The United States has the best technology and the most developed research in the world when it comes to health care. Nowadays, Americans live longer and healthier than they have recent history, in fact, the average life expectancy of Americans is currently about 77 years old (www.publicagenda.org). With all these facts out there, it is hard to believe that the number of people without health insurance shot up last year by 2.4 million, the largest increase in a decade, raising the total to 43.6 million (New York Times, 9/30/03). The main factor causing this lack of care for so many Americans is the increasing costs of health care. Due to supply and demand, over the past 15 or so years, Health Care has grown to represent 5.3% of the annual income of Americans (www.publicagenda.org). In recent years, many factors have contributed to a drastic rise in demand for Health Care; increasing incomes, aging population health insurance, and physician incentive. The United States is one of the only powerful countries in the world to not have standardized health care, which is provided to everyone who lives in the country. If these trends continue, over time supply and demand is going to drive the cost of health care up so high that hardly 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.
The rising cost of health care can be directly attributed to the laws of supply and demand. American Physicians supply the public with a service, in response to the demand sickly people have. This is an example of inelastic demand, meaning that there are not any substitute goods people can purchase instead, therefore people usually pay whatever cost they have to for the service. It is estimated that the price elasticity of demand for medical care is 0.2. This means that a 10% price increase would only decrease quantity demanded by 2% (Contemporary Economics, p.