Question

Please answer the following in regards to healthcare economics:

1. Why are private prices so high in the United States?
2. How are commercial insurance prices set for hospital services?
3. How are Medicare prices set for physicians’ services?
4. Should governments be involved in private price negotiations?
5. Would consumers be better off if healthcare prices were nationally negotiated?
6. Are other countries’ governments involved in healthcare pricing?

Answer 1

1.Why are private prices so high in the United States?

Health care prices in the United States explains market and non-market factors which determine pricing, along with possible causes that why prices are higher than various other countries. Some of the causes for higher prices are higher administrative costs, higher per-capita income, and less government intervention that is privatization.

2.How are commercial insurance prices set for hospital services?

Commercial health care prices are inversely related with Medicare spending across different regions. The providers may respond to lower commercial prices by shifting the volume of service into Medicare. Moreover further investigation is needed to establish the causalities.

3.How are Medicare prices set for physicians’ services?

Payment for physician services under Medicare was evolved since it was created in 1965. In the beginning, Medicare compensated physicians on the basis of physician's charges, and allowed them to bill Medicare beneficiaries the amount in excess of reimbursement of Medicare. In the year 1975, annual rise in physician fees were limited by the Medicare Economic Index (MEI). From 1984 to 1991, the change in fees was determined by legislation yearly. This was done because physician fees were increasing faster than expected.

4.Should governments be involved in private price negotiations?

Medicare prices are usually based on faulty premises, offer certain incentives for unnecessary care and provide highly varying amounts for equivalent drugs.

The government may be spending billions of dollars more than what is required for only few products and services. Also, the influence of Medicare prices means that those faults may be prevalent throughout U.S. health care.

I have answered 4 Questions and would like the student to try the remaining parts and read about the healthcare of United States in detail.