IntroductionUnited States of America is an owner of the most expensive health care system in the world. The U.S. spends on health care system more than any other country both in the absolute figures and in proportion to gross domestic product (GDP) per capita. Thus, only in 2007 the U.S. spent about 2.26 trillion dollars on health care, which is 7,439 dollars per person. According to some estimates in the U.S., the health care consumes about 16% of GDP. It is expected that the share of GDP allocated to health care in the U.S. will increase and its amount will reach 19.5% by 2017 (Andersen, Rice, Kominski, Afifi & Rosenstock, 2007, p. 311). However, the growth of spending on this sector over the past 30 years is mainly due to the government programs that could seriously undermine the financial stability of the country.
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According to the Institute of Medicine of the National Academy of Sciences of the USA, the United States of America is the only developed industrial country in the world without the universal health care system. In the U.S., about 84% of citizens have health insurance. Insurance is provided by the employer to 64% of them; 9% of citizens purchased it by themselves; and 27% of citizens get the insurance through the public programs. Certain government programs allow persons with disabilities, the elderly, children, veterans, and low-income people to get medical assistance. In addition, these government programs provide emergency care to all residents of the country regardless of their ability to pay. More than 45% of the country’s expenditures in the health care system are used to fund such government programs. Thus, the U.S. government is the largest insurer of the nation (Harrington, Estes & Hollister, 2007, p. 246).
There is constantly unfolding debate around the U.S. health care system. There are disputes about its availability, efficiency and quality, as well as huge amounts that are spent on its maintenance. In 2001, about 50% of companies went bankrupt because of the costs of medical care in the U.S (Harrington, Estes & Hollister, 2007, p. 249). In addition, according to the UN Human Development Report, “The uninsured are less likely to have regular outpatient care, so they are more likely to be hospitalized for avoidable health problems. Once in hospital, they receive fewer services and are more likely to die in the hospital than are insured patients. They also receive less preventive care” (Rowland & Hoffman, 2005, p. 3).
Besides, UN Human Development Report states that “Over 40% of the uninsured do not have a regular place to go when they are sick and over a third of the uninsured say that they or someone in their family went without needed care, including recommended treatments or prescription drugs in the last year, because of cost” (Rowland & Hoffman, 2005, p. 2). In 2006, 16% of the population did not have health insurance in the U.S., and this is 47 million people (Mahar, 2006, p. 274).
In 2000, after analyzing the health care system of 191 countries, the World Health Organization gave the U.S. the first place in the ranking of the most stable systems capable to respond quickly to changing conditions. Meanwhile, the U.S. took the 1st place among the most costly health care systems, only 37th place on the level of health care delivery, and 72nd place on the overall level of health. However, the WHO’s study has been criticized for its methodology and lack of analysis of satisfaction with the health care system by consumers themselves (Andersen, Rice, Kominski, Afifi & Rosenstock, 2007, p. 318).
According to the CIA’s World Factbook, the U.S. is on the 41st place in the world in terms of infant mortality and on the 45th place in terms of life expectancy. Some studies have shown that in the United States during 1997-2003 years the reduction in mortality levels occurred much more slowly than in other eighteen industrialized countries. On the other hand, the results of 2006 annual national health survey, carried out by the Center for Disease Control and Prevention of the National Center for Health Statistics, showed that approximately 66% of respondents believed that their health is “excellent” or “very good” (Harrington, Estes & Hollister, 2007, p. 251).
However, according to Human Development Report that was carried out in 2005, “Over a third (36%) of families living below the poverty line are uninsured. Hispanic Americans (34%) are more than twice as likely to be uninsured as white Americans, (13%) while 21% of black Americans have no health insurance” (Rowland & Hoffman, 2005, p. 2). In addition, Senate Democratic leader Harry Reid during White House healthcare summit in 2010 declared, “Harvard just completed a study that shows 45,000 Americans die every year because they don’t have health insurance, almost 1,000 a week in America” (Marlowe, 2010).
Many Americans, who have no private insurance, are covered by the government programs such as Medicare and Medicaid as well as by the other programs of various states and local governments for the poor. One of the studies showed that about 25% of uninsured U.S. residents (nearly 11 million people) could participate in one or another government program but, for some reason, they did not fall under their action. One of the government’s objectives is to expand the scope of these programs to all segments of the population who need them.
Back in 1986, it was adopted The Emergency Medical Treatment and Active Labor Act (EMTALA), which, at the state level, secured an access to emergency medical care for all people regardless of insurance availability. As well, there is a program TRICARE for veterans and their families. In 1997, the federal government created the State Children’s Health Insurance Program (SCHIP) that provides health care coverage for children from the families with incomes above the permissible to participate in Medicaid but who, nevertheless, can not afford to buy insurance. In 2006, this program helped 6.6 million children. Nevertheless, in many states, it has already faced the problem of underfunding (Mahar, 2006, p. 345).
U.S. government covers the cost of health care through the two main programs such as Medicaid and Medicare, which allow the poor and needy residents of the country to receive the medical services for free or at a low cost. In 2006, the Medicaid program provided 38.3 million low-income Americans with health care. As to the Medicare, it provided 40.3 million elderly patients and persons with disabilities with health care (Harrington, Estes & Hollister, 2007, p. 304).
Health Insurance and Medicare
Medicare is a known state insurance program for persons over 65 years. It was introduced in 1967. Prior to that time, the majority (50%) of older U.S. residents did not receive an adequate level of medical services. Under this program, all Americans over the age of 65 years must be insured as well as those, who are approaching this age and have serious problems with their health. Thus, more than 97% of the elderly, 90% of people with severe kidney disease, and 3.6 million disabled people are insured under this program (Andersen, Rice, Kominski, Afifi & Rosenstock, 2007, p. 382).
This insurance program covers medical care for acute conditions, including an inpatient treatment, the various diagnostic procedures, medical services at home, and non-durable stay in nursing homes. In addition, patients may receive some preventive services such as vaccination against hepatitis B, influenza, pneumococcal infections, mammography screening, etc. Such services as a long-term hospitalization, home nursing care, the provision of hearing aids and prescription drugs are not paid by this program.
Medicare is quite effective program. It is partly funded by a special tax on employees, half of which they pay themselves and the employer pays the other half. In general, this tax is about 15% of the income of employed Americans. Another part of Medicare is financed from general revenues (Mahar, 2006, p. 359).
Health Insurance and Medicaid
Adopted in 1966, the state Medicaid program provides health insurance to the Americans from the poor families. The elderly, persons with disabilities, disabled, pregnant women, and children are also under this program. Thus, the program covered 33% of newborns, 25% of children of all age groups, and 40% of patients with HIV. Federal Government and state governments fund Medicaid Program. The federal government pays its share of Medicaid costs from general tax revenues that are approximately half of all costs. The rest is paid by the government in each state (Harrington, Estes & Hollister, 2007, p. 327).
Medicaid affects the five basic services: inpatient and outpatient treatment, a consultation of the various experts, stay in the nursing homes, clinical diagnostics, and radiological research methods. The program pays for staying in nursing homes those people, who require constant care and can not be without outside assistance. A stay in such facilities is very expensive and can be up to 100 dollars per day. Therefore, the most people do not have enough of their savings for it. Major part of the money allocated to Medicaid is spent for patients at nursing home.
In 1966, the U.S. Congress passed legislation, which reformed the social security system in the U.S. Since then, every state of the country gives the federal government a plan to provide medical services to the groups covered by Medicaid. Upon approval of the plan, states use federal money as well their own revenues to finance the health care services. Each state has its own program of Medicaid, which makes it very complicated to manage (Andersen, Rice, Kominski, Afifi & Rosenstock, 2007, p. 408).
Obama’s Health Care Reform Bill
In 2010, the most significant change was made in the health system after the U.S. Medicare program in 1960. U.S. House of Representatives approved the health reform proposed by President. Barack Obama commented, “Tonight’s vote is not a victory for any one party – it’s a victory for them. It’s a victory for the American people. And it’s a victory for common sense” (Thrush & Lee, 2010). However, according to the opponents of the U.S. health care reform, the national insurance system may go under the government control because of it. Reform must provide health insurance for 32 million U.S. residents. The cost of this project is estimated approximately at 940 billion dollars.
“Reformatted” health care system provides that insurance coverage should be extended to all Americans. Of course, there will not be great changes for those, who have already got insurance policy or who have received social package from the employer. However, for others (more than 50 million people in the country have no health insurance today) the law provides the radical changes. During the next ten years, it is expected in the Congressional Budget Office that system will cover another 32 million have not yet insured Americans (Rice, 2010).
However, it will be still 23 million uninsured one by 2019, one-third of them are the illegal immigrants. Even so, coverage will be extended to 95% of the population (against 84% today). The new system, as it is positioned by Democrats, will help those, who have not previously had the opportunity to purchase insurance either because of its high cost or because the insurance company denied them, for example, due to the client’s illness (“H.R. 4872, The Health Care & Education Affordability Reconciliation Act of 2010 Section-by-Section Analysis”).
New system will provide still unprotected people with insurance in different ways, at different times, and gradually. Firstly, from 2014, companies that employ over 50 persons will be required (but not by their discretion) to insure the health of employees. Otherwise, they will face fines. Secondly, six months after enactment of the law, it will be prohibited the insurance plans that limit the effect of medical coverage by life expectancy. The purpose of this prohibition is that children of insured parents can receive medical services under the same insurance. Moreover, the age limit of children, who can be treated by a parent policy, will rise from the current 18-19 years to 26 years. Thirdly, the insurance companies would no longer be able to deny insurance to already sick people. Three months after the law start work, the Americans with preexisting disease will also be able to receive state-subsidized health coverage program for high-risk insurance (Rice, 2010).
This special system is not the final format, but only a passing phase. In 2014, a new system of medical insurance begins to work at full capacity. Since then, people, who have no other choice but to buy insurance on their own, will be forced to do it under the threat of penalty. First, a penalty will be $95 or 1% of income (whichever is greater). Then, it will grow gradually to $695 or 2% of income. Only those, who can not find the policy with value less than 8% of their income, will be freed from having to pay a fine. In addition, from 2014, sick people will no longer meet the denial of insurance but also be able to get a policy with no a lifetime or annual limits (“H.R. 4872, The Health Care & Education Affordability Reconciliation Act of 2010 Section-by-Section Analysis”).
Affected Parties in Business
Regarding this reform, opinions were divided not only between Democrats and Republicans, but between business representatives as well. Indeed, the new initiatives promise profits for some and, vice versa, harassment and problems for others. In the first place, this reform will affect the insurance companies. Initially, the insurers were afraid that the new law generally put an end to private health insurance and establish the public system instead. However, this has not happened. The most terrible thing that threatens them is a more thorough regulation by the authorities.
Besides, the insurance companies will get good profits, which will grow due to increased coverage of the population. According to the insurance companies themselves, half of 32 million people, who will be insured through reform, will choose the insurance plans of private firms. It means that all the insurers, who experienced lack of the new customers in recent years of crisis, will have their rapid influx.
However, the insurance exchanges can really radically change the life of the insurance companies affecting their business model. Today, the companies insure only healthy people in order to cover the costs for those, who became ill. According to the new law, they would have to insure sick people and, therefore, change the structure of insurance premiums in a way that, at least, maintains the level of profit.
Therefore, the main lobbying group of American insurers, namely, American Health Insurance Plans opposed to the adoption of this law. They argued that the companies would be forced to raise the premiums for young and healthy people to help offset the costs for the elderly and sick. As a result, the first one may opt out of insurance. Insurers are also waiting for other changes. However, most of them will not come into force before 2014 (“H.R. 4872, The Health Care & Education Affordability Reconciliation Act of 2010 Section-by-Section Analysis”). Hence, this is a fairly long investment horizon in order to be prepared for changes and accept them trouble-free.
Hospitals and doctors are another affected party. They are not just an affected party but also a winning one. Hospitals will reduce the costs on those, who do not have insurance or funds to pay for the medical services. However, as experts note, Medicaid, usually, compensates hospitals cost of treating the poor not fully. Therefore, a fresh influx of money into the clinic is still in question. Either way, the hospital has already agreed to take part of the reform’s costs, which is $155 billion over ten years, taking the lower payments for older Americans on the Medicare program. As well, doctors will not remain in the losers thanks to this reform. They confirmed their positive attitude to the initiative by the fact that American Medical Association started a public support of the bill already in early March (Abelson, 2010).
Lastly, the pharmaceutical market players embraced the reform more joyously. In fact, this joy was embodied into the quite tangible things. Thus, the pharmaceutical companies spent $100 million on the promotion of health care reform. In addition, they will contribute to the new system about $80 billion in the form of lower drug prices for state programs within ten years. Instead, as a result of all these innovations, the pharmacists will receive tens of billions dollars as more and more people will visit the doctors and buy the prescribed medicines.
Benefit from the reform for drug companies, in fact, is that it will help to close the so-called “doughnut hole” that is a gap in the provision of medicines under the Medicare program. Due to this gap, the old Americans are often themselves had to pay for drugs, but not having received them at public expense, because of what they just use to buy the cheaper or unlicensed versions of drugs. Now, they will buy the patented drugs that will also increase the profits of pharmaceutical companies (Staton, 2010).
Difficult Burden to the State
Even if the health care reform started by Obama is acceptable to the public and for business, it will be a difficult burden to the state. Despite all the benefits of the reform, it has two serious shortcomings such as the unreliable sources of funding and lack of opportunities to reduce the health care costs. According to Congressional Budget Office, the introduction of the new system will cost $940 billion just over the next ten years. However, as Democrats claim, they have foreseen all sources of funding. Moreover, it is expected that the reform will not only be paid off, but also will reduce the federal deficit by $138 billion over the first decade (2010-2019 years) and by more than $1 trillion (0,5% of GDP) for the second decade (2020-2029 years) (Rowley, 2010).
First of all, the new taxes will be imposed. In particular, a kind of a luxury tax, so-called Cadillac tax, is a tax on income from investments, which the well-to-do Americans get. It will go into effect in 2018. Then, the wealthy families with annual incomes of over $250 thousand will pay an additional 3.8% on their investment income, while paying a large amount of tax withheld from wages for Medicare. In addition, insurance companies that sell expensive insurance plans (with total premiums in excess of $ 10,200 per person or $ 27,500 per family) will pay 40% excise tax. Besides, the part of the funds freed by the reductions of other programs will be used to finance the health care reform (Leonhardt, 2009).
However, there is a risk that some of the funds that are expected to be obtained by reducing costs or as income will not materialize fully, as it can be politically difficult to gather them”. For example, it is planned that payments to Medicare will grow slowly over several years. However, Congress votes in favor of keeping the high rates of their growth each year. Even if Barack Obama will win the second term, he still would not reach the moment when the excise tax on expensive insurance plans will come into force in 2018. However, the funding will be needed much earlier.
Still, the greatest risk to the solvency of the United States is the speed with which health expenditures are rising. Washington can afford to expand coverage. Required for it an amount, about $94 billion annually in 2010-2019, is only a small fraction of $2.3 trillion spent on healthcare in the U.S. in 2008 (Werner, 2010). However, Washington can not afford the old trajectory of spending growth. Therefore, the problem with the new law is not that it inflates the budget while increasing the coverage but that it is not enough to slow the rising cost of health care services.
However, the slogan “Kill the Bill”, which the demonstrators chanted in front of the Capitol on the day of the adoption of the reform is still too strong reaction to such an initiative. In general, it will not have too much effect, and, certainly, it will not be a shock to the American economy, as it will be stretched to a decade. During this time, members of markets affected by the reform and all U.S. residents gradually restructure and adapt to the new health insurance system. Moreover, the economy may even feel the positive impact of reform. It is expected that it would create 400 thousand new job places that are needed so much in the United States battered by recession. Furthermore, if, after all, the cost of health care services would be reduced, then, it will lead to a significant increase in real GDP. Consequently, it will lead to an increase in the household incomes and employment. Perhaps, thsituation will not be worth as it was before. Therefore, it would be logical to chant: “Take the bill!”—————————————————————————–
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