This is actually my Economics course homework. But it kinda belonged on my blog!
I'm starting to think that everyone should be required to take economics before they are allowed to serve in government. We already have a good example of what happens on a small scale with the kind of "reforms" Obamacare creates. What makes us think that expanding it from tiny Massachusetts to the entire USA will make it work better?
A timely article I found concerning prices is the attached
article from the Boston Globe discussing the price of emergency room visits in
Massachusetts recently. The background
information required to analyze this price change includes the enactment in
2006 of the Massachusetts health care insurance reform. This law required everyone in Massachusetts
to maintain health insurance and provided free insurance for residents making
less than 150% of the federal poverty level.
The supply of emergency rooms is
held constant, both by government regulation, and by the practicality of
building new hospitals.
The price increase in emergency
room services has resulted from an increase in demand. As more people have insurance for emergency
visits, they are more likely to go to the emergency room, thereby increasing
demand. If a person is required to pay
for health insurance, he will have more of a tendency to “get his money’s worth”
and visit the emergency room for health issues he may not have in the
past. Also, the subsidy for poor
residents has increased their demand for health services over all, including
emergency visits. Another driver of increasing demand is the
change in expectations that occurred with the health insurance reform. The law was passed as an increase in access
to health care for everyone, and when the patient feels he is entitled to
immediate care, he frequently arrives at the emergency room. These changes all result in a large shift of
the demand curve to the right.
Another interesting aspect of
this article is the result of the change in the substitute service of primary
care physicians. As the supply of family
physicians has decreased*, the price (either as money or as waiting times or as
inconvenience) of their services has increased. Since emergency care acts as a substitute good
for primary care, this has shifted the demand curve to the right. In the last few paragraphs of the article,
the state is attempting to shift the supply curve of primary care to manage the
equilibrium point of emergency room care.
It remains to be seen how the
contradictory aims of health insurance reform will play out in Massachusetts as
well as the far larger national reform.
