Health care costs

Topics: Health economics, Health care, Supply and demand Pages: 8 (1769 words) Published: February 22, 2014
The Cost of health Care
Tina Melendez
HCA 305 The U.S. Health Care System
Instructor: Heather Ables
February 9,2014


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 is defined as the amount of a good or service that consumers are willing and able to purchase.


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.



The relationship in supply and demand price elasticity is not always constant but allows economists to follow consumer’s responsiveness to market variables.


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.


Preventative care is an area where you will see price elasticity. The alternative for preventative care is determined by price elasticity.



There have been substantiated increases in health care costs over the past decade.


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


According to 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”


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...

References: 1. Bentley, T. K., Effros, R. M., Palar, K., & Keeler, E. B. (2008). Waste in the U.S. Health Care System: A
Conceptual Framework
2. Butler, S. P. (2011). The Heritage Foundation. Retrieved from
6. Sage, W. M. (2010). Why the affordable care act needs A better name: 'americare '. Health Affairs, 29(8), 1496-7.
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