Question

Please answer the following questions regarding Health Care Costs and Product Differentiation . Using supply and demand analysis, explain some of the factors that may have led to rising healthcare costs in the United States from 1960 to the present day. In your opinion, which factor has had the greatest impact? Discuss the two ways that product differentiation affects the demand for the product. Give an original example of product differentiation.

Answer 1

Some of the factors that may have led to rising healthcare costs in the United States from 1960 to the present day include;

We reward the healthcare providers for doing more, rather than being efficient.

Nearly half the U.S. population has one or more chronic conditions such as; asthma, heart disease or diabetes, driving up costs of healthcare.

New drugs, technologies, and procedures are expensive.

Since the majority of people with insurance get it through their job and hence they are disconnected from making true consumer decisions about the cost of their care or their coverage.

Hospitals and other providers are increasingly gaining market share and thus they are better able to demand higher prices.

Doctors prescribe unnecessary tests or treatment out of fear of facing a malpractice lawsuit.

The factor that has had the greatest impact is; the U.S. population having one or more chronic conditions such as; asthma, heart disease or diabetes, driving up costs of healthcare.

The product differentiation affects the demand for the product for this reason only we as a nation focus on innovation leading to new drugs, technologies, and procedures.