Healthcare spending in the US for a bigger portion than ever in history, the healthcare spending is a ballooning expense for individuals, businesses, the federal government, and a major driver of America's debt. US healthcare spending rose significantly from just 5% of the country's economy in the 1960s to about 18.2% in 2018 according to estimates by Centers for Medicare and Medicaid Services (CMS) ( McCarthy, 2015) . By 2025, CMS projects that health care spending will have risen to about 20% of the nation's GDP ( McCarthy, 2015) . Between 2017 and 2018, the increased healthcare spending was mainly driven by Medicare and Medicaid expansion and growth in private health insurance spending ( Doyle Jr, Graves, J. A., & Gruber, J., 2017) . Employers in the private sector paid approximately $665 billion, in 2016, related to healthcare costs ( Doyle Jr, Graves, J. A., & Gruber, J., 2017) . However, over $500 billion was allocated to the subsidization of their employee's health insurance premiums ( Doyle Jr, Graves, J. A., & Gruber, J., 2017) . The rising healthcare spending in the US in comparison to other developed nations may have a negative impact on the economy.
The Kaiser Family Foundation states that, since 2012, the average premium increased by approximately 19% to about $19000 for family coverage and about $7000 for family coverage ( McCarthy, 2015) . Additionally, employers pay about 75% of their employees’ premiums ( McCarthy, 2015) . Regardless of the large subsidies from employers, individual spending has increased significantly. Other than the rise in premiums, employees have to pay higher out of the pocket costs including payments for co-insurance, deductibles, and co-pays. Between 2005 and 2015, the overall out of the pocket costs increased by over two thirds ( McCarthy, 2015) . The increase in health care spending is higher than the growth rate in wages between 2005 and 2015 ( McCarthy, 2015) . Current estimates show that the average health care costs will continue increasing annually in the short and long term.
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The major increase in health care spending may have an impact on key economic indicators such as inflation, GDP, and employment. Furthermore, it may affect all sectors of the American economy including households, governments, and businesses because the three sectors work together in the consumption, provision, and financing of health care ( Reeves et al., 2014) . Local, federal, and state governments collect taxes from households and businesses to finance the increased healthcare spending ( Popescu, 2014) . Also, businesses not only offer employment to households but also offer health insurance to workers. Although households are the end consumers, they are affected by increased premiums and out of the pocket costs. When one sector is affected by the increased healthcare spending, it will have an effect on other sectors. Increased healthcare costs may force governments to increase taxes while reducing investments in essential sectors such as infrastructure and education ( Popescu, 2014) . Such actions will suppress economic growth and may have a negative impact on households and businesses. Additionally, businesses may cut costs by reducing investment and employment in the US ( Popescu, 2014) . Ultimately, high healthcare costs may trigger inflation that may make US services and goods more expensive and less competitive globally.
However, increased healthcare spending may also have positive outcomes. For instance, the rapid growth in health care spending has led to a fast growth of the healthcare industry and all its related sectors ( Reeves et al., 2014) . Furthermore, it has led to improved income and employment. Notably, most of the healthcare firms are mainly US owned. Therefore, the increased revenues are also invested in other sectors of the American economy. Additionally, healthcare spending may not be entirely a burden because the US has a higher national income contrary to other developed nations. For instance, even after deducting health care spending, an average American has approximately $9000 more per capita than a typical individual from the United Kingdom ( Reeves et al., 2014) . Nevertheless, increased health care costs have a negative impact especially on people with chronic conditions and the uninsured.
One of the key recommendations is increasing value and competition in the healthcare industry ( Doyle Jr, Graves, J. A., & Gruber, J., 2017) . Regardless of the increased healthcare spending, it has not resulted in better health outcomes in comparison to other developed nations. The merger of some major hospital systems caused a significant increase in price. Studies show that American service providers are approximately 12.5% more expensive due to the lack of local competition ( Doyle Jr, Graves, J. A., & Gruber, J., 2017) . Moreover, studies show that four of the main insurance providers accounts for over three-quarters of the insured population. With minimal competition, health quality is compromised, and healthcare spending will continue increasing. Moreover, Medicare should negotiate the cost of prescription drugs on behalf of consumers ( Doyle Jr, Graves, J. A., & Gruber, J., 2017) . Over the past four decades, the prices of prescription drugs have increased significantly. However, if Medicare negotiated the prices on behalf of consumers, it may assist in lowering healthcare costs.
As mentioned earlier, the rising healthcare spending in the US in comparison to other developed nations may have a negative impact on the economy. It may negatively affect the economy by increasing inflation and lowering employment and GDP. However, a contrary analysis also shows that it may have a positive impact enhancing labor market productivity, and raising employment and incomes for employees in the US healthcare industry. Although healthcare spending may have minimal effects on high income earning individuals, it may have adverse effects on middle and lower income earning households and people with chronic conditions. Additionally, the increased spending has not caused increased health outcomes in comparison to other developed nations. In 2018, the US will spend about 18.2% of its GDP on healthcare, almost twice the average of other developed countries. Increasing competition in the healthcare industry will be essential in improving quality and value.
References
Doyle Jr, J. J., Graves, J. A., & Gruber, J. (2017). Uncovering waste in US healthcare: Evidence from ambulance referral patterns: Journal of health economics , 54 , 25-39.
McCarthy, M. (2015). US healthcare spending will reach 20% of GDP by 2024, says report. BMJ: British Medical Journal (Online) , 351 .
Popescu, G. H. (2014). Economic aspects influencing the rising costs of health care in the United States: American Journal of Medical Research , 1 (1), 47-52.
Reeves, A., McKee, M., Basu, S., & Stuckler, D. (2014). The political economy of austerity and healthcare: a Cross-national analysis of expenditure changes in 27 European nations 1995–2011: Health policy , 115 (1), 1-8.
