Economics of Health Care. Technological progress in the form of new medical knowledge, medicines, treatments, and medical devices has allowed Americans and people worldwide to live longer, healthier lives. As new treatment options become available, it is not surprising that the United States and other major industrialized countries continue to shift more resources to health care. Research suggests that between 50 and 75 percent of the growth rate in health expenditures in the United States is attributable to technological progress in health care goods and services. However, the increase in resources devoted to health care has led to concern about its affordability, both for families and for the Nation as a whole. The United States expends a higher fraction of GDP on health care than does any other industrialized country. According to an international comparison released in 2003, the United States spent 13.9 percent of GDP on health care in 2001, while the average among industrialized countries was 8.4 percent of GDP. Measures of health outcomes such as longevity and infant mortality, however, are not markedly different in the United States than in other advanced economies that spend substantially less on health care.
A. Use a normal good (demand-side) argument to explain why the U. S. consumer, among the richest in the world, spends a higher percentage of income on health care than do consumers in most poorer countries.
B. Use a supply-side argument to explain why the costs of providing health care services appear higher for Americans than for other world-wide beneficiaries of health care innovation.

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The Answer of Economics of Health Care. Technological progress in the form of new medical knowledge, medicines, treatments, and medical devices has allowed Americans and people worldwide to live longer, healthier lives. As new treatment options become available, it is not surprising that the United States and other major industrialized countries continue to shift more resources to health care. Research suggests that between 50 and 75 percent of the growth rate in health expenditures in the United States is attributable to technological progress in health care goods and services. However, the increase in resources devoted to health care has led to concern about its affordability, both for families and for the Nation as a whole. The United States expends a higher fraction of GDP on health care than does any other industrialized country. According to an international comparison released in 2003, the United States spent 13.9 percent of GDP on health care in 2001, while the average among industrialized countries was 8.4 percent of GDP. Measures of health outcomes such as longevity and infant mortality, however, are not markedly different in the United States than in other advanced economies that spend substantially less on health care.
A. Use a normal good (demand-side) argument to explain why the U. S. consumer, among the richest in the world, spends a higher percentage of income on health care than do consumers in most poorer countries.
B. Use a supply-side argument to explain why the costs of providing health care services appear higher for Americans than for other world-wide beneficiaries of health care innovation.