How Healthcare cost nationally impact its stakeholders
The US has several types of privately and publicly funded health insurance plans that provide healthcare services. The US Census Bureau reports that in 2005, 60.4% of the population was covered by employment-based health insurance, 26.6% was covered by government-based insurance, while 15.6% had no health insurance at all. (This total is higher than 100% because of the way the survey is taken.) The US spends more of its GDP on healthcare than any other developed nation. In 2003, the US spent 13.9% of its GDP on healthcare, compared with 7.8% for Japan, 9.4% for Canada, and 7.6% for the United Kingdom. It has been suggested that the high clerical load required to verify eligibility and follow specific rules is responsible for the high cost of care in the US. There is no doubt that healthcare cost are rising out of control. No one likes the increases, but it is far more understandable when considering all the reasons for these increases. American people look at their insurance bills, co-pays and drug costs, and can’t understand why they continue to increase. The insured should consider all of these reasons before getting upset.
In 2006, employee health care premiums increased over 11 percent, four times more than the rate of inflation. In 2005, premiums rose 10.1 percent and in 2004 they rose 15 percent. Employee spending for coverage increased 126 percent between 2002 and 2006. Those increases were lower than expected. (National Coalition on Health Care, 2005, Facts on health care costs). Premiums have risen five times faster than workers wages, on average. If medical spending continues to rise by just two percent more than personal income, by 2040 Medicare and Medicaid would hit 18.5 percent of the gross domestic product, leading the federal deficit to be 20.7 of the gross domestic product. (E. McGlynn, et al, 2003)
There are huge impacts of the rising costs. Many people can not afford health insurance. Of the families that do have health coverage, 50 percent are concerned about having to pay more for that coverage in the future, while 42 percent fear they will not be able to afford coverage at all. (National Coalition on Healthcare, 2005, Facts on healthcare costs). In 2003, health care spending reached 1.7 trillion dollars and 1.8 trillion dollars in 2004. That is 4.3 times the amount spent on national defense in this country. Even though 45 million Americans are uninsured, the U.S. spends more on health care than any other industrialized nation, and those countries provide health care to all of their citizens (National Coalition on Healthcare, 2005, Facts on health care costs).
Because of this and other factors, hospital and nursing home stays have increased. Fifty cents of every health care dollar is spent on hospital and nursing home stays. (Blue Cross/Blue Shield of Kansas, 2006, the rising cost of health care, the reasons). The older population also needs more medication to treat their ailments. Drug spending in the U.S. rose more than 11 percent in 2003 to over 180 billion dollars. Americans consume about 3 million prescriptions a year. People over the age of 65 spend an average of $2300.00 a year. That is just in co-pays. The co-pays for brand name drugs jumped 62 percent, from $16 to $25 in 2003. Most of these drugs have generic equivalents, but even those co-pays rose to an average of nine dollars. As a whole, retail prescriptions have increased 7.4 percent a year from 1993 to 2003, triple the inflation rate of 2.5 percent. (National Coalition of Healthcare, 2005, Facts about health care costs). Most of this increase reflects the cost of research, and the time it takes to develop a medication, and have it approved by the Food and Drug Administration.
The older population also needs more medication to treat their ailments. Drug spending in the U.S. rose more than 11 percent in 2003 to over 180 billion dollars. Americans consume about 3 million prescriptions a year. People over the age of 65 spend an average of $2300.00 a year. That is just in co-pays. The co-pays for brand name drugs jumped 62 percent, from $16 to $25 in 2003. Most of these drugs have generic equivalents, but even those co-pays rose to an average of nine dollars. As a whole, retail prescriptions have increased 7.4 percent a year from 1993 to 2003, triple the inflation rate of 2.5 percent. (National Coalition of Healthcare, 2005, Facts about health care costs).
This fact leads me to one of the reasons for health care cost increases: cost sharing or cost shifting. When an individual or family does not have insurance, and can not or does not pay their medical bills, the cost of that care is “shifted” to patients who do have insurance. For example, a study done by Harvard University found that 50 percent of all bankruptcy filings were partly the result of major medical expenses. The average medical expenses in these bankruptcy filings were $12,000. And someone files bankruptcy every 30 seconds in this country (National Coalition on Healthcare, 2005, Facts on health care costs). Most of those lost dollars are shifted to consumers in higher premiums and costs. In 2003, health care spending reached 1.7 trillion dollars and 1.8 trillion dollars in 2004. That is 4.3 times the amount spent on national defense in this country.
Even though 45 million Americans are uninsured, the U.S. spends more on health care than any other industrialized nation, and those countries provide health care to all of their citizens. Because of advances in technology and medicine, people are living longer lives. This is another reason for increased cost. The average age of insurance members today is 60 years old. By the year 2008, approximately 15 percent of the U.S. population will be 65 years old or older. (Blue Cross/Blue Shield, 2006, Healthcare costs).
Now, let us talk about technology. Hospital and clinic equipment wears out, just like other machinery. When that happens, new equipment must be purchased, and that equipment is usually an upgrade from the original equipment. Technology has a huge price tag. The cost of research, materials, and fabrication with precise specifications are astronomical. Those costs must be absorbed somewhere, mainly the consumer. Even if health care providers choose not to replace equipment with new technology, the cost of maintenance and repairs are large.
Last, but definitely not least, there is the issue of health care workers wages. Most health care workers would like to see the wages increase as rapidly as health care costs. Unfortunately that will not happen. None the less, health care workers are often paid well. There are several reasons for this. First of all, they must have a significant amount of education to be licensed or certified. Once licensed or certified, most need to take additional training called continuing education credits to keep those certification. Not to mention licensure or certification fees and uniforms and equipment. There is also the issue that health care is a very stressful job, and burn out can occur very easily.
Senator Clinton laid out a major plank in her framework for providing affordable Quality health coverage for all Americans: her 7-step strategy for lowering spiraling costs. The rising cost of health care is threatening working families, American businesses, and the Nation’s economic competitiveness. Premiums have almost doubled since 2000 up 87 percent four times higher than wages. And if left unattended, health care spending will double to $4 trillion per year over the next 10 years. Senator Clinton stressed that the necessary commitment to cover all Americans will require the reform of our often irrational, inefficient and wasteful policies.
Senator Clinton proposed a series of initiatives that will cut the spiraling rate of growth by One-third over time. Her health care modernization strategy achieves this by targeting the Drivers of health care costs, including
1. Our back-ended coverage of health care that gives Short-shift to prevention,
2. The nation’s reliance on an antiquated, wasteful, costly and even Dangerous paper-based medical records system,
3. Unmanaged chronic illnesses such as Diabetes and heart disease which account for over 75 percent of health care spending,
4. The Over-utilization of medical interventions that provide little added value and the underutilization Of those that do,
Senator Clinton’s proposals would reduce costs and improve quality in the health care system. Taken together they would lower national health spending by at least $120 billion dollars a year. If businesses received a proportionate reduction in their health benefits spending, they would achieve at least $25 billion in savings in 2006 dollars. Families would substantially benefit as well. In fact, Business Roundtable has estimated $2,200 in National health savings for the typical family and these savings would be reinvested in the System to help cover the 45 million uninsured (McKinsey Global Institute, 2007). Almost all states now have laws that bar insurance and managed care companies from denying coverage to small businesses (50 or fewer workers) just because their employees happen to be older or sicker. Most states also limit the amount an insurance company can boost its premiums for small businesses in a single year. While these laws have helped some small businesses buy and keep coverage, they have had little impact overall. High insurance costs still prevent many small businesses from offering coverage.
We need comprehensive health care reform where all Americans whether they work at a small firm or for a major corporation are covered by health insurance. We also need a national cost management strategy whereby average annual percentage increases in health care costs and insurance premiums are brought into alignment with increases in national economic growth. Slowing the rate of increase in health care costs will go a long way in promoting small business growth.
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