Economic Development and the Healthcare in the US


In the United States, the economy and health care are two critical issues. The two issues cannot be separated because they are mutually dependent. The increased spending on health care is the driving force to the local economy. The development of several towns and ICT infrastructures in the US are boosted by health care industry1. For instance, several hospitals, pharmaceutical companies, and health insurance companies have thrived in the US because of the government’s increased spending on the sector. The companies employ thousands of Americans improving on the country’s economic development.

Description of the issue

With respect to the economy of the country, the increased spending on health care lowers both the employment rate and the growth rate of GDP2. However, other economists perceive it as a positive impact on the economy since it results in better access to health facilities. The health care industry offers large employment opportunities. For instance, the industry created 14.3 million jobs in 2008, and it is projected to create another 3.2 million by 2018. Health care in the US has boosted the development of several towns and cities, which include Texas, Houston, New York, Pennsylvania, Philadelphia, Maryland, Baltimore, Boston, and Massachusetts. In the recent past, spending on health care has been increasing. Through this healthcare sector has been greatly enhanced by the introduction of new treatment technologies. With the introduction of new treatment technologies, citizens have received services that are much more efficient and cost-effective. Based on the above illustrations, it is apparent that improved health care has enhanced economic developments in the US because healthy citizens’ productivity is higher compared to unhealthy citizens’ productivity,

Why I selected the issue

I have chosen this issue because the relationship between economic development and health care in the US is a critical subject, which should be studied and analyzed. The issue cannot be ignored because, in recent years, the matter has attracted national attention. Politicians have debated the issue numerously. The democrats and the republicans have been debating and criticizing each other with respect to health care policies. Health care influences the growth of towns and the US economy in general.

Background information

The US healthcare industry has played a huge role in the development of towns and the growth of the US economy. The health care accounts for the largest portion of the US national budget compared to other economic sectors. The CEO survey report in 2004 indicated that health care accounted for much of the government spending. The trend in rising health care spending is dated back to 1960, where it recorded $ 27 billion. In 1985, a total of $ 427 billion was spent. In 2003, a record of $1.67 trillion was spent, while in2013 $ 3.4 trillion were spent on health care. The above statistics illustrate that the healthcare sector in the US is an important sector. Because the governments have continuously increased their expenditure in the sector over the years, the sector has added thousands of job opportunities to Americans. The jobs have been made available for doctors, nurses, technicians, electricians, computer scientists, and statistics experts3.

National issue

The relationship between economic development and US healthcare is a national issue in the US. It affects the Municipal, County, and State budgets. In fact, the most recent big debate was on the Democrat agenda of the OBamacare health policy, which faced resistance from the republican politician’s4. This is the actual evidence of how spending on health care is crucial to the US economy. Experts in the US have been examining factors that contribute to the rise in spending and establishing policies, which aids in cutting down the expenses. Research and studies point out population rise, high levels of technology, inflation and the changing health care consumptions as the major factors that cause a rise in spending.

Trends on the issue

Currently, the increasing cost of health care in the US is perceived as a threat to the country’s economic development. Money that should have been used in development projects are being used in meeting healthcare expenditure. Therefore, the government has put in place policies to address the issue. The US government has laid the legal framework to aid in cutting down the cost of health care. Currently, the Obamacare health policy aims at increasing the number of US citizens covered by the policy. The US health prevention of deprivation policy, patient’s preference policy, and wasteful spending policy are some of the trending policies. A report by CEOs in the year 2004 indicated that the rising spending on health care was a burden to the economy. Therefore, many employers had to increase employee contributions to the health care plan. In another scenario, they compelled workers to adopt other affordable health care covers.

Current practices/policies

Currently, the US government has several policies, which regulate different health covers. For instance, the Medicare and Medicaid health insurance policies are meant to address the issue. Others include the Minnesota health reforms of 2008. However, they ensure that health services are enhanced. There is another perspective on the rising spending on the US’ health care. California and Texas have adopted a Medicaid waiver. Through this, the states can attract federal funds. A number of financial analysts have illustrated that the increased spending will lead to important benefits, which prevail over the rising costs of the health care5. Their concept is valid, especially when the rising cost is due to the improved quality of health care facilities. Through this, many people will be able to access different advanced options of treatment because the new health care technologies can serve many people efficiently, thus saving on time and money which translates into economic growth of the US.

Desired policies

The US desired policies involve plans that help in balancing the economy and the rising spending of health care. It includes adopting streamlined medical billing systems to save about $7billion annual loss. The rising health care expenditure has an effect on the US economy. The health care spending growth is 9.6%, while the overall US economic growth is 3.6%. Economically, this means that a larger portion of the government funds is spent on health care at the expense of other sectors. The impact is experienced in both the private and public sectors. As such, the issue affects all the federal and state governments. They are faced with higher, rising costs than the revenues they collect, hence the need to create ways of reducing the rising health care spending. If the national and local governments will have less money for development projects, the overall economy of the US will be affected negatively.

Cost of financing the policies

The cost of financing these health policies is stated in the USA’s government budget. Faltin states, “In 1960 the public contributed only 25% of the total health care budget, while in the year2002 the public contributed 46%.” In 2013 the US budget, the health care counted for $ 3.4 trillion. The main reason for this increase is due to the introduction of Medicare and Medicaid health plans. If the government contributes a large portion of the health care covers, then it will be forced to increase taxes and long-term loans. The direct impact will be reduced household income. Hence individuals cannot engage in other economic activities.


The US health care sector should come up with appropriate policies, which does not affect economic development negatively. Through this, they will avoid increasing the cost of capital, which is available to firms for investment. Grinspun asserts, “The increased borrowing by the government for financing the rising health care costs will lead to reduced resources for other sectors”6. Thus, less capital will be available to firms hence leading to “crowd out” investment of other projects that should have been undertaken. Therefore, the rising health care spending and the economy of the US are related.


In conclusion, the US economy should be observed in terms of increased interest rates since there is deficit finance in federal health care. Through this, the performance of other industries can be determined, and thus the appropriate measures can be adopted to check the rising health care spending. Boslaugh and McNutt assert, “Research on economic models indicates that the deficit in finance affects negatively exports and industrial goods”7. The worst scenario is the fact that deficit financing leads to improper taxation, which ultimately affects the payrolls of employees. It affects the consumer services in the industries negatively since the higher cost is passed down to them.


Atlas, S. W. (2010). Reforming America’s health care system: the flawed vision of Obamacare. Stanford, Calif.: Hoover Institution Press.

Bali, R. K. (2006). Healthcare knowledge management: issues, advances and successes. New York: Springer.

Boslaugh, S., & McNutt, L. (2008). Encyclopedia of epidemiology. Farmington Hills, Mich.: Thomson Gale.

Edwards, N., & Grinspun, D. (2011). Understanding whole systems change in healthcare the case of emerging evidence-informed nursing service delivery models. Ottawa, Ont.: Canadian Health Services Research Foundation.

Faltin, F. W. (2012). Statistical methods in healthcare. Chichester, West Sussex: Wiley.

Griffith, J. R. (2000). The well-managed healthcare organization (4th ed.). Chicago, Ill.: Health Administration Press.

Pipes, S. (2010). The truth about Obamacare. Washington, DC: Regnery Pub.


  1. Bali, 2006: 3.
  2. Griffith, 2000: 13.
  3. Faltin, 2012: 1.
  4. Pipes, 2010: 4.
  5. Atlas, 2010: 6.
  6. Edwards and Grinspun, 2011: 46.
  7. Boslaugh & McNutt, 2008: 69.