Competitive Market

1. How does a competitive market determine the types of goods and services to produce, the costs to produce those goods and services, and who receives them?

2. Why do economists believe the value of additional employer-paid health insurance is worth less than its full cost?

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3. Why do rising medical expenditures cause concern?

4. Why do inefficiencies exist in the provision and use of medical services?

5. Why are unions and the government concerned about rising medical expenditures?

Approaches to Limiting Increases in Medical Expenditures

The United States should strive to reduce inefficiencies in both the provision and use of medical services. Inefficiencies in provision, however, are decreas- ing as managed care plans are forced to compete for enrollees on the basis of price. The large variations in physicians’ treatment patterns should decrease as more information on outcomes becomes available through the analysis of large insurer data sets. Vigilant application of antitrust laws is needed to ensure that healthcare markets remain competitive and that providers, such as hospitals and ACOs, do not monopolize their markets.