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posted on 17 February 2016

The Current State of the Healthcare Sector and Proposed Future Legislation

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In 2014 the United States spent 17.1% of its GDP on the healthcare sector, which totals to roughly $3 trillion. In per capita terms, this is about $9,523 per citizen. This is even more concerning when we are compared to other OECD countries, whose life expectancy, obesity rates, and essentially any other measurement of health is significantly better.

While legislation has been proposed to increase efficiency in this sector, such as removal of the fee-for-service model, evidence suggests costs may continue to increase in the near-term. Due to an aging demographic in our nation, paired with increasing projected healthcare costs, the deficit is expected to rise to 6% of GDP by 2040. This trend has been studied by the Congressional Budget Office, which also projects that the United States will see debt reach 100% of GDP by that time.

The Affordable Care Act has been a prominent factor in this projection, as the Center for Medicare and Medicaid services has projected that by 2022 this legislation will increase cumulative health spending by $621 billion. This will lead healthcare spending to grow to 19.9% of GDP in the same time period.

While these numbers are concerning, recently passed legislation is going to have a profound effect. The Medicare Access and CHIPS Reauthorization Act of 2015 (MACRA) will singularly transform the healthcare financial landscape. The goal of MACRA is to align payments to healthcare providers for improved value and better care. How this is implemented is as yet undefined but will be heavily influenced by the Center for Medicare and Medicaid Innovation (CMMI), which was established by Congress in 2010 to "test innovative payment and delivery system models that show important promise for maintaining or improving the quality of care in Medicare, Medicaid, and the Childrens Health Insurance Program, while slowing the rate of growth in program costs

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