Economic principles in health plan marketing strategies

Health Plan Principles

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definition (cee).doc

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The higher evolving costs for medical care have been debated for decades. The problem seems to be focused on costs fo research, care, prevention, etc. As a dollar for dollar per capita expenditure. Economists tell us that these are opportunity costs. For instance, opportunity costs of devoting resources to a use is the loss of the benefits the resources placed toward that use could have product if they had been used to their best opportunity. This problem leads us to the conundrum of how to allocate health care funding. Do we place more on research and development so there are solutions to the major health problems, or do we try to find ways of disease prevention through educational and other health related programs. It is almost a utilitarian argument, but one which has not been settled -- what is the greatest good for the most people, and how does society provide for that?

Part B -- The economic positives and negatives of a different look at healthcare vary. Healthcare is seen alternatively as an externality when actions affect others and as a market commodity. The positives revolve around the nature of healthcare as a commodity -- people need it, use it, want it, and the demand becomes greater the use and technological improvements become. Incentives are designed to limit costs and improve service, but are sometimes over-regulated to the point in which the efficiency quotient declines.

Part C- There are predictable changes involved in healthcare economics based on the demographics of the aging population. As more people require healthcare, the burden of that cost must be spread somewhere. Unpredictable market threats like recalled drugs or side-effects often change the supply/demand curve as well. Sometimes, the economic benefits of technology in terms of supply and demand change because of the redefinition of treatment for a particular illness or diagnosis. Consumers must then quickly adapt to changes in the market -- costs, insurance premiums, lack of insurance, trade-offs in health care, and may thus skew the supply/demand curve by only using health care for emergency situations rather than to plan and prevent future illness.

Part D -- Both articles show us that reform is crucial to fixing the American health care system. Right now, it is buried under insurance monopolies, supply side dynamics and government institutions that fail to regulate, or compensate, for promised care. Using a model of externalities, the healthcare system should, in fact, result in a system in which pricing was not a motive for care, and would not require the consumer to hold the burden of propping up the system.