The Pricing of Health Costs and its Effect on the Poor in the United Dissertation

The Pricing of Health Costs and its Effect on the Poor in the United States - Dissertation Example This part of the research paper focuses on reviewing relevant literatures about healthcare cost in the US and how it affects poor people who are relatively more needy to the healthcare-services than others. By reviewing various literatures, this part of the research develops a model presenting the relation between healthcare insurance claims and health risks. Healthcare pricing in the US According to Porter and Teisberg (2006), the US healthcare system is on a dangerous path due to toxic combination of high costs, uneven quality, frequent errors and peoples’ limited access to the services (p. 17). Out of these indicators, high cost seems to be a most challenging to the public, mainly to the poor. The healthcare services in the US are mainly delivered through private hands, but still, it is partially governed by free market forces. Healthcare service delivery and consumption do not meet the basic elements of a free market and is therefore often described as quasi-or imperfect m arket. In a free-market, there will be many patients- service buyers and many sellers, service providers who act independently. In such a situation, price is neither fixed by any external agency nor providers collude to fix it, but rather, prices are automatically governed by the forces of free-market due to the interaction of supply and demand forces (Shi and Singh, 2008, p. 12). But, when it comes to the US healthcare market, the consumers are general public with diseases who need quality medical services, payers are Medicare and Medicaid and sellers or providers are private or otherwise healthcare institutions. In such a marketing condition, prices are theoretically determined by the payers and not by market forces of demand and supply. Healthcare cost in the US has been rapidly increasing since 1960s, due to a number of factors including aging population, patient demand for high technology, need for best care available, technological advances, increasing therapeutic options and general economic factors like inflation (McCarthy and Schafermeyer, 2004, p. 649). A country can be said to spend in excess when it there is a differences between its spending per person on healthcare and its gross domestic product per person (Reinhardt, 2008). More specifically, the spending on healthcare in the US is more than that of other industrialized nations in the world and this cost increases surpasses the growth of various other important components of the US economy. most researchers found that Americans in general are highly dissatisfied of high cost of healthcare and its system as well (McCarthy and Schafermeyer, 2004, p. 649). How much does healthcare cost? Healthcare alone accounts to be one seventh of US national economy. The total spending on healthcare in the US in 1997 has been accounted to be $1,092 billion, which was twice as much as on education and three times as much as on national defenses. This spending also can be considered as one and half times as much a s on healthcare per capita spending of Canada (Heshmat, 2001, p. 67). The growth of healthcare costs has been slowing down dramatically since 1992, with 4.8 % in 1992, 3.1 % in 1993, 1.5 % in 1995 and so on. Healthcare cost growth, but in declining level, thus has been an unusual one in the recent history of US healthcare spending. Though there were greater advances in managed care and there were much efforts from