Question #1

Article

"A new OECD report released in 2017 reveals a shocking truth: About 20 cents of every dollar spent on health care in OECD countries is wasted in some fashion. That waste represents more than 20 percent of total health expenditure in the United States.

The findings of the report, entitled "Tackling Wasteful Spending on Health," will be discussed at a meeting for OECD Ministers of Health in Paris on Jan. 16-17.

According to the report's author, Agns Couffinhal, a senior OECD health economist, it is alarming that around one-fifth of health expenditure makes no or minimal contribution to good health outcomes, especially at a time when public budgets are under pressure worldwide.

As she explains, "Governments could spend 20 percent less on health care and still improve patients' health." With as much as 9 percent of GDP spent on health-care systems across the OECD 6.75 percent of which is by federal governments this savings could mean a lot.

Surprising findings in the OECD report reveal:

1 in 10 patients in OECD countries is unnecessarily harmed at the point of care.

More than 10 percent of hospital expenditures is spent on correcting preventable medical mistakes, or infections that people catch in hospitals.

1 in 3 babies are delivered by Caesarean section, despite medical indications suggesting that C-section rates should be 15 percent at most."

Questions:

1. Use an economic model to show current production of health care and "other goods" in OECD countries. Explain what your model shows.
2. Show, on your economic model above (label clearly) what you think an ideal point for the economy would be. Explain why you think this is an ideal point for the economy. Discuss the tradeoffs inherent in your decision.
3. Markets are supposed to lead to ideal outcomes! What are some of the reasons that health care markets may not lead to ideal outcomes?
4. A market that meets all necessary conditions for efficient resources are ideal. But the United States economy and health care system in the United States are far from ideal. Shortage in affordable housing.
5. Discuss how you would incentivize the shift from the current situation to your ideal situation, with specific reference to what role you think the government ought to have versus the private sector and why.