The Increasing Costs of Healthcare

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The Increasing Costs of Healthcare

The constantly increasing cost and prices of cservices are mainly due to a rapid increase in demand of the service in excess of the supply. It is common economic knowledge that purely competitive markets are able to attain production and allocation efficiency. On the other hand, imperfect competition markets are faced with a wide range factors that limit them in achieving utmost market efficiency. The demand curve for healthcare service is downward sloping just like that of a normal good or service. Healthcare service consumers are also sensitive to changes in price and quality of the service. This explains the movements that are experienced on the health service demand curve. Assuming that health care service includes medication prices, medical drugs among other medical related costs are represented in units, consumption of the service may be represented as shown in the graph below (cited in Patel & Rushefsky, 2014).

The above graphical representation above shows a normal curve for demand and supply of the healthcare service in the U.S. P* represents the price per unit of the health care service while Q* represents the unit quantity demanded. D and S represent the level of demand and supply respectively. The demand and supply meets at the equilibrium which produces the most efficient and effective price for the service given by normal market or economic forces. The pricing for health services is however somewhat complicated due to the financing. The increasing demand of health services has however triggered the upward shift of the prices…”