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Assignment 3: Persuasive Paper Part 2 – A Problem Exists
Rising Health Care Costs can be Controlled or not?
Feven Goitom
Professor Julie Davenport
ENG 215
August 16, 2012
Introduction
Rising health care cost is main contributor for un-sustainable projected, which increases in
main health programs of Federal Government that have been major contributors for the
projected Federal budget deficit. Effect of such cost growth has even been bigger than that of
expanding the life-spans and forth-coming retirement of baby boomer. In USA, health care is
provided by many independent legal entities. As per the current estimates US spends
approximately 15% of its GDP on healthcare. Though the US government spends
substantially on the healthcare services, private sector in the country owns much part of the
health care services providing industries. Health care provided by the government contributes
to more than half of the overall industry spend. Government sponsored healthcare programs
include: Medicare, Medicaid, TRICARE, Children’s Health Insurance Program and the
Veterans Health Administration.
Healthcare spending in US neared record levels in 2010. 2010 Healthcare spending in the US
increased by approximately 10 times over the last three decades. In 2010 alone, the healthcare
expenditure in US was approximately USD 2.6 trillion. Health care forms an important part
of the overall US economy. However, rising healthcare cost has posed numerous challenges
over the past few years. Given the contribution to the overall GDP, cost control has been a
critical issue in recent years for the current and previous government of the United States.
Thesis Statement
Though the growth in healthcare expenditure has eased significantly, one question that still
remains unanswered is whether this rise in costs could be controlled or not? Rising cost will
not only make healthcare unaffordable for hundreds and thousands of families, but will also
decrease the overall efficiency of the system. Thus a key question which needs to be
answered by the government (both federal and state) and the private players - Can the rising
Health Care Costs be Controlled or not?
Overview of healthcare in the United States
As highlighted above, healthcare industry contributes significantly to the US
economy. As a result, the government remains focused on contributing significantly in the
improvement for this industry. However, over the last decade, the healthcare spending in the
US has grown faster the national income, and is expected to continue its uptrend in the near
future. Citing the need to control the rise in costs, the US government has taken several steps
to curb the spending, and increase the efficiency of this industry. However, the efforts of the
US government have not been encouraging till date, and are still far behind its stated targets.
US is amongst the few countries where healthcare spending forms a substantial part of the
GDP (McKinsey Global Institute, 2007).
In 2006, the annual healthcare spending in the US stood at $ 2.1 billion, accounting for ~16%
of the GDP. Though the expenditure was very high in comparison to the previous years, it
was also observed that approximately 45 million people in the country had no health
insurance (McKinsey Global Institute, 2007). Despite, being among the richest nations, the
life expectancy, mortality amenable and other health outcomes are not up-to the desired
levels. This clearly shows that though the spending has considerably been higher, the
efficiency was really poor. This has left the government fielding several questions regarding
the efficiency of these spends (Oberlander & White, 2009).
Issues in the Healthcare Costs Control
Prospective Payment System
The issues in the health care system began in the 1980s, since the creation of initial health
care reform. In 1983, the US government created a Prospective Payment System or PPS
where fixed reimbursements for the use of medical technology could be paid. This implied
that the performance of treatment would not be the criteria for the pay scale. For example, if a
physician prescribes a bypass surgery, as a cardiac treatment, the amount paid to them would
not be on the basis of the cost involved to perform the surgery, rather it would be on the basis
of the national average cost.
Although, this was the initiative to beat the national average cost of performing
surgeries, which aimed at lowering down the system-wide costs, but it did not result in the
desired outcome. The other effect of the new payment system was that providers could
choose from various cardiac treatments, some of them being expensive compared to the
others. Due to the new systems in place, the treatments were preferred where the marginal
cost was below the average cost. This system, as some believed had lead to the over-reliance
on the costly treatments, which has resulted in the health inflation after the 1980s (McKinsey
Company, 2011).
Clinton’s Health Reform
Later during 1993 and 1994, Bill Clinton’s administration announced some reforms
including various cost control strategies. This included a national health spending system
with a de facto budgetary cap. This system had a severe impact on the incomes of various
stakeholders, and thus attracted severe criticism from the opposition party. This also led to
negligence from the politicians of the country towards the issue of cost control in the
healthcare industry. Since, then the governments at both the federal and the state level started
concentrating on the insurance coverage but the costs were not yet controlled.
Developments in last decade
Much later to that in the last decade, when the private sector also entered in the health care
industry from all the directions lowering down the burden of the government, the...