Question

Why does the economic concept of “cost shifting” work well in healthcare, but not so well with business?

Answer 1

ANSWER:

For this to answer, we need to understand what is cost shifting and since it works well in the healthcare system, let us look at an example of it. There are people with no insurance and when they come get ills, hospitals provide them treatment with lower costs and the hospitals then charge the people with insurance more money for the same treatment , thereby shiftig the costs and it works well because of the health care assistance provided by the government but the same can't be done in the business as it is impossible to charge one consumer higher price and another lower price because in business consumers can't be differentiated and therefore costs can't be shifted and even if the businesses tried to do that , the consumers would easily find a substitute and the business would have failed in shifting the cost to the consumer and ultimately result in a loss and therefore this cost shifting doesn't work well in the business and rather is meant for healthcare system where people are more bound to take the treatment.