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The costs of healthcare in the USA are rising because of the following factors; health insurance is expensive and a number of people depend on their employer for the insurance cover. There is also a growing demand for new healthcare technologies and drugs which come along with increased costs of the services. The life style of the people of USA has also contributed to the increased costs of health care, the number of aged people is high and they are growing sicker. An estimate on the amount of money individuals spend on purchase of medical care is provided by National Health and Expenditure accounts (Sensenig and Wilcox, 2001). The financial sources of these expenditures are also monitored which can be out of pocket, through assistance from government or insurance cover.

Healthcare expenditures are mainly on; new technology and procedures that are expensive e.g. Magnetic Resonance Imaging, purchasing costly drugs and payments for physician and hospital services. A lot of expenditures are also due to behaviors that are unhealthy. It is estimated that 70% of the deaths occurring in the US are due to chronic diseases such as, diabetes, cancer and heart diseases. These illnesses account for the most expenditures as they are highly costly to treat. The patients suffering from multiple chronic illnesses spend seven times more than those suffering from one chronic illness (Luo et al., 2004). The end of life healthcare of the Americans also takes a toll on medical services. A large number of America’s population is aged thus requiring constant healthcare and services from nurses and physicians. Five percent of the population accounts for approximately half of the whole amount of the expenses on healthcare.

The pharmaceutical companies have contributed significantly to the high prices of drugs in the market. These high prices are justified by the fact that research research and innovation was carried out to discover new cures for diseases. For example Pfizer reported just over $67 billion in revenue in 2011 but they spent just over $9 billion on research and development that very year. $9 billion is a lot of money which accounted for nearly 14% of their total revenue (Trouiller et al., 2002). Approximately $2.14 of the $8 (17%) is used in research and innovation. $2.50 goes towards purchasing medication. The high costs incurred in research and innovation is reflected in the market prices of these drugs. Between 1995 and 1998 there was an annual increase of 10 billion dollars on the expenses incurred on drugs. Similarly, there was an increase in the cost of physicians and the healthcare in hospitals. The increase these services was very high, twice the overall amount that was spent on drugs (Kola and Landis, 2004).

Understanding the costs of healthcare is important to all Americans. Health plans that are highly deductible and affordable have drawn attention. People are able to obtain insurance covers once they have adequate information on the expenses incurred in out of pocket purchases of drugs and services. There is also need for management of costs in healthcare and also the profits made by pharmaceutical companies, medical practitioners and pharmacists. Therefore, the US government ought to be aware of the costs and expenditure on healthcare services by monitoring, regulating and approving the costs incurred in medical services. The healthcare providers should therefore deliver services of good quality at prices that are reasonable (Berwick et al., 2008). Health is an important factor for the people of any country. The health care system of the United States therefore should be improved especially by working out a formula to reduce the costs of healthcare services. These will enable accessibility for of quality services at affordable prices for all the people. The government should also invest in research of new drugs and medical procedures. This will probably reduce the monopolistic involvement of pharmaceutical companies thereby reducing the cost of prescription drugs.

References

Berwick, D. M., Nolan, T. W., & Whittington, J. (2008). The triple aim: care, health, and cost. Health affairs, 27(3), 759-769.

Kola, I., & Landis, J. (2004). Can the pharmaceutical industry reduce attrition rates?. Nature reviews Drug discovery, 3(8), 711-716.

Luo, X., Pietrobon, R., Sun, S. X., Liu, G. G., & Hey, L. (2004). Estimates and patterns of direct health care expenditures among individuals with back pain in the United States. Spine, 29(1), 79-86.

Sensenig A., Wilcox E. (2001). National Health Accounts/National Income and Product Accounts Reconciliation -- Hospital Care and Physician Services, in: D. M. Cutler and E. R. Berndt (Eds.), Medical Care Output and Productivity, University of Chicago Press for the National Bureau of Economic Research, Chicago. pp. 271- 302.

Trouiller, P., Olliaro, P., Torreele, E., Orbinski, J., Laing, R., & Ford, N. (2002). Drug development for neglected diseases: a deficient market and a public-health policy failure. The Lancet, 359(9324), 2188-2194.