Economic Issues Shaping the U.S. Health Care Sector

Introduction

With virtually all attention focused on the ongoing COVID-19 global pandemic, policymakers and health care organizations run the risk of overlooking other important current and future economic issues that will have an impact on this sector. The purpose of this paper is to provide an analysis of the most important and pressing economic issues that will affect the health care industry in the United States at present and over the next ten years. Following this initial analysis, recommendations for specific strategies that relevant organizations can use to address these issues from an economic perspective are presented, along with a determination concerning the optimal strategic manner in which the U.S. can apply the best economic practices learned from other countries. Finally, an assessment of the likelihood that the public and private sectors will address these issues effectively is followed by a summary of the research and its most important findings.

Key Economic Issues Facing the Health Care Sector

Although there is a wide array of challenging economic issues expected to affect the health care sector in the foreseeable future, it is impossible to ignore the dominant pandemic-related concern. There are other issues, however, that are also expected to have a pronounced economic effect on the nation's health care industry in the coming years, including the following:

a. A rapidly aging population. In sharp contrast to just over a century ago, when life expectancy rates in the United States averaged slightly more than 48 years (American demographics, 2020), babies born today stand a good chance of living beyond 100 years. Even if people do not reach their century mark, the majority of people alive today can expect to live far longer than their ancestors, excepting diseases and catastrophic accidents (Meulen & Topinkova, 2008).

b. The enormous economic impact of the ongoing COVID-19 pandemic. The projected economic costs of responding to the COVID-19 pandemic are astronomical, and the models used to estimate them cannot account for the full constellation of variables that may add to these costs. Beyond treating the virus and developing an effective vaccine, significant additional economic costs have accumulated. The combination of lockdowns and restrictions across the country represent only part of the severe economic impact of the COVID-19 pandemic, and it is clear that this is the primary issue facing the nation's health care sector at present (Cornelissen & Hermann, 2020).

c. Innovations in health care and medical device technologies. Many of the same trends extending human lifespans are also driving up the costs of providing health care services over longer periods of time (Siwicki, 2019). Many consumers will suffer from age-related disorders that will create an inordinate burden on national health care costs. On the other hand, while it is impossible to predict the future, there are already signs that some technological innovations will cost less than current alternatives—in some cases, far less. According to one recent report, "Pocket-size ultrasound devices that cost 50 times less than the machines in hospitals (and connect to your phone). Virtual reality that speeds healing in rehab. Artificial intelligence that is better than medical experts at spotting lung tumors… These are just some of the innovations now transforming medicine at a remarkable pace" (Twelve innovations that will change health care and medicine in the 2020s, 2020, para. 4). While there may not be any "Star Trek tricorders" right around the corner that can diagnose and treat humanity's myriad ailments, it is clear that innovations in health care and medical device technologies will have a significant effect on health care costs for the foreseeable future.

d. Additional tax reform initiatives. The status of the Affordable Care Act remains uncertain, but most observers agree that the incoming Biden administration intended to make universal health care a major priority, thereby introducing new changes that would likely involve additional costs to health care organizations and consumers alike (Siwicki, 2019).

e. The proliferation of urgent care and emergency ambulatory care facilities. While some urgent care facilities are operated by tertiary health care organizations, a growing number of independent operators are competing for outpatient care dollars (American Hospital Association, 2019). This trend is driving increased competition among providers while also expanding access to health care services. As the editors of the Journal of Urgent Care Medicine (2020) emphasize, "U.S. healthcare has been a monolith of inefficiency, limited access, and untenable costs for decades, due mainly to a lack of healthy competition" (para. 3). By contrast, the proliferation of urgent care-type facilities has changed the health care sector in fundamental ways: "Today's healthcare landscape, however, spurred by converging market forces, is rapidly evolving into a competitive marketplace, with urgent care being one of the key catalysts for this welcomed and long overdue change" (How urgent care cultivates competition in healthcare, 2020, para. 2).

Economic Effects of Aging Population and COVID-19

Although all of the foregoing issues can reasonably be expected to have a major economic effect on the health care sector over the next decade, the two most significant issues currently facing the nation are its aging population and the severe economic impact of the ongoing fight against COVID-19.

The growing legions of retiring Baby Boomers—as well as members of other generational cohorts forced into early retirement due to the COVID-19 pandemic—are projected to live far longer than Americans did a century ago. Even though it is too early to determine precisely how severe the eventual mortality from COVID-19 will be or what toll it will exact on national life expectancy rates, present indications suggest that not only will people live longer, but the chances of living even longer increase substantially the longer one survives. According to Meulen and Topinkova (2008), "Even now there may be more surprises in store for those on the threshold of old age than for those already well advanced in years—a greater chance of living in good health into their nineties and, most remarkably for a growing number, beyond the age of 100."

The elderly currently account for about 29.5% of the U.S. population (55–64 years: 12.86%; 65 years and older: 16.85%). The rapidly aging population carries a number of additional health care costs, many of which are difficult to quantify but which will affect the nation's economy over the next several years. For example, increasing numbers of American adults will be forced to care for elderly parents, adversely affecting their earning capacity. Employee contributions to the Social Security safety net will also be stretched increasingly thin as the workforce shrinks and the rolls of retirees swell. From a strictly pragmatic perspective, the older people get, the more they cost American taxpayers.

Furthermore, the types of health care that the elderly will require represent an increasingly large share of the nation's health care burden. As Carr (2018) points out, "About 20 percent of the US population is age 65 or older, and as that number continues to grow, the implications for our health care system are great. The 'high cost, high need' patients among them make up just 5% of the population but already account for 50% of the country's health care spending" (para. 6). In other words, the addition of great-grandparents—and even great-great-grandparents—to the intergenerational mix will require a far greater share of scarce health care resources than in the past.

There are also additional pressing concerns related to this demographic shift. As many as 20% of elderly adults are believed to have at least one medical need currently going unmet, defined as delaying or foregoing needed medications or health care during the previous year (Carr, 2018). In addition, just 40% of elderly high-need adults report having a good therapeutic relationship with their health care providers, and more than 75% of the elderly population already has one or more chronic health care disorders (Carr, 2018). These alarming statistics collectively exceed 100% because many of these chronic disorders may already be, or eventually become, high-need conditions. As Carr (2018) concludes:

"It [is] just how important it is for us to figure out a cost-effective way to deliver high quality care, fast. Poor quality of life—human suffering, strains on family and community, increased costs, and lack of proper access to an already-overburdened health care system—will define the future of care for our elderly if we do not work together on solutions today." (para. 7)

These prescient cautions have become even more pronounced as the death toll and health care costs associated with the COVID-19 pandemic continue to mount.

Many scientists maintain that the human mind is incapable of conceptualizing the infiniteness of outer space, but the same may be true with respect to the economic impact of the ongoing COVID-19 pandemic. A recent study found that this once-in-a-century event will cost the United States at least $16 trillion, and more than half of this staggering sum will be required to address the long-term health care effects of the virus (Gandel, 2020). This estimate does not even account for the costs associated with periodic lockdowns and quarantines and their concomitant impact on local, state, and national economies.

To place the $16 trillion figure in perspective, the federal government spent $234 billion during the entire fiscal year 2019 on the nation's health care, meaning that the COVID-19 pandemic will cost the United States roughly 70 times more over the coming decades than it currently spends on health care each year. Moreover, despite spending more per capita on health care than any other country in the world, the United States still lags behind many other nations in important health care measures, including life expectancy and infant survival rates (U.S. people, 2020).

Conclusion

The research was consistent in showing that all of the current and likely future economic issues that will impact the health care sector involve the reallocation of already scarce resources in ways that will invariably affect some demographic groups more than others. While the arrival of an effective vaccine for COVID-19 is certainly welcome news, the speed with which it was developed and approved means that any severe long-term effects remain unknown. This is not to suggest that clinical studies erred in determining the vaccine's efficacy, but rather that it is too early to determine with precision which of the identified issues will prove most pressing in the future. Moreover, the combination of the two most significant issues—an aging population and innovations in health care and medical device technologies—will have a pronounced yet still undetermined effect on the health care landscape for the foreseeable future. In the final analysis, it is reasonable to conclude that all of the issues discussed above will have an impact, and that the health care sector of the second half of the 21st century will be a dramatically different place regardless of the exact course these trends ultimately take.

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