“Effect of Supply and Demand on the Price Americans pay for

ly anyone will be able to afford it. The United States Government is going to have to step in and stop these trends before this problem becomes unbearable.

In order to control the costs one pays for health care, insurance companies have enacted considerable deductibles along with co-payments for their clients to pay for the care they receive. This discourages patients from using medical care excessively for things they do not necessarily need, because they will have to pay a portion of what the care costs. This is one measure insurance companies take in order to keep costs down. Another measure taken to keep health care costs down is health-maintenance organizations (HMO’s). HMO’s are groups of health care providers that have their own facilities, at which patients make payments for service at a fixed cost negotiated by their insurance providers. In this scenario, doctors and hospitals are forced to control costs because they know that only a certain amount of money will be earned per patient regardless of what type of care they receive. This situation seems ideal; however, patients do not always receive as high quality care as they would receive without an HMO. A third method for controlling health care costs is preferred provider organizations (PPO’s). PPO’s are composed of numerous recommended or preferred physicians who provide care for prearranged discounted prices. Patients receive discounts for the care receive and end up paying for a small fraction of what their care actually costs. In so doing, PPO’s help greatly reduce insurance premiums, minimizing costs for their clients.

Increasing Incomes of American families have been one of the major factors in the increase of the demand curve. Economists theorize that spending on health care increases in proportion to the amount of income families’ gain, meaning that for an increase of 2% in income, families spend 2% more on health care. An

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