Obesity Treatment Supply and Demand Economic Theory Application

Supply and Demand Economic Theory

Discuss supply and demand economic theory as it applies to costs for diagnosis and treatment of obesity-related disease.

Healthcare services for obesity-related illnesses have a 'demand curve', just like other commercial services and goods; this demand curve slopes downwards. The same demand law that works for entertainment, clothing, automobiles, and other services and goods also applies here; movements along this demand curve take place with respect to consumer responses to price changes in obesity-related care services. It is assumed that healthcare, which includes doctor visits, hospital bills, medication, and other health services, are measurable in healthcare units (Bovbjerg, Dorn, Hadley, Holahan and Miller, 2006).

The method of healthcare financing complicates demand curve analysis for healthcare related to obesity. Nearly 80% of healthcare linked to obesity is funded by third-party financiers, which include government initiatives and private insurance firms (e.g. Medicaid and Medicare). While movements are caused along the obesity-linked healthcare demand curve due to price changes, other factors may also contribute to shifts in demand curve (Manning, Newhouse, Duan, Keeler, Leibowitz, & Marquis, 2007). Some non-price factors that may shift the obesity-linked healthcare demand are as follows: Number of Customers -- with increase in population, an increase in demand of obesity-related healthcare occurs; Preferences and Tastes - Consumer attitude changes with regard to healthcare may also lead to demand shifts. Doctors may also impact consumer preferences through treatment prescriptions; Income -- healthcare comes under the category of normal goods. Growing inflation-adjusted earnings of United States (U.S.) consumers causes a rightward shift in healthcare services' demand curve; Prices of Alternative Services - price of substitute obesity-related services and goods can alter, in turn, influencing other health services' demand (Manning et al., 2007).

Discuss the impact on State funds of Medicare and Medicaid expenditures. See Table 1, Estimated Adult Obesity-Attributable Percentages and Expenditures, by State (BRFSS 1998 -- 2000)

Obesity negatively affects physical well-being, but also places a financial burden on the healthcare delivery structure to cure increased diseases resulting from obesity-linked health problems. Fielbelkorn, Finkelstein, and Wang, in a study conducted in January 2004, estimated that almost $75 billion of U.S. public health costs of 2003 could be ascribed to obesity; around 50% of this cost was funded publicly. Three factors play a role in the growing burden of obesity treatment. They are increase in obese individuals; increased cost of obesity- specific treatments; and demographic shifts in society, with a common tendency for obesity in older individuals. The first factor, increase in obese persons, is the factor most malleable to change -- healthcare specialists, individuals, employers, community leaders, and elected officials can formulate community and individual interventions for decelerating the obesity rise. On a nation-wide level, the U.S., in the next decade, is projected to spend more than 343 billion dollars on obesity-linked healthcare costs, if obesity rates continue rising at the present level (Finkelstein et al., 2004).

Yearly American obesity-attributable health expenses are projected to be 75 billion dollars in 2003, with roughly 50% of these expenses funded by Medicaid and Medicare. State-level costs are estimated from 7.7 billion dollars (California) to 87 million dollars (Wyoming). Obesity-attributable Medicaid estimates vary from 3.5 billion dollars (New York) to 23 million dollars (Wyoming), while Medicare estimates vary from 1.7 billion dollars (California) to 15 million dollars (Wyoming) (Manning et al., 2007).