Health Care Reform

Abstract

Health Care Reform is the hottest topic in today's news. Health care expenditures are currently 18 percent of GDP and are expected to reach 34 percent by 2040. The costs of health care have risen rapidly and are expected to rise even more in the future. Today, 46 million Americans are uninsured and 25 million are underinsured. If health care cost growth is not sustained, the budget deficit will grow sharply since almost half of current health care spending is covered by Federal, state, and local governments. The health care reform plans proposes to offer affordable, comprehensive and portable coverage. It pledges to control the rising health care cost and improving the quality of care.

Summary

Health care reform is one of the hottest topics in today's news. The high and rising cost of healthcare is significant issue for people, businesses, and government. Current projections in 2009 estimates that total health care spending contributes to 18 percent of total GDP, 20.3 percent by 2018 and are expected to reach 34 percent by 2040. Figure below shows National Health Expenditures as a Share of GDP, 1980-2040.

According to projections released by economists at the Centers of Medicare and Medicaid, estimates health care spending to rise from $2.4 trillion in 2009 to $4.4 trillion in 2018. An average of $8,160 per person is spent on health care which is twice as much per person in any other developed country. With all this spending, the current system is increasingly inaccessible to nearly 46 million Americans who have are uninsured and 25 million other who are underinsured. The cost of health care is skyrocketing and health insurance premiums have doubled rising to 3.7 times faster than wages in the past 8 years. Soaring medical cost is even affecting the coved who are struggling to cope with the increased cost. Almost half of all personal bankruptcies are caused by medical bills today.

The current health care system is more costly and less effective in terms of life expectancy. The rising cost is unsustainable so reform is needed to control the rising cost and improve the access and affordability to Americans. Evidence clearly shows that the key problem with the health care system is its fragmentation. The delivery of insurance and care is undertaken by private insurers, for-profit hospitals, and other players who add cost without adding value. The government pays directly or indirectly for more than half of nation's health care. Most of this government spending is accounted for by two social insurance programs known as Medicare and Medicaid. The figure below shows the government insurance programs as percentage of GDP.

Without a reform, the Federal spending on health care as share of GDP will continue to rise. As health care costs increases and the baby boomers retire, we will be facing a long-term imbalance between revenues and spending. If government doesn't increase taxes or cut on other government spending, the United States will experience rapidly rising deficits. The rising deficits will have a very negative impact on our economy as it lowers national savings, raise interest rates, and crowd out investment.

At the moment, President Obama, Republican and Democratic members of Congress, the American Medical Association and America's Health Insurance plans all agree that a change is needed to the current system. There is little debate that the health care is necessary but a lot of debate on how the change should be done.

History of Health Care Reform in United States

Health care has been an important topic for many U.S. Presidents since the turn of the century. Several presidents have attempted and failed to reform the health care. The first serious attempt was made by President Franklin Delano Roosevelt to establish a national health care program but was quickly opposed by the American Medical Association. Since health care cost accounted for much smaller share of family overall expense, his administration decided to concentrate on addressing other problems they were facing. President Truman was another president who wanted to establish a national plan but this time, he was opposed from within its own party. In fear of the national health care plan will lead to the integration of hospitals, Truman backed off from his plan. Later on, as part of the broader civil rights agenda known as the Great Society, President Johnson managed to get Medicare and Medicated programs to seniors and poor citizens. President Clinton tried introducing the national health care program again but failed because of the administration mismanaged its development and presentation. At present, President Obama pledges to make health care reform a priority to his administration as more and more Americans are uninsured today not to mention skyrocketing costs of care.

Inefficiencies in the Current Health Care System

Although there is much that is right with United States' health care system specially the rate of technological innovation we have today, however, the system is weighed down with substantial inefficiencies and market failures. This inefficiency is becoming more costly as the health care sector is becoming a larger fraction of the economy. An example would be the tremendous variation in Medicare spending per enrollee across the states with no obvious evidence of corresponding variations in either medical needs or outcomes. Furthermore, inefficiencies in the current health care system include payment systems that reward medical inputs rather than outcomes, high administrative costs, and inadequate focus on disease prevention. In addition, the imperfections of market in the health insurance market create incentives for socially inadequate levels of coverage. In relative to spending in other countries, U.S. health care spending has risen dramatically in recent decades with no evident gains in relative outcomes and this only suggests that much of the increase is inefficient.

Economic Impact of Current System on Businesses, Employer-sponsored Coverage, and American Wages

The rising cost of health care is impacting all businesses and especially small business. The inability to offer coverage to employees is causing lost of productivity and preventing business growth. It is effecting employer-sponsored coverage and putting them in jeopardy. As costs of premiums continue to increase, employers are having more difficulty providing health care coverage. In the past nine years or so, more employment-based