Economic Issues Impacting Healthcare Sector

Subject: Healthcare Financing
Pages: 10
Words: 2744
Reading time:
11 min
Study level: College

Introduction and Background

Even though the United States spends more on healthcare than any other developed nation, the quality and accessibility of health care remain low. The United States government initiated healthcare reform to address some of the most glaring issues, such as a large number of uninsured. While laws such as the Affordable Care Act (ACA) have improved the accessibility of health care, the United States healthcare delivery system still struggles to maintain a consistent level of quality and reduce spending. In light of economic instability and rising costs, several economic issues confront the United States healthcare industry today and are likely to interfere with the process of change in the next decade. Such economic issues complicate the implementation of new regulatory policies and have to be considered in the development stage.

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Economics is a broad term which is typically recognized the study of concepts and processes related to human choice and resource scarcity. To improve the quality and accessibility of health care medical professionals and policymakers have to consider the economic approach towards analyzing current health care issues and their underlying causes. This paper seeks to address economic issues that have a profound impact on the healthcare industry today and are likely to do so in the future.

It is important to consider these issues in the context of healthcare reform to develop and implement effective strategies aimed at minimizing these issues. Such strategies are proposed in this paper. Since many countries have faced similar issues before, it might be beneficial to research and apply best practices from other countries to address economic issues.

The Current State of the United States Healthcare Sector

The system of healthcare in the United States is characterized by complexity and diversity. Private and public medical institutions offer medical services to individuals covered by individual-based, government-financed, and employment-based insurance. Recently, the discussions started on the issue of rising healthcare costs, which prompted many individuals to skip on paying for individual health coverage. On the other hand, more employers applied strategies to reduce healthcare insurance expenditures, such as cost-shifting from employers to employees. This, again, resulted in more people not having access to health care services.

Government-based insurance includes Medicare and Medicaid healthcare programs, which provide healthcare coverage to the poor, the disabled, and the elderly. The recent regulatory overhaul, which started with the introduction of the ACA, expanded the reach of these programs to improve the accessibility of care. As a result of the regulatory changes, the number of uninsured has dropped significantly in the last few years. At the same time, health insurance exchanges have been set up in every state to offer government-regulated insurance products eligible for subsidies.

Economic Issues which Impact Healthcare Industry

Despite the government’s efforts to reform the system of healthcare, many economic issues remain. These are rising healthcare costs, a large number of uninsured individuals, ethnic disparities, aging population, and obesity.

Rising Healthcare Costs

“Rising healthcare costs represent a central challenge for both the federal government and the private sector” (Mariotto, Yabroff, Shao, Feuer & Brown, 2010, p. 127). In 2009, the United States spent 17.4% of its gross domestic product on healthcare, 5.4% more than the highest-spending European country (Aiken et. al., 2012, p. 2). At the same time, the United States healthcare expenditures have been increasing at a faster rate than in any other country (Chandra & Skinner, 2012, p. 645).

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Rising healthcare costs are directly related to the increase in healthcare expenditures. Rising healthcare costs have contributed to the declining insurance coverage which, in turn, resulted in higher Medicare and Medicaid expenditures (Chandra & Skinner, 2012, p. 645). The adoption of new medical technologies also contributed to the rapid growth of healthcare expenditures. Some of these new technologies offer tangible benefits to a small percentage of the population, but are very expensive and do not improve the outcomes of the rest of the population (Chandra & Skinner, 2012, p. 646). The consumption of healthcare services has also been rising and contributed to rising costs.

Due to the abovementioned trends and other factors, discussed below, healthcare costs are likely to continue to rise in the following decades. Since healthcare expenditures are growing at a faster rate than other aspects of the economy, a major challenge is to analyze the factors which contribute to it and implement policies to address them. Unless clear, strict measures and policies are implemented to control spending, rising healthcare costs may pose a real threat to the economic stability of the United States.

A Large Number of Uninsured Individuals

The United States citizens rely on insurance to pay for medical services. Most of the working population is covered by their employer, which is the main financier of managed care. The rest of the population is either covered by individual or government-financed insurance or does not have any coverage. The latest CDC and Census data suggest that with the changes brought by the ACA, 9.2% of the population still does not have any insurance (ObamaCare: Uninsured Rates, n.d., para. 3).

Rising healthcare costs substantially added to the employers’ payroll expenses, and they implemented such strategies as cost-shifting from employers to employees to compensate for higher healthcare costs. This strategy meant reducing benefits and offering high-deductible plans, which also contributed to a large number of uninsured individuals. Also, high levels of immigration, including illegal immigration, negatively affected uninsured statistics.

If an individual is in pain or suffers from a condition that requires immediate medical attention, they will seek medical help, and somebody will have to pay for it. As such, uninsured individuals cost the United States $49 billion each year (Kennedy, 2011, par. 2). Only one in 10 uninsured individuals pay for medical services in full, and more than two-thirds of these expenses are covered by the United States government (Kennedy, 2011).

Because insurance companies can negotiate prices, medical services covered by insurance tend to be less expensive, than out-of-pocket healthcare expenses. As such, a large number of uninsured individuals contribute to rising healthcare expenditures and increasing the budget deficit. A large number of uninsured affects taxes since the government has no choice but to expand Medicare and Medicaid reach.

Ethnic Disparities

The fact that racial and ethnic health inequalities exist is a well-known fact supported by the number of studies. A consistent framework was created to evaluate these inequalities, and multiple studies suggest that ethnic minorities face a higher risk of obesity, tuberculosis, drug-induced death, as well as other diseases (Keppel, 2007, p. 97). Ethnic minorities are expected to comprise the majority of the US population by 2042 which highlights the need to deliver high-quality health care services to diverse populations (Roberts, 2008, par. 2).

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Several factors affect the level of health among ethnic minorities. Such factors may include the lack of insurance coverage and the inability to pay for medical bills, the lack of culturally and linguistically appropriate care, and stereotyping. Racial stereotyping is one of the most difficult challenges immigrants have to face in a foreign country. One of the studies which involved 1500 patients showed that patients who feel misjudged by the health care personnel do not trust their provider. Such patients are more likely to put off seeking medical help and less likely to follow their treatment plan (Ferguson, 2015).

Aging population

The ability of the healthcare system to deliver quality care depends in part on the number of individuals seeking medical help. A young, healthy population is less likely to seek help for expensive medical conditions and does not stress the healthcare delivery system as much as the older population with poorer health. The aging population is one of the factors which facilitate growth in demand for health care and it is estimated to be the largest growing population group in the United States by 2020 (Mariotto et al., 2010, p. 121).

While gradual, the aging of the population is likely to have a noticeable effect in the long term. Certain diseases, such as cancer, are prevailing among the elderly and are expensive to treat (Mariotto et al., 2010, 117). As such, the most significant economic effect of the aging population is the fact that healthcare expenditures are expected to rise along with the aging population. The higher cancer incidence rate among the elderly alone is estimated to increase healthcare expenditures, while other medical conditions are also specific to the elderly. “The prevention and management of chronic disease will increasingly dominate [health care] workload, and that this is likely to require a major shift in the way that care is delivered” (Howse, 2012, p. 171).


In the United States, obesity among both children and adults has been on the rise for at least 50 years (Cawley & Meyerhoefer, 2012, 219). Childhood and adolescent obesity, in particular, is an increasingly recognized public health problem that spread like an epidemic in the past several decades. Despite recent efforts to reduce childhood obesity, at least 12.7 million children and adolescents in the US are obese (Ogden, Carroll, Kit, & Flegal, 2014, p. 806).

Obesity is also associated with a variety of health complications including coronary heart disease, diabetes, cancer, musculoskeletal disorders, and depression, which can lead to future disability and lower quality of life (Cawley & Meyerhoefer, 2012, 228). Such diseases are likely to require constant medical attention in adult life, and studies have shown a correlation between obesity and diseases related to obesity and rising medical care costs (Cawley & Meyerhoefer, 2012, 219).

In addition to rising healthcare expenditures, a large part of the population with poor health harms economics in general. It means a higher demand for healthcare services, and also a smaller healthy workforce which is the driver of the economy. The most significant economic effect of obesity is the creation of government programs aimed at reducing obesity. Such interventions are expensive, put additional strain on the healthcare system, and require extensive research to evaluate the cost-effectiveness of such governmental programs (Cawley & Meyerhoefer, 2012, 228).

Strategies to Address Economic Issues

The United States government seems to recognize the importance of the government’s involvement in increasing the quality of health care, and such involvement is necessary to improve the situation in the healthcare sector. There are many ways the government can minimize the impact of economic issues.

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Rising healthcare costs can be addressed by increasing the cost-effectiveness of the healthcare delivery system and implementing policies to minimize spending. Cost-effectiveness can be improved greatly by increasing the efficiency of medical assets such as hospitals (Aiken et al., 2012, p. 2). Advances in medical science and technology should be used to minimize hospital stay time.

All of the patients who can manage their disease on their own should be discharged and provided with the necessary resources and support to manage their condition at home. Technologies, such as e-medicine, can be used to provide examinations and consultations without the need of the patient to stay in a hospital. Such strategies will allow the government to reduce the number of hospital beds and personnel without deteriorating the quality of care.

Cost-containment strategies such as those listed above should naturally decrease insurance premiums and encourage more people to buy coverage. Additionally, further expansion of Medicare and Medicaid programs will allow the government to increase the number of insured individuals and minimize expenditures. Expenditures are likely to decrease since the cost of medical services under insurance is lower than out-of-pocket costs the government currently compensates.

The performance of the healthcare system should constantly be monitored with the goal of cost-effectiveness and patient satisfaction. The quality and performance objectives established annually. Incentives should be implemented to increase patient satisfaction and maintain a consistent level of care.

Patient satisfaction is directly tied to whether the quality of care is corresponding to the patient’s expectations. As such, with the rising population of people with various ethnic backgrounds, it is important to consider culturally-competent care to minimize health disparities among minorities. Diversifying the workforce and delivering linguistically appropriate care will increase patient satisfaction and minimize the gap which exists between white and non-white populations. It is necessary to create national standards and provide sufficient financial investments that will improve the ability of health professionals to deliver higher-quality services to minorities.

To minimize the effect of the aging population, it is necessary to consider preventive care to minimize the incidence of such diseases, like diabetes and cardiovascular diseases. Obesity is one of the most important risk factors which have to be addressed to minimize the incidence of such diseases. As such, the government should initiate programs to promote a healthy lifestyle and staying physically active.

A holistic approach to care can also help minimize costs since it addresses the health of the person in general and not just a particular disease. A holistic approach to care can be used to promote lifestyle changes and help slow down the progress of such diseases, like diabetes and cardiovascular diseases. It is also important to consider investing in research to develop new, cost-efficient medical technologies to address such issues, as a cancer treatment. If the progress of the technology outpaces the aging of the population, it may compensate for the deteriorating health of the population and minimize costs.

The issues of obesity, in particular, childhood obesity, necessitates a multifaceted approach. While it is important to consider the effect of governmental programs, aimed at promoting healthy eating habits and physical activity, it is also important to consider the effects of the urban environment. Research shows that there is a correlation between the quality of the urban environment and the likelihood of childhood obesity, suggesting that certain features of the urban environment act as barriers to physical activity and promote weight-related problems (Kim, Lee & Sohn 2016, p. 121).

Well-designed urban settings which offer walking trails, green spaces, bicycle lanes, and accessible pavements reduce obesity by promoting physical activity and are generally associated with better health. On the other hand, poorly designed urban environments which lack green spaces or walking trails, have inaccessible pavements and no bicycle trails hinder physical activity and result in a higher probability of obese children and adults. As such, it is important to consider obesity as an urban issue and implement urban development programs with physical activity promotion in mind.

It is important to apply best practices already used by other developed nations to address the economic issues. The health care system of Ireland faced the same economic issues and achieved great progress through innovative policies and work practices (Carney, 2010, p. 509). The goal of their reform is to eliminate the distinction between public and private hospitals and provide standard insurance for all Ireland citizens. Such policy establishes equal access to care based on need, rather than on income, with universal hospital care available for everyone.


In the last decade, the United States healthcare sector underwent major changes, aimed at improving the quality, cost-effectiveness, and accessibility of care. Several important laws were passed, such as the ACA, which made healthcare services more accessible and highlighted current gaps that exist in the insurance safety net. New regulatory policies are being discussed, such as the Health Equity and Accountability Act (HEAA), which are aimed at further advancing the improvements brought by the ACA.

Nevertheless, certain economic issues remain and have to be carefully analyzed to create effective strategies to address them. These economic issues include rising healthcare costs, a large number of uninsured individuals, ethnic disparities, the aging population, and obesity. While these challenges already affect the quality of health care, unless they are addressed right now, they will remain a problem for the next decades, slowly deteriorating the United States economy and negatively influencing the health of the population.

However, none of the challenges which face the United States healthcare sector are unique, since many developed nations have struggled with the same problems in the past. It is important to consider the way these nations overcome these economic issues and apply best practices to minimize their negative impact. The position of the United States as a global economic leader dictates its ability to make drastic changes to improve the quality of life of its citizens. As such, it is likely that with a united effort from policy-makers and medical personnel, the impact of the economic issues can be greatly minimized. It is more likely that the government will recognize and address these issues since it is in the government’s best interests to keep its population health and the economy strong.


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