Svetlana asked in Social ScienceEconomics · 1 decade ago

Medical care in USA today: supply,demand, price - what is going on?

Supply,demand, price - what is going on

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  • 1 decade ago
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    Medical care should not be left entirely to the forces of supply and demand.

    Supply and demand (the market economy) is based on the concept that an equilibrium price will satisfy everyone. There will be consumers left out of the market, but only because they decide that the price is too high for the utility they gain from whatever it is that the market covers, and they will voluntarily take themselves out of the market.

    Medical care is different. Such a concept (having people priced out of the market) will guarantee that millions of people will die much sooner without proper care, more people will live in pain and with disabilities, and more people will be unable to participate in the labor market. All of this will happen, just to satisfy some abstract concept of how medical care should fit into a society that is based on a market economy. No humane society would allow such a thing to happen.

    However, you can't leave market forces out of the equation either. The resources involved have to be paid. Society would suffer greatly without having monetary incentives for people to become doctors, nurses, and other medical care professionals. Medical advancements cannot take place without monetary incentives for people to create new procedures, new medicine.

    Demand for medical services has risen sharply, but there are a number of factors which cause this. People want the latest, best treatment. The latest treatments, because they are technologically driven, are the most expensive. So supply plays a factor as well as demand. People are living longer (due to prior advances in medical care), and the population is aging, which leads to more demand for medical care.

    Costs of medical care shot up sharply in the US after it was made legal for doctors and drug companies to advertise directly to the public; this extra cost for advertising was passed along to consumers and at the same time the advertisements have been effective: people are asking for treatments only because they saw an ad on tv. A good example: drug company ads on tv typically contain a line such as "ask your doctor about...". It used to be, people didn't ask their doctor, they just told the doctor their symptoms, let the doctor examine them, and then the doctor would decide on proper treatment. The public didn't need to know the sales pitches for the drug companies.

    Also, the US government has passed laws that protect certain members of the medical and drug professions. These laws limit consumer choices, limit competition, and in turn raise prices. A massive congressional lobby is blamed for this.

  • ?
    Lv 7
    1 decade ago

    Actually, it's a brilliant example of the general equilibrium model at work.

    Demand for health services has increased rapidly as Americans have become less and less healthy, and the population ages. Supply has not kept pace with demand, and the price has risen, exactly as it should.

    This is not of course helped by the massive market distortions that occur due to ill-thought out policies over several generations in the US, but more demand than supply = high prices.

  • Anonymous
    1 decade ago

    The new health care reform bill passed the Congress recently should bring 40 millions more Americans into the health insurance system. This is expected that it will reduce the costs withing 6 years due mainly to the reduction of Medicare and Medicaid. And people who have lost their health insurance when they got laid off will be smaller. But the latest study argues that it will not. The cost will increase due mainly to the government subsidies on fees. The administration will be subject to a red-tape. And it will not be able to get rid off uninsured people.

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