Economic Terms and Health Care History Essay Sample

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The history and economics in health care can be traced back to the late 1890’s, but became prevalent in the 1930’s. Over the course of the last century health care industry has evolved to multi-billion dollar industry. This evolution can be attributed to managed care and third party payee systems. The cost of care has been the forefront for debate for over the last two decades in the United States. The cost of care has rising so dramatically some Americans are unable to receive coverage for the health needs. After researching health care economics, a timeline of this evolution is apparent. Development of health care economics, it is a changing system within the United States. It has become multifaceted and in the past two decades, the upheaval in health care in is largely in lieu of rising health care cost. It is a discipline that deals with the conception, distribution, and all intakes of goods and services.

Over the past years, it has dealt with pricing of products and the structure of the economy, as the price-cost relationship of a whole medical firm. It relates to an uncaring conversion, when a demand fails to increase or decrease in percentage to a decrease or increase in price. The adjustment involves the total health care market price of all the goods and services created within the form of a country during an identified time (“Gross domestic Product, ” 2014). One of the most notable research resources came from David D. Dranove. His book entitled The Economic evolution of health care provides information not only about the economics, but the history as well. To understand health care economics, one must first understand that health care provides goods and services to its consumer. Everyone needs health care at some point in their life. With that being said, controlling cost and in the U.S. is virtually impossible considering the mediocre attempts that were thwarted by the medical industry (Marcus Welby, 2015).

The history of managed care have remnants that can be traced back to the 1890s, when fraternal organizations and associations of workers created prepaid medical lodges to provide health care to members for a cost of $1-$2 per year per member. At that time, more than one third of all families, mostly in low-income brackets, were covered by these lodges. By following the development of health care reimbursement schemes throughout the 20th century, to include prepaid plans for work-related injury and illness in the 1920s. One of the most notable structures of managed care came with the emergence of Blue Cross and Blue Shield in the 1930s. The Kaiser system was created in the 1940s, providing complete coverage for ten cents per day, per employee. These early third party reimbursement systems were small. By 1950, only 10% of heath care costs in the US were paid by third party payers (Welby, 2015). It wasn’t until the 1950s, when antibiotics and anesthetics lowered the mortality rate in hospitals is when demand for hospital insurance began to rise. By the 1960s, the majority of working adults were covered by health insurance, which paid 21% of medical costs.

During the early 1960s, states began to provide coverage for the elderly and poor and in 1965 the federal Medicaid and Medicare programs were established. It is then that health care costs began to rise precipitously as a percentage of gross domestic product, with hospital costs being the largest component of overall costs (Eisenberg M, 2015). When the 1970s came the rise in the cost and spending associated with health care was being noticed by government officials. Efforts were made to help curb spending by the government proved to be dismal at best. Community based planning, rate setting, and certificate of need requirements that was attempted in the late 70s and early 80s proved to be a waste of time. This was due to the political power of the health care industry which ensured that regulatory health care cost containment efforts were attempted minimally.

In some states costs were indeed contained. For example, in Connecticut, a strong rate-setting program resulted in health care costs that were $300 million lower over a seven year period of time than they would have been if costs had increased with the national average (Eisenberg M, 2015). To conclude, in the last decade health care cost has risen so drastically in the United States to the point it has become a burden to families who simply trying to live and make a productive living. And the arrival of Obamacare infuriated coverage providers and health care providers to the point that lead the quality of care to dissipate. I tyrant was created in the healthcare system that wields a mighty weapon of capitalistic influence over our elected leaders. The name of this giant is called third party payors, and the weapon is campaign contributions. The cost is steadily rising with no end in sight.


Welby, M. (n.d.). The Economic Evolution of American Health Care: From Marcus Welby toManaged Care David Dranove. Retrieved January 15, 2015, from Eisenberg, M. (n.d.). Journal of Political Ecology. Retrieved January 15, 2015, from Gross National Product, Retrieved from

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