Question

“YOU’RE THE ECONOMIST: Why the High Cost of Health Care?” in Chapter 17. After reading the case, discuss the following questions: (1) Which of the causes of healthcare inflation discussed here could be considered demand-pull causes? Which are elements of cost-push inflation? (2) Can you think of any other causes for the rising costs of health care?

Answer 1

1.

Demand pull causes of inflation are the increased demand of health care services, due to increased income level, increased population, increased level of government spending and support for healthcare and higher age of the population that demand more of health care services. These are the causes that makes healthcare inflation to take place.

Causes of cost push inflation is the increased expenditure upon R&D work to find new medicines, devices and techniques to cure people, cost of development of health care infrastructure and higher cases of lawsuits increasing cost of healthcare deliveries. These are the reasons that increase cost and healthcare inflation to take place.

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2.

It is the deregulation of the industry that causes cost to increases. Service providers come with new ways and techniques, that increase the cost. Besides, it is the lack of ethical practices such as not suggesting the alternative and cheaper ways to treat people that also increases the cost of health care services. Further, lack of attention on preventive care also contributes to the rising cost of health care.