Introduction

Healthcare is arguably the most important issue in the United States because a healthy

population is productive and therefore leads to the development of the nation. The importance of

healthcare in the country makes it impossible to alienate the issue to politics and it is for this

reason that political campaigns always address it. Political candidates at all levels comment on

healthcare programs and proposals for reforms, offering promising solutions that they will

deliver the best care and this often compels people to vote for them because they cannot

understate the importance of a good healthcare system. One of the most pressing issues in the

United States healthcare system is rising costs and this paper delineates this issue, suggests its

economic effects, formulates strategies to address the issue, develops a strategic manner of

implementing the solutions, and critiques the likelihood of government and private sector to

addressing the issue.

High Cost of Healthcare as a Pressing Economic Issue

The high and rising cost of healthcare is a significant economic issue in the United States.

According to the National Health Expenditure, in 2020, healthcare expenditure grew by 9.7%

from the previous year to record an amount of $4.1 trillion (U.S. Centers for Medicare &

Medicaid Services, 2021). The expenditure further rose in 2021 to $4.3 trillion and these figures

are expected to rise in the future where it is expected that on average, there will be a 5.4% annual

growth rate in these expenditures. As a result, healthcare spending is expected to reach $6.2

trillion in the next five years (U.S. Centers for Medicare & Medicaid Services, 2021). The

average American spends huge sums of money on their healthcare and the situation is expected

to worsen in the future. According to the CDC (2022), personal care expenditure increased by
31% over a period of ten years, from 2009 to 2019. It is an indicator that healthcare costs keep

increasing and the citizens will keep feeling the wrath of this trend.

Although healthcare has improved in the past few decades, the benefits of these

improvements have come with immense costs. The high and rising costs of healthcare are a

result of a high level of spending in this sector which is significantly higher compared to other

developed countries. At the same time, the rate of growth in healthcare spending outpaces the

country’s Gross Domestic Product (GDP) and this contributes to rising costs. The intensity of

care in the United States is high as people frequently visit physicians leading to rising costs.

Additionally, the country has a fragmented delivery system where proper management lacks,

thereby driving the cost up. Evidence also shows that there is a high prevalence of chronic

conditions in the United States. According to Raghupathi & Raghupathi (2018) approximately

45% of Americans have at least one chronic condition, implying that they have a high chance of

hospitalization or hospital visits and this could contribute to increased healthcare costs.

Economic Effects of High Costs on the Healthcare Industry

The rising and high costs of healthcare in the United States have adverse consequences

on the industry. One of the effects is on the labor resources in the industry. Labor resources in

this case relate to the healthcare workers employed in this industry such as physicians and

nurses. As the cost of healthcare increases, this also causes the cost of labor in this industry to

skyrocket. As a result, hospitals will be unable to create jobs and this will subsequently lead to

labor shortages. Instead, many hospitals will take measures that cut labor costs such as reduced

number of working hours to mitigate high labor costs. From another perspective, rising

healthcare costs lead to increased taxes that are also imposed on healthcare facilities. High taxes

affect the ability of hospitals to hire more workers and this could contribute to labor shortages.
 The other economic effect is on the rate of capital formation among hospitals and

healthcare facilities. As the cost of healthcare increases, it acts as a barrier to the access of

healthcare services by the citizens. If the citizens' access to healthcare services increases, this has

a significant impact on income generation by hospitals. The low number of clients visiting

healthcare facilities means that these institutions' capital formation ability is adversely affected.

Additionally, the high cost of healthcare leaves hospitals in a difficult position to innovate. For

instance, it becomes hard or even impossible for a hospital to acquire technologically advanced

equipment that could improve the quality of services offered to patients. Consequently, many

players in the industry are unable to attract clients who generate revenues for them and this

means that they are unable to form capital.

Strategies to Address High Healthcare Costs

There are several strategies that could be implemented to address the problem of

skyrocketing healthcare costs. One of the measures that could be adopted is to reduce the burden

of preventable diseases considering that chronic illnesses are a major factor that contributes to

this phenomenon (Cecchini et al., 2010). Diseases such as obesity are preventable and if they are

not, then this becomes a contributing factor to chronic illnesses. The government and other

stakeholders within the healthcare sector should create health campaigns that seek to improve

patient's compliance with medications, their preventative care, encourage improved nutrition,

and encourage their participation in physical activities. Public campaigns that focus on these

factors could prove useful in preventing chronic illnesses thereby reducing healthcare cost

burdens.

The other strategy is to make healthcare delivery in the United States more efficient.

First, the stakeholders should create a system that is well-coordinated and which eliminates
unnecessary use of healthcare services (Cecchini et al., 2010). Coordination should be

supplemented by the continuous development of information technology which will facilitate the

provision of accurate and timely information to allow different stakeholders such as insurance

companies and healthcare hospitals to coordinate and achieve efficiency. Also, it is essential that

non-clinical costs that do not contribute to patient care are reduced to minimize overall

healthcare costs. For instance, excessive spending on administration and marketing should be

eliminated to reduce costs.

Strategic Manner of Applying Economic Best practices of Other Countries

The high and rising costs of healthcare are a major problem in the healthcare sector. It

could be recommended that the United States implement several policies that have been

embraced by Norway as a way of tackling this issue. Norway has significantly lower healthcare

costs than the United States, yet it has lower nurses and physicians to patients ratio and better

insurance coverage. As the United States pursues strategies of increasing efficiency and reducing

the burden of preventable diseases, it should follow Norway’s healthcare system example. First,

the U.S. government should fund the healthcare system through taxes while ensuring that

administration is done by the state. Healthcare is provided freely by the government in this

country and citizens only pay 10% of any treatment costs that are not paid for by the government

(Tjerbo & Kjekshus, 2015). Additionally, the United States should facilitate the low cost of

prescriptions and medicines as is done in Norway (Tjerbo & Kjekshus, 2015). Usually, many

United States citizens’ insurance do not cover medicine and prescriptions and this significantly

increases the cost of health for the average American. For this reason, the government should

create a system where citizens can easily access medicines and prescriptions at low costs.
 Critique On the Likelihood of The Government and the Private Sector to Address High

Costs of Healthcare

One would expect that healthcare like most things like smartphones will get better and

cheaper as time progresses but the fact is that it is unlikely that the government and the private

sector will influence healthcare costs to reduce. The problem is that policies that have been

implemented in the past such as the Affordable Care Act did not make healthcare more

affordable. One would even argue that it brought more inconveniencies and inefficiencies in care

delivery leading to the high costs of healthcare. It is unlikely that better policies that are effective

will be implemented to solve the problem. Also, as the private sector keeps investing in new

technologies, this will revolutionize treatment but it will also contribute to high costs.
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