Sample Economics Essays on Healthcare Expenditure in The U.S.

Question 1

The opportunity cost of allocating more than a quarter of Medicare’s budget to paying medical care for enrolees’ last-year-of-life is an increase in the number of young Americans who are uninsured. Consequently, the health of the productive labor force is foregone. According to Mariacristina De Nardi et al. (2016), in 2010, the average medical expenditures for the elderly, aged 65 years and above, was twice the average of the entire American population. Additionally, elderly persons accounted for one-third of the total medical expenditure in the year. As the year’s progress, the number of Americans qualifying for Medicare also increases. However, federal laws bar younger persons from accessing such healthcare insurance. Hence, as the country caters to the medical needs of the elderly population, a majority of its productive population remains uninsured.

The Medicare budget can be reviewed to include younger Americans but under the condition that they make annual contributions to their insurance. In doing so, the number of the uninsured population will decline, while the subsidized out-of-pocket insurance will increase. Alternatively, the government could set a stipulated amount per insured member for the last year of life medical expenses so that such expenditures are monitored not to surpass the set amount. The approach will help the Medicare program to regulate spending on the last year of life care.

Question 2

The U.S. healthcare spending detracts from the national economic growth of the country due to the associated healthcare costs, which is excessively high. Mariacristina De Nardi et al. (2016) note that the U.S has the most expensive healthcare system globally. Furthermore, the cost of healthcare continues to rise and consumes a large percentage of the Gross Domestic Product (GDP) on a yearly basis. For example, the 2018 report by the National Center for Health Statistics (NCHS) revealed that the U.S. healthcare cost in 2017 was approximately $3.5 trillion, an equivalent of 17.9% of the total GDP, which is projected to increase at an annual rate of 5.5%. Hence the healthcare expenditures consume a lot of the country’s national income.

The continued increase in healthcare expenditure limits budget allocations to other key sectors of the economy, such as agriculture, education, and manufacturing. As a result, the mentioned sectors cannot efficiently run their operations, nor complete projects thus resulting in a decline in the economic performance of these sectors. The sociologist theory supports that the high healthcare costs ensure access to quality care; and consequently, a healthy labor force. However, the healthcare contribution to U.S.’s economic growth comes at a pricey cost.

Question 3

Physician compensation methods influence the quality of healthcare services disseminated by different healthcare professionals. For example, a surgeon would perform best in a fee-for-service system since the specialty has low demand. Additionally, the profession deals with severe medical cases or long-term illnesses. As such, patient satisfaction is key in improving patient retention throughout the patient’s recovery journey. Per Rudmik, Wranik, and Rudisill-Michaelsen (2014), a study conducted by Sorbero et al. (2003) showed that 36% of patients with chronic diseases prefer fee-for-service healthcare providers because the health practitioners are keen on meeting the patients’ needs. On the other hand, a nurse performs best in a salaried system because the profession is a basic need in healthcare, hence the daily demand is high. Moreover, the compensation method acts as a disincentive to excessive administrative expenses as such appropriate care to patients is promoted while minimizing supplier-induced demand.

Question 4

The largest contributor to the excessive healthcare costs in the U.S. is the technological advancement in the health sector. Technological adoptions have paved the way for new treatment methods especially new surgical procedures. For example, in September 2012, an article by the Journal of American Medical Association revealed that 243,802 knee replacement operations were conducted on elderly persons aged 65 years and above, with each operation costing approximately $15,000 (Norbeck, 2013). Therefore, as more technological innovations are discovered, the incorporation of such innovations leads to an increase in healthcare costs.

Question 5

Nudge theory can be used to help employees save more towards retirement in their productive years. Hansen (2016) emphasizes that nudging is an attempt to create a social decision that influences the judgment of a group of persons, which prevents individuals from selecting self-declared options based on individuals’ interests. The theory can be applied to employees’ health insurance plan choice by providing compulsory Medicare contribution alongside the normal employer insurance plan. However, one can be allowed to drop the Medicare contribution upon attaining a set amount by the employer. In doing so, employers will help their employees to save for their later years, thereby reducing the federal burden of providing medical insurance to persons aged 65 years and above. Moreover, the approach will enable the federal government to include younger Americans who cannot afford private insurance into the Medicare insurance plan.

Question 6

The Affordable Care Act of 2010 (ACA) was implemented to provide affordable insurance cover to all Americans. The main benefactors of this law were concentrated among the unemployed population, low-income earners, as well as those who could not initially get health insurance due to pre-existing conditions, such as cancer. On the other hand, to effectively pay for ACA, the government increased taxation on medical devices and sales made on pharmaceutical products. Insurance companies also increased insurance premiums paid to help in covering the additional costs of extending their insurance coverage. As such, Roland (2019) notes that the diffused costs were passed on to the entire American population, insurance companies, and medical providers in various ways including medical providers have to meet the additional workload; taxation was increased for the high income-earners in most states; a majority of employers reduced work hours so as not to pay insurance for overtime work, and persons who already had health insurance were forced to adjust to the higher insurance premiums.

Question 7

The development of medical technology has been more influential in raising life expectancy in comparison to economic growth. Technological advancements have led to the discovery of newer drugs, as well as advanced surgical and diagnostic techniques. Hence, this signaled improvements in healthcare services to combat prevalent diseases. For instance, due to the discovery of medicine, the prevalence of measles and smallpox has reduced to nearly zero. Furthermore, various medical equipment has been invented, thus improving the accuracy of physicians’ diagnoses. Some of the equipment includes; ventilators, dialysis operators, radio nuclear imager, and computed tomography (Aggarwal, 2017). Hence, the incorporation of technology has resulted in improved services. Consequently, life expectancy has increased as mortality rates decline. On the other hand, economic growth has an insignificant relationship to the increase in a country’s life expectancy. A study on the life expectancy of developed countries conducted by Biciunaite (2014) revealed that despite the U.S having a very high capita GDP, the country has a lower life expectancy in comparison to Italy, Switzerland, Japan, and France. Economic growth results in an increase in disposable income, which also increases unhealthy lifestyle habits, such as smoking, and a sedentary lifestyle that promotes obesity. Therefore, the development of medical technology has led to an increase in life expectancy.




Aggarwal, L. M. (2017). Advances in medical technology and its impact on healthcare in developing countries. International Journal of Radiology and Radiation Therapy, 2(2(, 55-56. DOI: 10.15406/ijrrt.2017.02.00022

Biciunaite, A. (2014), Economic growth and life expectancy-do wealthier countries live longer? Retrieved from

Hansen, G. P. (2016). What is nudging? Behavioral Science & Policy Association. Retrieved from

Mariacristina De Nardi, French, E., McCauley, J. & Jones, J. B. (2016). Medical spending of the US elderly. Fiscal Studies, 37(3-4). DOI: 10.1111/j.1375-5890.2016.12106

National Center for Health Statistics (2018). Health expenditures. Centers for Disease Control and Prevention. Retrieved from

Norbeck, T. (2013). Drivers of health care costs. Missouri State Medical Association, 110(12), 113-118. Retrieved from

Roland, J. (2019). The pros and cons of Obamacare. Healthline. Retrieved from

Rudmik, L., Wranik, D. & Rudisill-Michaelsen, C. (2014). Physician payment methods: a focus on quality and cost control. Journal of Otolaryngology-head and Neck Surgery, 43(34). DOI: 10.1186/s40463-0034-6