spending on the information technology, and they are likely to continue this tendency in 2013. The major reasons for this are the transition to electronic health records, and the necessity to switch to ICD-10 codes. But these are not all the factors that caused great spending on the hospital care.

Many hospitals have upgraded their medical equipment. Many of them spent much on disposable products which prevent infections, etc. Some hospitals plan to become accountable health care organizations, which means large additional spending again. Therefore, according to the mentioned above, the nation should cut spending on the hospital care because a lot of funds go to the needless things. For example, there is no need to buy more new expensive medical devices because every hospital is already equipped quite well.

Another health care segment which shows a high level of spending is physician and clinical services. In 2011 the level of spending reached $540 billion. More than 80 per cent of the total spending for physician and clinical services was accounted for physician services, and this per cent keeps increasing. The reason lies in a large number of employed physicians and different diagnostic procedures and tests as well as defensive medicine that they do not always prescribe due to an actual necessity. It tells about wasteful spending which on the basis of the data provided should be cut.

Administrative expenses are estimated at the level of 14 per cent which is 7 per cent more than it was estimated in 2010. It covers the costs of private insurance, such as reserves, profits and losses, taxes, administrative costs, etc., and the costs of national social health insurance which is administered by the U.S. government. Many American analysts believe that the problem lies in the concept of mixed health care system which is basically public and private at the same time (Hsiao, 2011). Their thoughts meet the idea which states that such a mixed system makes ways for additional high health care spending. That is why there is a necessity to reconsider administrative expenditures and cut them where it could be possible.

Health care system of the United States is fundamentally different from those which are established in other countries in the world because the U.S. health care does not have a national health insurance plan. This is the very reason why public health care needs are generally covered by various payers. These are social insurance programs, such as Medicaid which was created for people who have low incomes, Medicare has been established for those who are 65 and older and people who are with disabilities; provider sponsor organizations, insurance companies and patients themselves (out-of-pocket payments). In such a manner, almost 25 per cent of public health care expenditures are paid directly by people who use medical services. The other 75 per cent is covered by the payers which have been just mentioned above. Further, they paid more than 95 per cent of hospital health care and only 60 per cent for drugs and other services (Lave, 2010). Therefore, we see that more than a half of medical services are paid by different governmental programs and insurance companies but still there is left 25 per cent of health expenditures which are paid by patients. They mostly pay for inpatient hospital costs and outpatient clinic costs.

The future of health care system in the United States is foreseen as full of brand new innovations, and along with this it will bring out more increases of expenditures. There are several economical needs of the health care system. Two of these are the following: changes in insurance coverage which is moving more towards national health insurance cover but it should not be necessary a single-payer plan, and new ways of improving control of spending on different segments of health care system. As we analyzed above, these two are urgently in need of reconsideration and improvement because a big part of health care spending in these segments is wasteful.

Therefore, in order to reform health care system and satisfy its economic needs, there must be many steps done. One of these steps is to design and establish an absolutely new health care insurance plan which will be appropriate by the U.S. government as well as by people. Another question is potential source of financing for this purpose. Basically, it could be financed by the government if to reduce its spending on health care.

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