How Supply, Demand and New Policies Affect the Costs of Medical Supplies, Healthcare


Just like other markets, the costs of medical supplies, healthcare services and insurance premiums are affected by supply and demand. In general, when there is high demand for a product or service and supplies are limited, costs rise. That being said, there are other factors responsible for influencing the costs associated with healthcare: These factors include tax increases and additional regulations placed on medical supplies and/or healthcare services.

The Journal of the American Medical Association (JAMA) Addresses Health Care Costs

From 2000 to 2011 there was a rapid increase in the costs associated with medical supplies and health care. These continuous increases were of great concern to insurance companies and to patients. According to JAMA, cost increases related to medical supplies, hospital care and medications accounted for 91 percent of the rise in health care inflation.

Substantial Increase in National Health Care Expenditures from 2014-2015

In 2014 and 2015, national healthcare expenditures increased by as much as 6 percent, which resulted in an estimated $3.2 trillion industry-wide. Experts believe that similar increases will occur through 2024. One factor that has contributed to this increase is the 2.3 percent excise tax that the Affordable Care Act (ACA) places on medical devices.

Inflation Related to Health Care Costs Outpaced the Consumer Price Index (CPI)

With the sole exception of 2008, health care inflation outpaced the CPI from 2005 to May of 2015. As the cost of medical supplies and health care services continue to increase, so do insurance premiums; however, the ACA is not the only factor responsible for these increases. Other issues affecting the cost of medical supplies, insurance coverage and health care services, include:

· an increased focus on precision medicine;

· health care system consolidation;

· new medications and medical devices;

· changes to insurance plans;

· the drive for increased financial gain.

Study Finds Popular Health Clinics May Increase Healthcare Costs

A study conducted by the RAND Corporation indicates that rather than reducing health care costs, retail clinics like CVS and Walgreens are creating a new demand; thus, causing health care expenses to rise. Scott Ashwood is one of the researchers who contributed to the Rand study. He has stated that retailers created a low-cost option for care and that people are using it; therefore, this new use is responsible for the higher cost.

The study states that these increases are modest, totaling $14 per patient per year and, for the most part, the population taking advantage of these clinics is the commercially insured. Additionally, nearly 60 percent of the individuals who visited these clinics did so to receive treatment for low-acuity conditions.

The President of CVS’ Minute Clinic Subsidiary Speaks on the Company’s Behalf

Dr. Andy Sussman is the president of CVS’ Minute Clinic subsidiary. Sussman states that with the extreme shortage of primary care physicians, retail clinics provide patients with health care savings by helping them stay well. He says that a patient who has the flu can visit the clinic to receive inexpensive care, even on the weekends. In other words, the clinic treats the patient’s condition before it worsens, which possibly prevents a costly hospital stay. Sussman declared that the clinics are improving health and saving resources, and these are important factors that cannot be measured by the Rand study.

Reducing the Costs of Medical Supplies and Healthcare

Over-regulation and excessive taxation may be a few of the issues contributing to the rise in health care costs. However, competition is necessary to reduce these expenses. Another factor that must be addressed is the challenge related to the ACA’s ability to continue increasing the number of Americans who have insurance, while simultaneously reducing the rapid increase of health care costs and medical supplies.

About the Author

Jade is currently pursuing her RN degree. She works as an LPN and Director at a Skilled Nursing Facility and Inpatient Rehabilitation Center. She enjoys researching the latest medical news and also keeps an eye out for the best possible medical supply deals for her facility. USA Medical and Surgical Supplies is one of her favorite options because they have such a diverse selection and because they are a supplier that makes it possible to reduce healthcare supply related expenses.







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Jade Rich