Supply And Demand

Health care costs have been rising for several years. Expenditures in the United States on health care surpassed $2.3 trillion in 2008, more than three times the

The cost of healthcare is on the rise and the demand for services has increased of required and

Delivery of health care is under an imperfect market: Various providers exist with varying prices. Hence, the lower the price, the higher the demand and vice versa.

The market price of a good is determined by both the supply and demand for it. In the world today supply and demand is perhaps one of the most fundamental principles that exists for economics and the backbone of a market economy. Supply is represented by how much the market can offer. The quantity supplied refers to the amount of a certain good that producers are willing to supply for a certain demand price. What determines this interconnection is how much of a good or service is supplied to the market or otherwise known as the supply relationship or supply schedule which is graphically represented by the supply curve. In demand the schedule is depicted graphically as the demand curve which represents the

The demand for medical care is derived from our demand for good health. Michael Grossman was the first to do econometric research on this topic. "Grossman 's work established two approaches for consideration. In the first, medical care is viewed as an input in the production function for health, and in the second, as an output produced by medical care providers (Henderson, p.142)." There are two main factors that determine the demand for medical care. The first is the patient factor. This includes a patient 's health status, demographic characteristics and economic status. The second is the physician factor. This is an interesting topic because it introduces the principal (patient)-agent (physician)

The basic economic problem is that there are limited factors of production but unlimited wants and needs. The text relates to this as the NHS struggles to keep up with the demands of the population, while on a limited budget. With constant admittances, new staff having to be trained, new technologies to be bought, limited resources, treatments and many more expenses, choices have to be made as to how to use their money. The basic economic problem is all about scarcity and choice. While spending in the UK exceeds £110 billion, requirements are not being met for the NHS, and this poses problems.

The growth in health care spending have increase immensely which has a significant impact on the healthcare industry. The rising cost of healthcare is affecting household expenditure. Household are between the adjusting of the need to use their static income against expanding budgetary portion on essential necessities and the need to invest in their health care. Families are now being forced to cut other expenses to cover the cost health care services. For less affluent households, this could result in forcing tradeoffs between health care and other normal necessities of living. For example, a 2003 survey found that 63 percent of families that reported problems with paying medical bills also had problems paying for other household necessities, such as food, clothing, and rent. As

d. In general, what happens to the level of consumer surplus as the price of a good falls?

There are many studies done focusing on the rising cost of health care and some of the findings states that the rising cost of healthcare premiums is a worldwide problem, however I also think they are higher in the U.S. In 2015, U.S. health care costs were $3.2 trillion. That makes health care one of the largest U.S. industries, equaling 17.8 percent of Gross Domestic Product in comparison to the late 1960s healthcare cost was only $27 billion which was 5 percent of GDP, which comes at a cost of $9,990 per person each year. The main reason for the rising cost of healthcare is a combination of government policies and lifestyles changes, such as, the insured, uninsured same sex partners, weight, smoking, drinking etc., just to give a

“Medical Care” is the provision by a physician of services related to the maintenance of health, prevention of illness, and the treatment of illness and injury. The high cost of medical care has been a recurrent theme in countries around the world. In the United States, medical expenses absorb one-sixth of the total annual output of the economy. Medical care is one of the many goods and services that can be provided in a wide variety of ways. At one time, it was common for ill people to buy medicine and pay doctors using their own money. Today, both the medical care and medicines are often paid for by third parties through either political or market institutions for example by insurance companies or government agencies, or both, with or without some portion being paid by the individual patient.

Over the years, the cost of health care has been increasing. Concerns such as inadequate health insurance and access to care are an issue for millions of people (Bodenheimer & Grumbach, 2012). The outcomes of these problems affect the value of health care and also the quality of it. In chapters 8 and 9, it will discuss the concerns of health care cost and some mechanisms into solving these issues. The connection between health care and its cost is to determine what is best for the community. It is not as simple as making one plan and hoping it will be beneficial for everyone.

The cost of medical treatment has increased dramatically, placing more focus on the significance of the doctor’s actions about what treatment suits the patient the best. Hall and Schneider ( 2008) found that the medical field is highly impacted by money. It is impacted by money creating a place where uninsured patients pay one third to one half more than patients who are insured. They still express that having access to health care is important by stating that, “ Still, professional ethics should encourage physicians to five patients in economic trouble at least the benefit of the lowest rate they accept from an established payer” (p.1257) Having access to basic health allows patients to be wise about their options in medicine. Hall and Schneider explain “Since the early 1990s, hospital list prices have risen almost 3 times more than their cost, and their markups over cost have more than doubled from 74% to 164%” (p.1259). The increases in prices may stop a patient from receiving a treatment for an illness. For the patients who ultimately do have to get the treatment it is extremely important to get a treatment that has the

There are three (3) factors that determine demand. The first factor is wealth. If people can afford healthcare, costs will not be an issue with seeking healthcare. “In most cases, when economic constraints are placed on consumers, demand falls (Drouin et al, 2008).” The second factor is social norms. “The evidence suggests that the people around any given individual shape his or her expectations (Drouin et al, 2008).” For example, if I interact with people who overeat, I will probably overeat as well. Those social norms will also alter my expectation of health causing the same illnesses/diseases of the influencer to be present in me. “Social norms dictate the frequency with which people consume health care products and services (Drouin et al,

(Key Question) Cite three examples of recent decisions that you made in which you, at least implicitly, weighed marginal costs and marginal benefits.

The economic model, however, assumes that factors such as price and income covariate with a set of other socio-demographic and need factors, producing the demand for health care, usually represented by health care utilization. Important in the economic model is the assumption that individuals produce a commodity called ‘health’ by combining their time and other inputs purchased from the market (e.g., one of the inputs could be medical/health care), and as such, the demand for health care is derived from a more basic demand for health (Grossman 1972).