Rising Health Care Costs: the Problem, the Causes, the Solution

Rising Health Care Costs: The Problem, The Causes, The Solution

Table of Contents

Introduction 3

Causes 4

The Solution 5

Conclusion 7

References 8

Introduction

Over the years, health care costs have grown to astounding levels, placing undue burden on government, communities, organizations and individuals. According to the Centers for Medicare and Medicaid, health care spending reached $2.7 trillion in 2011, the equivalent of $8,680 per person ("National health expenditures," 2011). This spending in health care equates to approximately 18% of the U.S. gross domestic product (GDP) ("What is driving," 2012). GDP per capita grew at an average rate of 2% per year between 1950 and 2011, while national health care expenditures per capita grew at a rate of 4.4% per year. The gap between the two rates of growth, 2.4% per year, resulted in the share of the GDP related to health care spending increasing from 4.4% in 1950 to 17.9% in 2011 (Chernew, Baicker, & Hsu, 2010). If this pattern of rising costs continues, health care spending is expected to reach 19.6 % of GDP by 2016 (Norman, 2010).

Given these figures, it’s not surprising that health expenditures in the U.S. are significantly higher than those of other developed countries. In fact, government per capita spending on health is greater than all other countries included in the Organization for Economic Co-operation and Development (OECD) with the exception of Norway and the Netherlands ("Oecd health data," 2012). Most experts believe that if health care expenditures continue to grow at this magnitude, there will be catastrophic consequences for the federal government and the U.S. economy (Chernew, Baicker, & Hsu, 2010). It’s therefore necessary for major steps to be taken to address these inefficiencies in health care so as to reduce the rising costs. Hence, the following is a presentation of some of the causes contributing to the rising costs in health...