Quantity may be increasing An aging population people demand more health care as they age A richer population rising incomes lead to more health care consumption More insurance coverage More insurance reduces out-of-pocket prices to patients of obtaining medical care Increasing quality of medical care each dollar spent on health care generates a higher marginal health benefit,so demand for health care increases Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Quantity may be increasing An aging population people demand more health care as they age A richer population rising incomes lead to more health care consumption More insurance coverage More insurance reduces out-of-pocket prices to patients of obtaining medical care Increasing quality of medical care each dollar spent on health care generates a higher marginal health benefit, so demand for health care increases
Are rising costs a bad thing? If rising costs are due to rising demand rising health care costs is not necessarily a bad thing People are not necessarily worse off If rising costs are due to rising prices Rising costs does harm consumers Health is getting more expensive to produce,so people will either have to cut back on health care or spend more money to stay healthy Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Are rising costs a bad thing? If rising costs are due to rising demand rising health care costs is not necessarily a bad thing People are not necessarily worse off If rising costs are due to rising prices Rising costs does harm consumers Health is getting more expensive to produce, so people will either have to cut back on health care or spend more money to stay healthy
Prices may be rising,because... Increased resource costs Less competitive markets Hospital mergers may have made the market more monopolistic Expensive new technology if modern medical care routinely incorporates new, expensive technologies like MRI machines,the price of treating many ailments will rise Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Prices may be rising, because… Increased resource costs Less competitive markets Hospital mergers may have made the market more monopolistic Expensive new technology if modern medical care routinely incorporates new, expensive technologies like MRI machines, the price of treating many ailments will rise
Medical inflation A medical care consumer price index(CPI) measures changes in the price level for medical goods and services Medical inflation:a rise in the price level for medical goods and services A medical care CPI can tell us how much more it costs this year to buy the same things we bought last year Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Medical inflation A medical care consumer price index (CPI) measures changes in the price level for medical goods and services Medical inflation: a rise in the price level for medical goods and services A medical care CPI can tell us how much more it costs this year to buy the same things we bought last year
Medical care CPI In the last thirty years,the U.S.medical care CPl has remained consistently higher than overall inflation 10 9 8 65 4 0 2 1985 1990 1995 2000 2005 Year All goods -----Medical care …Clothing Figure 13.2.Annual change in various price indices,1985-2003.The US medical care CPI grew faster than the general US CPI every year from 1985 to 2003. Source:US Bureau of Labor Statistics. Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Medical care CPI In the last thirty years, the U.S. medical care CPI has remained consistently higher than overall inflation