Americans spent $2.1 trillion, or about $7,026 per person, on hospitalization, doctor visits, prescriptions, nursing homes, and other forms of health care in 2006 (U.S. Department of Health and Human Services).
Altogether, health care spending accounted for 16% of the Gross Domestic Product (GDP) of the United States in 2006. This is only a slight increase from 2003, when Americans spent about 15% of the U.S. GDP on health care (Dredge 4). By way of comparison, Germany spent about 11% of their GDP on health care in 2003, and Britain spent less than 8% of theirs (Dredge 4).
Although some Americans may believe that health care costs are covered by government or by employers, the actual total cost of the nation’s health care is ultimately paid by workers and taxpayers, either through payments for insurance premiums, lower salaries from employers that provide health care benefits, through taxes that are spent on programs like Medicare and Medicaid, direct, or in direct out-of-pocket expenses for medical bills.
The high cost of health care in the United States is affecting the incomes of individuals and the profitability of businesses.
In 2003, employers provided insurance to almost two-thirds of Americans who were under the age of 65 (Stanton 2) at a cost of about $3000 per year per employee (Clemans-Cope and Garrett 17). For companies that provide family coverage as part of their employee benefits plans, the cost of coverage is even higher.
The average annual cost of providing family coverage through an employer health plan was more than $12,000 in 2007, an increase of 6.1% over the previous year (Furhmans). It is important to remember, however, that the money that employers pay out for health insurance benefits for their employees is money that could be spent on increases in employee salaries and other forms of employee compensation (Fletcher A01).
In addition to paying for health insurance for their active employees, many companies are also responsible for paying for health insurance for their retirees.
This time-honored practice of providing life-long benefits for pensioners, however, is changing. In 1988, 66% of large companies in the United States (defined as companies with 200 or more employees) provided some level of health care benefits for their retirees; by 2005, that number had been cut in half, with only 33% of large companies continuing to provide health care benefits for retirees (“Disappearing Retiree Health Benefits”).
Private insurance plans, including employer-sponsored health care benefits packages and insurance plans that are purchased by individuals, cover about 42.8% of all health care expenses in the United States (Machlin and Carper, Figure 6).
The balance of health care expenditures are funded by Medicare (20.9%), out-of-pocket payments (19.0%), Medicaid (10.6%), and by other sources (Machlin and Carper, Figure 6). In an increasing number of cases, the cost of treatment must be absorbed by the health care system.
In 2006, about 1 out of every 5 Americans, or about 47 million people, did not have any type of health insurance coverage (DeNavas-Walt, Proctor, and Smith 18).
The number of uninsured increased by 2 million people between 2004 and 2006 (DeVavas-Walt, Proctor and Lee). A significant portion of this increase may be attributed to workers who lost their employee insurance benefits because their employer could no longer afford to pay all or some of the insurance premium (Clemans-Cope and Garrett 17).
In some cases, workers became uninsured when they became unemployed. Increases in the cost of providing health insurance for employees has been cited by many companies as a reason for layoffs and staff reductions (Porter, Freudenheim, and Andrews).
A portion of the cost of providing medical services for the uninsured who cannot pay on their own is covered by state and federal governments. The portion that is not covered by government programs or charitable organizations must be absorbed by the hospital or other health care provider (Hadley and Holohan).
This includes providing health care to undocumented immigrants who cannot pay. The exact cost of providing health care for undocumented immigrants is unclear; however, in 2004, the cost of uncompensated medical care for illegal immigrants came to $1.4 billion just for the state of California (Martin and Mehlman 1).
For those who can afford to pay, the United States has the best health care facilities in the world. Unfortunately, American health care is also the most expensive.
Efforts at reducing health care costs to employers and patients, including managed care, higher deductibles, and other strategies, have been unsuccessful because they have been unable to keep up with the increasing cost of treatment. Historically, American employers have covered the bulk of these expenses through employer-sponsored health benefits packages for employees and, in some cases, for their families.
The cost of this coverage, however, is eventually passed along to the employee in the form of reduced wages or, in more tragic cases, the reduction of the company’s workforce. Government-sponsored health coverage such as Medicare, Medicaid, or other programs also come at a cost the taxpayer.
People who argue that the government should pay for health care seem to forget that government money comes from taxpayers. It is true that shifting the burden of health care from employers to government would provide some relief for businesses, both financially and administratively.
This change, however, would ultimately have little difference on the cost to the people who would then pay for health care through their taxes. Ultimately, the only way to reduce the burden of health care is to reduce the cost of delivering health care services.
Clemans-Cope, Lisa and Bowen Garrett. Changes in Employer-sponsored Health Insurance, Sponsorship, Eligibility, and Participation: 2001 to 2005. Washington, D.C.: The Kaiser Commission on Medicaid and the Uninsured. 2006. Online. 12 April 2008 <http://www.kff.org/uninsured/upload/7599.pdf>
DeNavas-Walt, Carmen., Bernadette Proctor, Cheryl Lee Income, poverty, and health insurance coverage in the United States, 2005. U.S. Census Bureau, Current Population Reports, P60-231. Washington, D.C.: U.S. Government Printing Office. 2006. Online. April 12, 2008 <http://www.census.gov/prod/2006pubs/p60-231.pdf>
DeNavas-Walt, Carmen., Bernadette Proctor, and Jessica Smith. Income, Poverty, and Health Insurance Coverage in the United States: 2006. U.S. Census Bureau, Current Population Reports, P60-233. Washington, D.C.: U.S. Government Printing Office. 2007. Online. April 12, 2008 <http://www.census.gov/prod/2007pubs/p60-233.pdf>
“Disappearing Retiree Health Benefits”. Kiplinger’s Retirement Report. December 2005. Online. 12 April 2008 ;http://www.kiplinger.com/retirementreport/features/Cover_Dec2005_01.html;