History of Healthcare and Economics

This paper will discuss the history and evolution of healthcare economics and healthcare funding timelines. In the 21st Century healthcare has proven to be one the largest industries world. The healthcare industry has changed dramatically in the last hundred years. As changes and progression are examined, it becomes clearer that healthcare and the economy it has created, is an important part of American life. The way the funds flow in the healthcare system allows financial managers to track the money through the health care system. The initial flow of funds has drastically changed throughout the years.
The economics of healthcare, “the study of how scarce resources are allocated among alternative uses for the care of sickness and the promotion, maintenance and improvement of health, including the study of how healthcare and health-related services, their costs and benefits, and health itself are distributed among individuals and groups in society”, according to The journal of Mental Health Policy and Economy (2006). There are records as early as the turn of twentieth century that show that healthcare providers charged for services including surgeries such as tumor removal, appendectomies and gynecological operations.
Services may have been exchanged for items such as livestock, food items, or cotton. The patient or his or her family may have exchanged services for patient care. No form of health care insurance was available; prices were not set by any organization or person. Physicians of the early twentieth century were tradesmen and essentially businessman. Patients paid the full price for the medical services offered by the physician. According to PBS (n. d. ), in the 1910’s some reformers argue that there should be some sort of health insurance.

Although the idea seemed to have some support, many physicians and other interest groups did not approve. War World One took place in 1917 and for the moment healthcare reform was put on the back burner. The lack of technology and inadequate health centers raise the amount of cost needed for medical care. The current economic and war state of the country took priority over healthcare reform. General Motors offers life insurance for 180,000 workers through Metropolitan Life. The same time doctors’ wages increased.
During the Great Depression, it became apparent that there should be some sort of benefits for individuals as they reached retirement age. Instead of health insurance, the Social Security Act was passed. During the Roosevelt Administration, many reformers pushed for health insurance again, but conflicts within the country once again pushed for health care insurance. Blue Cross started offering private insurance for hospital care in many states even though it was considered a bad idea by many insurance professionals. The timeline from the PBS (n. d. ), website in the 1940’s a radical reformation took place.
War World Two wages were capped and controlled on American employers. Companies began offering health benefits to compete with other employers. This idea has sparked the employer-based system that is used by employers today. A Universal Healthcare plan is introduced by President Truman, but is never used. The American Medical Association (AMA) believes the plan is Communist in nature. As the Korean War approached, healthcare reform was once again a low priority. The government established a policy that would make the federal government responsible for sick poor.
Many people in 1950’s can no longer afford health care insurance, especially those who do not work. The price of hospital care doubled. President Johnson signs Medicare and Medicaid into law. During the 60’s, more than 700 insurance companies are selling health insurance. During the 1980’s Medicare begins charging insurance by the diagnosis and not the treatment of the patient. Technology, vaccinations, medications, and a rise in hospital expenses raise healthcare costs tremendously. Medicare’s high expenditure rates and rapid inflation of the economy also affected the higher cost of healthcare.
Health care has seen many changes over the past years, but all the changes have created the health care system and the economics of the system to this point. As the gross domestic product (GDP) , which is the total market of healthcare, started to increase annually, the private sectors of healthcare, government controlled entities, and insurance companies profit and change policies, which in turn increases the (GDP). An increase in population, aging population and communicable diseases such as Hepatitis, HIV, AIDS, and Tuberculosis has increased the cost of health care even in recent years.
Small deductibles, low copayments, and employer-based healthcare insurance have molded the idea in many patients’ minds that the patient should use medical services often to “get what they pay for. ” This has created an imbalance of supply and demand. There are numerous reports that there is a shortage of providers. Rapid training of Physician Assistants and Nurse Practitioners are being educated and trained to help fill the gap of the numerous amounts of patients that need medical attention.
The elasticity in health care has forced changes to be made in healthcare billing and insurance. The increased amounts of patients that need medical attention have increased the amount of providers needed. The increased costs of healthcare, technology, research, drugs, and lack of funds available for Medicare have forced a price increase for patients. Many employers find it more difficult to provide costly insurance to employees. Elasticity of services might normally demand a decrease in price, but prices have been inelastic in nature.
Elasticity can also have a direct impact on when the government intervenes to set a fair price for services according to Tutor2U (2006). The insurance companies play a huge role in determining the amount of money that is needed for medical care. Supply and demand differ so greatly in the health care community than any other service or industry, making supply and demand a very different story than simply buying milk or a computer. Macroeconomics is the branch of economics that deals with the economy as a whole, such as unemployment rates, deflation and inflation.
Microeconomics deals with the insurance companies and other health care related aspects that are affected by the economy fall into a more specific category known as microeconomics. As the whole economy changes, families, patients and individuals must choose to make decisions based on the economy. Healthcare decisions within communities and household are examples of microeconomics. As advances in healthcare are introduced, government regulations are introduced and the economy faces multiple challenges in the future, healthcare will likely see more changes to come.