Running Header: Terms Comparison Paper. Comparison Paper University of Phoenix HCS/552 Health Care Economics Barbara Smardz April 6, 2009 According to Robert Carroll, (2007) health care costs continue to rise in the United States. The growth of health care costs has been exceeding the GDP growth by two percentage points annually since 1940. These rising costs impose a substantial burden on the U. S. economy. Higher spending on public programs like Medicaid and Medicare strains state and federal budgets. Higher insurance premiums pose a challenge for employees and burden workers with higher health costs and lower wage increases. The burden of rising health care costs is particularly problematic for small businesses, which tend to have much smaller pools of workers to spread risk and increasingly choose not to offer any health insurance to employees. ” (Carroll, R. 2007). This paper will compare three terms risk, resources and cost, to economics and health care. Risk: Risk management is the discipline of identifying, monitoring and limiting risks. In some cases the acceptable risk may be near zero. Risks can come from accidents, natural causes and disasters as well as deliberate attacks from an adversary. Wikipedia. org, retrieved 4/6/09) In business, risk management entails organized activity to manage uncertainty and threats and involves people following procedures and using tools in order to ensure conformance with risk management policies. (Wikipedia. org, retrieved 4/6/09) In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss and the greatest probability of occurring are handled first, and risks with lower probability of occurrence and lower loss are handled in descending order.
Intangible risk management identifies a new type of a risk that has a 100% probability of occurring but is ignored by the organization due to a lack of identification ability. These risks directly reduce the productivity of knowledge workers, decrease cost effectiveness, profitability, service, quality, reputation, brand value, and earnings quality. Intangible risk management allows risk management to create immediate value from the identification and reduction of risks that reduce productivity. (Wikipedia. org, retrieved 4/6/09) In health care risks are associated with the expected value of all losses averaged over all people.
According to Getzen, T. E. , (2007) from the individual perspective, insurance is a trade between two possible states of the universe: one in which the person has a heart attack and one in which he or she does not. Money is shifted from the state in which individuals have more (when they are healthy) to the state in which they have less (when they are sick), similar to the ay savings shifts money from good periods to pay for the bad periods. From a societal perspective, insurance is a method of pooling risks so that the burden of financial loss is disturbed over many people. Resources: A resource is any physical or virtual entity of limited availability, or anything used to help one earn a living. In most cases, commercial or even ethic factors require resource allocation through resource management. ” (Wikipedia. org, retrieved 4/6/09) Resources have three main characteristics: utility, quantity, (often in terms of availability), and use in producing other resources. The quality of a resource refers to the total amount of a given raw material, rather than reserve which is an economic term. There are different types of resources; natural and human. Natural resources are derived from the environment.
Many of them are essential for our survival while others are used for satisfying our wants. Human beings are also considered to be resources because they have the ability to change raw materials into valuable resources. According to Wikipedia, (2009) the term Human resources can also be defined as the skills, energies, talents, abilities, and knowledge that are used for the production of goods or the rendering of services. Economic of health is built on scarcity. People have many desires, among then good health, but there is a lack of resources to provide all things to all people.
Some people would consider resources when talking about health care economics; could include good health, education and access to financial means to afford health care costs or insurance premiums. In the presence of this scarcity, someone, or some process, must decide what mixture of goods and services to produce, what quantity of each is to be produced, and how to allocate the production to participate in the economy. Access and use of available resources can impact one health. “Individuals can undertake a variety of actions to achieve their desired level of health, which is constrained by physical factors and is subject to various risks.
People’s choices about living location, work, and diet, recreation, over the counter medication, recreational drug use and formal health care can all affect their health status. Perhaps, startlingly, studies of factors that determine health in affluent societies indicate that changes in lifestyle choices and status such as environment, income, education, and cigarette consumption outweigh the contribution of changes in health care services. ” (Answers. com, retrieved 4/6/09) Costs: In economics, costs can be defined as the price paid to acquire, produce, ccomplish, or maintain anything. (Dictionary. reference. com, retrieved 4/6/09). Cost can be the amount paid or required in payment for a service rendered or a purchase. In health care economics costs is defined as, “the aggregate expenditures, or price paid, for health care services-not as the costs incurred by the providers of health care. The rationale for this definition of cost is that legislators are ultimately interested in evaluating the financial impact of mandates on each of the major payers for health care services in the state. ” (www. chbrp. org, retrieved 4/6/09)
Conclusion From an individual perspective, insurance is a form of trade between time periods or between different possible states (healthy or sick) in the future. From a societal perspective, insurance is a method of pooling risks so that the burden of financial loss is distributed over many people. An individual’s savings can spread the cost of illness over time. Using family, friends and charity voluntary spreads risk across people. Private insurance contracts spread risk through organized markets. Social insurance uses taxation to spread risk over all citizens. Getzen, (2007). Resources Wikipedia, the free encyclopedia, www. wikipedia. org , retrieved 4/6/09. Answers. com, www. answers. com/topic/economics-of-health. retrieved 4/6/09. California Health Benefits Review Program, www. chbrp. org, retrieved 4/6/09. Getzen, T. E. , (2007) Health Economics and Financing (3rd Ed. ) Hoboken, N. J. : Wiley & Sons, Inc. Carroll, R. (2007), The Economic Effects of the President’s Proposal for a Standard Deduction for Health Insurance. National Tax Journal, Vol. LX, No. 3 September 2007. ———————– 5
