Health Care Spending

Health Care Spending


One of the most informative indices for evaluating a country’s well-being is the quality and availability of health care that is made available to its citizens. Evaluating this index could prove a painstaking, albeit thankless task, because of the numerous small aspects and players that make up the healthcare provision and delivery sector. In view of these seemingly unsolvable Gordian knot, there, perhaps, should be a more readily accessible and reproducible means of quantifying the healthcare delivery of any country. The often most used yardstick is calculating the total of its GDP that any nation spends on healthcare; this includes the direct government expenditure on health care provision and delivery, as well as the amount of out-of-pocket expenditure on health care that its citizens are involved in. When easier accumulated data are assembled, it will enable any interested party to objectively evaluate and compare the said country. This paper will take a look at the United States from the perspective of health expenditure.

It turned out to be odd that healthcare delivery is not directly proportional to government expenditure on health. The United States proves this point clearly, as it is the highest spender on the planet, according to the world health organization. WHO data show that the expenditure per head of the American citizen is the highest all over the world, with the US spending $8362 per head in 2012 on health.(WHO, 2012). In fact, for the same year health care expenditure was projected to grow at an average of 5.8%. This growth rate of health expenditure was even higher, than the forecasted GDP growth rate by 1% .As a matter of fact, the rate of growth of health expenditure has far outstripped the growth of wages between 1960. Thus, the year 2010 statistics show that health expenditure has grown by a massive 818%, leaving behind gross domestic product and wages at 168% and 16% respectively (Hall &Diehm, 2013).

Surprisingly, this huge health expenditure on health cannot be explained by a comparatively higher income, a greater supply of hospitals, doctors or an older population. Enquiry and research into this subject, however, seem to subject that the higher spending, recorded in the United States is a consequence of  more readily accessible technology, higher prices and, almost as important as the previous two, the obesity epidemic, currently griping the United States. Incidentally, health care in the United States varies and is not particularly superior to the far less expensive systems, which are obtainable in other OECD countries. In Japan, which has the lowest spending of the OECD countries, for instance, they have pursued healthcare provision via a different route. In comparison with other sectors of the economy, the health care sector is largely publicly funded. Therefore, the access, or in this case affordability, is ensured through universal insurance based, or tax-financed programs that are operational in the United States, such as Medicare and Medicaid, as well as employer sponsored health coverage (Squires, 2012).  This provides evidence that the United States is no slouch when it comes to spending funds on healthcare.

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In particular, the issue in the United States isn’t the dearth of funding per se, it is either by the government or by private non-monetary expenditure. Besides,  it is more along the lines of the delivery of the service and the cost of obtaining the said service. The article in the Huffington post (Hall &Diehm, 2013) showed that the Americans, in spite of the high level of spending on health, did not necessarily visit the doctor more often than the other OECD countries. The frequency average for Americans taking the doctor consultation hours is by an order of magnitude lower, than in Japan. Another factor, highlighted in the same article, which distorts this picture, is the price of the simplest most prescribed medications in the US. The price of these simple medications is much higher, than in other OECD countries, where it is more obtainable.  The average US prescription costs $947, while the Australian and Japanese averages are $503 and $556, respectively. Moreover, while Americans spend more time, after the average time  on admission in hospitals, the cost of staying in those hospitals is unequalled among OECD countries. To view the situation from a new perspective, Germany has the highest hospital stay among OECD countries with a 10day hospital average, which costs about $4000. In comparison, Americans can stay up to 7 days in a hospital, spending, on average, $16000. These massively distorted figures make it abundantly clear that the inadequate expenditure has never been the issue, and in the American health sector enough money is being spent.

The question that now arises from the stated above consists in the following: if spending per se is not the issue, what then is. The answer can be found if chasing the thing the money is spent on. A breakdown of the United States health expenditure shows that 7% of the whole health expenditure was expended on administrative costs only. If compare this figure with the issue in Japan and Canada, which, thereupon,  have comparatively better health sectors/systems, the US, yet, spent, on average, 4% of funds on administrative costs. Accordingly, it sheds light on the American problem. This is an attribute of the entire American health sector. A study carried out by price water house cooper showed that the healthcare industry was massively inefficient. The findings showed that $1.2 trillion out of the $2.2 trillion spent on health was, in effect, wasted. This waste was readily apparent from carrying out the unnecessary tests and examinations. There is a huge tendency among the policy makers in the United States to place unusual amount of emphasis in curative and diagnostic equipment and facilities, which at first glance might appear astute, but bears further questioning (Price Water House cooper, nd).

Regarding the issue of obesity, for instance, the statistics from the centers for disease control and prevention show that more than a third of American adults and over 16% of its youths are obese. In 1998 the cost of treating obesity, related to the health issues in the United States came practically to $78.5billion; and by 2008 the total cost of the same issue had jumped to a whopping $147billion, rising year after year. Studies carried out showed that obesity was responsible for 27% of the inflation adjusted health spending between 1987 and 2001(Finskelstein et al, 2009). If this is the case and, evidently has been so for more than two decades, the problem that policy makers in the health sector would rather pour huge amounts of taxpayer’s money into finding cures and diagnostic tools as against institution and enforcing prophylactic measures to nip this situation in the bud can only be described as supremely irresponsible. Therefore, there is a overwhelming need for the policy makers to adjust their sights and focus their money and expertise on proactive as against reactive health policies. These will include studying the major health needs of the country and instituting prophylactic policies that will forestall these health issues before they come up; it is something that will be particularly effective in the case of obesity.

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Healthcare in the United States primarily is paid for by such universal aid programs as Medicaid and Medicare, and employer provided health insurance. In the future, however, several things will become more significant issues; for instance, universal healthcare coverage will become an even bigger issue in the coming years, as the population continues to grow both organically and via immigration, and a trend is coalescing and will continue to expand in the non-too distant future. Healthcare provision is primarily insurance based, the issue is that the insurance premiums. Undoubtedly, medical care is so expensive now that the cost of getting it without insurance is almost prohibitive. If it continues to be the case and the insurance premiums continue to rise, the target of providing health care to people will ultimately fail. As alluded to earlier in this paper, the rate of increase of healthcare costs far outstrips the rate of increase of wages. Should this trend continue (and nothing today suggests it won’t), there might come a time when people will be unable to afford even the relatively cheaper insurance.

Obesity is quite a massive issue and the way things are going at the moment will continue to be the same for a while yet. Obesity, in particular related to cardiovascular pathologies/diseases, alarmingly accounts for more than a third of the mortalities, recorded in the United States (Finkelstein, 2009). This is a trend that is supposed to increase and even possibly double in the coming years. In addition, an inordinate amount of money is being spent on obesity and obesity related issues. This should be notified today to strain resources in the near future.

The financing of these needs can be got from more efficient spending model of funds, which are currently being wasted. The government can remove the administrative bottle necks, as while trimming the health sector and removing the repeat oversight functions that increase costs, in order to save more money that will be spent on proactive health measures.


The health sector in the United States proves that throwing money at a problem does not necessarily equate to solving it. The government has to take the necessary steps to bring down the costs of health care by borrowing a leaf from the Japanese that has found out a way of keeping the costs of procedures and medications down, to ensure that it does not spiral out the reach of the population.

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