The healthcare industry impacts all of us, through its interactions with ourselves, our loved ones, our family, and our friends. The high costs associated with the healthcare industry are intertwined with the physical, emotional, and spiritual trauma that occurs when someone close to us becomes ill or feels pain.

In the United States, the healthcare system is in a fragile state, as healthcare expenditure exceeds 15% of the nation's total GDP; this proportion far exceeds that of other developed countries, and is expected to rise to at least 20% by the year 2040 (Braunstein, 2014; Bernaert, 2015). The rise in healthcare costs in the US, and internationally, can be attributed to several factors. One is a shift in demographics to a more elderly population. Average life expectancy (LE) rose to in excess of 80 years of age for the first time in 2011, up from 70 in 1970 (OECD, 2013). While this is a positive development, elderly patients are usually more prone to falling ill and are therefore more expensive in the eyes of the healthcare system. The second reason for rising costs is the increasing prevalence of serious chronic illnesses, such as obesity and diabetes (OECD, 2013), which increases the risk of other chronic conditions. Patients with chronic conditions account for the vast majority of healthcare expenditure (Braunstein, 2014). A third reason is misaligned incentives, which are discussed in the upcoming provider reimbursement section. A fourth reason is advancing technology, as the cost of equipment for performing expensive MRI imaging and CT scans have increased in all OECD countries (OECD, 2013).

Next, we will discuss some basic healthcare terminology and how healthcare is financed in the US.