Current Level of National Healthcare Spending Research Paper

Currently, the national healthcare spending is estimated to be about $3130.2 billion (Center for Medicare & Medicaid Services, 2014). The spending has risen by 7.4% compared with the previous year. The increased spending is primarily due to healthcare coverage expansion because of the Affordable Care Act (ACA).

In fact, the ACA has caused a sharp increase in the Medicaid spending estimated at $579.2 billion, which is an average increase of about 18.0% compared with the previous year. Besides, the private health insurance spent over $997.8 billion representing an overall growth of about 7.9%. The increases in spending on Medicaid and private health insurance have contributed hugely to the national healthcare spending (Leonard, 2011).

Further, since the insured population is relatively younger, their spending on prescription drugs as well as physician and clinical services increased tremendously causing a sharp increase in prescription drug spending growth by over 8.8%. Similarly, the clinical and physician spending growth increased by over 8.5%.

However, spending in other areas such as out-of-pocket has reduced significantly from $322.7 billion to $317.7 billion since most of the consumers’ expenses were taken care of by the third party coverage (Center for Medicare & Medicaid Services, 2014).

Moreover, the overall hospital spending growth rate is expected to remain constant at 6.7%. Generally, the overall healthcare spending is increasingly high particularly due to the new reforms that have been introduced.

Whether the Current Level of Healthcare Spending is High or Low

Given the existing statistics, the current level of healthcare spending is high compared with the previous years. Besides, studies indicate that the growth of national healthcare spending surpassed the GDP growth in 2012 (Leonard, 2011). In fact, the average annual growth of healthcare spending is over 0.9% of GDP since 2011. By January 2014, the annual growth in healthcare spending jumped to over 7.4%.

The main reasons for the high rate in healthcare spending include the increased number of the aging population, improved economy and the new healthcare policy. The growth will become unsustainable particularly when the economy does not grow correspondingly with the national healthcare spending.

The healthcare providers and the governments, both at the federal and state levels should focus on the provision of quality healthcare at reduced costs. In fact, new strategies should emphasize on increasing efficiency in healthcare provision, quality care and reduced costs (Center for Medicare & Medicaid Services, 2014).

Where National Healthcare Spending Should be Added or Cut

The main aim of healthcare providers is to achieve improved overall healthcare system performance and reduced spending growth. In other words, the healthcare system providers should respond to the public need of reduced cost, increased efficiency in delivery and improved access to healthcare. In order to attain the healthcare goals, spending has to be reduced in areas with fewer outcomes (Leonard, 2011).

In particular, healthcare spending should be reduced in professional, physician and clinical services as well as prescription drugs because private individuals and firms are the main beneficiaries. However, spending should be increased in hospital care, residential and personal care services, home healthcare, nursing care facilities and continued care retirement communities.

Most importantly, the healthcare spending should be increased in medical infrastructure development including increased information accessibility. In particular, spending should be increased in durable technological equipment aimed at improving health (Leonard, 2011).

The Manner in which Public Healthcare Needs are Paid

The major sources of healthcare spending include Medicare, Medicaid, private health insurance and out-of-pocket or individual spending. Besides, various sponsors including households, federal governments, state and local governments, private firms as well as corporations pay for healthcare needs.

In terms of sponsorship, the households account for over 28% of the total spending on healthcare needs (Leonard, 2011). The federal government financed about 26% of the total healthcare spending while private businesses financed about 21%. The state and local governments financed about 18% of the total healthcare expenditure.

In terms of major sources of funding, Medicare spending represented over 20% of the total healthcare spending. The spending represented an increase of about 15% compared with the previous year. The new health policy has contributed to the sharp increase in the Medicare spending.

The Medicaid spending is estimated to be about 18% of the total national coverage of the healthcare needs while private health insurance is estimated to be about 7.9%. Out-of-pocket or individual expenses for medical services represented only 12% of the total healthcare spending representing a decrease of 1.5% due to increased coverage of the individual expenses (Center for Medicare & Medicaid Services, 2014).

The Major Economic Challenge Faced by the Healthcare System Providers

The major economic issue facing the healthcare providers is how to pace up with the value-based models. The value-based models are founded on the need to provide quality of health services at increased efficiency and reduced costs. Hospitals and healthcare system providers are facing the major challenge of establishing core skills required in order to succeed in the current and fast transforming healthcare market.

The current needs of health services are forcing healthcare system providers to improve their performance through the assessment of operational, clinical and administrative roles (Teitelbaum & Wilensky, 2013). The need to pace up with the model requires a future vision, the capability of implementing the vision as well as the transformational leadership that would unite all stakeholders towards attaining the vision.

The Reason why this Challenge should be Addressed

The value-based model remains critical in addressing most of the healthcare issues ranging from reduced cost to problems of inequality in healthcare provision (Teitelbaum & Wilensky, 2013). The rising healthcare cost requires new strategies aimed at reducing costs and increasing efficiency as well as effectiveness in health service provision. Besides, the rising spending in healthcare should be reduced in order to correspond to the growth of the economy.

Unless new strategies and models are developed to curb spending, healthcare cost will consume an uncontrollable amount of consumer and government income (Teitelbaum & Wilensky, 2013). Therefore, the challenges in implementing the model should be addressed in order to improve the healthcare system.

Financing the Challenge

Similar to all challenges involved in the healthcare system, financing requires the input of all stakeholders particularly the federal and the state governments.

In fact, the government should come up with a policy framework that guide the implementation and provision of cost estimates involved in addressing the challenges during the implementation process. Specifically, the government should have a larger share in financing the strategies aimed at building the required capacities to implement the program.


The spending on healthcare has increased gradually since 2009. However, the tremendous increase in healthcare spending has been realized in the last two financial years, particularly due to the increased number of the aging population, improved economy and the new healthcare reforms as envisioned in ACA. However, the current cost of healthcare is high and there is need to curtail the velocity of spending depending on the growth of the economy.


Center for Medicare & Medicaid Services (2014). National health expenditure projections 2011-2021. Web.

Leonard, B. (2011). National health expenditure (NHE): Projections 2009-2019. Darby, Pennsylvania: Diane Publishing.

Teitelbaum, J. B. & Wilensky, S. E. (2013). Essentials of health policy and law. Burlington, MA: Jones & Bartlett Publishers

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