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Health care expenditure is undoubtedly the most discussed issue currently in the world. The growing health care expenses have a reasonable impact on the national budget. There are various reasons for the growing cost of health care. The constant improvement in the health care technology has a considerable effect on the health care budget. The reasons for the driving health care cost are increased income, the pace of drug prescription, the dramatic rise in treatments of chronic diseases and increased number of aging population due to advances in medicine. The WHO summarizes a policy to oversee and assess health care expenses globally called as the National Health Accounts. The WHO keeps an account of per capita health care expenditure in countries worldwide. This paper focuses on the various aspects of health care that have a growing effect on the country's national budget globally and also implications that can cut down these costs.
Global Health Care Expenditure
Health Care is undoubtedly the most discussed issue currently in the news all over the United States. The growing cost of health care is having a reasonable impact on the national budget. This is not only the situation in the United States but also in other countries worldwide. In Asia, Europe the government is now considering to privatize some elements of health care so that it lessens the burden on national health care expenditure. The main question arising here is what the reason is for such an increase is in health care expenditure.
Health care expenditure has many dimensions. One of the most important aspects is the growing GDP of a country. An increase in the total health care expenditure portrays the ability of a country to spend because of the growing GDP which eventually sights at the increased per capita income of a nation. It can be stated that the government, employers and employees in a country with a high GDP per capita will be able to buy and spend more on a higher and better quality of health care services than many other countries. The way a country spends on health care is directly linked to the economic system of the country.
Reasons of the increasing health care cost world wide
There are number of reasons for the growing increase in health care cost but the most important ones are:
Advances in health care
The rapid pace of health care technology is one of the major aspects for the growing health care expenditure. The integration of heath care technology has burdened the cost even more. The growth in health care has enabled medical professionals to diagnose and treat diseases which were earlier impossible to be treated. The effects have been seen in both private and governmental institutions. The overall expenditures on hospital care, physicians and other medical services is the greatest because they amount to the largest category in health care. Also the prescriptions of drugs, various clinical tests and analysis and the cost of administering public and private insurances have substantially increased. Currently in United States the spending on health care has grown more rapidly than its economic growth. The Medicare and the Medicaid shows 15.3% of the total GDP expenditure.
Projected Federal Spending Under One Fiscal Scenario
(Percentage of gross domestic product)
(Congressional Budget Office)
Global health Risks
The advancing technology has resulted in easy, comfortable and luxurious lives for many but this has lead to an increase in a number of diseases. Diseases due to obesity, stress and hypertension has increased worldwide. Childhood obesity has become a growing problem. As stated in the Weight Control Information Network of the US Department of Health and Human Services, obese people pay 42% more on heath care than normal weight individuals. All these factors are increasing the amount of treatment administered to patients, thus increasing health care expenditure. Also other diseases fast rising are heart failure, diabetes, cancer, infectious diseases like STDs, etc. The cost due to such alarming rise in diseases is increasing subsequently. The WHO estimates 60% of death worldwide are due to chronic diseases.
The elderly populations are a fairly considerable in amount all over the world. Also the advances in medicine had led to longevity of life. The elderly population has a substantial spending per capita on medical care. This leads to a consistent increase in the amount of insurance expenditure and debts in developed countries.
Here is an example of hypothetical exhibit of the improving quality of life to the growing health care expenditure.
(E. Reinhardt, Peter S. Hussey and Gerard F. Anderson)
In many countries health care is provided to the general people by various profit and nonprofit health organizations. But for a better quality of health care provision the providers need to be kept informed about the national information on health expenditures. The World Health Organization has developed one such policy called as the National Health Accounts. It provides information regarding policy design and implementation, policy dialogue, monitoring and evaluation of health care interventions. They provide the evidence to help all level of policy-makers, non-governmental stakeholders, and managers to make better decisions in their efforts to improve health system performance. (World Health Organization)
National Health Accounts (NHA)
The World Health Organization is a part within the United Nations. The WHO aims at developing and maintaining health quality in different countries around the world. It maintains leadership in global health issues; it monitors health reforms by setting global norms and standards, and maintains and coordinated growing health trends. The NHA is an important tool for evaluating the health care expenditures in different countries around the world. It has a specific evaluation system based on international classification. The international classification of health care accounts is based on 4 major dimensions: financing sources (financial inflow), financing agents (who manage the health care expenditure), providers (individuals that provide health care services), and functions (health care activities provided by a system). Also other factors like the pharmaceutical industry, the socio economic leverage, and statistics of various diseases are considered. The NHA methodology has been considered by many nations an evaluation factor because it shows the range of global expenditures on health care. Countries worldwide are thus able to compare and reason the amount of the national health care expenses.
The above representation gives a fair idea of the amount of US$ spent per capita in nations worldwide. According to the above data, the United States and western European countries spend $1000 to $5000 and more per capita on the health care expenditure.
In 2006, the total world health care expenditure was approximately US$4.7 Trillion. The composition of world health care expenditure consisted of 44% Social and Private Insurance, 34% General government expenditure, 18% Out of pocket expense and 4% other expense. (WHO)
Compared to the other nation US devotes considerably huge amount of its economy to health care than many other developed countries. According to Organization of Economics Co-operation and Development in 2006 Unites States spent around 15.3 % of its GDP, while other countries like Canada spent 10%, France spent 11%, Germany around 10.6% while UK and Japan estimated around 8.1% of their total GDP.
The US health care spending
Health care expenditure is a major constituent of GDP (Gross Domestic Product) of the country. The GDP of the country rises when there is an increase in health care expenditure. The personal consumption expenditure in the last three decades has shown a steep rise in United States. In 2009, the spending on health care was about 17.6% of the US GDP (Congressional Budget Office). The Center for Medicare and Medicaid (CMS) estimated that the US government spends over US$ 2.5trillion in 2009.
The health care expenditure is distributed by the types of services. Approximately 31% of the total health care expenditure is spent on the hospital care and 21% on physicians and other clinical services. The remaining 48% is spent on personal health care and other health expenditures. This shows that the amount of health care cost has increased. This augmented cost have to be paid by the general public out of pocket as the insurance premiums and also other subsequent payables as long as the public is covered under the insurance.
Total = $2.3 Trillion
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group
The reason for the driving health care cost are the growth in technology, pace of drug prescription, the dramatic rise in treatments for chronic diseases, and increased number of aged population due to advances in medicine. Also the administrative cost has a fairly big proportion in the national health care spending.
Implication on health care expenditure
In order to control the growing health care cost the countries must either reduce the current health care cost or innovate ideas to reduce the future health care spending. The most basic thing for any economy is the public awareness about the health care system and its operations. Facilitating an optional health care system, wherein the government gives the people the ability to choose between private and public health care providers for the basic health care need, is a simple way of beginning to implement reduction in health care costs.
IT development in Health care- The governments of many countries give a large incentive to technology in health care. Technology, like the use of electronic medical recording, should be put in practice to reduce overhead costs. It in accordance also will improve the efficiency and quality of health care. The US president Barack Obama's latest health care stimulus also concentrates fairly on the IT development in health care industry. If this stimulus is put into action not only will it widen the scope in health care technology but also will increase the general employment to a considerable level.
Prevention- With the advancement in technology there has been an increase in a large number of diseases. Chronic diseases like diabetes and cardiovascular disease are related to obesity, smoking, alcoholism etc. The governments should put forth proposals to prevent these causes by providing incentives for workers to engage and educate people about it. This would ultimately incur a decrease in medical cost and expensive lifelong treatments.
Choice of health care providers- The government should make health care more feasible to the people by letting them choose from Private and Public health care. This would encourage more people to buy health care coverage for themselves and prevent from ignoring personal health issues and leading a healthy life.
Some of the major factors that will lead to a better and more consumer friendly health care system is by recognizing the lack of strategic implications and providing a more consistent health care economy.