Healthcare Spending In the United States

Healthcare Spending In the United States

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Health Care Spending in the United States

Part I

  1. The level of current national health care expenditures

As at 2012, the amount of money spent on healthcare was at three million dollars (Munro, 2014). Currently, this figure has increased to 3.8 trillion dollars (Munro, 2014). The Sustainable Growth Rate (SGR) is an element that has posed a challenge for the healthcare industry as far as expenditure is concerned (Munro, 2014). According to the Congressional Budget Office (CBO), the cost to repeal the SGR in 2012 was 316 billion (Munro, 2014). This figure has reduced to 116 billion (Munro, 2014). This affects the sector’s ability to increase the earnings of healthcare staff.

The average expenditure that each American spends in a year is $8,233 (Kane, 2012). Compared to the rest of the world, this figure is more than two and a half times more. This translates to healthcare costs eating up 17.6% of the GDP (Kane, 2012). This notwithstanding, the U.S. has the best healthcare in the world (Kane, 2012). In the United States there are fewer physicians per person that in most other countries in the Organization for Economic Co-operation and Development (OECD) (Kane, 2012). The number of hospital beds in thee OECD averages 3.4 per 1000 population (Kane, 2012). However, the average for the US is at 2.6 which mean that the healthcare industry cannot be able to comfortably manage a national disaster that affects a large part of the population (Munro, 2014). Life expectancy in America has also increased to an average of 78.7 years owing to the increased level of healthcare standards (Kane, 2012).

  1. Whether the spending is too much or not enough

The national health care expenditure is too much and cannot be sustained by the healthcare industry (Munro, 2014). While a 200 billion reduction in the SGR is a move in the right direction, the growing consensus that there may be a congressional resolution later this year is positive for the SGR (Munro, 2014). The industry is clearly unable to improve the Medicare physician payment formula (Munro, 2014). It is hoped that Congress could make changes that permanently replace the current Medicare physician payment formula (Munro, 2014).

  1. Where the nation should add or cut, and why

There is a clear need to reduce the SGR for healthcare expenditure as this would increase the chances of an increase in the earnings of healthcare staff (Munro, 2014). Considering that the United States is considered to have one of the best health care systems in the world, it can comfortably be said that the country has no need to reduce the healthcare costs that each American citizen incurs.

In the US, spending on almost every area of healthcare is much higher than in other countries (Kane, 2012). This is partly owed to the industry not being quick in embracing information technology to improve the administration (Kane, 2012). As a result, much more is spent in administrative costs. This would not only reduce medical errors but also the hours of work for the pharmacists per day (Kane, 2012).

The US can also borrow strategies from Japan and France who use the same healthcare model and are able to keep their expenditure level down (Kane, 2012). They use a common fee schedule that allows hospitals, doctors and health services to be paid similar rates for majority of their patients (Kane, 2012). In the US, the level of healthcare that one makes depends on the kind of insurance one has. This allows for healthcare facilities to discriminate their patients based on the kind of insurance they have (Kane, 2012). They are also flexible when it comes to responding to certain costs which exceed the budget. In Japan, if spending in a specific area seems to be growing faster than projected, they lower fees for that area (Kane, 2012). This is the same case in France as well which has an organization set up that monitors spending across all kinds of services and if they see a particular area is growing faster than they expected, they can intervene by reducing the cost for that service (Kane, 2012).

  1. How the public’s health care needs are paid for such as being financed by various payers, while indicating the percent of total expenditures they represent.

The American people have the option of government run healthcare or private insurance covers. Government run healthcare translates to higher taxes for the American people and relegating this responsibility to the insurance companies translates to their being allowed to operate without rules (change,2014). Obama care was meant to create a balance between these two worlds. Obama-care strengthens employer coverage and makes insurance companies’ accountable (, 2014). Thus ensures patient choice of doctor and care without government interference (, 2014). Patients are able to make health care decisions with their doctors as opposed to having to go through the insurance company. The benefit of this plan is that the cost of healthcare, per person, will reduce by as much as $ 2,500 per annum (,2014). Americans that do not have health insurance also have the option of selecting a cover from a range of more affordable health insurance options (, 2014).

Section II: Forecast of the following:

  • The future economic needs of the health care system
  • Why these needs must be addressed
  • How these needs will be financed

The needs of the US healthcare system revolve around reduction in healthcare costs (Schoen, Guterman, Zezza, & Abrams, 2013). There has been a steady rise in the percentage of healthcare on the GDP (Munro, 2014). This has unfortunately not translated to an improvement in the health of the general population as well as in the standards of healthcare (Schoen, Guterman, Zezza, & Abrams, 2013). This is important since the US spends twice as much on health care per capita and 50% more as a share of GDP compared to other developed nations (Schoen, Guterman, Zezza, & Abrams, 2013). Stabilizing health care spending will help to free up billions of dollars which can be diverted to other economic and social investments (Schoen, Guterman, Zezza, & Abrams, 2013).Obama-care is a strategy that hopes to make this a reality in the long run.


Kane, J. (2012). Health Costs: How the U.S. Compares With Other Countries. Retrieved from PBS:

Munro, D. (2014). Annual Healthcare Spending Hits $3.8 Trillion. Retrieved from Forbes:

Schoen, C., Guterman, S., Zezza, M. A., & Abrams, M. K. (2013). C. Schoen, S. Guterman, MConfronting Costs: Stabilizing U.S. Health Spending While Moving Toward a High Performance Health Care System, Commonwealth Fund Commission on a High Performance Health System. Retrieved from Commonwealth Fund: Obama-Biden Plan. Retrieved from

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