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The escalating costs of Medical care system and factors related to healthcare have received a lot of debate the healthcare care policy literature. In addition, many recommendations which have been put in place to control Medical care costs have ampasized on the benefits of monitor the changes in Medicare expenditures while at the same time taking into account the accessibility of the healthcare services to the beneficiaries.  There is a lack of analysis attempting to estimate the the factors which determine the cost of Medical care. Previously, there were various efforts which directed towards identifying the sources of medical care  expenditures which relied on accounting relationships to determine and allocate changes which exist in healthcare costs to various aspects of the cost of utilization of the Medicare services.

Previous studiesconducted have failed to identified the supply and demand side determinats  in evaluating  Medicare expenditures. This has resulted into an urgent need to determine the extent to which Medical care costs are influenced by the supply and demand side factors. For instance, reimbursement to healthcare institutions or physicians to reflect the demand side factors which influence medicare costs, including the ability of consumers to afford Medical care services.

Understanding  the rate at which the supply and demand determinats affect Medical care costs, for the services provided by the hospitals and the services provided by the physicians, is a major challenge. Because of this, there is a considerable confusion to understand the most important way to manage Mediacal care costs. There are different initiatives to monitor and control Medicare costs both from the supply and demand side, such as,  prospective payment system. PPS was recently introduced to the Medical care reimbursement for the hospital services and has been adjusted by various methods.

There are also other measures such as, utilization review which has been implemented in the Medicare setting to control the costs and have changes in matters related to Medicare participation. Other issues which have received much attention in the past include the increasing beneficiary in the existing payment strategy, such as, coinsurance rates or a combination of both. However, these require readjustments.

A private health insurance coverage which does not integrate Medicare costs may contribute into an increase in expenditures upon entry when compared to previously insured individuals. This is indicated by an improvement in self reported health care among individuals who are uninsured, based on utilization. However, this trend is disappearing in the long-run; hence may contribute to efficiency gains which would spread Medicare expenditure which, is determined by the existing Medicare system.

Supply and demand factors in the determination of health care costs

This analysis will cover the trends of Medicare costs and expenditures in the Medicare system. Previous studies have shown that there is an increase in Medicare expenditure, which has been the center of focus in the health policy literature. The Medical care system has lacked analysis that directly determined the supply and demand of Medicare. The literatuture reviewed clearly indicate that there has been lack of adequate studies on supply and demand side factors in the evaluation of Medicare expenditures. This program outcome will explore the supply side considerations, for instance reimbursement to health care facilities of physicians, or reflect demand side phenomena, for instance, the ability of the beneficiaries to pay for services. In addition, it is not clear the impact or the extent to which the supply and demand determinants differ in their impact on Medicare costs in hospital services and expenditures wages. Therefore, it is important to explore the uncertainty which remains concerned the most effective means for controlling the Medicare costs.

This analysis will also focus on a variety of initiatives which have been implemented in the previous years to coordinate and monitor Medicare expenditures from the demand and supply side. For instance, the author will explore the prospective payment system (PPS) which has been implemented to Medicare reimbursement for the services provided by the healthcare facilities. Consequently, reimbursement for the physician services has been adjusted by different means with various changes, for instance the use of relative value scales. As stated earlier, the analysis will also focus on the utilization review which has also received much attention in the healthcare setting , coupled with changes in relation to the rules focusing on Medicare.

Previous studies have noted that statistical estimates of the factors affecting the Medicare expenditures could result into the important input when arriving at decisions which focus on healthcare reforms. Thus, this program outcome will also focus on such statistical estimates, with much attention focusing on multivariate analysis of the supply and demand factors of the Medicare costs. Such analysis is beneficial since the direct estimates which will be obtained of the extent to which Medicare expenditures are driven by the demand and supply factors.

This program outcome will be organized as follows; the introduction part will describe the issues and models or approaches to be applied in the review of the factors which are likely to influence Medicare costs and expenditures. This analysis will also present the methodology will be used to estimate Medicare expenditures in the log run. The author will also describe the methodology to be used by utilizing the quantitative data to support the phenomenon under investigation. This analysis will explore the economic forces which influence the demand and supply of Medicare expenditure by using the quantitative data to support the perspective. In addition, the analysis will also explore the assumptions, limitations, and provide recommendations which the analysis will be done.

Determinants of Medicare costs and expenditures

This analysis will explore the factors which influence Medicare cost containment. Since the inception if Medicare, policy makers have strong a strong containment to control Medicare expenditure. However, it has been noted that the costs have continued to increase over time. In addition, previous efforts to control cost may be be used to constrain costs may be implemented by applying them in the efforts to control the demand and supply factors which influence Medicare costs and expenditure.

Supply factors of Medicare expenditure

This analysis will explore the supply factors which constrain the Medicare expenditure. Previously, the  increase in Medicare costs have been lonked to the increase in the physician cost and the hospital services. Therefore, in this analysis the students will be able to understand the earlier efforts to constrain health care costs.  In addition, this analysis will provide vital information on reforms in Medicare system coupled with earlier approaches used in cost containment. In addition, the author will also highlight on the repeated efforts which have been made to constrain the Medicare cost. This will include the freezing of wages to be paid to health care providers.

This analysis will keenly follow the findings of previous studies which demonstrate that there is a considerable dispute existing concerning the desirability government involvement in  regulating Medicare costs and expenditures. Thus, considering the physician reimbursement, the author will look into previous arguments that state that the impact on the efficiency of Medicare system price controls have detrimental impacts for the efficiency of Medicare reimbursements, considering the quality and quality provided by health care providers to the beneficiaries. This study will seek to provide solutions following a an argument adequate measures would boost the services provided by the physician, resulting into little savings to the Medicare. This study noted that proponents of the physician demand reimbursement support views which are against price controls.

Price control is an important measure of constraining Medicare costs and expenditures without presenting detrimentral impacts to the beneficiaries and the Medicare system. However, previous studies indicate that  previous data on Medicareand price controls can be used to provide an explanation the increase in supply of  care providers. This is a very important indicator  which can also be used to determine and mitigate the potential access issues which are detrimental to Medicare system and are influenced by price controls.

The analysis will also explore the changes experienced in the supply of physicians and the impact of the shortage of physicians in the healthcare setting. The Medicare costs and expenditures which are directed to hospital services follows the same trend to contsrol Medicare costs on the supply side. In this analysis, students will try to determine how these changes have been triggered by the introduction of the prospective payment system, which is a scheme intended make changes to the retrospective Medicare cost reimbursement, which is directed to inpatient services. The study will also explore how the approach has made hospitals to record the same rate of Medicare admission, focusing on an individual assessment at time of patient discharge. Previous researchers observed that before the introduction and implementation of prospective payment system, the Medicare costs were directed towards inpatient services increased rapidly. Thus, it can be assumed that the PSS provides incentives which are aimed at constraining Medicare expenditures by reducing the duration a patient takes in a hospital or the costs of service provided that they may include both. Previous researchers in this field also suggested that PSS has greatly influenced the increase in hospital costs relative to the Medicare cost reimbursements.

Medicare Demand

The author will also explore the previous analysis which demonstrated that patients and the general consumers can also be blamed for the growth experienced in the Medicare expenditures. In addition, previous studies brought forward two arguments which were used to provide proof to this argument. For instance, economists observed that the general income has been continuously increasing, as well as, the social secure payment which surpassed the increase in income for the remaining segment of the populations. This is also combined with the increased  living standards of the beneficiaries in absolute terms and relative to the rest of the population.

The author will also evaluate the contribution of the government, for instance, changes in government expenditures which have greatly influenced expenditures on Medicare while the Medicare cost has been been very effective and modest, considering the elderly in the society. Through analysis of the history of Medicare system, very little have been done to constrain Medicare expenditures. The main challenge is an increase in the liability of the beneficiaries. According to Iglehart (1988), the Social Security Amendments of 1972 have been noted to have a limited premium increase in Medicare expenditure increase to the yearly increase recorded by the Social Security benefits, which has contributed to a reduction in the proportion of the expenditures financed through the governments premium revenues.

The author will also explore the efforts which had been put in place to limit the rate of government expenditure. For instance, the promotion of the legislation which permits premiums to increase at a rapid rate more than the social security payments. Moon (1988) observed that in spite of the direct changes experienced in Medicare system, previous efforts have been used by policy makers to constrain the costs which are channeled to cover the expenditures, or the supply side of Medicare system. Such changes have been very crucial, since they directly influence the liability of the beneficiaries. In addition,  this is also experienced on the demand side of Medicare system. According to Moon (1988), the application of the prospective payment system may influence the demand side since it may increase the beneficiary liability. This can be observed in the reduced hospital stays which have been induced by the prospective payment system. Previous studies also indicate that this may serve to increase the average cost of hospital readmissions. The analysis will also focus on other efforts to minimize reimbursement on the supply side which may also be used to limit the liability of the consumers who are the beneficiaries. The author will also explore the argument that  despite  measures which have been put in place to cotrol the supply and demand of Medicare, there are other measures which have been put in place safeguard the liability of the beneficiary.

Other factors which affect the supply and demand of Medicare

This analysis will also explore other necessary factors which influence costs in oter ways, apart from the demand and supply factors. For instance, the author will explore the implications of new technology, commonly referred to as the Medicare’s cost disease. The author will explore the impact of information technology in the delivery of Medicare services to the beneficiaries. Previous studies indicate that there is a link between sophisticated technology and the need to seek for Medicare. Industries, such as, Medicare, have various opportunities which are regarded as cost reducing, which will also be explored because they have implications on Medicare costs; hence, affects the supply and demand. The author will also provide a recommendation on possible research topics which may also go beyond this current study, such as the implication of adopting new technology, bearing in mind the slow productivity in Medicare system.

In this analysis, the researcher will make a comparison between the demand and supply factors. This will be beneficial in the determination of their contribution in the effective delivery of Medicare services. The researcher will adopt this methodology, since previous studies never succeeded in doing this. In addition, the researcher will explore the determinants of the Medicare expenditures by the application of statistical analysis. In order to achieve this, the researcher will determine the implications of enrollment, and other factors which characterizes the Medicare system. This will enable the researcher explore the increase in services provided by each enrollee, which is a crucial factor and an important determinant of the Medicare cost. This analysis will be important since it is evident that the relationship between supply and the demand side of the issue is not  very apparent, due to lack of adequate research. Thus, the author will seek to estimate these factors separately.

This analysis will also explore the dependent and independent variables  to achieve the objectives and goals of the  current study. According to previous studies, it is vital to understand that the costs and physicians will be considered as measures of supply variables since they are used to estimate the payments which are made to suppliers  and may have significant implication to the healthcare expenditures, hence, it woll also be included in the program outcome. This implies that the overall cost of the medical supplies should  be high. On the contrary, the researcher will consider the demand variables which have been observed to influence Medicare expenditures to an extent that they have influence the ability of the consumers to seek for care; however, they are not expected to to have an implication on Medicare cost. On the other hand, this analysis will consider the demand side variety of Medicare to incorporate measures which includes a measure undertaken to control income.

The author  will follow the various steps on this program outcome. The author will begin by evaluating the demand side determinant of the Medicare system. This will be beneficial since physicians have a responsibility to make decisions on the most appropriate medical treatment which is necessary; hence, are most likely  to have impact  over the decisions on the appropriate Medicare. However, based on this application, the findings of previous studies noted that in all aspects of patient decision making, patients have been regarded as independent in their choice of physicians; but the choice of the appropriate Medicare is made by the clinicians. Therefore, the assumption which will be made is that the data will be influenced by its availability.


The limitation of the current study is that there exists unresolved controversy in the existing literature based on the usefulness of  the available data, which are the main cause of a great measurement data. The main reason for this disagreement follows the bias  which may be introduced by the aggregation in the statistical analysis. Thus, this may also be a limitation since it may result into a measurement bias.


This program outcome will examine some of the major determinants which are thought to have an impact on Medical care expenditures. In this analysis, the author will separate make attempts to separate the influence of the demand side factors as well as, the supply side factors. This will be very vital in the analysis of the Medicare since the quantitative evidence on the critical roles played by these determinants of Medical care can be very important in the provision of vital input in decision making. Furthermore, this study will be important since these determinants of Medicare, for instance, the demand factors play a critical role in increasing  Medicare costs. This is true, with particular regards, to the elderly income or the size of the elderly population with the propensity to utilize the Medicare services. The findings of this program outcome will elaborate on the relationship to the prevailing Medical care costs which have been linked to the reduction in Medicare expenditure given each enrollee.

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