The Impact of Healthcare Costs on the US Economy and Interconnected Sectors

July 20, 2023
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The allocation of social insurance spending and the share of GDP dedicated to healthcare in the United States has raised concerns about the adverse effects of healthcare cost inflation on the nation's economy. These effects are expected to have a far-reaching impact on all sectors of the economy, including governments, businesses, and households, as they all play crucial roles in the provision, funding, and utilization of healthcare services in the country. Notably, the Federal, state, and local governments collect taxes from businesses and households to support universal health insurance programs and provide healthcare services directly to families.

Businesses play a significant role by offering employment opportunities to households and providing health insurance benefits to their employees. Families, on the other hand, are the ultimate consumers of healthcare services and also bear some of the associated expenses. In this report, we will examine the individual effects of healthcare costs on the overall economy and each interconnected component. However, it is essential to acknowledge that the impacts of rising healthcare costs in one sector are likely to influence outcomes in other sectors as well. For instance, in response to escalating healthcare costs, governments may limit eligibility for universal health insurance, leading to increased insurance rates among families. Additionally, the increased healthcare expenses may prompt governments to consider raising taxes, borrowing more funds, or reducing investments in vital sectors like education and infrastructure, thereby dampening economic growth and affecting both businesses and households.

At times, the availability of Medicaid coverage, even without working or with limited work hours, can create a lack of motivation for individuals to seek better job opportunities or additional sources of income. For some people, receiving Medicaid benefits while not working seems advantageous, which can discourage them from seeking more gainful employment. As a result, they may become content with their current situation and forgo the pursuit of better career prospects.

There are multiple avenues for individuals to access Medicaid, depending on their income levels or other household factors. Certain states have implemented early approval mechanisms by Health Departments to review the provision of selected types of expensive healthcare and services. This review process occurs before the service is provided, and Medicaid payment for the service depends on the outcome of the review. The costs involved include program administration and form processing, while the benefits encompass the value of services that may be denied or altered due to the prior approval process. A study has revealed that three out of seven prior approval categories are considered cost-effective, despite potential discouragement of benefits. The findings from this study have led to proposals for new policies in the other four categories. (

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For a successful Medicaid care management program, partner support is crucial and should be present from program design to evaluation. Partners should be involved in every stage of the program, helping to build support, providing valuable input for design, and participating in evaluation and continuous quality improvement activities. These partners may include senior Medicaid and agency management, the Governor's office, the provider network, the patient and support community, the State council, and the Centers for Medicare and Medicaid Services (CMS). Engaging partners throughout the entire process can lead to early buy-in, effective program design, and long-term support for the initiative. The following subsections outline three strategies to engage partners, including identifying 'champions,' establishing relationships and regular communication with partners, and managing expectations for the care management program.

Opponents of Medicaid have long contested the law, often raising moral arguments, claiming that it violates individual and states' rights. However, in their efforts to undermine the law, many of its most vocal adversaries are committing their own moral offense. The refusal of some Republican-led states to embrace the Affordable Care Act's Medicaid expansion, denying healthcare access to many of America's poor, is more than just partisan politics; it is unethical. Fortunately, states retain the option to opt-in to Medicaid expansion at any time, giving citizens the opportunity to urge their state leaders to prioritize people over partisanship and provide assistance to Americans in need. (

While each state's system of engagement strategies and incentives is unique, the demonstrations share two primary goals. These goals include raising awareness of the costs of care and encouraging beneficiaries to adopt certain health practices. In return for considering the costs of their care and/or seeking preventive care, each state provides participating beneficiaries with financial incentives and/or improved benefits. These implicit contracts between the state and beneficiaries can be straightforward or complex, requiring varying degrees of understanding and strategic behavior from participants to attain the potential rewards.

It is worth noting that on July 30, 1965, President Lyndon B. Johnson signed into law the legislation that established the Medicare and Medicaid programs. For decades, these programs have been safeguarding the health and well-being of millions of American families, saving lives, and enhancing the economic security of our nation. (

The prevailing healthcare system has garnered recognition for requiring significant change. Many individuals working in real healthcare settings are now inspired to advocate for policies, laws, or regulations that can bring about such change. However, engaging in this type of advocacy often means stepping beyond their own practice setting and into the less familiar world of policy and politics. For many nurses, this realm may seem daunting, as they may not feel adequately prepared to navigate its complexities effectively. Successful policy advocacy demands authority, determination, time, and energy, as well as the political acumen required to navigate the legislative arena.

The Democratic party has long been striving to secure universal healthcare for the American people. They proudly highlight their achievements in passing Medicare, Medicaid, and the Affordable Care Act. The party remains primarily focused on preserving and protecting the Affordable Care Act, which has brought peace of mind to millions of Americans by ensuring access to healthcare. Democrats vow to fight against any efforts to repeal the law that could potentially take away healthcare from countless Americans.

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