Question

Healthcare Costs: When President Obama signed the ACA, he declared it would "lower costs for families and for businesses and for the federal government." Early evidence contradicts his claim - private insurance costs are up, estimated health care spending is up, and Congress is already considering regulations to give states the power to reject rate requests that are considered "unreasonable." There is a strong consensus that health care spending is too high and growing too fast, but this has not led to agreement on the causes or the appropriate responses.

A. What are the main cost drivers causing high and rising spending?

B. Can we reduce spending and expand access to an additional 40 million Americans simultaneously? In other words, can you increase access without increasing cost? Explain.

C. Are price controls the answer? How will they affect the health care market?

Answer 1

A) The main cost driver causing high and rising spending is the easy access to healthcare, which allowed people from all income groups to have easy and affordable access to health care. As a result, those with even minor health issues now approach hospitals to get themselves treated. Also, the problem of moral hazard has also increased among people, leading to higher spending on healthcare.

B) It would be difficult to increase healthcare access and at the same time reduce spending. However, this can be only be done through adequate monitoring and regulation of private hospitals who do not make large bills for small ailments.

C) No, price controls will reduce hospital supply of services and increase demand for healthcare services by people, leading to shortage of medical care in the economy.