Issues in Healthcare Finance

The landmark healthcare reform legislation passed by the Obama administration in 2010 was meant to make American healthcare programs more solvent in the future. Medicare, Medicaid, Social Security, and other programs that are part of the US welfare state were deemed potentially insolvent as the national debt continued to rise and the tax revenue base continued to decrease. Overall, the healthcare industry faces a number of financial challenges, some of which are impossible to handle without the industry succumbing to even more massive reforms.

Insurance Costs

• Insurance costs have risen consistently over the years for a number of reasons. First, the cost of liability insurance for doctors has risen, and the cost of that insurance rise is reflected in the overall costs of healthcare services that doctors' provide. Thus, insurance companies that cover the cost of healthcare services are compelled to raise their premiums. Second, healthcare consumers have taken more tests than necessary in dealing with a problem and have not utilized preventative care enough. Thus, small problems go on undetected until they become big problems, and then those big problems are often treated. This raises the net amount that insurance companies must pay out, compelling insurance companies to raise premiums and alter deductible and co-payment schemes.

People Live Longer

• Advancements in medicine and technology has drastically increased the lifespan of the average American over the past hundred years, resulting in the healthcare industry as a whole taking care of a lot more people at an advanced age. These aging people are also more likely to succumb to chronic illnesses, for example arthritis, diabetes, and heart disease. According to the Kaiser Foundation, "it is estimated that health care costs for chronic disease treatment account for over 75 percent of national health expenditures." Relatedly, the advances in medicine and technology are often expensive to create and then equally expensive to use, creating a spiral of rising healthcare costs that is caused by advancing the healthcare industry in general.

Demographic Trends

• The greatest liability facing the US healthcare industry financially is the retirement of the Baby Boomer generation. Longer lifespans combined with this massive demographic shift combined to create a currently unfunded national fiscal liability. According to CNBC, "At 78 million strong, the oldest of the Boomers, born between 1946 and 1964, are already making unsustainable demands on federal entitlement programs, Medicare and Medicaid." The Boomer generation also visits doctors more than the generations that preceded them, adding to the general burden they place on the healthcare industry.