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The effects of rising healthcare costs on the US economy.

1. Introduction

This paper discusses the major trends in scholarship about the accountability for healthcare performance in a competitive setting, the augmented expenditures of employer-supplied healthcare coverage, and the degree and growth rate of expenditures on healthcare. The material gathered in this study contributes to the literature by providing evidence on the downturn in healthcare expenditure growth, current healthcare consumption fluxes, and extents of growth in the healthcare sphere.

2. The Extremely Decentralized Character of Healthcare Decision-making in the US

US health scheme splits the payment facet of the health system, to keep it rather feeble in comparison with the supply side. Diminished costs for healthcare inputs may not generate a smaller provision of real resources for healthcare, nor to reduce quality, decreasing the quality of life experienced by the suppliers of healthcare. (Reinhardt, 2012) Nearly all employers who have provided health coverage are unwilling to remove health insurance benefits, employment-based health insurance is stretched by economic shrinkages, and employer-sponsored coverage has sustained its predominant function in health coverage (the significance of healthcare and its expenditures has grown). Despite rising healthcare spending, employers identify ways to reshape insurance coverage (healthcare expenditures have advanced swifter than wages or general inflation). The consequences of economic shrinkages run counter to the continuous growth in the health sphere, growth and reinforcement are likely to regulate healthcare distribution, and economic elements impact the employment of health services and health outcomes. (Bernstein, 2009)

Health expenditures are an effect of the costs of healthcare services and the use of those services. Rising spending on government healthcare plans covers a substantial portion of federal and state budgets. Entire health spending is a direct consequence of how much care is used and the cost of those services. The deceleration of cost growth originates considerably in a decrease in the utilization and strength of private health services. Behavioral health impacts both mental and physical well-being. Improvements in medical technology lead outstandingly to augmenting health and boosting longevity. Healthcare professionals may report inefficiently the relative expenditures and benefits of different treatments to patients. Utilization of higher cost suppliers generates augmented healthcare expenditures. The basic determinants of costs and employment are the ones of total healthcare spending growth in the US (BPC, 2012) Worries about increasing healthcare expenditures and affordability of healthcare for households continue. The Affordable Care Act (ACA) furnishes outstanding financial support to assist individuals with low and moderate incomes in managing coverage and related cost distribution. System-wide healthcare expenditures are still estimated to increase faster than national income for the predictable future. Recommendations to cut down federal health expenditures rely on the assumption that health plans are developing to too expensive levels and must be decreased. The healthcare system goes on to innovate and supply new treatment choices to individuals with grave acute and chronic illnesses. Healthcare costs have overstepped economic growth in recent decades. The US spends considerably more on healthcare than other developed economies. The sharing of sources of financing for overall national health costs has altered over time. Increasing healthcare expenditures lead to households reducing care and encountering pressing financial problems. (KFF, 2012)

Increasing healthcare expenditures and descending health insurance coverage are endangering the health and financial safety of augmenting numbers of middle-class families. Current tendencies in healthcare and insurance expenditures are leading to the financial pressure and uncertainty undergone by middle-class American families during their working and retirement years. Families tackle the direct expenditures of intensifying health insurance premiums and out-of-pocket costs for services. For both working-age and retirement-age middle-class families, increasing healthcare expenditures are taking up a substantial proportion of financial resources. Healthcare costs include insurance premiums and out-of-pocket spending. As healthcare expenditures have boosted, more middle-income households of all ages are encountering significant degrees of healthcare costs. (Komisar, 2013)

3. The Determinants of Healthcare Cost Growth

Substantial rates of nosocomial infection and detrimental drug consequences imply the necessity for enhancement in the US healthcare system. In order for medical care to ameliorate, those involved in supplying it should have supremacy over care judgments and be accountable for results (making prophylactic healthcare more achievable can diminish illness). Workgroup contest will enhance operation on the measures assessed and alter the way endeavors to supervise healthcare expenditures are handled. An available and trustworthy 24/7 increased triage process will considerably augment the medical system's cost-efficiency and capacity to assist patients well. (Bar-Yam et al., 2013) Non-Medicare patients are vulnerable to more significant out-of-pocket payments, the increase in the cost of services confronting patients may justify the lag in healthcare spending, and the progress of technological growth has impacted healthcare expenditure growth. Modifications in relative prices to users and suppliers and technological growth are the most relevant determinants of the healthcare lag. (Chandra, Holmes, and Skinner, 2013)

Increasing twofold the copayments is the most adequate cost containment tool, mandatorily insured individuals cannot select the health insurance system or benefit package, and cutting down health costs is the main goal behind the policy reforms. (Ziebarth, 2014) A significant knowledge on how individual and scheme judgments influence shifts between health conditions during life can optimize strength and prevent costs (healthcare devisers can back prophylaxis and undertakings over particular groups of population at risk). Cutting down shifts from health to worst states can generate notable resource savings for the healthcare system, a more significant lifetime healthcare spending for women is a consequence of a higher life likelihood, and certain interventions integrating those affecting healthy population should be used adhering to cost-effectiveness standards. (Carreras et al., 2013)

Health insurance premium rises systematically surpass inflation and the growth in employees' earnings. Employer contributions of payroll going toward health insurance expenditures continue to increase. Employer spending for health insurance constitutes a more significant portion of offset for employees in lower-wage positions than for employees in higher-wage positions. Households are paying more out-of-pocket for healthcare. Out-of-pocket expenditures as a proportion of entire national health costs have decreased over time. Healthcare spending has an outstanding effect on citizens' income, being a relevant cost for households and individuals. Public programs supply health insurance coverage to citizens who are regarded as too impoverished to afford the entire price of coverage on their own. For individuals whose income oversteps the qualification standards for public coverage, the proportion of family income necessitated to compensate for individual health insurance boosts considerably. Redundant or unsuitable treatments and tests generate the significant level of healthcare expenditures. Incompetence in medical care distribution and funding leads to healthcare spending. (KFF, 2012) Health insurance supplies financial protection and enhances access to medical care. Tendencies in employer-sponsored health insurance influence middle-class families considerably. Health insurance premiums have expanded more rapidly than national healthcare costs per person. Rising premiums affects both employers' and employees' judgments about health insurance. For individuals who incur significant healthcare costs, lack of insurance can generate out-of-pocket expenditures that boost medical debt. A severe raise in high-deductible health schemes indicates more insured households experience the threat of significant medical bills. Increasing healthcare expenditures have decelerated growth in middle-class wages, and make it progressively problematic for retirees to have sufficient savings to compensate out-of-pocket health costs throughout retirement (healthcare expenditures will assimilate an increasing proportion of retirees' incomes in the future). (Komisar, 2013)

4. The Costs and Efficiency of the Healthcare System

Employers are knowledgeable of the threats of passing too much expenditure to workers. Increasing healthcare cost-sharing comes to the detriment of wages. Significant cost-sharing responsibilities may reduce healthcare costs. (Haren, McConnell, and Shinn, 2009) Struggle to acquire consumers powerfully persuades insurance suppliers to enhance service quality and/or diminish premiums. Contest in health insurance functions if sufficient consumers shift to more competitive insurers (competitive healthcare schemes do not affect the rise in premiums). The absence of premium merging may be linked to the inefficacy of competition. Switching expenditures produced by the link between fundamental and complementary insurance arise both from the consumer and the company. Altering health insurers for basic coverage involves low quality-related or transaction-type switching expenditures. Some regulatory aspects may undermine contest in the fundamental health insurance market. (Lamiraud, 2014)

Increasing healthcare expenditures may be counterbalanced by employers via wage-benefit exchange, cost-shifting to workers, and health benefits qualification management. Workers are limited considerably by increasing healthcare expenditures, rather than comparative spending structures (rising healthcare expenditures may not cut down producers' cost competitiveness). Employers in economies with (nearly) global healthcare coverage bear outstanding contributions towards social health insurance strategies. (Semenova and Kelton, 2008) The slower growth in healthcare spending is ascribed to the downswing in the US economy in 2008 and 2009. As the economy advances, rises in healthcare costs may reappear to more significant levels. The capacity of the healthcare system to analyze more circumstances and supply more care indicates that healthcare expenditures will develop swifter than the economy. The increase of insurance coverage under the ACA will raise the level of healthcare costs in the short term. The US healthcare system is a combination of public and private payment and distribution agreements, public health insurance having a irrelevant function in insuring the population (most of the elderly and of the poor are insured through public health insurance programs). Private health insurers mainly moderate the cost and utilization of services for individuals covered by private health insurance. The US could reduce healthcare expenditures by lowering the function of government in the healthcare system. Endeavors to enhance population health could have a long-run impact on disease pervasiveness and assist in diminishing healthcare costs. (KFF, 2012)

Costs for long-run services and assistances constitute a significant threat to economic safety in retirement for middle-class families (increasing healthcare expenditures have negatively influenced the economic safety of middle-class families during their working and retirement years). The future economic health of the US will be based on confining the growth in healthcare costs that must coincide with a priority on enhancing the importance of healthcare. Healthcare resources should be employed expeditiously to accomplish inexpensive insurance coverage and quality care. (Komisar, 2013) The alterations in health insurance coverage over the years and in the relative cost of medical services are not exogenic, and tend to be a function of earnings. The cost of health insurance encountered by the consumer when choosing whether to use a specific health service is the out-of-pocket expenditure. Labor services are the most significant stimulant to the production of healthcare. A proportion of the health spending effect to national economic shocks may indicate endogenous consequences in federal Medicare and Medicaid schemes. The health spending of their recipients reacts quite dissimilarly to alterations in GDP than the consuming of those without coverage from either program. The link between GDP growth and national health expenditures is rather strong: the current downturn in health costs is the consequence of the poor economy undergone in the 2000s. (Sheiner, 2014)

5. Conclusions

The implications of the developments outlined in the preceding sections of this paper suggest a growing need for a research agenda on the dynamics and origins of health spending growth, the responsibilities of high employer healthcare expenditures, the lag in healthcare spending, and the effectiveness and quality of the healthcare system. The findings of this study have implications for the downturn in the out-of-pocket proportion of health spending, the long-term growth rate in healthcare costs, and the economics of employer-sponsored health benefits.

Elena Toader

toader. elena@yahoo .com

Grigore T. Popa University of Medicine and Pharmacy of Iasi

REFERENCES

Bar-Yam, Yaneer, Shlomiya Bar-Yam, Karla Z. Bertrand, Nancy Cohen, Alexander S. Gard-Murray, Helen P. Harte, and Luci Leykum (2013), "A Complexity Science Approach to Healthcare Costs and Quality," in Joachim P. Sturmberg and Carmel Martin (eds.), Handbook of Systems and Complexity in Health. Dordrecht: Springer, 855-877.

Bernstein, Jill (2009), Impact of the Economy on Health Care. Princeton, NJ: Robert Wood Johnson Foundation.

BPC (2012), What Is Driving U.S. Health Care Spending? America's Unsustainable Health Care Cost Growth. Washington, DC: Bipartisan Policy Center.

Carreras, Marc, Pere Ibern, Jordi Coderch, Inma Sanchez, and Jose M. Inoriza (2013), "Estimating Lifetime Healthcare Costs with Morbidity Data," BMC Health Services Research 13: 440.

Chandra, Amitabh, Jonathan Holmes, and Jonathan Skinner (2013), "Is This Time Different? The Slowdown in Health Care Spending," Brookings Papers on Economic Activity Fall: 261-323.

Haren, Melinda C., Kirk McConnell, and Arthur F. Shinn (2009), "Increased Patient Cost-Sharing, Weak US Economy, and Poor Health Habits: Implications for Employers and Insurers," American Health & Drug Benefits 2(3): 134-141.

KFF (2012), Health Care Costs. A Primer. Menlo Park, CA.

Komisar, Harriet (2013), The Effects of Rising Health Care Costs on Middle-Class Economic Security. Washington, DC: AARP Public Policy Institute.

Lamiraud, Karine (2014), "Switching Costs in Competitive Health Insurance Markets," in Anthony J. Culyer (ed.), Encyclopedia of Health Economics. San Diego, CA: Elsevier. Forthcoming

Reinhardt, Uwe (2012), "Divide et Impera: Protecting the Growth of Health Care Incomes (Costs)," Health Economics 21: 41-54.

Semenova, Alla, and Stephanie Kelton (2008), "Are Rising Health Care Costs Reducing US Global Competitiveness?" CFEPS, Kansas City, MO.

Sheiner, Louise (2014), "Perspectives on Health Care Spending Growth," paper at the Engelberg Center for Health Care Reform's April 2014 conference on the Future of US Health Care Spending.

Ziebarth, Nicolas R. (2014), "Assessing the Effectiveness of Health Care Cost Containment Measures: Evidence from the Market for Rehabilitation Care," International Journal of Health Care Finance and Economics 14(1): 41-67.
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Author:Toader, Elena
Publication:American Journal of Medical Research
Article Type:Report
Date:Oct 1, 2014
Words:2210
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