Health Care Financing

Health Care Financing


Health Care Financing

Health care financing is a branch of finance that deals with the mobilization of funds for health care (Courtney, 2004). In the past years, a low health care spending system has been something that many governments and health care reformers have strived to avoid. However, there seems to be a negative development regarding this issue in the United States. Recently, the Congressional Budget Office analyst lowered the projections for the next decade’s outlays on Medicare, Medicaid and the coverage of the uninsured under the health care reform law. The reason behind this move by the Congressional Budget Office (CBO) was that the society-wide health care spending was noticeably slowing down. Nonetheless, these changes appear to benefit the government and healthcare reformers since they have helped lower the congressional budget office’s projections for the government deficit (Holtz, 2008).

This estimate by the Congressional Budget Office comes just three months after a February 2013 estimate that showed spending on Medicare to be at 8.07 trillion dollars between the years 2014 and 2023. The new estimate, however, currently shows that the spending on Medicare between the years 2014 and 2023 will be at 7.94 trillion dollars, which is less than the initial projections by nearly 85 billion dollars. The projections for federal spending on Medicaid have also reduced by 77 billion dollars to a new figure of 4.283 trillion dollars. Moreover, the estimates for net spending in the patient protection and the Affordable Care Act have also dropped. These estimates that were on close watch have reduced by 74 billion dollars from their original value in the February 2013.

To understand the dynamics of these new developments in health care spending, one has to look back into the historical trend of health care spending by type, age, state and the major private and public sources of funding (Niles, 2011). During the past several years, health care spending has grown more slowly for both the national and federal medical programs than it did historically. Over the past decades, two trends were noticeable in health care financing policies. On one hand, policy makers focused on achieving universal access to health care services by establishing and gradually expanding mandatory coverage for a specific set of services to the general population. On the other hand, health care reforms aimed at containing the collective financing of health by increasing the share of individual responsibility and participation in the financing of health care spending (Paolucci, 2011). These two trends together with the gradual expansion of mandatory coverage of individuals in the past led to the increase in the demand for voluntary and supplementary health and insurance.

Health care spending is widely affected by the growth of the cost of health care. If the cost of healthcare is high, the demand for healthcare will be low and as a result, health care spending will reduce. One can argue that the driving forces of health care spending are the factors that affect the cost of health care (Niles, 2011). One such factor is the cost of technology used and the prescription drugs expenditure. In the past decades, spending on prescription drugs and medical services had been high because of their high quality and affordability. However, as advancements were made in the pharmaceutical and medical field resulting to state of the art and expensive medical technologies, the health care expenditure declined. This is because it is relatively hard to generate demand for health care services if the services themselves are not cost effective.

Another factor that affects health care spending in a country is the rise of chronic diseases. In the past, a longer life span in the human population was largely associated with chronic illnesses, which increased the demand for the health care system (Zelman, 2009). It is estimated that health care costs related to chronic illnesses account for 75 percent of national health expenditure. For instance, diseases such as overweight and obesity have largely contributed to the increase in health care expenditure. However, the approach towards dealing with these diseases has shifted the focus towards prevention as opposed to treatment. This changing nature of methods used in disease eradication has widely contributed to a decline in health care expenditure because the number of people suffering from chronic diseases is significantly low.

The projection by the Congressional Budget Office that the overall health care expenditure will decline in the next ten years has a huge impact on the United States economy. For instance, the federal budget deficit is expected to increase by 40 billion dollars. This is because the tax penalties on employers and individuals for not obtaining an insurance coverage will drop. However, at first, the projected decline in the health care expenditure is expected to contribute to the short run reduction in the federal budget deficit before the deficit begins to increase (Zelman, 2009). Regardless of the negative implications, the changes are sure to be welcomed by the White House and healthcare reformers. This is because the Congressional Budget Office has used this projection to lower its projection of the government deficit by 618 billion dollars through 2023 as compared to the estimates that were offered just three months ago.

In my own opinion, I think that financial management is a task that should be assigned to professionals and experts in the field of finance. Only experienced experts and professionals can come up with well-informed and unbiased financial decisions that can help an organization to grow. Health care financing is no exception to this fact. For instance, the policy makers involved in the designing of health care systems should consider using policies that favor health care expenditure so that the government can enjoy the revenue generated from it (Paolucci, 2011). Regardless, the latest Congressional Budget Office projections are expected to fuel the growing debate in Washington that the budget-cutting policies have become a major drag on economic growth and are unnecessarily prolonging the long-term unemployment crisis.


Courtney, M. D., & Briggs, D. (2004). Health care financial management. Sydney: Elsevier Mosby.

Holtz, C. (2008). Global health care: Issues and policies. Sudbury, Mass: Jones and Bartlett Publishers.

Niles, N. J. (2011). Basics of the U.S. health care system. Sudbury, MA: Jones and Bartlett.

Paolucci, F. (2011). Health care financing and insurance: Options for design. Berlin: Springer.

Zelman, W. N., McCue, M. J., & Glick, N. D. (2009). Financial management of health care organizations: An introduction to fundamental tools, concepts, and applications. San Francisco: Jossey-Bass.

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