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Health Care Spending in the U.S.


In its quest to improve accessibility and the quality of health care services, the U.S. government has experienced a significant increase in healthcare spending. The rising cost of health care in the country has become one of the most contentious issues in the public realm. The point of contention is attributed to the government’s inability to control health care costs. It is estimated the current health care expenditure is higher compared to the expected GDP growth rates. Therefore, the country should adopt effective ways that can be used to control the increasing expenditure at the national and federal levels (Cardon & Showalter, 2007). Based on these observations, this study looks at the issue of health care costs in the U.S.

Current National Health Care Expenditures

Currently, the health care expenditure in the U.S. is higher compared to the earnings of the workforce in the country and expands at a higher rate than the economy of the country. Unlike other developed countries in the world that spend approximately 8.5 to 10.5% on the higher side, health care expenditure in the country has risen to 16% of the GDP. This figure translates to $ 14 trillion of the GDP (Cardon & Showalter, 2007). For the next 15 years, expenditure on health care is expected to increase if the government does not take proper steps to control the problem. The causes of the problem have been attributed to increased rates of duplicative care among the citizens, low productivity among the health care workers, lack of monitoring strategies to control Medicaid expenses, poor use of electronic medical records, poor use of insurance coverage, and uncontrollable pharmaceutical costs (Vistnes, 2006).

Changes in government policies in health care have also raised the cost of health care. For instance, the increase in Medicare expenditure was caused by the government’s initiative to the subcontractor Medicare system to private companies. This practice was initiated by President Bush at the onset of the year 2008. Such strategies have forced the government to ensure a balance between the cost of public health and the number of funds paid to private insurers (Cardon & Showalter, 2007).

Status of Healthcare Expenditure

Based on the above information, it is important to note the current health care expenditure is too much since it is unsustainable for the country. The country’s spending on various elements of health has reached uncontrollable levels and should therefore be reduced. To cut the excess expenditure in healthcare, the government should ensure effective management of Medicaid services, proper control of both private and public health insurance, and ensure proper use of public health insurance such as Obama Care. Moreover, the government should control the pricing strategies adopted by the institutions in the health sector. For instance, to solve the current battle between employers and health insurers, there is a need to adopt transparent pricing approaches in the health sector. Health care prices charged by most insurers are very high and do not conform to the expected market rates in the country. There is a need to ensure that the healthcare system is focused on the outcomes where best administrative strategies are adopted to achieve efficiency (Cardon & Showalter, 2007).

Another stop that should be taken to reduce the expenditure in health care and make and ensure its sustainability is to embrace information technology. It is imperative to adopt electronic management of health records to improve the efficiency and productivity of healthcare workers. These approaches will play an important role in reducing the cost of operating the health entities’ care and medical programs in the country. Cost-sharing in the healthcare sector should ensure a balance between government expenditure and the cost incurred by low-income earners.

Funding of Public Health Care Needs

Public health care needs in the country are funded through various approaches. The most common approach is through Medicaid and Medicare programs. The two programs target individuals and families with low income. The Medicaid program is funded both at the national level and the federal level in the country. The national government through the congress determines amount of budget that is allocated to health care services. From the budget, the government determines the total amount of funds that are allocated to federal states (Heffler, 2002). During the inception of Medicaid, the government had the main objective of providing affordable health to U.S. citizens in the lower-income brackets. However, changes in health policies have forced the government to include permanent and legal residents in the health care plan. More changes through the Patient Protection and Affordable Care Act have forced the government to cover all residents in the country including adults with or without dependent children. However, these changes are expected to increase the level of health care expenditure in the country. Other sources of funding for public health care needs include senior hub initiatives established by the federal governments of various states. The programs supplement the funds provided by the Medicaid and Medicare programs.

Employer-based payers system is another program that is used to pay for the public’s health care needs. Such programs provide health care coverage to the employed individuals of various organizations in the private sector. The government also provides health care coverage to public civil servants in the country. The other category of funding is a private insurance program that is used by business people and other individuals who can afford private insurance programs. Other private health insurance programs include consumer-based health initiative programs that also provide affordable health care coverage to low-income earners in various parts of the country.

Percentages of the total funding by various payers can be expressed as shown in the table below (Heffler, 2002).

Payer Amount in %
Medicaid and Medicare 65%
Private Based Employer 20%
Government Based Employer 10%
Private Insurance 5%
Total Amount Spend in public health needs 100%

From the above table, it is evident that Medicaid and Medicare programs are the largest payers of the public’s health needs. This, therefore, shows that the government spends a lot of funds to ensure that the majority of the citizens are covered. Private employer-based coverage program also contributes a significant amount of funds to public health care funding. The amount of funds paid by private insurers is very low compared to other payers since most Americans cannot afford private health insurance. The coverage bracket mainly targets business people and other individuals who can afford private health coverage (Heffler, 2002).

Future Economic Needs of the Health Care System

Health care needs in the country will require significant reforms to ensure the sustainability of the health sector in the country. To reduce the current average family spending in health care from $ 19, 393 to $ 6,500 per year, the government will be forced to introduce reforms in the sector or risk payroll taxes that will only account for 38% of funds spent on Medicare. Without reforms, the budget deficit of the federal government is likely to increase to unmanageable levels. The reforms will also play an important role in improving the quality of health care and reducing deaths that result from chronic disease in the country (Cardon & Showalter, 2007).

Why Address the Needs

Health care needs must be addressed to improve the accessibility and the quality of health care services. Addressing the needs will enable the country to sustain its health care programs and ensure economic growth. The government will focus on other areas of development such as infrastructure and education. Economic health reforms are expected to increase the number of Americans who can access private health insurance from the current 8% to 25% by the year 2023. America is one of the countries in the world where citizens may succumb to bankruptcy due to high expenditure on health care. Expected changes in the health sector will play an important role in reducing such cases. Another area of economic interest is the issue of health care fraud, which has been associated with increased health care costs in the country. For example, Medicare fraud in the country is currently estimated at a cost of $ 30 billion per annum (Heffler, 2002).

How to Finance the Needs

Reforms in the health sector will enable the government to conduct proper budgeting of the health care needs in the country. The government will spend on areas that need improvements such as administration of the health sector and investment in electronic health records. The health needs will be financed through the federal budget and other public health entities through non-profit arrangements (Cardon & Showalter, 2007).


Cardon, J. & Showalter M. (2007). An examination of flexible spending accounts. International Journal of Health Care Finance, 20 (3), 935-954.

Heffler, S. (2002). Health spending projections for 2001-2011: The latest outlook. Health Affairs, 21 (2), 207-218.

Vistnes, J. (2006). Employer contribution methods and health insurance premiums: Does managed competition work? International Journal of Health Care Finance, 12 (1), 159-165.

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