Microeconomics of Health care Costs

Microeconomics of Health care Costs
Microeconomics of Health care Costs

Microeconomics of Health care Costs

  1. Health care is a necessity for everyone and the expenses are inevitable. Everyone deserves the health care they need from the right provider at the right time (Quincy, 2016). Another difference is the cost of drugs compared to other nations and a lot of people consider it to be unreasonable. In majority of the countries, there is negotiation done by the government to control drug prices with the manufacturers, but the existence of Medicare Part D denies Medicare to negotiate prices. This is why a branded drug costs higher when bought in the U.S.A. compared to other countries. However, this is beneficial to the doctors because of the higher earning they get if they do this compared to other countries. Additionally, a lot of drug suppliers charge more in the U.S. for medical equipment.
  2. The top drivers of health care are chosen lifestyle, utilization, price inflation and mandated benefits. The society today is a culture that favors diagnosis and treatment rather than living healthily and preventing disease. It is still a necessity for consumers to have a healthy mindset and practice a better lifestyle for disease prevention. Due to the increase in utilization, there has been a rise in health care costs and the forms are not all the same (Smart Business, 2009). There is a total of 70% health care costs that come from employee behavior linked to cancers, diabetes, cardiovascular disease, and obesity. Moreover, advertising deceives consumers and make them think prescriptions and procedures could cure their conditions. This is why consumers end up getting unnecessary treatment and the rise of new technology is also a factor why health care costs increase.
  3. Supply and demand seems to be an automatic reason why health care costs more in the USA. There are two answers for this because there can be an increase in prices due to demand and the other reason is because of limited supply, prices are higher (Theory and Applications of Microeconomics, 2012). However, price is not the only thing that matters in supply and demand in health care because it is a fundamental commodity that is relevant to a person’s well-being. A lot of people want health improvement and this is why they demand for health care. Although, the health’s relationship to health care is not direct because even if health care impacts health, a lot of other things can be a factor. Health is considered as a good, but other goods are more tangible compared to it due to its characteristics. People cannot pass on or trade their health with others, except for certain diseases.
  4. Quality health care had always been a main focus and the medical professionals attempted to improve their practice and give the best care in the world, but the results are not equal. The number of medical practitioners in an area is linked with the type of health care they can provide. Therefore, if there is a shortage in workforce, the quality of health care in the area with fewer medical practitioners are going to suffer. There is a health care reimbursement model to pay-for-performance that provides incentives or penalties from patient outcomes and frequency of readmission (Anderson DNP, RN, CNE 2014). If the workforce is weak, pay-for-performance will suffer in some areas. This will lead to a higher demand for services, but limits the access of patients to health care. 
  5. Technology and computers could increase health costs of today since majority of medical equipment needs digital platforms to function properly that makes medical facilities dependent on software. This increases health care costs so it becomes inaccessible to those who cannot afford it. Furthermore, there are a lot of elements that cause an increase in health care costs. And to an average patient, technology gives them helplessness and vulnerability.

One example is echocardiography which has the immense capability to detect ailments and it is safe for everyone. In order to interpret the images, an expert is called to do this. Unfortunately, not all companies have this machine and there is no way to make it inexpensive so any patient can have access to its services (Kumar, 2011). Therefore, technology and computers improve the quality of healthcare, but it contributes to the increase in costs.

  • Since resources are scarce, organizations have disease management. Those suffering from chronic illnesses need more healthcare attention like hospitalization, physician visits, and prescription drugs. The objective of disease management is to improve the condition of those with chronic illnesses and lessen the use and cost of health care services that are linked to preventing complications (Georgetown University, 2017).
  • Before the organization implements disease management, they first have to know the population and how patients will enroll. They use demographics to find out which patients are going to need disease management program the most. The chronic diseases such as diabetes, asthma, and hypertension are included.

Furthermore, this increases public awareness which has a significant impact in the way decisions are made on the medical care received by the patient.


Amy Anderson DNP, R. C. (2014, March 18). Heritage. Retrieved from Heritage Web site: http://www.heritage.org/research/reports/2014/03/the-impact-of-the-affordable-care-act-on-the-health-care-workforce

Georgetown University. (2017). Georgetown University. Retrieved from Georgetown University Web site: https://studenthealth.georgetown.edu/insurance/requirements/full-time/premierplan

Kumar, R. K. (2011). Technology and Healthcare Costs. NCBI, 84-86.

Quincy, L. (2016, April 10). The Wall Street Journal. Retrieved from The Wall Street Journal Web site: https://www.wsj.com/articles/are-out-of-pocket-medical-costs-too-high-1460340176

Smart Business. (2009, October 27). Smart Business. Retrieved from Smart Business Web site: http://www.sbnonline.com/article/drivers-of-health-care-costs-how-to-identify-the-top-drivers-of-health-care-costs-151-and-what-to-do-about-them/

Theory and Applications of Microeconomics. (2012, December 14).

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