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Impact of Economics on Health Care


It is worth noting that tax revenues form the main source of coverage for government spending. This rule applies to the healthcare system, and health expenditures are measured in percentage of gross domestic product (GDP). The level of national expenses for this area is calculated based on both public and private expenditures (Milstead, 2013). However, this indicator does not take into account the uniformity of the distribution of costs within the country as well as the factors associated with it. The purpose of this paper is to discuss the gross national product in terms of health care spending.

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Gross National Product and Federal Budget

According to experts in the field, almost 18% of the gross domestic product is dedicated to the expenditures on the health care system (Kaufman & Roehrig, 2012). Importantly, these expenses grow more rapidly than the actual growth of the GDP of the country. This tendency is associated with the federal deficit as well as with the Medicare policies. In terms of the federal budget, since the 1980s, the expenditures have grown from 7% to greater than a quarter in the past financial period. To be more precise, starting in 2015, the total federal spending has approached almost 1.1 trillion USD.

Health Care Funding

Importantly, the federal budget is aimed at funding different aspects of the economy, and if the expenditures grow, the resources should be redistributed to address the areas by their significance (Chernew, 2016). That is to say, when health care consumes a large percentage of federal expenditures, certain programs are allocated fewer resources. For instance, such crucial areas as transportation, training, education, foreign aid, and so on, will receive less funding. It is justified by the fact that these expenses belong to the group of discretionary spending. However, entitlement programs are publicly covered; therefore, in case there are not enough resources, the federal budget will still be directed at covering these costs.

If Congress and the Federal Government implement cuts to Federal health care funding, many programs and services will likely be eliminated. For instance, according to the American Health Care Act of 2017, family planning providers will experience drastic cuts in funding (Congress, 2017). Planned Parenthood Federation belongs to such services. Also, cuts could be made to training programs. According to the evidence, expenditures on nursing training programs and research are likely to be reduced to a significant degree. However, this initiative is likely to affect the existing issue of nurse shortage.


Although these cuts will positively affect the budget since they will allow reducing the federal expenses by millions of dollars, these changes will have an impact on patients and the state (Chernew, 2016). For instance, cuts in nursing research will affect ongoing clinical trials. These occurrences will result in the cancellation of programs needed for patients at critical phases of illness. Apart from that, cuts on training opportunities will lead to the reluctance of individuals to work as nurses, which will intensify the existing issues in the healthcare industry of the country.


Thus, it can be concluded that federal spending is a complicated issue, which requires a considerate attitude towards resource allocation. If expenses on health care grow faster than the actual GDP, the problem of resource redistribution occurs immediately, and the government has to decide in which areas cuts could be made. However, in terms of the health care industry, each program or service is crucial; therefore, any cuts in expenditures produce a negative effect on the well-being of the population.


Chernew, M. (2016). The economics of Medicaid expansion. Web.

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Congress. (2017). H.R.1628 – American Health Care Act of 2017. Web.

Kaufman, K., & Roehrig, C. (2012). GDP+0: Prospects and challenges of bending the health care cost curve. Web.

Milstead, J. A. (2013). Health policy and politics: A nurse’s guide (4th ed.). Burlington, MA: Jones & Bartlett Learning. Web.

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