Write a short (2-3 page, double-spaced, typed) essay identifying and describing

Question

Write a short (2-3 page, double-spaced, typed) essay identifying and describing the current state of the health care industry using the tools we have studied this semester. Also, in your paper list the pros and cons related to the health insurance industry along with a short explanation of health insurance. You are asked to develop your own solution to this social issue. Your answer in terms of what you think is the socially optimal solution versus the economic least cost solution, but you must understand and explain the economic costs of your decision.

Explanation / Answer

Health care industries in now a days is increasing at a rapid manner. Since the developing or developed countries pass through the second or third stage of demographic transitional theory they focus on expanding the service sector. In this regard health sector also expands. Surely, govt. must not look over private profit. Now, as govt cannot meet up the total demand, specially in the developing countries due to huge population explosion private nursing homes/hositals comes into play. Owner(s) of those has a motive to exploit patients as much as it can and to earn most profit. For those entrtrepreneurs doctors are labourers and they are often advised to make a bill at most as possible. Due to adequate wealth of a large section of people their entities run well. On the otherhand, poor people cannot afford that. Hence, they end up going to public hospitals. Thus, both expands at its best. Problem, altough with public hospitals is that that they are not often provided adequate machinaries, technologies, facilities or funds scarcity. Often economc analysis of cost benefit mix up and end to political cost-benefit analysis.

In case of an asymmetric information system market can fail. It may end up to the shut down of expansion of health cares too. In this regard, health insurance can solve the problem. It may be the case of moral hazard. It defintely hedges against market failure. This is definitely a good solution.

It can be done that beyond age of 50 they have to pay more and below that it has to pay less as lesser health issue is associated with the latter. In this pool due to higher premium rate only people with health issue will come to have this and the rest of the task will be easier for the health companies.

Neo-classical decision of the former analysis is based on social outcome and the basic principle or dual of the profit maximization problem is cost minimization. Hence, it is efficient.

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