Health Care Economics The United States health care system is ina state of rapid evolution, with changing payment, organizational,and management structure (Vercelloti, 2004). It is important tounderstand the economic component in health care in order to besuccessful in today’s market. This paper will discuss the historyand evolution of economics in health care as well as the time linefor health care funding. History and Evolution Health careeconomics provides an information framework in which the objectivesof both efficiency and equity may be pursued. Economics alsoprovides a framework which aims at maximizing benefits withinavailable resources (Vercelloti, 2004). Kenneth Arrow, whom manybelieve first brought forth the idea of health economics as adiscipline, wrote an article in 1963 titled “Uncertainty and TheWelfare Economics of Medical Care” that discusses the way themedical-care industry satisfies the needs of society in comparisonwith the “norm” (Arrow, 1963). Mr. Arrow discussed the nature ofsupply and demand. He believed that the most obvious distinguishingcharacteristic of a person’s demand for medical services is that itis not steady and predictable; meaning people seek medical care inthe event of illness not on a regular basis. When discussing supplyconditions Mr. Arrow states (1963), “Entry to the health careprofession is restricted by licensing. Licensing, of course,restricts supply and therefore increases the cost of medical care “(para. 8). In the 1970’s medical care was expensive, and its costrose at a rate that exceeded the rise in the cost of living. By1979 the total cost of medical care reached more than $2 billiondollars or 9 percent of the gross domestic product (GDP), up from alittle more than $7 billion dollars and 7 percent of the GDP in1970 (enotes.com, 2010). In those times most people did not makeenough money to be able to afford medical care. Only one in fivefamilies had some type of health insurance coverage and most onlycovered hospital cost
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