Cost Accounting Role In Public Health Insurance Debate

Health attention policy and system reform in the United States has been debated over the old ages without a conclusive measure for the federal authorities to take with respect to the issue. Harmonizing to the US Census Bureau study of 2003 and 2008, approximately 60 per centum of the population was covered by employment-based wellness insurance, about 27 per centum of the population was covered by government-based insurance and the staying population of about 15 per centum had no insurance as shown in Figure 7 ( Murdock, 19 ) . As apparent, a larger population is covered by private employment-based insurance while a comparatively smaller sum of the population sector is covered by public wellness insurances. Notably, a considerable sum of the population subdivision is non insured at all.

The United States spend most of its GDP on wellness attention with approximately 14 per centum of its GDP traveling to the health care sector ( Robert, 9 ) . Despite the outgo there is still a great concern attributed to the affordability of these services, because eligibility to the wellness attention entree has strict restricting regulations required for one to be insured in any signifier of insurance coverage that exists in the state. This has been the generation of the wellness attention reforms issues in the state in the recent old ages. With respect to the cost and managerial accounting construct, there is a batch for the United States federal authorities and other relevant policy shapers to make up one’s mind based on the cardinal constructs profoundly articulated by Cost and Managerial accounting ( Michael, 7 ) .

Cost accounting is chiefly concerned with constitution of a suited budget, operational cost and profitableness of the money invested in a defined sector of the economic system. In brief, cost accounting is chiefly concerned with the fiscal value of the investing made through a concatenation of events from production through to the attendant value of the investing in add-on the GAAP criterions that should followed ( Kurunmaki, 11 ) . Managerial accounting on the other manus is concerned with the utility of the accounting information provided to the directors ; such information includes the cost accounting inside informations which together with other relevant accounting information provide the director with pertinent and equal information in order for informed determination doing. Health insurance is a scheme which provides services and fiscal insurances for the intent of medical attention in the event of unwellness or unannounced disablement from an unwellness or accident and it is usually administered by either private or public insurance program ( Robert, 11 ) .

With ample cognition on of cost and manegerail accounting, one will be in a better place to do determinations based on the facts articulated by the information he/she is equipped with. Sing the problematic issue of the options on private and public insurance, this paper looks into inside informations on the relevancy of cost and managerial accounting constructs on the best fiscal determination to be made by either the province or the stakeholders. The paper will therefore shade more visible radiation on the private and public wellness insurance and suggest a compendious proposal on the better fiscal pick based on the cost and managerial accounting rudimentss.

Private Health Insurance

Statistically, wellness attention installations of the United States and other European states are owned by the private sector, these histories for more than 60 per centum of the wellness sector in the United States. This is due to the fact that bulk of the people obtain their wellness insurance from their employers one time employed ( Murdock, 21 ) . There are several private wellness attention services available to the citizens of the United States. Some include ;

Blue shield, Consumer-driven wellness attention, High deductible program, Health care organisation ( HMO ) , Medical Underwriter, Flexible Spending history ( FSA ) , Health salvaging accounting, and Preferred provide organisation ( PPO ) .

Most of the above insurance companies do non denote their annual premiums in progress taking to a state of affairs where an person could happen his/her premiums have increased greatly and accordingly taking them to oppugning of the cogency of the insurance. Since most of the private insurance services are through employer sponsored program, a larger figure of the unemployed or self employed subdivision of the population is left out. More so, employers can easy compose off employees insurance premiums from their nonexempt incomes, which is non the instance for persons who have to pay their revenue enhancements on the same income that financess their wellness insurance. This has lead to an increased employee-dependence on the employer on the extent of wellness attention administered to them and therefore compromising the quality of the service ( Robert, 8 ) .

Equally far as the private wellness attention program to be and managerial accounting is concerned, there is a critical demand to turn to the policies of the private wellness insurance policies. For case, Health Maintenance Organization ( HMO ) has inordinate cost film editing constabularies which dictate the sort of medical services to be provided to patients harmonizing to their ain footings regardless of the existent demand of the medical attention. Obviously hence, an person may hold to seek extra medical attending outside the wellness attention policy that is supposed to be covering him/her. As a consequence, there is an increased excess cost on wellness attention that should hold been addressed by the insurance policies. In the managerial position, this state of affairs defies the demand to hold insurance companies.

Public Health Insurance

Harmonizing to the US Census statistics study of 2008, approximately 27 per centum of the United States population is covered by public wellness insurance ( Figure 7 ) . They chiefly include the aged, kids, disabled, veterans and the hapless ( Figure 8 ) . Some of these authorities funded plans are ;

Medicare-This plan covers the aged citizens of above 60 old ages and besides the handicapped.

Medicaid- This plan concentrates on low income the class of earners including pregnant female parents, kids and the handicapped.

State Children Health Insurance Program-This plan dressed ores on low income kids who in one manner or another failed to be covered by other plans such as Medicaid.

The Veterans Administration-This plan, as the name suggests provide services to the veterans.

As evident from the signifier of insurance plan available to the populace, the public wellness insurance is chiefly concerned with bulk of the population who are non eligible to obtain private insurance or unable to obtain the services due to the perceived low productiveness degree ( Lewin Group survey ) .

Proposed option

The proposed Universal wellness attention being debated at the minute sets out that wellness attention should be cosmopolitan and uninterrupted to each person and household. The cost of the plan should be borne by the government-funded establishments and therefore doing entree to insurance a right and non the ability to pay insurance premiums. This manner, the authorities will be able to pull off the intensifying cost of wellness attention in the United States. Cost and managerial accounting leads to the truth through proviso of information that is critical to the success in the bringing of wellness attention services as its aids stakeholders in set uping the net income borders in their services. Accounting factors such as direct and indirect cost of wellness attention proviso will besides be of public involvement since this information will be able to set up cost per process informations to existent estimations about people being served by the wellness attention program ( Michael, 6 ) .

Widening the range of both the managerial and cost accounting basicss, there is a clear demand for the consequence of what is invested to be utile and deserving in footings of pecuniary value. Despite this demand, there is an overall hazard in the procedure of investing in the assorted sectors involved in treating the invested sum into net income. Managerial accounting is fundamentally meant to inform the director or determination shaper of the best equipt determination to do with respect to any concern. Notably, all companies the universe over are largely profit oriented and therefore necessitate insurance as an entity and to its workers who are the most of import resource a company has at its disposal ( Lewin Group survey ) .

Sing employees against diverse hazard with respect to the house maps is one of the most of import investings a company can make. In making so it is merely protecting the most important portion of its productiveness. Sing the state as a whole, its people is the states ‘ most of import resource yet there are 100s of 1000s Americans who die every twelvemonth because of wellness insurance related issues. The major grounds for increased underinsurance harmonizing to the study America at hazard, it is preponderantly because of poorness, low income and the rise demands for eligibility to wellness insurance entree coupled with economic recession. The figure of the uninsured was 45.7 million in 2007 and a per centum addition rate was about 15.3 per centum harmonizing to Figure 6 ( Families USA, 25 ) .

Despite passing more than 6 per centum of its GDP on wellness attention, the US is the lone state among OECD states that is mostly criticized for its uneven and unjust wellness attention policy that has led to decreased figure of insured people in the state. The cause of these jobs centres in the policies that govern wellness attention reforms of the state. The private sector owns the largest duty of sing Americans. This laterality is the beginning of wellness attention issues that are being addressed without any significant solution predominating from this much issue. With mention to the managerial and cost accounting cognition, it is prudent to increase support and creative activity of new federal-based insurance strategies.

From cost and managerial position, the cardinal inquiry that one needs to reply is, what will be the impact of decreased insurance strategy to the populace and frailty versa? This inquiry is unfastened to un-ending argument on the right fiscal steps to take with an purpose of increasing the state ‘s productiveness. Since cost and managerial accounting purposes at happening suited budgeting and operational costs before set uping the best possible determination to take, there is demand for increased public wellness insurance based on the overall cost impact of the uninsured population as shown in ( Figure 9 ) the increasing figure of uninsured people ( Families USA, 4 ) . The United States jurisprudence clearly outlines the necessity of the exigency section and all wellness attention establishments to go to to all exigencies without inquiring for payment. After the patients involved are treated, the infirmary or any wellness installation can travel in front and order payments from the victims or their insurance houses ( Ake, 774 ) . If it turns out that the victims involved were non insured and can non afford to pay the infirmary measure, the wellness establishment will be forced to compose off the disbursal as bad debts. Other state of affairss that farther support the demand for an overall demand to increase insurance screen which can merely be through federal support is the increasing figure of people deceasing as a consequence of unequal wellness attention. This should non be the instance in a state that invests the largest sum of its GDP on wellness attention systems more than any other state in the universe. In managerial footings, this merely a failed investing as it does non turn to its cardinal intent and there is demand for pressing reforms.


As compactly discussed, managerial and cost accounting cardinal aspect shades more light on the issue that is mostly poignant Americans in their command to guarantee just and uninterrupted wellness attention handiness for all. The information provided clearly articulates the demand and processs to follow in guaranting public satisfaction with the wellness attention policy in a state disbursement about 14 per centum of its GDP on wellness attention reforms. As a consequence, there will be an increased cost if a larger subdivision of the populace is uninsured. Hospital measures and complaints because of unequal bar steps will intensify due to this high cost of wellness insurance policies and medicine processs.

As proposed, it will be wise for determination shapers to increase insurance to the populace and in the procedure increase the productiveness of the population while cut downing cost of wellness attention because of equal preventative steps to diseases that can be easy controlled. The lone option that the authorities can take in order to increase public insurance therefore is to fund more federal strategies that offer wellness attention services to the less privileged and the needy. More ordinances should be made in order to ease insurance eligibility demands in both private and public insurance strategies. The consequence of these reforms will be increased productiveness and reduced wellness attention costs as a aspect of managerial and cost accounting constructs.

Work Cited

Ake, B, Leger, Pierre T. “ Information dissymmetry, insurance and the determination to hospitalise, ” Journal of Health Economics, Vol 24 ( 4 ) , pp. ( 2005 ) : 773-799.

Families USA. Americans at hazard: One in Three Uninsured. New York NW, Suite 1100. ( 2009 ) . 3- 37

Kurunmaki, Liisa. Failing Organizations and Organizational Failures: The instance of Accounting and Health Care. United kingdom: London School of Economics and political scientific discipline, 2006. 9-12.

Lewin Group survey. New Report Finds 86.7. Million Americans Were Uninsured at Some Point in 2007-2008 Families imperativeness release sum-ups. 2009:6-9.

Michael F. Cannon, “ All the President ‘s Mandates: Compulsory Health Insurance Is a Government Takeover, ” Briefing Paper no. 114, Cato Institute, 23 Sept, 2009.5-9

Michael, Tanner, “ Individual Mandates for Health Insurance: Slippery Slope to National Health Care, ” Cato Institute, Policy Analysis No. 565, April 5, 2006.5-7.

Murdock, S. “ Income, Poverty, and Health Insurance Coverage in the United States U.S. Census Bureau: 2007. ” Issued August 2008.1-84 hypertext transfer protocol: // 235.pdf.

Robert L. Ohsfeldt and John E. Schneider, “ How Does the U.S. Health-Care System Compare to Systems in Other Countries ; ” presentation given at an American Enterprise Institute conference on October 17, 2006. ( 2006 ) .7-12