Economics Of Health Care

804 Words 4 Pages
There was a time when organized medicine did not exist. With the creation of the American Medical Association in the early 1900s, the United States started the evolution of the health care system we currently utilize. In these early days, formal insurance coverage offering preventative or general health care coverage did not exist. However, workers in dangerous jobs may have been offered accident or sickness settlements. Throughout the decades, economics has played a role in developing the health care system by evaluating social problems and changing the course of government regulation (Johns Hopkins, n.d.). In order to continue the evolution and improvements in the health care system, it is important to understand the history of health …show more content…
Health economics is described as the “applied field of study that allows for the systematic and rigorous examination of problems faced in promoting health for all” (Johns Hopkins, n.d.). An important factor that economists consider when looking at the economy is the gross domestic product (GDP). The GDP is the “primary indicator used to gauge the health of the country’s economy” (Investopedia, 2015). Economists utilize the GDP when studying microeconomics and macroeconomics of health care. Microeconomics studies health care markets and how it affects “consumer behavior, individual labor markets, and the theory of firms” and macroeconomics studies the economy as a whole (Pettinger, 2013). One aspect that microeconomics focuses on is the current supply and demand of the market. Supply is defined as services that health care can provide to the public (Getzen, 2013, p 23). When analyzing health care supply, economists look at resource utilization, costs, and outputs. In addition, microeconomics looks into consumer demand. Demand evaluates the need for health services (Getzen, 2013, p 23). While the demands for good health may not be something enjoyable, improved health is a universal goal (Parkin, 2009). When further evaluating demand, economists look at the market’s elasticity and inelasticity demand of price sensitivity. The elasticity of demand looks at “the relationship between change in the quantity demanded of a particular good and a change in its price” (Investopedia, 2015). Reversely, inelasticity is described as services being “unaffected when the price” changes (Investopedia,

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