Economic Tools And Concepts Essay Example

a patient receives. The goal is to implement a "gatekeeper" plan to determine appropriate and cost-effective healthcare. Supply management controls the timing and nature of care, for example, scheduling colonoscopies and body scans after the age of 50. To reduce the supply of healthcare, deductibles, co-pays, eligibility requirements, and coverage restrictions can be increased (AIPM, 2011). The demand for healthcare is influenced by chronic conditions and diseases that affect approximately 125 million Americans, with new diagnoses daily. In 2006, around $2.3 trillion was spent on managing chronic diseases (Preventive Care, 2009). Currently in the United States , healthcare is primarily driven by monetary compensation which could lead to changes depending on insurance plan availability.

Previously, private insurers and third-party payers such as Medicare and Medicaid financed the expenses of essential healthcare and provided reimbursements. Medical services were covered by insurance plans, with the bills being sent to insurance providers. However, due to greed and an increase in fraudulent claims, the healthcare system transitioned to a managed care system to manage excessive costs. The growing need for healthcare is influenced by factors like a growing elderly population, increasing incomes, and advancements in medical technology.

The healthcare system must be ready to provide exceptional medical care as the demand for elderly care continues to grow. Advancements in medical technology have led to improved treatments, resulting in older individuals enjoying a higher quality of life and longer lifespans. Furthermore, the management of healthcare can be influenced by different resources including land, labor, income, capital, goods, and services. However, rising healthcare costs lead to reduced revenue, making it relatively more expensive compared to other products and services. As a

result, there is an interconnected relationship between salary increases and the demand for healthcare.

The relationship between healthcare cost and quality implies that a reduction in income will lead to reduced healthcare accessibility. This is due to the fact that the affordability of services relies on the correlation between cost and quality. Any alteration in cost will result in a shift along the demand curve. For example, if there is a substantial increase in the price of bariatric surgery, individuals dealing with obesity would seek out alternative weight loss treatments. Consequently, an increase in income or a decrease in surgery price would cause a shift in the demand curve.

Demand Management involves patients taking control of their healthcare decisions, either independently or with the help of healthcare providers. This strategy enables individuals to effectively handle their healthcare needs and requirements. It provides various self-care resources such as advice lines, self-care videos, workshops, and publications for patients to make informed medical choices (AIPM, 2011). Medical Price Elasticity refers to the degree of responsiveness of the demand or supply curve to price changes.

The price elasticity measures the impact of price changes on consumer demand. According to Health Economics (2010), it calculates the percentage change in quantity of medical care demanded divided by the percentage change in price. The price elasticity for medical services falls between zero and negative one, indicating that if costs rise by 10%, the demand for medical services should decrease by less than 10%. This highlights the inelastic nature of medical goods (Health Care Economics, 2010).

When the price change is seen as insignificant in the supply or demand, a good or service

is considered inelastic. These commodities, such as basic necessities, are essential to the consumer's daily life (Investopedia, 2011). According to Health Care Economics (2010, para 3), income elasticity measures the percentage change in the demand for medical services with an increase in income. If the income elasticity exceeds one, medical services are considered a luxury. As consumers become wealthier, their desire for what is considered good increases.

A good or service, such as physicians or managed care, is considered highly elastic if a slight change in price results in a sudden change in the quantity demanded or supplied. These products are easily accessible in the market and may not be essential for daily life. Marginal Analysis examines whether implementing preventive health services will save government spending or be a valuable investment. This debate revolves around finding the most effective way to reduce healthcare costs in the country.

A study conducted by the Florida Department of Health examined 20 proven preventive services and determined the potential cost savings if these services were implemented. The services included immunizations, screenings for breast and cervical cancer, tobacco and alcohol abuse screening, and daily aspirin use (Maciosek, Coffield, Flottemesch, Edwards, & Solberg, 2010, p. 1656). According to the study, the United States could prevent the loss of millions of years of life by improving the utilization of preventive services. The estimated total cost of 90 percent utilization of this package of services would be significant.

In their study, Maciosek et al. (2010, p. 1658) discovered that smoking-related illnesses made up 4.1% of the total personal health care spending in the United States in 2006, amounting to $72.1 billion. The authors

suggest that implementing preventative services could have a beneficial impact on the entire population and address healthcare requirements driven by the desire for improved well-being and longer lifespans. These factors, combined with economic conditions and living standards, have significantly impacted the managed health care system in recent times.