Analysis Of Gregory Mankiw's Ten Principles Of Economics

The United States’ enormous amount of health care spending on laws like “Obamacare ", “Medicare ” and “Medicaid ” has been increasing spending per US citizen on health care services for the past years. One of the serious reasons behind the rising health-care costs is that the government’s restrictive policies on the health sector increase the tax burden on citizens and distorts incentives of both consumers and suppliers of healthcare as it intervenes between them. According to the Congressional Budget Office, annual per-person health spending went up 2% quicker than per-person economic growth between 1975 and 2005 . The augmentation of health care costs has surpassed the rise in national income, which left more people unable to afford insurance.

Just like in any other market for goods and services, market prices are the ones to reflect the most accurate information on consumer demands and supplier costs. In this hypothetical market-driven health system, reduction of costs and efficiency would be driven through increased competition where health-care decisions would be in the hands of consumers and taxpayers, not just upper bureaucratic policy makers and the government. Moreover, increased competition in the health sector can increase value for patients in the long run by adapting quality and process improvements that don’t only decrease costs, but also increase their satisfaction and utility . One of Gregory Mankiw’s Ten Principles of Economics discussed in his book “Principles of Microeconomics” is that markets are often a good way to arrange economic activity. In Chapter 6 of his book, this principle examines why economists are often against price controls. To economists, prices are the outcome of supplier and consumer decisions that lie behind the supply and demand curves to work on balancing them together and, thereby, harmonizing economic activity. When policymakers and government regulations set prices or other restrictions, they make the allocation of resources more difficult and vague. (Mankiw, 2014, p.121). For those reasons, the United State’s healthcare system should convert into a market-based

Medicare is a government program that pays health care providers based on the amount of services they provide, which gives them incentives to become less efficient. The largest payer in most healthcare markets in the United States is Medicare, which explains why negative inducements from programs like Medicare distort the economics of the healthcare sector . Moreover, Obamacare increases taxpayer obligations by introducing two new entitlement programs at an expense of at least $1 trillion over a 10 year-long-period in which it raises taxes by more than $500 billion. It also decreases payments of Medicare medical services providers by roughly $500 billion . It becomes apparent that the federal government has immense control over the current health sector, allowing bureaucrats to alter the decisions of every American insurance carrier, doctor and hospital. A market-driven health care system would be the best alternative to the current system, in which the power of financial incentives can be used to stimulate consumers to efficiently choose available services and would also reward suppliers for coming up with ways to supply more for lower costs. In order to successfully achieve a market-based system, Congress could first provide the elderly with subsidies to obtain a Medicare plan of their preference in which they pay less if the chosen plan is less than the government subsidy or pay the difference if