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Overview in Healthcare Spending In the United States the total cost for a family of four for healthcare is approximately $19,393.00. According to Milliman, a global consulting and actuarial firm, this increase “…might be only 7.3 percent higher than last year's average cost of $18,074, which is the smallest year-over-year increase in almost a decade. But it's also the highest year-over-year increase in total dollars spent per family at $1,319.”(Strachan, 2011). Listed on the same web site according to Lorraine Mayne, Milliman principal and consulting actuary, "In 2002, American families had healthcare costs of $9,235, and those costs have now doubled in fewer than nine years." Of these healthcare costs the employer paid for 48.6% of the increase while the employee was burdened with largest portion of 51.6%. “According to data from the Kaiser Family Foundation-Health Research and Educational Trust Annual Employer Survey and the U.S. Department of Labor, premiums for employment-based private insurance increased 114 percent from 1999 to 2007, while earnings increased 27 percent, leaving a gap of 7 percentage points per year, on average.” (Ginsburg, 2012, p. 3). This constitutes an ever increasing part of the household budget. Numbers captured in 2009 estimate that U.S. consumers spent $363 billion on healthcare. Four of the main areas that contribute to these rising costs in healthcare are: Demographics, Health Insurance, Productivity, and Managed Care. Demographics The United States faces increasing healthcare costs that are in part due to the demographics of our current population. We are currently seeing a rise in our elderly population and an increase in life expectancy in this country. These increases have put an incredible strain on the Medicare budget that will only get worse. The average senior citizen in this country that depends on Medicare to help pay for their medical expenses sees more and more money coming out of their own budgets. “Gaps in Medicare benefits mean beneficiaries must bear a large financial burden for medical and long-term care services. In 2004, the average beneficiary paid nearly 20 percent ($2,477) of their health care costs out of pocket. During that same year, 10 percent of beneficiaries paid $5,000 or more out-of-pocket.” (Orszag, 2008). This will only get worse because as they age, their need for more healthcare also increases. In addition to the increase in our elderly, there are more and more unemployed in our nation. If their health is not maintained through regular medical care, then they will in turn suffer long-term health issues that we, the tax payer may have to provide for. Health Insurance Health insurance varies widely in our country and remains a major topic of debate. “A range of insurance covers different subsets of the American population. The first key differentiation among them is public programs vs. privately sponsored insurance products.” (Kovner, 2011, p. 52). The major public insurances are Medicare for the elderly, Medicaid and Children’s Health Insurance Program (CHIP) for the poor. Private healthcare insurance has been on the decrease since the 1960s with public insurance on the increase. In 2008, the private share of healthcare spending was $1.2 trillion. The problem remains the high cost of health insurance coverage. “The average annual premium for family coverage in 2011 is $15,073; the average annual premium for single coverage is $5,429.” (Lyons, 2011). In 1985 the Consolidated Omnibus Budget Reconciliation Act (COBRA) was established to assist those who lost their jobs to maintain insurance coverage for up to 18 months. The downside of COBRA coverage is that the ex-employee now has no income and has to pay 100% of the premiums which can be expensive. Productivity The productivity of healthcare in the U.S. is poor on a national scale. The biggest factor in healthcare productivity is the organization of care delivery. David Cutler, Harvard economist and adviser to President Obama during the 2008 campaign, stated that, “The failure of medical care is not so much that mistakes are made, but rather that the system has not evolved mechanisms to minimize those mistakes.” (Evans, 2011). This lack of productivity amounts to an estimated $700 billion wasted each year. It would seem that the overall reason is poor information about quality and publicly subsidized insurers that pay for the amount of care delivered, regardless of quality and efficiency. This cost, in turn, is passed on to the consumer. Managed Care Managed care plans are health insurance plans that contract with health care providers and medical facilities to provide care for members at reduced costs. There are three types of managed care: Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), and Point of Service (POS). HMOs make you choose between providers within the network, PPOs are the same but will pay a portion if you go outside the network and POSs let you choose between the two. The problem with HMOs is that there are increases in managed care activity that may have 'spillover effects,' influencing the performance of the entire health care delivery system, so that care for both managed care and non-managed-care patients is affected. “The fact that managed care can influence expenditures for this population suggests that managed care activity can have broad effects on the entire health care market.” (Baker, 1997, p. 2). We undoubtedly need effective management on all levels of healthcare from the consumer all the way to the government to solve these problems. In closing, if these areas are not corrected, healthcare in our country can only decline further. References Medicare. Retrieved March 25, 2012 Evans, M. (2011, June 1). The price of poor productivity in healthcare: $700 billion. Retrieved March 25, 2012 Ginsburg, P. (2012, October 8). The Synthesis Project. Retrieved March 25, 2012 Kovner, A. (2011). Health Care Delivery in the United States (10th ed.) (V. Weisfeld, Ed.). New York: Springer Publishing Company, LLC. Lyons, K. (2011, September 27). Average cost of family health insurance plan climbs 9 percent. Retrieved March 25, 2012 Orszag, P. (2008, May 29). The Future of Medicare: Demographics vs the Cost of Health Care. Retrieved March 25, 2012 Strachan, M. (2011, May 16). In The Huffington Post (Ed.)
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