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Economic Tools and Concepts

A major concern amongst citizens is the health care reform and how the government participates
in the regulating of providing that health care. The United States will utilize the Affordable Care
Act to dictate health coverage as it begins to regulate the health care industry. The United States
health care system has to deal with the shortage of nurses and doctors alongside the health care
reform. From an economic point of view, there are a multitude of aspects that occur and effect
the regulations of health care spending for the health care organizations and government. For
instance, Medicare and Medicaid are subsidized by the government and are to be utilized by the
poor and the disabled patients. I will be discussing the economic tools of elasticity concepts,
marginal analysis, and the supply and demand curve to express the variations amongst progress
and change of the managed health care system.
Supply and Demand curve
The United States has the largest health industry in the world and is utilized on a daily basis. The
health care system is the overall product that symbolizes fourteen percent of the United States. It
is vital and favorable that health care patients understand the health care systems and that the
government controls the health care market. Health care is a limited service for monetary
reimbursement and adjustments in demand can happen dependent upon lack or existence of
health insurance coverage. Fundamental health care is reimbursed and can be covered by
government payers such as Medicare, Medicaid, private insurance agencies, and third party
payers. The need for supply can occur when the medical providers are experiencing shortages or
overages and other determining factors as well. When the level of cost is altered, then the supply
curve will have to be modified. An example would be new technology or medication needed so
this would in turn increase the cost of health care. The established cost for service will be
covered by health care managed care groups. In order to decrease health care costs, the
government supports a variety of economic enticements for patients, payers, and providers.
According to Meyer (2004-2009), Historic tax preferences for employer-paid employee health
insurance, Medicare, Medicaid, the subsidies in Obamacare as well as the rules in Obamacare
that discourage high-deductible policies and require that everyone buy insurance rather than pay
as they go. The result is a shift in the demand curve to the right, along with a shift to a more
vertical demand curve (meaning people are more price-insensitive, since a third-party is paying)
(How Government Interventions Affect Health Care Supply and Demand). The picture below
shows the supply and demand for doctor services:

Changes in improvements in medical technology, the aging population, and rising incomes will
raise the need for demand and supply in the health care delivery system. The aging population
demand more health care services because of illness or ailments related to their age and the
health care system must supply the anticipated quality of healthcare. In order for patients to have
a good quality of life, treatments need to be increased by the improvements of medical
technology. Shifts in managed care are caused by factors such as goods, services, economy,
employment, finances, and capital. Health care is more-costly when paralleled to other services
and the rise in health care amounts tend to lower a persons income. If a person has an income
increase, then they are more likely to seek more medical care when needed and with the
distribution of third-party payers the demand for health care services will also increase.
Escalated competition in the health market by supply being in excess or not enough demand is
called price elasticity that affects the health care delivery system in the U.S. The market stability
charges become elastic and patient capacity becomes sympathetic to minor variations in costs.
According to Di Matteo (2003), Parametric and nonparametric estimation techniques are
compared in estimating the relationship between income and health expenditures with
implications for the reliability of past estimates of health expenditure income elasticity (The
Income Elasticity of Health Care Spending. A Comparison of Parametric and Nonparametric
Approaches). Government involvement influences the surge of health care fees and generates
inadequacies. Big organizations are clipping aids, demanding increased worker assistances with
hope of similar programs being eminent. The amount of trivial and medium-size health care
organizations providing healthcare plans declines. Customers can demand an improved Medicare
of Medicaid program, but increasing health care expenses can influence the services they get.
Third-party insurances will experience more difficulty because they will have to provide
insurance policies customized to the needs and budgets of customer. Health care plan costs vary
by the health care provider, third-party payers and consumers. Fundamentally the health care

delivery system is propelled by industry. Dependent on the health care system and its
competition, providers may raise treatment prices and services.
Marginal Analysis
Marginal analysis is utilized as an economic tool that measures the fundamentals of reasoning in
making decisions for business. This tool analyzes the benefits and costs of the marginal unit of a
good or input (Getzen, 2007). It aids people in distributing inadequate supplies to enlarge the
benefits of the output process and involves identifying the control variable and defining what the
rise in total benefits and cost would be if more units of the control variable is increased. Another
unit should be added if the units marginal benefit surpasses or matches its cost. An example of a
marginal analysis is when determining what type of health insurance to buy. A person can
measure their salary intake of $20,000 a year and the cost of their health insurance premiums of
$5,000 a year to determine what is best for them meaning that their health insurance premium
takes up 25% of their income during the year. The United States converges health care demands
by documenting populations for increased shares of the gross national product (GNP). Marginal
analysis offers numerous benefits in analyzing health expenses in the United States. The surge in
health care delivery system paying as a part of the marginal or rise in the gross national
merchandise delivers perceptiveness into the unspoken marginal spending of government,
consumers and third-party payers.
The U.S. is driven by the governmental regulations on costs associated with health care utilizing
the economic tools and ideas. Consumers wanting to be healthy are the ones affected by the price
of health care at the end of the day. Elasticity raises the demand of price wars amongst
competitors in the medical market. Demand and supply curve signifies the price of the
government participation with doctors demand of providing health care services. Marginal
analyzing demonstrates the value and price of a separate cost of health coverage and cost of
living. The health care system is growing and developing improvements as time goes by. Over
time the improvement tools within the economy will provide the United States with a more
effective health care delivery system. The new restructuring will raise the demand for nurses and
doctors without any cause for shortages or fear of not being able to get the health services

Di Matteo, L. (2003). National Center for Biotechnology Information. Retrieved from
Getzen, T.E. (2013). Health economics and financing (5th ed.). Hoboken, NJ: John Wiley &
Sons, Inc
Meyer, W. (2004-2009). Coyote Blog. Retrieved from