Economic Foundation of the US Healthcare Delivery

Published: 2022-03-04
Economic Foundation of the US Healthcare Delivery
Type of paper:  Essay
Categories:  United States Research Technology
Pages: 7
Wordcount: 1781 words
15 min read

In the healthcare delivery field, the government has an active role to play. In the US, the government plays its role in raising the health and living standards of the citizens. The federal government manages two reachable and expanded healthcare programs that aim at ensuring the provision of these services to the indigent and elderly namely Medicaid and Medicare (Barr, 2016). These systems are supported by tax as they are initiated by the national government. It includes the expenses of services that are provided in the country's private market (Drummond, Sculpher, Claxton, Stoddart, & Torrance, 2015). Currently, the households' medical expenditure seems to be is subsidized by the modern United States income tax code with most of them being are neither poor nor elderly. In case, the federal government alters health services price.

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Moreover, the US Government may also intervene in the effort to regulate the medical services quality which mostly happens when the consumers seem reasonably ignorant. Such regulations on the quality of services are aimed at the structure of the operation (Baum, 2016). One of the common cases is where one of a government agency requires all its medical workers to be professionally licensed. The same agency may direct the management to maintain a certain staff-to-patient ratio as its minimum (Drummond et al, 2015). Higher quality level requirements in the medical structures encourage an increased quality in the delivery process as well as the outcome stages. However, the perception is that the regulations imply higher production costs which eventually imply a reduced medical services supply.

The role of the government in regulating the price of medical services depends on various factors such as a third-party involvement, level of competition, the baseline for the price ceiling applied as well as the health insurance moral hazards (Folland, Goodman, & Stano, 2016). However, price controls generate supply shortages which could lead to unintended effects like longer waiting lines, group-based discrimination, and reduced quality. The popularity of managed care has increased gradually the country over the past one century. The government and employers increased demand for more access to improved quality of healthcare.

The State governments and the Federal government place more importance on the types of care that can be provided by the social security scheme (Grosse, Nelson, Nyarko, Richardson, & Raskob, 2016). These include the restrictions on the amount of payment that will be availed to the hospitals and the doctors for the care. It could be discouraging because the patients are suffering from different illnesses and some wish they could pay from their pockets (Stiglitz, & Rosengard, 2015). The low reimbursement rates available for this scheme, a significant number of the physicians and specialists providing primary care are reluctant to accept payments via this scheme. This means that the option that patients are left with is opting to pay from their pocket.

The health insurance industry or market in the United States is highly concentrated. The top insurers have executed approximately 400 mergers in the last decade (Stiglitz, & Rosengard, 2015). Majority of the markets that are providing services such as hospitals seem to be overly concentrated. This implies that these insurers are left with little choice which translates to little leverage which they can use to control prices they will pay. However, regularly, large insurers negotiate MFN clauses to consent to an increase in the rates (Folland, Goodman, & Stano, 2016). In the case there are a few firms operating at diverse price levels, it becomes an Oligopoly market structure. Some other small producers may be operating in the same market but the market is already dominated by the few large firms. This causes information asymmetry and leads to social welfare loss and it is always meant to happen.

Economic models that explain the role of economics

The economic models of healthcare in the US include social, public, organizational, and economic health models. The healthcare perspectives are quality, access, delivery, availability, effectiveness, and efficiency. It is challenging to identify the differences between the concepts when used with the four models (Baum, 2016). The Organizational Model in the US is a collection of numerous informal systems which are fragmented as well as uncoordinated but also interchangeable. The basic concept here is that this model emphasizes on focusing resources on the four basic medical care components that are defined. These components include financing, delivery, personnel, as well as knowledge and technology.

The Social Model embarks on the universal objective of realizing "Equity of Access" to health care. This model of healthcare economics aims to achieve this through the three principles. These principles include, right to health care, finite resources are committed to health care, and developing the mechanism for assigning scarce resources is the main concern of health care (Baum, 2016). The objective of achieving equity in the medical care access depends on the organizational values or their understanding of the just and equity.

The Economic Model focuses on efficiency. In this model of health care, efficiency is defined based on three key assumptions. The model assumes that there are scarce resources, there are alternative uses of the scarce resources, and different individuals want different things. Therefore, in this model, based on these principles, the goal is efficiency and not equity. This model uses the assumptions in line with various economic principles such as the principle of Behavior, Benefit, Demand, Value, Policy Issues, as well as Economic Incentives to achieve an equilibrium.

Lastly, the Public Model of health care has a definite mission which is to fulfill the interest of the society in making sure that people are in healthy environment or conditions. This model has its focus on the society as it organizes communities, public and private organizations, as well as local and national governments. This is done to fulfill its core functions including assessment, policy designation as well as assurance. There is a great influence as well as the changes that have been brought about by the Public Health in the US health status through education, research, regulation, as well as the implementation of care technology. However, the Public Model is parallel to the Organizational Model but it adopts Social Model's objectives (Folland, Goodman, & Stano, 2016). The Public Model has achieved great results but relies a lot on the fiscal support from the government which means it has no political power foundation.

Role of Production of Health and Demand and Supply

The demand and supply of healthcare by households faces the challenge of informational asymmetry. However, besides informational problems, government intervention and suppliers power in the market makes it hard to analyze the healthcare market using the standard supply-and-demand curves. Moreover, the spending behavior on medical care today possess effects on the individual's future health status (Gilks et al., 2006). Therefore, current spending serves as a future investment.

Moreover, the demand for medical services, just like other goods, is dependent on personal income as well as the price of the health services. However, unlike human demand for other various types of goods, the demand for medical services is affected or influenced by health insurance costs Gilks et al., 2006). Additionally, unlike in several other types of goods, in health care services, consumers demanding them seem to be relatively less informed or uninformed about various types of service they are purchasing (Chang, Lin, Galla, Clayton, & Eatock, 2015). Therefore, healthcare production function takes inputs, including and machines, doctors, and nurses and then produces different health-care services.

Economic Benefits and Challenges of Individual Vs Population Health

Individual health approach focuses and concentrates its efforts on individuals identified as high-risk because they have a risk factor level that is above a specified threshold. However, when these people have preventive measures targeted at them because they are high-risk, the risk factor level distribution can only shift a little to the low-level direction which is indicated as a curve with a relatively higher gradient in the curve (Chang et al, 2015). This approach identifies high-risk or susceptible people and offers such people individual protection. This approach is more appropriate to individuals but it has less or limited impact at the population level (Chang et al, 2015). This approach fails to alter the underlying causes of ailments. The Individual health approach requires expensive and continuous screening procedures to identify the individuals who are high-risk.

Population health approach is a strategy that seeks to shift the entire distribution of the risk factor to a lower level. Moreover, the whole risk-factor level distribution curves towards to lower the values in a curve with a relatively higher gradient than the Individual-based approach curve (Chang et al, 2015). This approach also strives to promote the healthy behavior of individuals to achieve a general lowering of risk within the total population. The population health approach aims at controlling the health determinants in entire population (Chang et al, 2015). This approach may be disregarded for individual approach but it is less expensive and not tedious because it does not engage all members of the whole population in some continuous screening processes.

International Comparisons of Health

In the United States, spending on health care services exceeds that various other high-income countries (Bradley, Canavan, Rogan, Talbert-Slagle, Ndumele, Taylor, & Curry, 2016). Although the rate of growth of the spending in America, as well as many other countries, has slowed down in recent years, the level of spending is still high in the US than in countries such as Canada, Netherlands Australia, Denmark, Germany, France, and Japan. Additionally, even though America is the only nation in the list of 14 countries that had no universal public health system by 2015, it had the highest spending rate of public funds on health care than 10 countries in the list (Squires, & Anderson, 2015).

However, although Americans exhibit relatively lowest number of physician visits and hospital admissions compared to other high-earning countries, they are greatly using expensive technologies compared to others and such include MRI machines (Squires, & Anderson, 2015). Additionally, the latest cross-national pricing report suggests that the medical prices in America are remarkably higher than in other areas. This is a potential explanation as to why there is a higher health care spending. It is clear that the country spends heavily on quality medication by purchasing quality equipment (Bradley, Canavan, Rogan, Talbert-Slagle, Ndumele, Taylor, & Curry, 2016). In the same way, Americans value quality health care services because they spend more on machine supported medication as compared to people from other developed countries.

On the contrary, America allocates less share of the country's budget or revenue to crucial social services. Services such as employment programs, food security housing assistance, and disability benefits are allocated the smaller portion of the economy when compared to the same services in other developed countries (Squires, & Anderson, 2015). The culture of United States that determines the pattern of health and service provision is different to that of other coun...

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