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Chapter 7: Problem 9

The late Nobel Laureate Robert Fogel of the University of Chicago argued, "Expenditures on health care are driven by demand, which is spurred by income and by advances in biotechnology that make health interventions increasingly effective." a. If Fogel was correct, should policymakers be concerned by projected increases in health care spending as a percentage of GDP? b. What objections do some economists raise to Fogel's analysis of what is driving increases in spending on health care?

Short Answer

Expert verified
a. If Fogel was correct, policymakers should not necessarily be concerned by projected increases in health care spending as a percentage of GDP, as the increase may simply reflect income growth and beneficial advances in biotechnology. b. Some economists may raise objections that Fogel's analysis does not consider other factors influencing health care spending like inflation, an aging population or inefficiencies in the health system. They might also argue that even if the increase is driven by income and technology advances, it could still be a concern if health care spending rises faster than GDP, crowding out spending in other areas.

Step by step solution

01

Understanding Fogel's Argument

First off, one must understand the fundamentals of Robert Fogel's argument. He posits that health care spending is primarily driven by two factors: income and advances in biotechnology. The more income people have, the more they are willing and able to spend on health care. Similarly, as biotechnology improves and health interventions become more effective, people are inclined to spend more on these more effective treatments.
02

Analyzing the Implications for Policy

Next, consider the implications for policy if Fogel is correct. According to him, increased health care spending is not necessarily a bad thing since it's driven by income and advances that make health care more effective. Therefore, policymakers shouldn't necessarily be concerned if health care spending increases as a percentage of GDP. Instead, they might want to focus on ensuring that the benefits of increased income and advances in biotechnology are distributed equitably.
03

Considering Counterarguments

Finally, analyze possible objections to Fogel's argument. These could include points like health care spending can also be driven by factors like inflation, aging populations, and inefficient health care systems that Fogel doesn't mention. Alternatively, some economists might argue that even if health care spending is driven by income and biotechnology advances, it could still be a problem if it increases faster than GDP, as it could crowd out spending in other important areas.

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Most popular questions from this chapter

Improvements in technology usually result in lower costs of production or new and improved consumer goods and services. Assume that an improvement in medical technology results in an increase in life expectancy for people 65 years of age and older. How would this technological advance be likely to affect expenditures on health care?

Define the following terms: a. Health insurance b. Fee-for-service c. Single-payer health care system d. Socialized medicine

(Related to Solved Problem 7.4 on page 241 ) In 2017 , an article in the Wall Street Journal discussed trends in the health care sector. The article noted the "adoption of new health information technology," using "advanced algorithms and natural-language processing technologies to read and reformat" data on patients. Assuming that health information technology continues to advance, use a graph of the market for medical services to show the effect. Explain any shifts in the demand curve or supply curve and the effect on the equilibrium price and quantity of medical services.

What is meant by the phrase "health outcome"? How do health outcomes in the United States compare with those of other high-income countries? What problems arise in attempting to compare health outcomes across countries?

Briefly discuss the most important differences between the market for health care and the markets for other goods and services.
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