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Health Care Spending

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Economic Terms and Health Care History

Tina Hamm
HCS 440
November 28, 2011
Nanc Renninger

There are many terms that are used in Healthcare History, some of which have been used since the beginning of time and some that have been adapted over the years with the never ending changes in healthcare. In the next few paragraphs we will learn when these terms began and where they take place. When one learns the history of healthcare and the fundamentals of the economic terms they are able to better understand just how the system works. The terms that we will learn about in the paper are as follows: economics, supply and demand, microeconomics, macroeconomics, elasticity, inelasticity, and gross domestic product. There are constant changes and amendments all the time and for this very reason all persons within the healthcare business has to history in order to be prepared for future changes. Let’s start with economics in healthcare and how it has changed over the years. The major reason for the change in economics is due to the continuing change in technology and the different ways healthcare is offered. In the 1800’s is when healthcare began to take a formal way of medical technology. Doctor’s started to form hospital structures and education became necessary. In the 1900’s America was the largest of population to have hospitals only to find a economic decline that made the stock market crash. I am sure everyone has heard of the Great Depression, which made it very hard for people to pay for the medical care. There were many hospitals that had fixed cost and were not very flexible with patients. The advantage patient went from payments of $200 for each patient to $60 per patient. The hospitals were not able to change their prices to help out the financially stricken but the doctors on the other hand some were able to lower their prices. In order to keep the hospitals afloat they had to come up with insurance plans that would bring a steady flow of funds into the hospital without causing financial problems. There were different plans done in several different places by nonprofit hospitals to strengthen the income and increase patient care.
As the demand increased for hospitals in the early 1900’s and the economy was looking for a way to survive and keep their heads above water they introduced Blue Cross and Blue Shield hospital insurance. The program was founded in 1929 by a group of Dallas teachers that contracted with Baylor University Hospital at which they would provide 21 days of hospitalization for a fixed $6.00 payment. Over the years BCBS has grown to be able to offer many different types of medical insurance to billions of consumers around the world. The supply and demand started to take over and grow tremendously with commercial Insurance companies now trying to enter the market. They were scared at first and would only offer insurance to certain people but once they seen how Blue Cross had went from around 10,000 in
1940 to almost 130,000 in 1960 they wanted to jump on the wagon. When dealing with microeconomics we are dealing with economic decisions that are made at a low level. Microeconomics is used by individual businesses or firms to make decisions that involve pricing or say cost relationships to the place of business and how this pricing is going to work for the business. Whereas, macroeconomics is the big picture of what is going to happen to the economy, the effects that the cost of something is going to have both on the economy and on the consumer. Elasticity in healthcare would be best described would be if a procedure is done at a certain price and all of a sudden the price jumped way up there some consumers is probably not going to still have the procedure done which means there will be less demand for the procedure. Whereas, inelasticity can best be described as a procedure that people are going to pay for to have done no matter what the cost might be. For instance a person that has a bad heart and has to have a heart transplant is going to have the procedure no matter what the cost is because they have to have it in order to live. Whereas, a person that is having some type of cosmetic surgery might decide not to have the procedure if there is a big rise in the cost. In closing the Gross Domestic Product is statistics used to measure the economy. They measure everything that is produced by companies in order to calculate the outcomes. The GDP does not count things made outside of the United States. For instance if they were counting medical office supplies and there were some that was made outside of the United States they would not count them even though they are being used in the United States.

References
Amadeo, K. (). About.com US Economy. Retrieved from: http://useconomy.about.com/od/grossdomesticproduct/p/GDP.htm
Beggs, J. (). About.com Economica. Retrieved from: http://economics.about.com/od/economics-basics/a/Microeconomics-Versus-Macroeconomics.htm EH.net. (2010). Retrieved from: http://eh.net/encyclopedia/article/thomasson.insurance.health.us

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