Essay on "Over Indulges in Government Spending"

Essay 6 pages (1955 words) Sources: 6

[EXCERPT] . . . .

Overspending: Government Health & Medical Programs

The United States health and medical system about 50 years ago basically involved the payment of medical costs by citizens based on how they were incurred. However, the country's health system has undergone several changes that have contributed to numerous changes in the coverage of medical costs. As a result of the huge changes, much of today's medical costs are covered either by private medical insurance or government health programs. Private companies are required to provide medical insurance to their workers as periphery benefits as the Medicaid and Medicare programs offered insurance for medical care to the elderly and indigent. In the recent, several health care legislations have resulted in various transformations to the provision of health care services. The result of these changes is evident from the fact that the government's health and medical programs are not only broke but also indebted.

Government Spending in Healthcare:

Healthcare costs have been regarded as a major problem for consumers, families, the government, and employers who provide healthcare coverage since government spending on healthcare accounts for over 16% of the country's GDP. For the government, healthcare costs are a major concern because of its expenditure on healthcare services, medical research and training, and health safety programs. Some of the findings of an analysis on the health care industry include the fact that government expenditure on health is a large and evolving share of federal expenses. As public spending on healthcare results in an evolving portion of the national healthcare expenditures while the private spending on health accounts for a lessening share (Jenson, p. 2). One of the major ways with which there has been an increase in government expenditure on health care is through its health and medical programs such as Medicare and Medicaid as well as tax expenditures for health insurance.

As compared to other industrialized or developed countries, the United States spends an estimated $2 trillion on healthcare expenses on an annual basis. The huge expenditure is despite of the lack of universal health coverage policies within the country. One of the major reasons attributed to the ballooning healthcare expenditure is the current economies woes that the country is experiencing. Due to the huge health care expenditure, an increasing number of the nation's businesses are becoming less competitive in the international market. The government has been forced to adopt various policies and strategies towards lessening healthcare expenditure and improving accessibility of the services. According to Johnson (par, 1), some of the initiatives have included the upgrade of the existing government's health and medical programs like Medicare and Medicaid.

Based on information from the Office of Management and Budget, the federal spending on health and medical programs in 2007 were approximately $808.6 billion, which was the total of gross expenditure for healthcare benefits and public health programs. Much of these expenditures i.e. approximately 77% were spent on the Medicare and Medicaid health programs. The other elements in the huge federal expenditure on health care programs are health benefits for military personnel, federal employees, retirees, veterans, and additional programs like children health insurance programs. The most common governmental health and medical programs that are part of its expenditures include Medicare, Medicaid, Social Security, Defense, and other discretionary programs.

As there have been numerous changes to most of these government health programs, expenses on these programs have become a huge burden making them broke and indebted. In certain extents, the changes in the health programs are reflections of the changing public priorities for the utilization of government resources. Therefore, it's necessary and suitable to direct the evolving share of federal spending to Medicare and Medicaid. On the other hand, increased expenditure in government's health programs faster than the economy will result in a huge gap between the federal spending and revenues.

How the Government's Health Programs are Broke and Indebted:

According to reports by analysts, the financial conditions of the government's health programs like Medicare, Medicaid, and Social Security remain challenging. The projected long-term costs for some of these programs are highly unsustainable based on the existing finance schedule. Consequently, there is a need for legislative changes in order to avoid disruptive consequences of the provision of the services to beneficiaries and taxpayers. it's actually reported that such legislative actions would provide elected officials with improved opportunities to lessen the unfavorable impacts on vulnerable populations like low-income workers. The major way that shows how government's health programs have become broke and indebted include the increase in annual deficits.

First, the Social Security health program exceeded its non-interest income in 2010 for the first ever time since 1983 (Blahous III & Reischauer par, 5). The huge deficit of $49 billion in 2009 and the projected annual deficit of $46 billion in 2011 of this program are largely attributed to the weakened economy and downward income changes. it's widely expected that cash deficits will continue to grow rapidly after 2014 because of the expected increase in the number of beneficiaries at a greater rate than the number of insured employees.

The annual cash deficits in the next decade will basically consist of trust fund assets from the General Treasury Fund. This will be accompanied by an increase in the trust fund balances since the redemptions of the trust fund assets for Social Security will be significantly less than interest earnings. There is also a wide expectation that costs of Social Security benefits will gradually increase by to 6.2% of the country's gross domestic product in 2035.

Secondly, similar to the combined Social Security Trust Funds, the Medicare Trust Fund also faces an increasingly more instant funding shortage despite of its improved long-term financial position on the current projections. These costs are expected to increase substantially from an estimated 3.6% of GDP in 2010 to approximately 5.5% within the next 35 years. One of the most notable features regarding this health program by the government is that it's expected to cater for more hospital benefits and extra expenditures than is obtains in income in all the coming years. However, this is coupled by an ongoing failure of the program's long-range test of close actuarial balance.

Third, the financial outlook for the cost of Medicaid shows that the government's expenditure towards the program has generally increased considerably more than the pace of growth of America's economy. Actually, the expenditures towards this program are expected to increase by 6.9% to an estimated $404.9 billion within the nest fiscal period. The major reasons for the increase in enrollment and expenditure towards Medicaid are mainly attributed to the recent economic challenges, lower income growth, and relatively high rate of unemployment. it's also projected that Medicaid expenses will increase at an average of 8.3% annually to approximately $840.4 billion in the next decade (Truffer, et. al., p. iv).

Reasons for the Broke and Indebted State of Government's Health Programs:

With the huge increase in expenditure and annual deficits in these medical programs, the government's health programs are broke and indebted. The current state of the government's health programs is mainly attributed to several reasons including

Cost Factors:

The main reason for the state of government's health and medical programs as broke and indebted is due to the increase in costs factors at higher rates than the growth of the economy. Some of these cost factors include all types of health insurance plans, inflation of prices in the healthcare sector, increases in wages, development of more complex and expensive healthcare services, and delivery of a higher number of health services. The combination of these cost factors has presented numerous difficulties for the government's limited ability to fund medical care through both the public and private attempts. As the difficulties present challenging policy dilemmas to the government, the health and medical programs remain broke and indebted.

Unsustainable Cost Projections:

As the various cost factors continue to present the numerous difficulties that result in policy dilemmas, they also contribute to unsustainable cost projections. The existing projected long-term costs for some of the government's health programs like Medicaid, Medicare, and Social Security are highly unsustainable under the current financial scheduling. The unsustainable cost projections not only present difficulties in catering for the program's benefits and administrative costs but they also result in the need for the investment of excess funds in interest-bearing securities. Due to the excessive pressures from the untenable cost projections, the government's health programs remain broke and indebted. As evident throughout history, government programs, particularly on health care normally exceed the spending estimates.

Increasing Budget Deficits:

In the past few years, the federal government has recorded the largest and ever increasing budget deficits as part of the economy ("The Long-Term Budget Outlook" par, 2). The increasing budget deficits have contributed to an increase in the amount of federal debt held by the public. The rapid increase of federal deficits is due to lower tax revenues, increased federal spending, turmoil in financial markets, and severe economic recession. The increase federal deficit is also because of the increase… READ MORE

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