Opportunity Costs of Healthcare

OpportunityCosts of Healthcare

OpportunityCosts of Healthcare

Accordingto Jim, the cost of health care has gone through the roof over thepast two decades. The federal government and state governments havebeen spending considerable amounts of money on health care. Forexample, The State of Illinois has had the cost of health carequadruple from the year 1989 to the year 2009. As of the year 2011,the State of Illinois was spending close to $4400 per Medicaidenrollee this according to the author is relatively lower than the$6000 average for all the states (Nowlan, 2015). The high cost ofhealth care has been squeezing the amount allocated for othergovernment programs such as education, pensions, and social services.Thus, a cost is foregone in order to provide health care. Researchhas shown that healthcare costs are expected to rise and may soon beunmanageable when it matches the Gross Domestic Product (GDP). Thispaper will discuss the opportunity cost of health care.

Opportunitycost is one of the key principles of economics. This is because thereare unlimited needs and very limited resources to satisfy theseneeds. As such, we are forced to use our resources wisely. Both thefederal and state government have an obligation to ensure that peopleare able to access affordable health care. With the cost ofhealthcare increasing, more and more people are unable to affordhealth care costs. This has forced the government to intervene andensure that these people can still be able to access qualityhealthcare services. Currently, the United States government spendsclose to $ 2.8 trillion on health care, which translates to around$8000 per person in each fiscal year. (Kaplan et al. 2014)

Opportunitycost looks at the best use of resources. In this case, the governmentshould spend on programs and drugs that are more likely to save morelives. For example, it is important that the government spend more onpreventive health care. Preventive health care is cheap when comparedto treating a patient diagnosed with a certain disease (Russell,1992).

Thegovernment should also spend more on buying state of the art medicalequipment and facilities. For example, there are robots that can beable to operate on patients. The initial cost of purchasing theequipment may seem to be high. However, the government shouldconsider the number of lives the equipment will be able to save andthe period the equipment can be used. The cost of educating medicalpractitioners, paying their salaries and allowances and paying theirpensions should also be considered.

The government should also consider cost-effectiveness when spendingon health care. The government should consider all the availablecourses of action and decide to invest in the best alternative, whichwill give them value for their money (Kaplan &amp Haas, 2014). For,example, there are many types of medication that can be used to treata certain disease. The government, in this case, should consider thetype of medication that will be most effective. In doing so, thegovernment can be assured of getting value for money.

Inorder to maximize utility, the government has to consider differenttypes of opportunity costs before making decisions and budgetestimates. This is the best way that policy makers can ensure thattaxpayer’s money is used sparingly. They also have to considerother important factors before finalizing on the health care budgetestimates. They have to bear in mind that there are unlimited needs,which need to be satisfied using limited resources. The money savedon health care can be used to improve our schools or even provideother important services.


Kaplan,R. S., &amp Haas, D. A. (2014). HOW NOT TO CUT HEALTH CARE COSTS.Harvard Business Review,92(11), 116-122.

Kaplan,R. S., Witkowski, M., Abbott, M., Barboza Guzman, A., Higgins, L. D.,Meara, J. G., &amp … Feeley, T. W. (2014). Using Time-DrivenActivity-Based Costing to Identify Value Improvement Opportunitiesin Healthcare. JournalOf Healthcare Management,59(6), 399-412.

Nowlan,J. (2015). Whatare opportunity costs of health care?. QCOnline..Retrieved 15 April 2015, fromhttp://www.qconline.com/opinion/what-are-opportunity-costs-of-health- care/article_ec87c802-d6aa-51be-9b77-a672f0974147.html

Russell,L. B. (1992). Opportunity costs in modern medicine. HealthAffairs,11(2), 162-169.