The Impact of Rapidly Rising Medical Cost

In: Business and Management

Submitted By janicecalice
Words 1156
Pages 5
The Impact of Rapidly
Rising Medical Cost

In Partial Fulfillment of the Requirements of:
Managerial Economics
Summer 1, 2013

Trends in Medical Costs
There is no denying that medical costs have not only risen in the past and continue to do so in the present, but this rise is faster than that of other expenses. [1] In this sense the relative costs of medical care have been rising. ‘Health care spending has risen about 2.4% points faster than GDP since 1970 according to the Kaiser Family Foundation. [2] The causes of this rise can be traced to many policy reasons that include-increasing role of third party insurers which pay the bills, and the increasing role and scope of government intervention in policy and finances of health care. [3] Experts point out that the main problem is that the final user does not pay the cost anymore and this distorts the market and pricing mechanism of health care. Also, the demographic status of USA is such that the older people are rising in numbers, and they need more care-which raises medical care for the economy. Thus, a combination of wrong policies, and demographic factors, along with the current recession conditions have lead to a galloping of medical care bills for the entire economy. The share of medical care costs in GDP is rising consistently.
Indifference Curve Analysis

The effects of rising medical care costs are widespread and need a general equilibrium, economy wide modelling. In brief we can understand the impact on an individual using the concepts of microeconomics. We use the tool of indifference curves to show that a rise in medical bills causes
➢ a decline in expenditure on other goods,
➢ a fall in the quantity of medical care sought and
➢ Possible decline in the overall well being of the individual.
This analysis assumes away the real life scenario where the…...

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