High Costs of Medical Services – Health System Example

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"High Costs of Medical Services" is a great example of a paper on the health system. Economic Concepts and Medical Services Costs                       Health has been a major concern for decades now. Health insurance has been developed to save patients on costs incurred when seeking medical treatments. With each passing year, the prices charged by hospitals on various treatments continue to rise at an alarming rate. Technological advancements seem to be contributing significantly to these high medical charges. Patients who do not have insurance find it difficult to pay for some of these medical treatments.

The cost of emergency services is quite high for the ordinary citizen. For instance, in the case of Ms. Singh, she was charged a total of $2,229.11 for only three stitches. There are more such cases as described in an article by Elisabeth Rosenthal (Rosenthal, 2013).                       Hospital pricing is not regulated by any government policies thus the bills can be highly inflated. Being admitted for a day in an American hospital costs about $4,000 as an inpatient, and when comparing these charges to other developed nations these prices are too way up about five times more.

According to economists the high costs for medical care are attributed to fiscal factors and not medical. This continual escalation of medical costs is a result of the increase in costs of medical equipment, drugs, and other services. Hospitals charge of high prices is due to the constant change of technology, which requires an upgrade and buys new equipment that is quite expensive. Running hospitals is also an expensive adventure as there is a requisite of highly trained doctors and more staff such as nurses and high salaries (Rosenthal, 2013).                       Insurance covers help the consumer to pay part of the bills which usually varies with the insurance premium involved.

For example in the case of Jamie Burke, while playing soccer she was knocked out and decided to visit a hospital. “ The bill amounted to $5,039; her insurer’ s in-network contracted rate was about $2,700. With co-pays and coinsurance, she owed $600 for the visit. ” (Rosenthal, 2013) Thus, the benefit of insurance to the insured is they pay less cost for the services. On the other hand, the uninsured struggle to pay the bills since they have no second party to negotiate for them.

For example, the situation of Arch Roberts Jr. who was unable to pay a $2,000 bill for stitches and even after getting a discount when he pleaded for the costs to go down; the offer by the hospital of $800 bill was also impossible for him to pay (Rosenthal, 2013).                       The structure of the insurance system promotes ineptitude by decreasing incentives for clients to evaluate the worth. The system of insurance where there are low co-pays, low deductibles, and broad coverage leads to the escalation of medical costs.

Furthermore, it promotes extreme employment of healthcare services, unavoidably resulting in extravagant expenses. In the past, the average cost that people used to pay for medical services was about 50% from their pockets, but currently, it is about 13%. Hence this makes people oblivious of the fact; it is still their money from the insurance cover and is not keened on the costs of drugs or when comparing different services.

This has been the backbone of ineptitude and escalation of hospital prices. The rising costs consequentially make many people not to be able to afford insurance cover (Hall, 2007).                       Economists’ best explanation of these high costs focuses on insurance. The health insurance sector receives tax subsidies. The people taking insurance cover are high, and the insurance is somehow inefficient. This rise in the level and form of insurance coverage negates the requirement for health care services.   This indistinct form incorporated with other constraints in the industry such as technology has led to an accelerating of expenditures in medical costs (Pauly, 1986, p.

629).                       Financial incentives offered to physicians positively influence their dissemination of health care services. An increase in their wages will boost their morale and in turn provide much better healthcare. Also, more reimbursements translate to better health care services. The physicians usually invest in the latest technologies that are essential to achieve better health care. Thus, it is essential for people to get insured to enable physicians to expand on quality services without disadvantaging some people. According to Finkelstein's (2007) research findings, the more the number of people insured translates to generous physician reimbursements at the same time protecting the consumer from incurring huge costs from their pockets (Finkelstein, 2007).                         The financial incentives received by physicians contribute significantly to the high costs of medical care services.

The high salary wages offered to them, their investment in devices with the latest technology needs a lot of cash. Thus to cater to these factors hospitals escalate the medical services costs. The patients have to pay more for the physician services, equipment used, drugs, and even the general hospital facilities.   Passing down this cost to consumers negatively affects the uninsured people as they would be unable to pay for the high costs of treatments.                       Economists' explanations on the issue of high costs of medical care have majorly centered on insurance and its promotion of ineffectually immense use.   However, it is quite vivid that the rise in the costs of medical services has been due to the high costs of the latest technologies and not from that of existing technology.

Innovations in the medical field have caused a rise in costs of care and increased the need for insurance.

It has also widened the scope of services that need to be insured. The policy strategies in health care focus much on reducing the costs of services, and little about offering quality care (Weisbrod, 1991).                         The nation needs to provide an affordable health care system to its citizens. It should begin with addressing the issue of high medical costs which is rising at an indefensible rate. Much attention should be on the major factors that escalate the cost of medical care services.

This includes; unhealthy lifestyles, elevated prices for services rendered by physicians, the drugs are extremely expensive, and advances in medical technologies, and the traditional pricing system which focuses more on quantity than the quality of service.


Finkelstein, A. (2007). The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare. quarterly journal of Economics, 122 (1), 1-37.

Hall, R. a. (2007). The Value of Life and the Rise in Health Spending. Quarterly Journal of Economics, 122 (1), 39-72.

Pauly, M. (1986). Taxation, Health Insurance, and Market Failure in the Medical Economy. Journal of Economic Literature, 24 (2), 629-675.

Rosenthal, E. (2013, December 2). As Hospital Prices Soar, a Stich Tops $500. Retrieved from The New York Times: http://www.nytimes.com/2013/12/03/health/as-hospital-costs-soar-single-stitch-tops-500.html

Weisbrod, B. (1991). The Health Care Quadrilemma: An Essay on Technological Change, Insurance, Quality of Care, and Cost Containment. Journal of Economic Literature, 29 (2), 523-552.

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