There is a short history when it comes to health care this history does provide a small view of how the United States decided that it would make a simple choice for supply and demand, this was done through fee-for-service to managed care, for PPOs, as well as other insurers of health care which also included the federal government. Fee-for-service in the early 1900s was thought of as the norm. for the American public. Insurance companies did not provide health care, to anyone other than the wealthy people at this time.
A set price was charged by Physicians based on the disease, or ailment, the physicians were paid in either goods or money. In the 60s and 70s it was becoming more prevalent for employers to pay health insurance for their employees as employers did realize that if they provided this essential benefit, the productivity as well as the profits would increase due to the fact that there would be healthier employees. Near the end of the 70s Americans were demanding health benefits due to this the cost of health insurance then increased.
In 1965 the government entered into the health insurance arena this was when the government passed Medicare and Medicaid, this now would cover people without health insurance as well as the elderly, children and mothers. Legislation changed health care services as well as the supply and demand of the American public. Today the United States health care system is terrible mess of complexity due to coverage, funding, and regulation. The factors that influence health care economics as well as the new advances in technology and medical care.
This paper will discuss supply and demand and price elasticity in health care economics. Demand I. Demand is defined as the amount of a good or service that consumers are willing and able to purchase. II. Economists speculate on demand. They speculate how consumers will respond to changes in the market. Economists watch trends in price increase and spending. They watch consumer’s response to changes in cost of health care which involves price elasticity of demand. III. The elasticity of demand measures the quantity of services and the cost of services available IV.
Price elasticity of demand predicts what consumers will spend when price changes. In supply price elasticity there is a positive relationship between cost and quantity supplied. Supply I. The relationship in supply and demand price elasticity is not always constant but allows economists to follow consumer’s responsiveness to market variables. II. Price elasticity of supply is always positive. III. : If prices of eye exams rise it will take time for insurance companies, government, and managed care to react, and accommodate additional health care services.
This will lead to additional need in providers to cover the increase in demand for eye exams. IV. This increase in price and the increased demand of services takes time. V. Preventative care is an area where you will see price elasticity. The alternative for preventative care is determined by price elasticity. Increases I. There have been substantiated increases in health care costs over the past decade. II. This has caused health care benefits to become a very important issue for employers, as well as all of the parties involve to be demanding some more accurate knowledge when it comes to the costs.
Unnecessary spending I. According to Kaiseredu. org website (2010), “Some experts estimate that up to 30% of health care is unnecessary, emphasizing the need to streamline the health system and eliminate this needless spending” II. Due to the fact that there are many excessive administrative costs incurred by insurance companies, along with its complex provider payment systems, as well as inefficient and substandard services, there is waste in the health care system. III. According to Getzen & Moore, (2007), “Physicians are harmed by reducing unnecessary medical services, even if patients are not”.
IV. So within the United States there are spiraling health care costs within a system where a physician’s philosophy is one that everyone should have a credit card with no regard to the cost. Obama Care I. With the new Obama-Biden health care plan every American will be provided with affordable II. and accessible health coverage this will be done by building on the current insurance system that we have. III. This plan will also leave Medicare the same for all of the older and disabled Americans. IV. Annual health care costs will be lowered by $2500, per the typical family.
V. For Americans who are happy with their current health insurance, this will be the same, the cost will go down. Butler I. Butler (2011) stated, “If the Patient Protection and Affordable Care Act (PPACA) actually goes into effect as scheduled, without major changes, a growing worry about the Act- among many other major concerns- is whether it will succeed in “bending the cost curve. ” Will its provisions succeed in slowing the rapid increase in federal health spending in the U. S.? ” (If Health Spending Controls Fail, What Are the Options? ).
II.Option 1: Butler (2011) stated, “This approach to reigning in health spending is to influence the pricing and payment allocation of services in such a way that the system operates less expensively and that total spending is moderated” (If Health Spending Controls Fail, What Are the Options? ). Legislation should be able to achieve a desired level of spending by improving the efficiency of the health care system. If the PPACA does not hold down costs, strengthening the direct management of the health care system is necessary such as tighter rules, more interventions in health delivery, and public options can control costs.
Tighter rules that will direct regulation of physician fees, and interventions. Further tightening of payment levels in Medicare for physicians and hospitals. Intervention in health delivery, if the Administration fails to achieve significant savings through one attempt to reorganize health care, they will simply turn to others. Public option is giving the public the ability to choose a government-organized plan rather than a private one (Butler, 2011, p. 2).
III. Option 2: Butler (2011) stated, “This option would be to create an Independent Payment Advisory Board (IPAB) that would respond to over-budget spending by proposing a package of payment changes for health care providers”. (Butler, 2011, p. 4). IV. Option 3: Butler (2011) stated, “Is to tackle total public spending in health care directly by placing a firm budget on federal health spending, replacing the openending entitlement we have today for most federal health programs, especially Medicare” (If Health Spending Controls Fail, What Are the Options?).
Two ways of doing this would be to distribute the budget to service providers. The government would allocate funds directly to facilities and institutions, and, the government and the providers make decisions. Next would be to distribute the budget to individuals through a defined contribution, which would distribute a budget to beneficiaries for them to choose a plan that meets their needs, as a distributed payment toward the premium of the chosen plan (Butler, 2011, p. 5). Arguments I.
With the universal health care system there are a variety of arguments as well as related health policies. Everyone knows that health care is an important part of the health systems therefore it often accounts for one of the largest areas in spending for both governments as well as individuals all over the world. II. One very large example of this is, medical debts it is now one of the leading causes of personal bankruptcy in the United States. III. I believe that there should be a policy created in order to help lower the cost of health care.
Changes in health care costs People are living longer Conclusion When it comes to the idea of health care economics there is a multi-facetted approach. This approach starts with fee-forservice, and then ends with today’s health care as a complex area of private insurers, employers, employees, managed care, and government insurance. The idea of demand is to measure the consumer’s response to the market demand in health care services. Then there is supply which does depend on increased prices for services as well as alternatives to services that will then motivate
purchasers to consider health care as a luxury and not as a need. When it comes to the consumers they fear increase costs and many of these consumers will only seek medical help in case of emergency. Everyone understands that the increase in price of services, and goods and current demands are happening and health care organizations know that change takes time as well. Health care spending has tripled over the past two decades it does not seem as if the costs will be coming to a close anytime soon, if there is not a plan in place to take care of the problem.
Beings that approximately 30% of that spending is being used towards, waste, administrative, operational, and clinical procedures which need to be reviewed as well as restructured. Along with that there are other wasteful aspects have been mentioned like complex provider payment systems, average services, as well as physicians practicing defensive medicine, these also need to be addressed. There are many new solutions that have been put into place in order to help limit the waste from exceeding.
Some of these solutions being, the Patient Protection and Affordable Act (PPACA), Independent Payment Advisory Board (IPAB), Government legislation/regulation, as well as a reduction in federal spending.. In addition, creating better ways to have people insured has also been taken into consideration. Yet, while all of these options are viable ones, the combination of all of them can be the answer to what the big problem has been all these years health care spending in the United States. 1. References 1. Bentley, T. K. , Effros, R. M. , Palar, K. , & Keeler, E.
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proquest. com/docview/1269646963? accountid=32521 5. Fontenot, S. (2013). Understanding the Affordable Care Act Bit by Bit: Will Transparency and Sunshine Shrink Costs?. Physician Executive, 39(5), 86-91. 6. Sage, W. M. (2010). Why the affordable care act needs A better name: ‘americare’. Health Affairs, 29(8), 1496-7. Retrieved from http://search. proquest. com/docview/744045554? accountid=32521 7. Sultz, H. ; Young, K. (2011). Health care USA: Understanding its organization and delivery (7th ed. ). Sudbury, MA: Jones ; Bartlett. ISBN: 9780763784584.