Key Economic Concepts Of Health Care Essay

Grossman’s model states that a person utility is based on health (H) and other non-health related goods (Z) that the person consumes. The production possibility frontier for Grossman model shows the tradeoff between home good production (Z) and health (H). Unlike usual production possibility frontiers, an individual needs an optimal level of H to maximize consumption of Z goods.

Changing factors such as aging populations and new technologies becoming available are increasing expectations from people throughout the world, and decision makers must make rational choices to maximise benefits to population health whilst working with limited resources. Yothasamut et al (2009) summarise this by observing that "health care resources in every setting are always constrained, while unlimited demand is observed". The 'best' choices in the context of economics are the ones which maximise utility (individual satisfaction through consumption of goods) and welfare, the sum utility experienced by all individuals in society. Decision makers often have to seek satisfactory rather than optimal solutions, also known as working with 'bounded rationality' (Simon 1957 in Williams et al 2008), as it is important to pursue both efficiency and equity in the funding of health care. Therefore, it may be unsuitable to fund the most cost effective option if it sacrifices the equal distribution of benefits. Research in health economics can take a normative or positive approach and this reflects the balance needed between cost control and equity when making economic decisions. Positive economic research and analysis is concerned with 'how things are' and seeks to explain economic phenomena, whilst normative economic research and analysis is concerned with 'how things ought to be' and relies on value

All healthcare systems, regardless of funding mechanisms, ration the limited resources of health care to some degree (Petrou & Wolstenholme, 2000). Even setting limits on patient choice is a form of rationing that takes place in almost all countries’ health systems (Lauridsen, Norup & Rossel, 2007). In the United States, health care is rationed according to free market principles while other countries employ other means such as long wait times for non-acute conditions or delays in the

Kenneth Arrow’s classic 1963 article, ‘Improbability and the Welfare Economics of Health Care’ is bright, and leading the economic vision of the many changes in the American health care system (Ruger 581). The health economics that has emerged, based on the demand of the market, are supplies, goods, and services. This theory, of our health care economy, is through market prices. There is no other theory, that of Kenneth Arrow, that makes a similar model of both supply and demand. Arrow’s other theories depend on the characteristics outside patients’ choices, values, principles, and preferences. The allocation could be reached, if the government used tax transfer wealth, to restore market equilibrium for improving the people’s quality of service in healthcare. Kenneth Arrow began to figure out how to engage possible uncertainty, into economic decisions and theories. The government allocation is optimal in order to reach market equilibrium. The government allocation also facilitates the market toward more stability and also encourage the redistribution of wealth and transference of goods (Greenberg & Lowrie 879).

Government financed health care typically has more control to place limitations on care offered to patients and doctors in order to keep costs down. Since payers must try to deliver the most care for the

The economy is tied into everything that is put into it. Economics certainly apply to health care and the way that health care is administered in our country during this time. To ignore such a vital part of our economy would be disingenuous and dishonest. The purpose of this essay is to examine the relationship between the economy and the health care system. The essay will also investigate this issue by examining the statistical methods that contribute to the measurements of the economic factors that affect the health care system.

The opening statement of the presentation accurately summarizes the United States’ healthcare system as it relates to everything that Dr. Roper said in his speaking. I found it shocking that America spends more money on healthcare than any other country in the world, yet everyone does not have proper health insurance, meaning they are underinsured or simply uninsured. Most of the problem, in my opinion, lies in the cost driven system for healthcare in this country. As a matter of fact everything about this country is money driven; everything is about how it will affect the economy. From the hospital companies down to the patients who receive services, the major concerns are rooted in cost. When doctors are paid based on how many patients they serve and not how well they serve the patient's, everything is more about numbers where it should be about the welfare of the patients. The system is rigged to being more about quantity than

As a result there seems to be the growth of commercialization in health care where it seems that a competitive profitable market will bring on a more efficient and effective health care system. The opposing thoughts argue that injustice is being done on the poor patients, and nothing should keep them from getting the care they deserve (Andre, C. & Velasquez, M., n.d.).

To fully analyze the economic standpoint of healthcare, the concept of scarcity is necessary to understand. A resource is scarce when there is a limited amount of it, and it is not able to satisfy everyone’s needs and wants. In relation to healthcare, there is a scarcity of health

Health economics is a new subfield of economics that analyzes various health care related topics. For example, some health economists evaluate the long term effects of lifestyle choices on health. Others examine the estimated costs and benefits of new or proposed health care policies. One health economist may propose more efficient ways to provide certain health care services, while another may seek to increase the cost effectiveness

Principals to the workings of any economy are the laws of supply and demand. When the supply, price, quality and demand for a service are in line with the market it can potentially work to its optimum. The laws of supply and demand trigger’s the nation’s economy which also applies to the delivery of health care services. The health care market is notably full of distortion. One reason for this distortion is a separation between the supply and demand of services. This, in turn or in part by the fact that consumers are not aggressively involved and appropriately educated as partners in the consumption of health care services. “Demand” strategies are fixated on just that issue: shifting how health care services and products are used by consumers,

One out of every seven dollars spent in the United States is spent for health care services. This is a greater percentage than in any other industrialized country. The topic of health care arouses deep emotions and generates intense media coverage. How can we understand many of the important health care issues? One approach is to listen to the statements made by politicians and other concerned citizens. Another approach is to use supply and demand theory to analyze the issue. There are two articles that I have found that uses supply and demand theory to analyze this issue.

If economic analysis is applied appropriately, it can help clarify choices available for policy on health, how to select amid different services, how to choose what to buy, how to pay and how to assess the outcomes of such consumption. Indirect effects in thinking of economics when dealing with questions is the use of; insurance, taxes and out of pocket payment, as well as governments intervention in regards to health and how it may affect the welfare and health of a population (Musgrove,

As a graduate student offering healthcare administration, one of the key issues relevant to this field is managed care and quality care. Most of the concern for the last several decades was focused on the cost of increase in healthcare delivery. Focus during this age was on physician patient relationship dependence; where services provided were based on ‘fee for services’ or what is called unmanaged or traditional form of healthcare delivery. With this system, patients were charged base on the nature of sickness including hours spent. Because the system was a source of income to physicians, they inclined to spend quality time giving quality care to achieve a positive result if not negative using effective evidence based system (where patients were allowed to bring to counter their own personal preference and unique concerns as well as expectations which includes values). But the question still remains that, how many people were able to afford this kind of health cost? Obviously the average and the unemployed couldn’t afford and this became a burden for the public, because the structure was favoring only the rich in terms of cost and quality of care. The continuity of this issue (unmanaged care) made America one of the highest healthcare costs in the world with about 60% to 100% higher than most other countries because only few people could purchase it (health cost). And as those cost approached, it then exceeded to 14% overall economic output, thus increasing pressure

The free-market environment provides the ability for people to exercise their preferences for different goods and services. It helps to motivate firms to adjust their supply dependent on the consumer preferences through allocative efficiency and firms to become as efficient as possible to survive the competitive market. Firms are encouraged to compete for the highest quality of care creating incentives into research and development for better and new treatments. Therefore, greater investment into capital goods to help boost the productive proficiencies in supplying high- quality healthcare for consumers. However, there are also noticeable flaws with a free-market system through the existence of imperfect information that consumers could choose decisions dependent on the authority of a person and not the appropriate choices. Healthcare is a personal choice and does not rely on the experience of others, therefore there is a risk of asymmetric information that consumers cannot judge the quality of their purchases and select undesirable choices. Some may argue that price signals could be implemented in a way to encourage consumers to evaluate their purchases and weigh up the benefits versus costs, but we must remember healthcare is neither a commodity or a luxury service. Over-consumption of healthcare is unwanted but under-consumption is a negative risk too that if individuals become solely focused on their needs; the positive