Health Economics in the United States

What is the role of the government in financing U.S healthcare? How is this role determined?

The role of the US government in financing U.S healthcare is tri-fold. It is determined largely by economic considerations and rationales for government actions. The objectives of government influence in U.S healthcare are as follows (Niles, 2016):

  • Provide and supervise publically financed investments into healthcare in order to assist the poor, who have no ways of receiving quality healthcare otherwise, with the purpose of reducing poverty and improving public health.
  • Promote actions that promote health through the creation of pure public goods and positive externalities that would not be produced by private markets.
  • Improving the function of private markets in order to promote healthcare and avoiding market failures in healthcare and health insurance.

The participation of the government is necessary due to the specifics of nursing and healthcare in general that do not allow it to be effective under the standard free-market approach.

What Is Health Economics and Why is it Important for Nurses?

Health economics is a discipline that concerns itself with various aspects of the economic efficiency of healthcare services and affiliated products (Phelps, 2017). It is a very important discipline for nurses, especially those that occupy financial and administrative roles within healthcare organizations. Since public and private healthcare does not operate on unlimited resources and has to work within various budgetary constraints, it is important for hospitals to spend money efficiently and receive the most benefits per every dollar spent.

Aside from that, nurses benefit from health economics as they allow them to understand and evaluate the rationales behind various government actions, which is the basis for initiating many economic and political initiatives. In other words, health economics is a macro discipline that, while not directly involved in actual nursing processes, affects hospital and healthcare management nation-wide. It allows the efficiency of operation when resources are scarce and ensures the best possible outcomes.

How does health economics differ from economics in other disciplines? How do the social determinants of health affect health economics?

Health economics is different from economics in other disciplines in many ways. This difference is born of the nature of healthcare itself. It is a very chaotic market with various factors distorting the clear picture and making normal economic laws work poorly. The health market is inelastic, as customers would be ready to pay anything when they need healthcare the most. Health economics is based on a series of morals and ethics that do not allow refusing service when a particular patient is dying and is unable to pay for it (Phelps, 2017).

Healthcare insurance is a controversial business model – health insurance companies make a profit by ensuring healthy people who do not need to go to the hospital too often, while at the same time they lose profit by selling insurance to the people who need healthcare the most (Phelps, 2017). Government interventions and regulations affect healthcare more so than any other field of economics.

According to Brucker (2017), social determinants of health affect health economics in a variety of ways. Factors such as income and social status, education, physical environment, the state of health services, and the presence of social support networks can drastically influence costs of medical healthcare by reducing the effects of the majority of preventable diseases (Brucker, 2017). At the same time, the cost-benefit analysis of preventive actions is hard to assess due to social factors being numerous and often correlated, which makes estimations and healthcare demand predictions increasingly complicated. Thus, social determinants are important factors to consider when calculating the best possible values for government healthcare expenditures.


Brucker, M. C. (2017). Social determinants of health. Nursing for Women’s Health, 21(1), 7-8.

Niles, N. J. (2016). Basics of the U.S healthcare system (3rd ed.). Burlington, MA: Jones and Bartlett Learning.

Phelps, C. E. (2017). Health economics (6th ed.). New York, NY: Routledge.

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NursingBird. "Health Economics in the United States." April 17, 2021.