The Financial and Governmental Issues & Solutions on The Elderly Health Care in U.S.

Abstract The purpose of this study is to determine financial and governmental issues which existed in the elderly health care in U.S., and reasonable solution for those two aspects of issues. The motivation for this essay, it is that even American health system is expending huge amount of money to develop compared with other countries, especially a lot of budget is expending on the elderly health care, but it still have critical problems. The financial issue is that the elderly are hard to afford health expenditure based on their capitals; and costs of health expenditure are too expensive based on a less competitive industry. The governmental issue is lack of supervision and coverage of Medicare. This essay is including two ways of reasonable solution for different aspects from potential measures and innovative solution. The whole contents may be useful in improving financial and governmental weakness in the elderly health care in U.S.

Introduction According to the report National Health Expenditure Projections 2011-2021the U.S. health care expenditures were $2,809.billions for 2012, which means 17.9% GDP was spent on health care (National Health Expenditure Projections). This shows health care occupies a significant rate in the U.S. economy, and elderly health care is occupies biggest rat in health care expenditure. It is reported that 13% of total population who over 65 years of age and over consumed 36% of total U.S. health care expenditures in 2002 (Stanton). But, has elderly group achieved enough benefits such as better health status and longer life expectancy from existing health care through spending

huge amount of money? An analysis shows that this may not be so. According to the last part of this analysis (Lubitz, Ellen and Harold 1054), result shows that longer life for the elderly does not depend entirely on higher health care expenditures. More details are shows that the total health care expenditures (until death) on elderly who were 70 years old and over and in good health were similar to the expenditures on elderly who were in poor health with same age. Based on this analysis, it shows existing health care system is less effective through spending huge amount money. Thus, what actual money spends for? What kinds of reasons drive people must spend a lot on elderly heath care. This article will discuss some major reasons that health care expenditures are unaffordable and inefficient for the elderly, and discussing some suitable solutions. Also issues and solutions are based on financial aspect and governmental aspect. Topics discussed include the following: the medical care system for elderly, existing issues and reasons about elderly health care system, potential measures for improvement and new innovative solution.

Medical care System for Elderly In order to better understand issues in U.S. elderly health care, it needs to know the basic framework of the U.S. health care system. There are four major groups in American health care system: individuals, insurers (public and private), health service providers and the government (Chua). Insurers can be categorized to public and private. Public health insurance includes Medicare which is a federal program and provides services for seniors aged 65 or over and disabled persons; and Medicaid which provides services for low-income and disabled (Chua). Private health insurance includes Employer-sponsored insurance and private non-profit-group insurance which is purchased by

self-employed or retired. Individuals pay taxes to the government, and the government uses money from taxes to reimburse health care providers (Wise 44). Private insurers use premiums from purchasers to reimburse health care providers (Wise 44). Then, health care providers provide relevant health care services to individuals. After introduction about whole system, this system is logical and reasonable, but it is not means this system is faultless. There are main issues which existed in American health system.

Main Issues
There are still issues that need to be resolved and major issues are based on the existing system such as social, economic and political. This essay will focus on issues by financial factor (individual factor, costs factor) and government factor.

Financial Issue - Individual The first issue is that the Elderly does not have enough money to spend on health care. From 1960 to 2011, the average health spending growth rate was 2.6%, which exceeds 1.6% over GDP growth rate over past twenty years (Assessing). This means peoples growth of income can hardly afford excessive growth of health care costs. But for the elderly, they need to use limited capital to pay long-term health care; it is an essential service which has to be paid for maintaining healthy condition in the remaining life for 70% seniors who are over age of 65 years old (Prior). Excessive health cost growth rate, limited budgets and necessity of health care - those three factors make elderly unaffordable for their health expenditures. Also, even for the seniors who have financial investment, they still need to face unpredictable risks. For long-term aspect, inflation could decreases return rate.

For them short-term investment involves higher risks of lower return rate. Therefore, investment will not always take their money back; it is also difficult for those elderly to increase capital to spend on health care based on unsuitable investment.

Financial Issue - Costs The second issue is that health care costs are excessively high in the U.S. The health care cost in the U.S. is around $8,000 per person while in other developed countries it is around $2,000 (Saute and Charles). One factor shows how American health care system is expensive, which is hospital-stay fees. Average cost of hospital stays is $18000 in the U.S., compared to that of less than $10,000 do for same service in other developed countries such as Germany and Australia (Parker-Pope). Also, the high costs of drug prices are another reason for expensive health care. Each person who lives in other developed countries which have very good health care will spend at least 600 dollars per year, but an American, it is $950 (Saute and Charles). Furthermore, higher health care costs are not equal to better quality and more efficient health care services and longer life expectancy in the U.S. Many of expenditures are spent on expensive and unnecessary diagnostic procedures (Saute and Charles). For example, some patients had to pay for excessive spending in blood work and X-ray, even they just got minor sport injuries (Parker-Pope). Americans life expectancy is 78.2 years ranked 27th in the world, Americans have highest health care costs per person in the world (Saute and Charles). Those data show that Americans spend more on most expensive health care services, but do not obtain equal values and returns from the inefficient services.

Government Issue The U.S. government provides Medicare and Medicaid as social basic services for the U.S. citizens, but the coverage is weak and limited. Those federal programs do not cover health items such as dental, hearing, or vision care (Chua). Especially for the elderly, those federal health care programs do not cover chronic long-term care and nursing home care (Rowland and Barbara 61), and these caring expenses are one of the biggest out-of-pocket expenses for the majority of elderly families (Graham). Thus, elderly Americans have to spend their limited income to pay expensive but necessary health care expenditures that Medicare does not cover. The elderly who are over 65 years of age occupy 13.41% of total population (Population), and the number will increase to 21% by 2050 (U.S. Meet Aging Populations Heath Care Need). The need for more health care expenditure for the elderly will increase, and it will place more economic burden on the country in the future (Wiener and Jane 778). Thus, if this does not improve in the future, the government will not be able to afford to provide programs such as Medicare and Medicaid and other health services.

Reasonable Solution Potential Measures Based on Financial Aspect One of main financial issue for the elderly is that they do not have fixed income after retired; their capital and budget are limited in their remaining life. The situation is elderly cannot gain more money from job, thus investing and managing money become necessary for improving financial situation. Because of limited amount in operability of budget, to manage first then spend their money

could be helpful for reasonably allocating financial recourses during remaining life; and efficiently invest in higher return rate of product could create another way to gain more capitals for improving financial situation based on nonworking situation. First the elderly need to make plans about necessities such as transportation, health care and food (Prior). They need to formulate long-term plans about necessary life demand and reduce extra spending. For example, seniors should plan on moving to cheaper location when they plan on and consider the distance between workplace and home (Udo). Because of limited disposable income, they need to make reasonable decisions. For example, the elderly need to consider purchase materials to cook rather than ordering food; they can learn to cook since they have more time after retirement, and the expenses of diet might decrease (Udo). Another small but important tip is that their budget need to be calculated after taxes in order to avoid overspending (Munk). For the financial investing aspect, seniors need to consider intermediate-term bond funds rather than long-term or short-term ones, because intermediate-term have higher returns, less risks; it is more suitable and affordable for the demand of the elderly (Prior). Compared with intermediate-term, inflation will make their long-term investments counterproductive returns. If the elderly could not receive enough returns, it is wasting time and hindering for making effective profits for satiating long-term economic life demand; and yield of short-term investments is lowest, and could not fulfill the objective of earning more governable capital after investment and life expenses (Prior). Budget is inflexible for the elderly; they must seriously consider and plan every expense, and being more efficiently manage their budget and maximize profits. After the elderly understand risks and returns rate of financial investments, they have to face complicated problems of the insurance market (Rowland). Seniors need to know four major factors before buying any insurance product. First, the elderly need to know specific coverage in the

insurance, because they need make certain that the insurance has practical value for potential benefits. Also, seniors need to know the obtainable amount of daily benefits and validity data of the insurance, because they need to know that are actual and specific benefits instead of those of insurance advertisement hype (Rowland). Seniors also need to make sure their insurance include inflation compensation, it could ensure to get predicted return during inflation. This clause help the elderly to obtain prospective profits even during economic down turn. Those four factors will assist the elderly to choose suitable and economical insurance plan based on their needs. Also the elderly must know their health insurance is qualified for them. Starting in 2014, if they do purchase an unqualified insurance, they will have to pay a tax penalty (Munk).

Innovative Solution by Government Aspect The U.S. government does not adopt any population policy (Population), thus it must consider how to develop effective policy and market leading policy for the existing health care system. For example, the government should consider the introduction of private health plans to partly replace the mainstay of government funded programs (Wise). After those policies adopted, it is possible that more money will come into the existing market that become open and more completive. This will force service providers and insurance companies to consider their operating costs, and provide better quality care to maintain customers and occupy the market share (Wiener and Jane 779). There is an innovative proposed change to existing Medicate system about market leading policy, which was made by Representative Paul Ryan on April 5, 2011. The proposal is not just providing improvement for existing system, but also providing an innovative solution for changing existing system. The new innovation is called Premium support system (Proposed Changes, 1). This proposal mentions that

new beneficiaries (beginning in 2022) from Medicare will only allow to accept health insurance plan from private insurers, not governmental health organization (Proposed Changes"); in the same time, government will directly subsidy to private insurers and help them to operate this business . This proposal could help health care system trend to marketization. Insures will consider controlling costs and supervising medical expenses from health service providers for maintaining profits, because more competitors will enter this market. Also, they could not increase prices for obtaining profits, and need to provide better qualities of services, because this market becomes more competitive; and customers are sensitive about price (Kim, Kannan and Ronald 173). They have more choices and substitutions in a competitive market. This proposal could help government efficiently spend their capitals, and avoid extra and higher cost of healthcare. Because of flexible prices, the elderly could choose more economical plans with relevant coverage through their limited budget, which is more specific and customized for their own situation.

Conclusion Elderly health care systems issues are complex, and there is no single solution that can solve this complex problem. As this essay mentioned, there are exist financial and governmental issues which some representative issues in this complex problem. For financial issues, the elderly need to learn how to efficiently managing and investing their money, which could help them to improve their inflexible financial situation. Also, governments need to make special policies and efforts together. Governments need to improve healthcare qualities and benefits for citizens, and reform this industry to marketization in order to providing a lower, competitive and compared price for the elderly.

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Response Letter I wish to thank the all reviewers, Shannon, Francine and Christen for their effective comments. Those comments are very useful on my final draft, and let me to redesign and arrange lots of sentences and structure into new layout. Also, their contents remind me to set back as a normal scholar to more objectively view my article. Shannon made a great suggestion about transitions. I consider that my confused structure and formatting makes he thinks connections is confused. Thus, I try to redesign whole formatting and break longer paragraph into different detailed paragraph. I think it will clearer for readers to follow contents with existing layout in my final draft. Francine mention that some paragraphs need more connections, thus I add some new sentences to connect each sections, and adding an abstract in beginning of essay. I think it is better to let audiences to know detailed contents between each paragraph. Also, Christen mention some contents are unnecessary because audiences are ready know, and I delete all extra information and over-explain contents, which make my essay become more concise and professional. But I still keep my original idea about two types of discussion of issues, because I think there are connect with each other and hard to break to individual. But I try a lot to change formatting, section titles and detailed discussion of idea, and make all contents become more compact and logical.