Rising Costs within the Healthcare Industry

Financial Impact of Covid-19 Pandemic

The current economic issue in the healthcare sector that I will address is the impact of the covid-19 pandemic on financial management. In early 2020, the covid-19 pandemic hit the world, which had a massive economic interruption in many sectors, including the healthcare industry. According to Wake Forest school of medicine, the health care industry is likely to feel the covid-19 financial impact for years to come (2021). The American Hospital Association (AHA) in 2020 reported that the sector lost approximately $320 billion as it attempted to respond to the pandemic (Wake Forest School of Medicine, 2021). In 2021, the industry continued to realize the impact, as it lost between 453 and $122 billion (Wake Forest School of Medicine, 2021). Despite the federal government providing $178 billion to relieve the financial loss. The impact has been realized in different ways.

Since the onset of the pandemic, the healthcare payment system has been negatively affected; many patients have depended on insurance covers such as Medicare and Medicaid. This has placed an economic burden on the health sector because it has to go the extra mile in providing for the patients. Also, the burden has been spread to insurance companies that cover health-related services. Patients’ economic decline has influenced the dependence on Medicare and Medicaid. For example, some might have lost their jobs when many businesses closed down, and some might have had health complications increasing their health expenditure. All these impacts have been realized because of the pandemic.

The supply and demand for health care services have also been affected. As a result of the pandemic, the number of patients has increased. However, not all hospitals have increased their number of doctors. This has led to the high demand for health services but a low supply to insufficient doctors. Besides, the supply has been affected because patients are forced to wait for longer times, while doctors burn out quickly due to the increased number of patients. Additionally, in an effort to combat the pandemic, most health workers are utilized in providing care for covid-19 patients. This reduces access to primary care for regular patients, who are then forced to seek medical attention elsewhere. Also, the probability is that such patients could purchase opioids in pharmacies, increasing their demand.

The costs of health care are rising day by day. It is mainly attributed to the rising expenses of combating the covid-29 pandemic. However, even before the pandemic, the costs were still rising. According to Probasco (2021), the cost of health care rising can be attributed to government policy, specifically Medicare and Medicaid programs. Since the inception of the two programs, health care providers have been increasing prices, leading to high costs of health services. The article also highlights other causes of the rising health care costs, such as population growth, population aging, and disease and pandemic incidences. An example is a covid-19 pandemic that has increased the costs in terms of adding more doctors, more medications, and more health equipment such as intensive care unit machines. Besides, the pandemic has prompted too much spending on Medicare and Medicaid programs, increasing the overall healthcare costs to the federal government.

There have been various regulations on covid-19 that are affecting and others likely to affect the health care industry. Firstly, the lockdown regulation, which was most prevalent in 2020 and still applies to some designated areas, affects health care’s economic part. Due to the lockdown, many people could not do their jobs, which decreased income (Besley & Stern, 2020). Such people depend on free medical covers to get treatment, which economically affects the health care system. Another regulation is regular hand washing and sanitizing. It has both positive and negative effects on the health care system. The positive impact is that it is going to improve quality and reduce cases of health complications brought about by dirt. On the other hand, it is likely to increase expenses leading to a rise in costs of health care.


While the economic impact of covid-19 on the health care system is likely to be realized in the next few years, the issue can be addressed in two ways; educate people on preventing the pandemic and control spending. To avoid the acceleration of the covid-19 pandemic, educating people on its impact and how to prevent it is a prerequisite to preventing its economic impact. Although education has been on the rise, it can be improved to ensure the mass undertakes every measure in combating the disease. If implemented, the outcome will reduce the number of infections and patients and reduce government spending. For example, doctors will not burn out when few patients contract the virus, and spending on covid-19 drugs will be reduced.

The second recommendation is controlling spending. It centers on auditing the expenditures of health care funds. There could be a misappropriation of funds such as fraud, wasteful spending on equipment, medication, and other things. Controlling such inappropriate expenditure is crucial in reducing the economic crisis in the health care industry. If implemented, the outcome of this recommendation is that funds will be used only when required, cutting the expenditure. In the end, few funds will be spent on health care, which will allow access and enough money to deliver the essential services.


Besley, T., & Stern, N. (2020). The Economics of Lockdown. Fiscal Studies, 41(3), 493-513. https://doi.org/10.1111/1475-5890.12246

Probasco, J. (2021, June 10). Why do healthcare costs keep rising? Investopedia. https://www.investopedia.com/insurance/why-do-healthcare-costs-keep-rising/

Wake Forest School of Medicine. (2021, June 25). Current issues in financial management in health care. Wake Forest University. https://onlinehealth.wfu.edu/blog/financial-management-in-healthcare/