Health Care Economics Essay

Pages: 3 (1422 words)  ·  Bibliography Sources: 1  ·  File: .docx  ·  Level: College Senior  ·  Topic: Healthcare


Physician referral process for the model health care setup should be upheld according to the required standards to minimize conflicts between patients and physicians as well as the implications of referral for quality of care and cost to the patient (Shortell & Anderson, 1971). In this regard, the exchange theory will be used to allow for conceptualization and analysis of the various aspects of the referral interaction. According to this, if a referral is necessary, the physicians should decide to whom the referral is made, for how long, and for what services.

Question 4

The concept of direct exchange between the buyer and the seller is not present in the health care market. A basic characteristic of health care systems in all developed countries is that the majority of payments for medical services flow through third parties. A third party is an entity, usually an insurance company or government agency, which pays for medical services but does not receive or provide health care services. In general, third-party financing is due to two major reasons, the first being that individuals want insurance against the large and uncertain cost of illness, and governments want to assure access to health care for its citizens. In addition, if the concept of direct relationship between the doctors and patients existed, then individuals would pay providers directly for health services at prices set by those providers.Download full Download Microsoft Word File
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TOPIC: Essay on Health Care Economics in Economics, Assignment

Healthcare is funded by either taxes or premium; individuals pay for the premiums to insurance companies and the taxes to the federal government which in turn pay for health care services. Aid in the employers often pay for a large share of insurance premiums and taxes, the amounts paid by employers are passed on to individuals and households through lower wages for the employees, higher prices to consumers for the employers' goods or services, or lower returns to investors on capital (Getzen, 1997). Besides, people with the highest incomes pay proportionately more than people with the lowest incomes, regardless of their use of medical services. On the other hand, insurance funded mainly by premiums is the most regressive because people with lowest incomes pay a higher proportion of their total income than people with high incomes.

Health care reimbursement is a vital issue in health care; it is the standard method of payment to health care providers. However, it varies among the insurance companies and government agents and the continued trade-off between organizations' efficiency and bottom-line profit vs. The freedom of patients and providers is likely to determine the reimbursement amount

Question 5

The best option is fee-for-service with no consumer copayment since it is the same as coinsurance thus, the patients will have no out-of-pocket payments. Thus, consumers will demand higher medical care as though it were a free good because they face zero prices. This will ultimately result in high-cost and lowest low-benefit medicine.

For option a; Fee-for-service plan with 40% consumer copayment, there will be a moderate incentive for the production of high-cost, low-benefit medicine. Consumers most likely are sensitive to price, but physicians prefer additional spending on medical care. For Prepaid health plan with 40% consumer copayment, there will be little incentive for the production of high-cost, low-benefit medicine since both consumers and providers are sensitive to costs.

The next, Fee-for-service plan with no consumer cost sharing will result into the creation of a significant incentive for the production of high-cost, low-benefit medicine and neither the consumers nor providers will bear any financial risk. Prepaid health plan with no consumer cost sharing creates a modest incentive for the production of high-cost, low-benefit medicine. While Fixed-salary plan with 40% consumer cost sharing results in little incentive for the production of high-cost, low-benefit medicine.


Amartya, S. (2000). The Discipline of Cost-Benefit Analysis. The Journal of Legal Studies, 29(2), 931-951.

Black, W. (1990). A Graphical Representation of Cost-Effectiveness. Medical Decision Making, 10(3), 212-214.

Getzen, T.E. (1997). Health Economics. New York: John Wiley & Sons.

Neumann, P.J., & Weinstein, M.C. (2010). Legislating against use of Cost-Effectiveness Information. New England Journal of Medicine, (363), 1495-1497.

Phelps, C.E. (1992). Health Economics. New York: Harper Collins.… [END OF PREVIEW] . . . READ MORE

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How to Cite "Health Care Economics" Essay in a Bibliography:

APA Style

Health Care Economics.  (2013, January 19).  Retrieved December 1, 2021, from

MLA Format

"Health Care Economics."  19 January 2013.  Web.  1 December 2021. <>.

Chicago Style

"Health Care Economics."  January 19, 2013.  Accessed December 1, 2021.