We've come a long way in our exploration of microeconomics.
We apply our economic toolkit to health care.
The health care crisis in the United States is caused by the debate over healthcare spending.
Universal health care, also known as national health care, is the solution to the healthcare crisis because it would help to control costs.
The federal healthcare law often called "Obamacare" argues that expanding healthcare coverage will lower healthcare costs.
Supporters and opponents disagree.
The debate about healthcare is about trade-offs.
In this chapter, we discuss how the healthcare industry works and how the government and the market can make the delivery of health care more efficient.
We consider how health care is delivered, who pays, and what makes the provision of medical care unlike the delivery of services in any other sector of the economy.
Supply and demand analysis is used to look at the medical market.
Information plays an important role in the incentive structure of medical care.
There are many sides to the healthcare debate.
It's a big business to provide health care.
The education and automobile sectors make up 10% of the national economic output.
Almost $3 trillion is spent annually in the United States, or over $8,000 for every citizen.
That is a lot of money, no matter how you slice it.
The key issues in health care are how much is spent on it, where the money goes, and who the key players in the industry are.
The goal is to show you how the sector works.
We turn our attention to supply and demand.
We look at how health care has changed over time.
Life expectancy in the United States was less than 50 years at the start of the twentieth century.
It would have been unthinkable a few generations ago that life expectancy is close to 80 years.
Some of the advances that have improved the human condition can be seen in the way medical care was delivered.
In the United States, infectious diseases were the most common cause of death.
Major killers were tetanus, diphtheria, gangrene, gastritis, and smallpox.
A cure was often worse than the condition it was supposed to treat because of the poor state of medical knowledge.
Tobacco was used to treat bronchitis and asthma, and leeches were used to fight laryngitis.
In the first half of the twentieth century, a trip to the doctor was often painful and did not produce positive results.
Since 1950, advances in cellular biology have led to better understanding of diseases and more precise diagnostic tests.
In addition, discoveries in biomedical engineering have led to the widespread use of various diagnostic techniques.
The medical practices of the past have been replaced by technological innovations.
In addition, pharmaceutical companies have developed a number of "miracle" drugs for fighting many conditions, including high blood pressure, leukemia, and bad cholesterol.
Sometimes, the medical advances cost a lot of money.
In exchange for a longer life expectancy, we have made a trade-off: we now devote more of our budgets to health care.
The United States spends more on healthcare than any other country.
The expenditures in Canada and Mexico are similar, but this one is a bit higher.
Canada and Mexico both spend a bit more on health care.
Life expectancy in the United States is lower than in Canada because the United States spends more on health care.
Most countries agree that increased healthcare expenditures are making people healthier, happier, and more productive.
Environmental factors, genetics, and lifestyle choices are variables that are not constant across countries.
We should be asking if we are getting our money's worth, not how much we are spending.
The economists are most concerned with the obstacles to the efficient delivery of medical care.
There are many reasons.
Health insurance contributes.
When private insurance covers most treatment costs, many patients agree to tests or medical visits that they wouldn't be willing to pay for out of pocket.
If the patient isn't paying directly, doctors are more willing to order tests that aren't necessary.
Medicare and Medicaid add to the demand for medical services by providing coverage to the elderly and poor.
When there is more demand for services, the market price goes up, as long as supply remains constant.
The number of uninsured people in the United States is 35 million.
Uninsured people often seek care from emergency rooms and clinics, which raises costs in two ways.
Emergency care is more expensive than routine care.
Waiting until one has an acute condition that requires immediate attention often requires more treatment than would be done with preventive care or an early diagnosis.
An insured person who develops a cough with a high temperature is likely to see a doctor.
If the patient has bronchitis, a few days of medicine and rest will do the trick.
Uninsured people who develop bronchitis are less likely to seek medical help and are more likely to develop a more serious condition, such as pneumonia, which can be difficult and costly to treat.
When there is no competition, hospitals and other providers can charge what they want, and patients will have to pay.
Many people don't take care of their health.
Heroy end- of- life efforts are expensive.
These efforts come at a steep price and may extend life for a few months, days, or hours.
In the United States, no expense is spared in the effort to prolong life for a few days.
The orange curve shows a society's aggregate health production function, a measure of health reflecting the population's longevity, general health, and quality of life.
When small amounts of health care are provided, the function rises rapidly, but the benefits of additional care are smaller.
Compare points A and B to understand why.
A small amount of medical care is provided, but it has a large impact on health.
The marginal product of medical care is the slope at point A.
Higher medical care expenditures are unlikely to improve longevity and quality of life because many other factors, such as disease, genetics, and lifestyle, also play a key role in determining health, quality of life, and longevity.
The slope of the health production function indicates that B medical care is higher at point A than point B.
Over half of health retirement communities care expenditures are for nursing care facilities and continuing care.
"National Health Expenditure clinics Data" can be found at cms.gov.
It's not surprising that medical costs rise because extending life becomes more difficult.
Society must answer two questions.
The figure shows where the health dollar goes.
Half of all medical expenses are spent on hospital care, sicians and clinics.
After that, prescription drugs, dental care, home health care, and nursing homes represent smaller parts of healthcare expenditures.
There is a contradiction here.
Medical care has become more efficient as medical records are computerized and many procedures that used to take days of hospitalization can now be done on an outpatient basis.
Reducing medical costs through efficiency gains is ongoing.
Costs continue to rise.
The incentives that patients, providers, and insurance companies face when making medical decisions are examined in the next section.