The Dynamics of Health Care

health care

For decades, concerns about high and escalating health care costs have been a major focus of policy attention. Those costs, it is claimed, threaten the solvency of federal, state and local governments, the competitiveness of American industry, the financial security of tens of millions of Americans, and the health and well-being of their children.

In response to these claims, many strategies have been proposed and implemented to control costs. Some of these have had varying degrees of success, but the effectiveness of any particular strategy depends on the theoretical underpinnings and assumptions about fairness that drive it. The efficiency approach, for example, assumes that the right thing to do is that which maximizes the happiness of the greatest number of people; in practice, this is not always possible.

Moreover, there are different views about what constitutes a fair share of resources to be allocated among the public and private sectors. This is a question of economic and moral philosophy that will not be resolved by market-based reforms alone.

The term healthcare is often used without definition, but it is generally understood to mean the effort to maintain or restore mental and physical well-being through the services of trained professionals. It may include prevention, treatment, rehabilitation, and palliative care. The word is also sometimes referred to as the health system or the medical profession.

Health care is an enormously complex ecosystem containing many moving parts that vary from one person to another. Some of these moving parts, such as the ability to access medical services and the quality of those services, are in the hands of patients, others in the hands of physicians and hospitals. Yet others are in the hands of government agencies and private insurers, which in turn depend on a host of other entities for their operation.

While these varied moving parts are linked through the needs and desires of individuals, they are only a part of an underlying, interdependent, dynamic system of supply and demand that has been shaped by many forces. The factors that shape the dynamics of the system include population growth, economy-wide price inflation and excess medical price inflation, and a number of other residual categories.

In the end, the underlying dynamic of healthcare is that supply and demand meet through market competition. A free market allows consumers to discover, learn and choose goods and services that are best for their own circumstances, providing them with outstanding quality and multiple price options. When the consumers are informed, wise and thrifty, free markets will take care of the rest.

Unfortunately, the healthcare marketplace has not been allowed to utilize the efficiency and fairness of the free market in almost a century. As a result, the current health care landscape is complex and difficult to understand. To help simplify the situation, this NYHealth-funded chart book has pulled together a wealth of existing data on health spending and trends in an objective and easy-to-use format. We hope that it will help to clarify the nature of the problems in our nation’s healthcare system and lead to better solutions.

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