Why are the United States and many other countries facing dramatically increasing cost for their government programs - Research Paper Example

Running head: United s and many other countries are facing dramatically increasing costs for their government programs Name: Course Name: Course Instructor: Date: Abstract United States as well as other countries in the world are currently facing dramatically increasing costs for their government programs. This constant increase of cost has made countries all over the world to experience challenges in trying to adjust their budget so that to fit all these programs. This paper analyses the healthcare program as one of the programs which has led to the constrained budget in the US, and how it has become a challenge for the policy makers when allocating the public resources.

Introduction Healthcare expenditure in many countries has been a growing concern. In the United States, the healthcare expenditures have grown more than twice the pace of the countries national gross domestic product (GDP) over the last years. The chart below shows how the healthcare expenditures have grown between 1980 and 2010; the portion of the country’s GDP which it spends on health is projected to have roughly double. Fig. I. National health expenditures as a share of GDP 20 18 Projected % 16 GDP Actual 14 12 8 1980 1985 1990 2000 2005 2010 Calendar years Source: (Aaron 20).

You find that the public funds are paying for a larger share of these costs and this is done through Medicare, Medicaid plus and other public funded programs. The figure above shows that every year, the healthcare costs consume more and more of public funds hence less money is left for the other programs which are also necessary for the growth of the economy, like infrastructure among others. If the trends continue as it can be seen in the figure above, the United States will be required to raise approximately $ 250 billion to support Medicare come 2014.

This is twice the amount the states in the US are contributing currently (Aaron 23). Currently, the policy makers are trying to control the increasing healthcare costs by the use of cost-containment measures. The US government however is also paying more attention to the root causes of the skyrocketing medical expenditures which has brought about challenges to the policy makers in the distribution of public funds. The known cases which have led to this rise are the increasing rates of chronic diseases, the current use of more expensive pharmaceuticals, the increasing costs which are associated with emerging medical technologies as well as more long-term case.

The costly chronic diseases are seen as among the key contributors to the increased costs the US is facing. As a result, the policy makers in the US have come up with a strategy that reduces the prevalence and the costs of the likely preventable diseases. Examples of some of these chronic diseases include; cancer, diabetes, and respiratory diseases seen as the major killer diseases in US and other countries around the world. So, without proper programs to intensively dig on to the root causes of these diseases, then these trends are expected to rise and even worsen in the near future.

The policy makers in the US do face a challenge in making a choice on how to distribute the public’s funds to the various programs of the government due to the increasing trends of these programs (Aaron 2005). Trends in health care costs These chronic diseases in the US are costing many lives and dollars. You find that the US government is squeezing the budget and the families too are facing a burden of digging deeper into their pockets. Previous trends on government spending are described bellow; Overall spending: the total national spending in 2003 on healthcare rose to $ 1.

68 trillion and with this was an approximation of $5,670 per person; this shows an increase of 7.7% in the previous year. Research shows that the one significant cost driver to this increase is the pharmaceutical costs in the public sector. Between 1965 and 2000, the pharmaceutical costs which were paid by the public sector grew from 4% to 22%. In 1990 and 2000, the personal health care expenditures increased for the prescription drugs, home health and also other costs while on the other hand, hospital costs decreased slightly.

Research clearly explains that chronic diseases are responsible for 83% of all the health care expenses in the US. In addition to this data according to Aaron (23); 96% of the Medicare expenses/spending and 83% of the Medicaid spending are for those people known to have the chronic diseases On average, the annual health care coverage cost for people in US with the chronic diseases is 46,032 and this is five times higher than for the people with other diseases State spending: The expenses for both the Medicare and Medicaid are seen to consume more of the state’s general funds than the other programs, which parallel the national trend.

In 2003, data was collected on these spending and it was found that Medicaid alone accounted for approximately 22% of all the governments spending while health care constituted approximately 32% of all the government’s spending (this also included all the states revenue resources). The pie chart below shows that Medicaid consumed 16.5% of the government’s expenditure in 2003 and this sector is seen to out space the states general funds. Between fiscal years 2004 -2005, the economy grew for an approximation of 2.

8% while the Medicaid expenses growth more than doubled (Aaron 24). Fig. 2 the US Medicaid expenses as a percentage of general fund expenses, in 2003 Medicaid 16.5% public assistance 2.2% Higher education 12.1% Corrections 7% Transportation 0.

6% Elementary & secondary All other education 35.5% 26.2% Source: (Aaron 23). The rapidly rising healthcare costs are seen as not only a federal budget problem but also the growth in health related spending to drive the long-term fiscal challenges which face the local government and the state at large.

The magnitude of all these pressures is seen to present vexing long term sustainability challenges in all the levels of the government. The US is also receiving an increased demand for services in a period when the revenues are declining and reduced access to capital. The state and the local government sector face increasing fiscal challenges The fiscal sustainability presents one of the national challenges which are shared by all the levels of the government. In order to provide congress and the members of the public with a broader perspective of the national’s fiscal outlook, a physical model of the state had to be developed.

The model complements with GAOs long term simulations of the federal deficits plus the debt levels and policy assumptions. The model shows the US is facing growing fiscal challenges. A measure of the fiscal balance can be used to put in place the priority areas which need to be considered hence, this can be used to solve the arising problem in the state’s budget. Conclusion The US budget is usually constrained by the many programs which the government has to finance. Ultimately, it appears that the government will need to put in to consideration a more active role in trying to reform most of its healthcare systems that exist today.

The issues of funding are important ones especially with the ever-increasing budget deficit and the increasing national debts. You find that in most of the cases, the revenues are usually not enough to cater for the growing trends in most of these programs hence this becomes a challenge to the government when allocating its resources. Works cited Aaron, Hobbes. The challenge of rationing health care. Washington D.C: Brookings Institutes, 2005. Print