The Economic Impact of Healthcare Spending

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Health care reform has been a perpetual issue in the United States. The market of health care providers is yielding to high and rising health care costs in the United States. Health care expenditure is influenced by the rising prices and quality of health care services, with an alarmingly high price per unit of care physician fees coupled to high costs of hospitals and drug prices. The new and innovative technologies catering the health sector are very expensive, and huge amounts have to be spent in treatments.

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Some research findings by Glenn and his workers (Glenn, 2008) suggest that once we limit the supply of resources, it will result in a reduction of the quantity, and also the costs of health services. His analyses also proposes in shifting of the financial risk of health care costs from insurers to providers, diagnosis-related-group payment and capitation reimbursement, can also be effective in containing costs as medical bills from petty accidents can deplete our savings, a major illness can push us into bankruptcy.

In large companies, group coverage, especially when it’s employer-subsidized, is definitely a better deal, rather than anything you can get on your own, irrespective of your age. Most insurance policies cover doctor visits, but benefits for eye care, mental health, prescription drugs and dental care are almost always optional. Since in the USA, financing is tied to the labor market, it is always wise to plan with the most comprehensive coverage galvanized with a lowest out-of-pocket cost that entitles you to use a specified network of hospitals, doctors, labs, and other providers. The more flexibility one demands, the more we will end up paying, in either premiums or co-payments.

According to state laws in the USA, usually, medical expenses, including insurance premiums, are not tax deductible until they exceed 7.5 percent of ones income. But if we are self-employed we can get a tax break without meeting the threshold.

Clinicians should inquire about family income, as most of the low income group cannot gain access to a proper insurance policy, and are unable to generate the resources to pay their premiums. Children are at significantly higher risk of impaired access to health and dental care, including preventive and specialty care. Children also face several nonfinancial barriers to health and dental care access, and the elimination of such barriers may necessitate improved access to medical interpreters, better cultural competency training, and more family-centered health care systems.

The need of the time is to subsequently focus on questioning whether the financing of the US social health insurance system is sustainable, in light of the economic malaise that is currently prevailing and has heightened global competition.

Currently, United States is struggling with increasing health care costs which results in an out pace of growth in national income. Health care expenditure as a percentage of gross domestic product has increased tremendously, and this increased spending rate is a cause of concern as it effects the global competitiveness of enterprises.

Economic downturn has been a matter of great consideration as the US health insurance sector relies on the contributions from both, employees and employers. Since the mid-1990s, the US economy has been sluggish, leading to the very low unemployment

US Health Insurance has been considered to be of international importance, since USA is an important “big country”) being the testing grounds for innovations in health technology assessment, drug pricing and reimbursement, and disease-management programs. USA is one of the models of health care financing employed in developing nations across the globe.

Productivity in hospitals should be increased, and efficiency in spending should be given the financial incentives to provide better time to provide patients with more services (Graig 1999; Busse and Schwartz, 1997).

Some diseases that people have to encounter in their life spans are so severe, that the costs needed to cure them are very high, and at times, unaffordable. For these contingencies, it would be recommendable for a health insurance to be acquired. The insurance schemes offered by the government are a good option for those who fall sick, as the companies can sponsor them, for the services they provide. A certain amount of money is put into a health insurance package, and those employees who fall sick can be treated with the funds accumulated. If there are no illnesses, the premium deposited may be used when needed, later.


According to the US Census Bureau, healthcare units consist of five industries, which are, home healthcare services, physicians, dentists, ambulatory services, hospitals, and other nursing facilities. The economic impacts of the country are based on the direct and indirect effects of services, by business to business transactions, and by stimulated or payroll spending effects (Bunting, D. & Jones, D.P., 2006). The total impact on the economy is based on output, labor income, and employment. There is a persistent effect of these elements on the economy, with various aspects giving rise to different percentage differences in the overall outcome, and impact.


  1. Bunting, D. and Jones, D. P. “The Economic Impact of Health Care Spending in Washington State” Paper presented at the annual meeting of the Economics of Population Health: Inaugural Conference of the American Society of Health Economists, TBA, Madison, WI, USA .
  2. Flores, G. & Sandra, C. Paediatrics 2008. Web.
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