Question

2. Consider the issue of health care costs. Research has revealed that there are significant cost variations within counties, cities, and even within hospitals. This phenomenon is sometimes referred to as Small Area Variations (SAV).

a. Discuss the role of physician incentives, asymmetric and/or imperfect information, medical technology, the hospital industry/market structure, and anything else that you deem important from your readings this semester, in driving these cost disparities.

b. Suppose you are a policy maker charged with reducing SAV. Design two potential policy solutions and explain why they would be successful.

Answer 1

Yes ,there are cost variations within the countries,cities and even at the hospitals .There are various reasons behind this fact.In rural areas, you wont find best hospitals,best doctors or best medical technology ,this is one of the reasons of disparity.Also not everyone has medical insurance so it automatically becomes expensive for those who don't have it or insured.Commercialisation in hospitals have also made this variations ,they only think about of earning income and make the facilities expensive for those who cant afford it.When you are not fine and healthy it becomes difficult for you to maintain good quality life ,thus you are unable to find high paying job which eventually creates the variations.Even those middle class section who have insurance suffer a lot and face bankruptcy because they are not prepared for unexpected deduction of insurance costs.
Two potential policy solutions would be -
1.Minimum wage rate should be increased- When one earns enough, it automatically solves everything.When money will be enough ,it will help the low income and middle class group to afford the mediclaim policies for themselves.
2.Medicaid programs should be expanded -Medicaid coverage will provide good health and will give access to health care services .There will be low mortality rates and will reduce financial strain on anyone.