The U.S Economy and Health Care Essay

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Growing health care expenditure contributes greatly to the American government’s financial wellbeing. Citizen burden when it comes to funding these expenses, in the form of growing taxes and increased long-term loans, constitutes the chief effect of this upsurge in governmental health expenses. Dealing with this issue necessitates active participation of every healthcare worker in process map creation and estimation of resource expenses surrounding patient treatment throughout the care cycle. Suggestions for curbing growing healthcare expenses include avoiding preventable ailments and bringing about healthcare value improvements through the: 1) Elimination of needless process and process variations which fail to add value; 2) Delivery of appropriate processes at appropriate places, with relevant clinical capabilities suited to the processes; 3) Quicker cycle time; 4) Optimization over the complete care cycle; and 5) Reimbursement reinvention.


Tackling health care is one of the most significant economic issues in America today. The Brookings Institute reports that health care spending in the United States has doubled as a share of GDP since the 1980s, largely due to changes in insurance plans, provider payment methods and public sector programs (Boddy et al., 2015). The latter are in particular important – federal spending on healthcare is increasing rapidly. Demographic shifts bear some of the blame for that – the baby boomers are a massive generation aging into Medicare territory, a demographic time bomb on the nation's finances, given that seniors are the largest segment of health care spenders and that end-of-life care in particular is expensive (CBO, 2017). This paper will examine the impacts of health care on the economy, and seek to determine if there is a better pathway to health care delivery.

Impacts on the Economy

The exorbitant healthcare expenditure in America, and its consistent growth, is a widely -examined and -discussed topic for many years. Of late, increasing concerns have been voiced, with hearsay as well as research evidence indicating constant swift increase in expenditure can pose a threat to the nation’s economy. But examining the aforementioned possible association is complicated. Healthcare expenditure has multifarious and multifaceted influences on the economy, which vary across populations and economic sectors. Analysts, for instance, observe that healthcare expenditure hinders economic development in general but has the potential to promote economic prosperity and development in particular economic segments as well (Sood, Ghosh & Escarse, 2007). Comprehending these impacts of healthcare expenditure necessitates evaluation of these elements.

The CBO notes that federal health care program spending is increasingly rapidly, and with that comes the need to fund that spending. It notes that the Affordable Care Act has served to reduce the cost burden of health care on the economy, in particular on consumers, but only by means of slowing the growth in health care costs; not reversing them. The Office studied the potential impacts of ACA repeal, and found that repeal would deliver a short-run gain in the federal deficit, but by 2018 would start a process of sharply increasing the deficit. One of the reasons for this is that many Americans would, instead of having regular medical coverage, become reliant on emergency wards for their primary medical care (CBO, 2015). This, amid dramatically reduced coverage for tens of millions of Americans.

The main drivers for increased health care are an increase in chronic illness, such as diabetes and heart disease, diseases suffered by almost half of Americans and very expensive to treat (Amadeo, 2017). The sickest 5% of the population account for 50% of health care costs, while the healthiest 50% of the population account for just 3% of health care costs. Most of the former group are Medicare patients, which is precisely why federal share of health care expenditure continues to rise.

Increased healthcare expenditure, on the whole, which encompasses Medicaid and Medicare expenditure, regulates the funds investable by entrepreneurs and the government at the federal level in the areas of energy problem resolution, development of export products, infrastructure development, creation of technology capable of facilitating clinical breakthroughs, etc. (Folland, Goodman & Stano, 2016). The disparity between economic development on the whole (3.6%) and increased healthcare expenditure (9.3%), implying an increased percentage of an increased number of resources is committed to the healthcare sector as compared with other goods, has potential effects on the private as well as public sectors (Sommers & Gruber, 2017).
The latter, which comprises of municipal, state and federal governments encounters expenditure growths at a swifter pace as compared to income growth, thereby enhancing scrutiny on healthcare and related expenditure. Organizations witnessing growth in healthcare costs might avoid increasing wages, cut down other spending, demand more cost-sharing by workers or decrease healthcare insurance benefits. With increased expense-shifting to customers, healthcare service value will be weighed more closely as compared to other services.

According to some economists, swiftly increasing healthcare expenditure increases inflation but decreases overall employment and gross domestic product (GDP). Healthcare expenditure impacts on rate of interest and the comparative effect on industry-wide economic performance is reliant on funding source for federal healthcare expenditure. The findings of a research that relied on econometric models suggested that deficit funding had a disproportionate adverse impact on the capital goods and export sector; further, payroll tax funding had a disproportionate negative impact on the consumer service sector (Folland et al., 2016).

But one must bear in mind the fact that certain economists deem healthcare expenditure growths to have at least a neutral, if not a positive, economic effect. Here, healthcare expenditure growths are considered a transfer.

Government spending

Growing health care expenditure contributes greatly to the American government’s financial wellbeing. Public financing for the year 1960 made up roughly one fourth of overall healthcare expenditure. By the year 2002, the above figure grew almost twofold (roughly 46% of overall expenditure). The increase kept up and the federal government covered a substantial percentage, particularly after Obamacare was enacted (Sommers & Gruber, 2017). This growth is attributed largely to Obamacare, population aging and expansion of Obamacare’s benefits and eligibility.

Citizen burden when it comes to funding these expenses, in the form of growing taxes and increased long-term loans, constitutes the chief effect of this upsurge in governmental health expenses. Besides decreasing families’ and organizations’ earnings allocated to other activities, growth in tax gives rise to incentives to participate in activities that help evade these growths’ impacts (Sommers & Gruber, 2017). Greater governmental borrowing for funding the above growth similarly affects resource availability for other undertakings. With interest rates mounting on account of governmental borrowings, families’ and organizations’ cost of capital grows as well. This serves to crowd out outlays in other activities.

Lastly, greater expenditure typically leads to growth in intergenerational wealth transfer from the population’s youth to older clusters.

International competitiveness of American goods

Technically, increased healthcare expenditure decreases American services’/goods’ competitiveness within global markets. Not varying any other element, growth in healthcare expenditure must be reflected by the cost of end product. Considering the swift rise in healthcare expenses within other nations, this may lead to comparatively costlier services and goods (Graham, 2016). But acquiring a quantitative estimation of how far healthcare expenses influence American interest measures including trade deficit is complicated.

OECD (Organization for Economic Cooperation and Development) figures for 2012 reveal that healthcare expenses made up roughly 15% of the nation’s GDP. On the other hand, Switzerland (the second highest nation) and Slovakia (the lowest nation within the comparison cluster) depict healthcare spending amounting to roughly eleven and six percent of national GDP, respectively (Graham, 2016). The above figures demonstrate an intense contrast across nations but transforming the above disparities into comparative service/product rates involves considering technology, employee productivity disparities, healthcare proportion of overall production expenses, and similar elements impacting relative product rates across nations.

Alternative views on the healthcare and the economy

Between 1960 and 2013, the percentage of America’s GDP allotted to the health sector increased more than threefold. But this didn’t affect the economy’s capacity of delivering superior per capita GDP outside of healthcare. PPP (purchasing power parity)-adjusted figures in nominal dollars between 1960 and 2013 are as follows: healthcare expenditure grew by 8,937 dollars whereas per capita GDP grew by 50,269 dollars. Therefore, per capita GDP in case of other services and….....

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Amadeo, K. (2017) The rising cost of health care by year and its causes. The Balance. Retrieved November 29, 2017 from

Boddy, D., Dokko, J. ,Nantz, G. &Schanzenbach, D. (2015). Six economic facts about health care and health insurance markets after the Affordable Care Act. Brookings Institute. Retrieved November 29, 2017 from

CBO (2015) Budgetary and economic effects of repealing the Affordable Care Act. Congressional Budget Office. Retrieved November 29, 2017 from

CBO (2017). Health care. Congressional Budget Office. Retrieved November 29, 2017 from

Folland, S., Goodman, A. C., & Stano, M. (2016). The Economics of Health and Health Care: Pearson International Edition. Routledge.

Fuchs, V. (2013). The Gross Domestic Product and Health Care Spending. New England Journal of Medicine, 369(2), pp.107-109.

Graham, J.R. (2016). U.S. Health Spending Is Not a Burden on the Economy. National Center for Policy Analysis. Retrieved from on 17 Dec. 2017

Kaplan, R. S., & Porter, M. E. (2012). THE BIG IDEA-How to Solve the Cost Crisis In Health Care. Harvard Business Review, 46.

Kemble, S. B. (2010). A Better Idea for United States Health Care - The Balanced Choice Proposal. Hawaii Medical Journal, 69(12), 294–297.

Podesta, J. (2017). Inclusive Economic Growth: Increasing Connectivity, Expanding Opportunity, and Reducing Vulnerability - Center for American Progress. Center for American Progress. Retrieved from on 11 Nov. 2017.

Sommers, B. D., & Gruber, J. (2017). Federal Funding Insulated State Budgets From Increased Spending Related To Medicaid Expansion. Health Affairs, 36(5), 938-944.

Sood, N., Ghosh, A., & Escarse, J. (2007). The Effect of Health Care Cost Growth on the US Economy. Office of the Assistant Secretary for Planning and Evaluation, US Department of Health and Human Services. Retrieved from on 17 Dec. 2017.

Wang, F., Wang, J. and Huang, Y. (2017). Health expenditures spent for prevention, economic performance, and social welfare.

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