Healthcare Finance

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In 2010, the United States health care spending grew 3.9 percent. The total health care expenditures reached $2.6 trillion, which translates to $8,402 per person or 17.9 percent of the nation’s Gross Domestic Product (GDP). Health care spending plays a major role in shaping our country's health care system. Financing health care influences how people access health care, the types of health care provided, and how the cost of health care is distributed among members of society by income and by health status. The United States has been in a recession for much of the past decade, resulting in higher unemployment and lower incomes for many Americans. (Wikipedia)

There are three main reasons why spending in the United States has significantly increased. Throughout the years, spending on prescription drugs and new medical technologies has been cited as a primary cause of the increase in overall health spending. The availability of expensive, state-of-the-art medical technologies and drugs fuels health care spending for development costs and because they generate demand for more intense, costly services even if they are not necessarily cost-effective. Longer life spans and chronic illnesses have placed tremendous demands on the health care system. It is estimated that health care costs for chronic disease treatment account for over 75 percent of the national health expenditures. Administrative costs of government health care programs and the net cost of private insurance make up 7 percent of health care expenditures. The mixed public-private system creates overhead costs and large profits that are also creating health care spending. (E Notes)

The majority of the United States obtains health insurance through their employment, which is known as private insurance. Some employers do not offer insurance at all, while others pay anywhere from all to none of the insurance premium. Individuals may also purchase an individual health insurance policy. Growth in total spending for private health insurance premiums slowed in 2010 to 2.4 percent from 2.6 percent in 2009. Growth in aggregate benefit payments also slowed, from 3.7 percent in 2009 to 1.6 percent in 2010. The slowdown reflects a decline in private health insurance enrollment, which increases in cost sharing However, for the first time in seven years, growth in total premiums exceeded growth in total benefits; as a result, the private health insurance net cost ratio increased from 11.4 percent in 2009 to 12.1 percent in 2010. (Wikipedia)

The average monthly premium paid for individual policies was $183, while the average premium paid for family policies was $414. Between February 2010 and February 2011, the average premium increased 9.6% for individuals and 5.6% for families. The average deductible for individual policies was $2,935, and the average deductible for family policies was $3,879. Within 1 year, premiums have almost tripled, which has caused health care to be unaffordable. (E Notes)

The Medicare program is a federal program that was enacted in 1965. Medicare covers almost everyone who is sixty-five years of age and older, as well as a small subset of the general population who have been receiving Social Security Disability payments for two years and almost everybody who has end-stage renal disease. The Medicare program is funded through a combination of payroll taxes, general tax revenues, beneficiary premiums, and direct beneficiary payments. Medicare spending grew 5.0 percent in 2010 to $524.6 billion. Spending for fee-for-service (FFS) Medicare grew 5.0 percent in 2010 as well. In 2010, Medicare Advantage (MA) spending also increased by 4.7 percent. (Wikipedia)

Medicaid was enacted in 1965 to provide medical care for certain vulnerable and needy individuals with low incomes and assets. Jointly funded by the federal and state governments, it is subject to broad national guidelines and state-specific rules, which can vary by eligibility...
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