The U.S healthcare system is reportedly an increasing cost industry. Through the years, the costs of healthcare service delivery in the U.S have been increasing annually, with the impacts being increasing expenditure in welfare. In spite of the introduction of Medicare and Medicaid financing, the costs have not reduced significantly, and the expenditures incurred by the states in payment for Medicaid have been increasing. Similarly, the expenditures in the education sector have also been rising significantly. As at 2017, the combined expenditures in healthcare and education comprised of more than 5p0% of the total state expenditures. Understanding the dynamics behind such changes can be an effective approach towards getting the right information and projecting fiscal needs in states and the country as a whole. Healthcare spending has grown so much so that it almost replaces the welfare funds allocated to families for spending.
Healthcare Spending in the U.S
The overall budgetary spending in the U.S both by the federal government and by the state governments has increased significantly from the 1970s through to the present days. The increase in expenditure is attributed partially to recession and inflation factors. However, it is important to note that the individual spending in the U.S has increased more than the increase in inflation and the impacts of recession could account for. The healthcare sector is considered one of the major contributors to the increased government spending besides education. Fisher (5-6) reports that as part of the welfare funding, Medicaid expenditure has grown significantly. The welfare spending takes approximately 17% of the national budget yet most of it is spent on healthcare services. As much as the federal government provides grants to boost Medicaid expenditures, such grants also constitute part of the payments made by the states towards effective and quality healthcare delivery.
The perception created by the expenditures in healthcare show that the healthcare spending in the U.S are higher than those in most countries across the world. Scutti (par. 1) reported that the healthcare costs in the U.S increased by more than $ 933.5 billion between 1996 and 2013. The increasing costs of healthcare in the U.S could be caused by a variety of factors including increased outpatient treatment of certain conditions such as those involving colonoscopy; increased expenditure on specific conditions such as diabetes which went up by approximately 64.4 billion USD in the period between 1996 and 2013; increased cost of healthcare services; and increased cost of pharmaceutical drugs. For instance, during the same period of 1996 to 2013, the cost of expenditures on diabetes drugs increased by about $ 44.4 billion (Scutti par. 5). This shows that the increased cost of diabetes treatment came majorly as a result of increased cost of drugs. For service delivery, the costs increased by about $137.5 billion as a result of the population growth rate (Scutti par. 3).
Besides the healthcare sector, another significant increase in state and /federal expenditure came about due to the education sector. Fisher (6) reported that the expenditure on education was an average of 38% of the total government expenditure across states. The share of funding spent on K-12 education increased significantly while that spent in higher learning institutions declined. Increase in education expenditures is attributed partially to the increased use of charter schools and the recommendation for use of the same. Across all states, the use of private and charter schools is recommended compared to the use of public schools. Such chartered schools receive 30% more government funding than the other public schools. As such, they are bound to have better facilities, better service delivery and to be more efficient relative to the general public schools. Silvernail and Johnson (1) reported that public charter schools have received recognition and criticism in equal measure.
The proponents of such schools argue based on evidence that such schools are more effective in performance than others; result in greater service to minority and disadvantaged students and are generally more effective in terms of meeting student needs. The opponents of such schools on the other hand argue that the performance and efficiency of public charter schools is contextual and varies from one school to another. The findings reported by Silvernail and Johnson (19) show that the performance of charter schools cannot be generalized. Rather, each school should be evaluated independently based on a variety of factors that influence student performance. As such, it cannot be deduced that public charter schools are better than other public schools.
The education and healthcare sectors in the U.S have been showing significant increase in expenditures in the past, especially from 1996. The two sectors incur more than 50% of the total government expenditures in the state and federal sectors. The healthcare sector in particular, continues to incur high costs due to various factors mentioned including high cost of services, increased cost of pharmaceutical products and increasing prevalence of certain conditions. Similarly, the education sector continues to incur high costs due to the funding of public charter schools and the recommendation for their use rather than the public schools. For policy makers, these two raise concern over the need for effective management and policy constitution in regards to funding. In particular, evidence has shown that public charter schools do not result in an increase in performance that matches the perception commonly held.
Fisher, Ronald C. The state of state and local government finance. St Louise Regional Development, vol. 6, no. 1, (2010), pp. 4- 22. Retrieved from files.stlouisfed.org/files/htdocs/publications/red/2010/01/Fisher.pdf
Scutti, Susan. 4 reasons why U.S healthcare is so expensive. CNN News. Retrieved from edition.cnn.com/2017/11/07/health/health-care-spending-study/index.html
Silvernail, David L. and Johnson, Amy F. The impacts of public charter schools on students and traditional public schools: What does the empirical evidence tell us? Maine Education Policy Research Institute. Retrieved from files.eric.ed.gov/fulltext/ED561362.pdf