../../../MY_DOC%7E1/MY_DOC%7E1/ECONNEWS/South-Western%20College%20Publishing%20-%20Economics  
You Can't Afford to Get Sick Anymore
Subject Change in Price of Health Care
Topic Supply and Demand; Equilibrium
Key Words Price, Change in Demand, Change in Supply
News Story

The prices that consumers pay for health care insurance rose by 13.9% this year, the largest increase since 1990, and there are no signs that the increase will be temporary. In fact, since 2000, the price Americans pay for their insurance rose by 50%, from an average of $1,619 annually to $2,412. Price increases resulted from increased prescription drug costs, hospital care, insurers' desire for more profit, increased demand for medical care, and patients' persistent cries for less restrictive managed care. The good news for Americans is that relatively few employers dropped health care insurance for their workers, implying that relatively few Americans lost their health insurance coverage


(Updated November, 2003)

Questions
1.

Use a graph of supply and demand to illustrate what is happening in the article. Be sure to label your axes and curves, and indicate the direction of the shifts of the curve(s).s?

2. Which factors in the article account for a change in demand? Which factors in the article account for a change in supply?
3. Suppose the government responded to these rapid increases in health care insurance by imposing a mandatory cap on insurance premiums - that is, by imposing a price ceiling. What would be the likely response by the market? Why might this happen?
Source "Tab For Health Care Rises Rapidly," Julie Appleby, USA Today, 9 September 2003.

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