Healthcare has been a hot topic during this year’s presidential campaign and no matter who wins the election, the United States healthcare industry will be reformed or should we say transformed. The healthcare industry in the United States has been under sever scrutiny and is feeling the effects of government regulations on many fronts. Margins are low and the need to control cost is critical. This paper will give an overview of the multiple facets that comprise the healthcare industry and how their role has contributed to the US national health expenditure totaling 2.5 trillion dollars in 2009 (National Health Expenditure Data, 2009). The paper will also provide financial insight contributing to the current crisis that the US healthcare industry faces if it continues on this path.
Healthcare Industry Overview
To understand the current U.S. healthcare industry you must understand how it evolved to what it is today. Prior to the 1920’s the healthcare industry ran pretty much like any other industry, consumers would pay out of their pocket for a service. Physicians back then really didn’t know as much about diseases as they do today so their charges were not so exorbitant. As medical technology / knowledge advanced so did the quality of care physicians could provide to patients. This advancement coupled with physicians utilizing hospitals increased physician / hospital charges; these cost were past off to the consumer which just became worse with the start of the great depression. In an effort to assist in the healthcare needs during the depression Baylor Hospital in Dallas created a system that would revolutionize the market for health insurance (Carlstrom, 2009). The plan shortly became known as Blue Cross, this plan was specifically designed as a pre-paid plan for hospital services. Shortly thereafter Blue Shield was created for physician services. With the success of Blue Cross and Blue Shield more consumers were willing to participate which led other private insurance companies to enter the market, it was obvious competition was inevitable. The government also offered tax breaks to employers who provided healthcare to their employees. The Blues were doing so well but they changed how they did business based on the private companies raising premium rates based on age, gender, health status and pre-existing conditions. These behaviors led the Blues to change their one flat rate premium for all insured’s in order to remain in the game. The 1940’s was paving the way for establishing the commercial health insurance system and as the supply of health insurance increased so did the number of other commercial insurance companies entering the market. Then in 1965 Congress enacted Medicare and Medicaid to guarantee that the elderly and poor Americans would not be denied healthcare. To ensure physicians would not combat the new legislation the government knew they had to tread lightly and they did this by paying physicians their usual and customary rate but by 2001 32 % of health care expenditures came from Medicare and Medicaid (Carlstrom, 2009). Medicare / Medicaid reimbursement are being reduced, health care cost are being driven higher due to medical technology, law suits, competition amongst physicians / hospitals, and increased pharmaceutical costs. These factors where never taken under consideration during the 60’s when the private healthcare industry was initiated in the United States and now our healthcare industry is in turmoil. According to PricewaterhouseCooper, a Health Research Institute, the United States Supreme Court ruling upholding the Affordable Care Act re-injects a sense of urgency into the transformation of an industry that represents nearly one-fifth of the US economy. This is because the healthcare industry is with challenges and opportunities that so many other US industries do not encounter. The healthcare industry is a 2.5 trillion dollar business and the...
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Medica Global Healthcare Marketplace
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