Assignment 1: Applying Economic Concepts Relevant To Health Care Spending Assignment

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Assessment #1: (15%)

As you learned in Week 1, health care spending is growing faster than overall growth in the economy (as measured by GDP) and by 2026 is expected to consume 20 percent of GDP. In Week 2, the article by Hartman (et. al.) states that “the trade-offs required to finance health care spending have become increasingly challenging for both private and public payers.”

Given what you have learned from the course material in Week 1 and 2, discuss these trade-offs and how to evaluate them from an economic perspective.

Specifically, do the following:

  1. From an economic perspective, explain why health care spending cannot grow greater than overall growth in the economy for an extended period of time without adverse consequences.
    1. Identify what economic constraints overall and in the healthcare industry will occur if this happens.
  2. Identify TWO Economic concepts that can be used to evaluate the trade-off between health care and other economic goods and services. In doing this:
  • Define the economic concept completely
  • Apply the economic concept to the current issue of rising health care spending and trade-offs
  1. Evaluate the unique characteristics in health care that complicate this analysis.

This briefing report should be at least four double-spaced pages, include a reference page, and cover page. In writing, your report you should rely largely on reference material in the course readings and summary slides in Week 1 and Week 2.

Be sure to include your name and section headers corresponding to the parts of the report above.

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Explanation & Answer

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Economic Concepts and Healthcare
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The health of the nation lies in the health of her people. To measure the performance of
the country both economically and from the social perspective, one needs to consider the health
of the inhabitants of the land. A healthy nation is at a better position of performing well
economically, and the life expectancy of her people is likely to be high compared to other states
with weak health coverage system. Health care costs in the current studies especially in the
United States are growing at a higher rate compared to the overall economy. In an attempt to
deliver proper medication, the government has incurred high expenditures on health-related
matters, for instance, construction of hospitals, hiring medical professionals and paying for
suppliers of medicine. The trade-offs in health care faced by both the government and the private
sector such as insurance companies to meet the medication needs regarding financing healthcare
spending have become a challenge. The government, for example, needs to forgo funding
education and other social projects to channel the resources to healthcare. On the other hand, the
companies need to choose between salary increment and covering the employees.
Healthcare and the economy
Regarding the previous studies, the cost of health care is projected to grow more than the
overall economy of the United States. As per the projection, by 2025 the price will rise by 5.8
percent every year. As a result of introducing coverage of new diseases that were not previously
included in the health insurance cover, a constant rising of medicine prices, higher price for

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