Nursing and Economics: The Impacts of the Economic Principles

Subject: Nursing
Pages: 11
Words: 2884
Reading time:
10 min
Study level: College


Economic principles are statements explaining how individuals make decisions, how economic actors interact; it generally explains how the economies work or should work as a whole ( Slembeck, 2006). According to Mankiw include; how people make decisions – trade-offs, cost choices etc.; how the economy operates as a whole – trade and welfare economics; and how people interact – country’s living standards, and level of production, prices of commodities/services, monetary and fiscal policies tradeoff between inflation and unemployment. ( Slembeck, 2006).

These principles affect the allocation of health care resources, the cost of health care services, the availability of the health care resources and the choice of the services.

The economic principles do affect nursing not just within the health care system but also outside the health care system and usually have an impact on decisions on lifestyles of individuals, e.g. the feeding habits, drugs usage, the kind of shelter people have acquired and so on. Such decisions generally impact the health of the individuals.

The Financial resources in health care are spent by the government programs such as Medicare and Medicaid that take a reasonable amount while the rest is spent through private and out-of-pocket spending (An, Saloner, Tisdale and Ranji, 2009).

Consumers need to be concerned about the cost of the health care services, the insurance premiums have greatly shot up and it is become a problem for most people to pay for them. Research has now shown that health care costs are becoming a nightmare for most people to meet and it is not only for the insured but also for the insured.

The health care money is normally spent on prescription drugs and technology, on chronic diseases, administration expenses and on the aging population.

In order to contain the costs within the levels of affordability by a number of people suggestions are being made to have modern information and technological means of service provision included in the provision of the health care services. There are also recommendations to improve the quality and efficiency of the health care services provided, to improve the rates of compensation of the health care providers, to focus on the prevention of the diseases, to increase the consumer involvement on the purchase of the health care services and altering the task preference for the employer.

Economic Principles in healthcare

Making decisions means giving up one item for the sake of another ( Slembeck, 2006). This at times happens as a result of limited resources hence making it difficult for an individual to acquire all the items he or she desires and as result the individual ill be obliged to trade off one item for the other. Rational decision making therefore requires that the individual decides on what he or she feel meets best his requirements.

It is important that one considers a critical look at the cost of what he or she is purchasing and its worth. This implies that one should be able to reason rationally while making a decision about a given product or service for purchase. At times, people make serious mistakes by purchasing a given commodity without carrying out an assessment to determine whether the marginal benefits of a given service are greater than the marginal costs ( Slembeck, 2006.)

Incentives are normally inducements offered to people in order to influence their decisions. Most people have been known to respond positively to incentives. For instance, when an item or a service is offered with an added benefit then it is likely to attract people’s attention unlike the ones with no incentives added to them.

Trade allows the exchange of commodities, services and ideas. It also enables people to specialize in their areas of interest; here they are likely to obtain optimum results and generally improve the living standards of people ( Slembeck, 2006).

Markets are very important in organizing the economic activities as they allow people to exchange goods and services.

What can be done to contain the costs cont’

The market outputs can be influenced by factors such as pollution, inflation or even monopoly. The government can change these through public policies which may be in the form of regulations to stop or control such factors ( Slembeck, 2006). The government normally comes in especially when such factors become a great threat to the businesses and is likely to interfered with the livelihood of the people.

The living standards in a given country is normally determined by the country’s ability to produce goods and services required by its citizens ( Slembeck, 2006). For a country to improve the living standards of its people, it will therefore need to provide it’s people with the goods and services that they need. If the needs and the requirements of the citizens are not meet then it means that the people will be living under poor conditions for instance when if the country is unable to provide its citizens with the basic medical care and education then the living standards in that country ill certainly be low.

When a country prints so much of its currency thereby causing a lot of money to be in a circulation, the prices of the commodities are certainly set to rise since much more money is needed to buy the same commodity that as earlier on being bought with a smaller amount of money ( Slembeck, 2006).

There is normally need to reduce inflation so as to be able to understand the short term effects of government spending, changes in taxes and monetary policies. Such an action is likely to cause temporary unemployment since the financial firms will not have enough funds to lend out and even the employers may not have enough funds to support their staff. It is therefore important that such a trade off of inflation for unemployment is considered as it is normally bound to results in an improvement in the economy in the long-term.

Influence inside the health care

The economic principles affect the allocation of the health care resources to various regions by the government. Most governments tend to provide health care services to its people. For instance in the universal health care provision system every citizen is covered by the government. For the government to improve the living standards of its people, it should be able to provide quality health care services to all its citizens as this will ensure that everyone has an access to medical care. In countries here the the medical cover is employer based like in the United States, for the poor ho can not afford the premiums are normally unable to access health services and this lowers the living standards of such citizens.

The economic principles also affect the also affect the cost of health care services in the sense that the government at times put up some regulations to control the health care system, for instance the regulation by the American government to have Medicaid and Medicare as the sole health providers, has given them monopoly in the field and this has resulted into increased care costs.

The type of the health care services available to the consumers are basically governed by the health care regulations that tend to limit the care services one can gain access to. The citizens have been accused of being irresponsible by asking for unreasonable medical covers just because they are covered by their employers. It may be important that rationality is employed in the access to the health services one can gain access to as this may also help in reducing the costs.

The principles affect the choice of care services in the sense that the health care system has rules that prevent the care giver from giving the consumers the ideas on the choices of care services they can access. The consumers are therefore left to accept hat is offered to them, this could be because the government is only offering the consumers the services according to the amount of resources they invest in health care. Since this is never much, the government may not be willing to allow people make a choice since it may cost much more than hat has been paid for.

Influence outside health care

The availability of a market for a commodity will increase its production. For in instance in the at times there could be some medical services that are really sourced for by consumers ad this has resulted in a reduction in the provision of such services or gadgets by the industries.

The trade off principle at times forces consumers to go for substandard or even harmful choices due to financial constraints. This is likely to influence nursing in that when people, for instance, are forced to go for unhealthy foodstuff unclean water for consumption due to financial difficulty, this will resulted in nursing being affected too.

A number of the principles impact on the lifestyle of the people. For instance unemployment due to reduced inflation or trade offs will tend to determine one’s living standards and this ill definitely determine the number of people ho access the health care services.

Unemployment due reduced inflation or the governments failure to provide jobs for its citizens make people unable to afford higher living standards and this may result into such individuals being predisposed to poor health conditions, this too will impact on nursing.

Who holds the purse strings in health care

Medicare is the main health provider in the United States and it is normally run by the federal government. In 2007 Medicare and Medicaid were showed to be the main beneficiaries of the health care resources. They infact spent about 46% of the total amount (An, Saloner, Tisdale and Ranji, 2009)

Medicaid just like Medicare are the major beneficiaries of the public health expenditure. Medicaid expenditure though has been shown to be growing at a slower rate than private spending on health care (An, Saloner, Tisdale and Ranji, 2009).

In 2007, private spending on health care services was shown to be about 42%. This means that a large number of people are out to source for their own medical care services. It could mean that a lot of people are not covered by the national. health care programs (An, Saloner, Tisdale and Ranji, 2009)

Out of pocket spending was shown to be about 12% in the year 2007. This also means that a substantial amount of the population are not covered by any of the health care providers. (An, Saloner, Tisdale and Ranji, 2009)

The need for concern by the nurses

The nurses do need to advocate for the provision of quality health care services to the consumers.The health care system should be able to provide the nurses with suitable working environment. The government really need to incorporate the use of modern technology in the medical sector, this is important because it will enhance efficiency in the care provision and it will also increase the speed of service.

The nurses also need to advocate for the provision of long term care to patients with long term illnesses. This is important as it will ensure that the patients health are kept on check so as to prevent dangers.

The long term care is normally very expensive due to the fact that that most of the illnesses normally require a lot of expensive medical appliances medical appliances and medication. This therefore means that a lot of funds are normally needed in the provision of such services.

Most of the nurses are normally overworked and at times the amount of wages they are paid does not really measure up to the amount of work that they do. The nurses should therefore advocate for a good pay for the services they offer. It is also important that the nurses are allowed the capacity to make important medical decisions without being compromised by the regulations of the health care system.

The nurses do need too to be concerned about the shortage of the nurses as this first of all is derailing the nursing profession by having most of t he nurses employed on contract basis. This also makes the already employed nurses to be overworked while there is a large number of trained nurses in need of employment.

The need for concern by the consumers

The premium costs have greatly shot up therefore making it difficult for a numbed of people to pay for them. This is a great concern since a number of people are nolonger able to afford the costs of the premiums and as a result making it impossible for them to afford health care services. The consumers really need to be concerned about the continuously augmenting costs of the health care premiums (An, Saloner, Tisdale and Ranji, 2009).

The value of the deductibles have substantially gone up and according to an assessment done, a number of people are greatly dissatisfied with the cost of the deductibles on their health care plans. If this isn’t addressed then a number of people will end not sorting the medical cover and this is likely to lower the people’s health status (An, Saloner, Tisdale and Ranji, 2009).

The people who are not covered are forced to source for the medical services out of their pockets. The cost is still high since the medical services are generally high and thus sourcing medical services becomes a bitter pill to swallow not just for the uninsured but also for the uninsured.

A research done showed that more than half the people interviewed expressed dissatisfaction with the insurance coverage. Some ere not happy about the fact that the premiums do not cover all their children’s sicknesses hen they are unwell. The other group were unhappy with the fact that the cover does not include the children’s medication. This too needs to be a great concern to the consumers since hat is importance of offering a person medical services without medication, ho will the conditions be treated without medication.

How the health care money is spent

The spending on good quality drugs and state of the art technology could be the major reasons for the high cost of health care spending. These may include things like EMR( electronic medical registers).

Chronic diseases account for a higher percentage of health care illnesses in the United States and as a result a lot of the spending of the health care resources is on the management of the chronic or long term illnesses. This could be because such illnesses require nursing homes and continuous use of drugs and medical appliances to manage such illnesses.

A community with a large number of aged people experiences a lot of medical problems. This is because old age comes with a lot of medical challenges and a lot of medical attention is needed by such people.

An analysis done showed that the health care systems spend about 7% on administration. This may for the purposes of billing or marketing. The research showed that the percentage is much lower in the Medicare program that uses about 2% only.

What can be done to contain healthcare costs

It may be important that the health care systems consider investing in modern technologies and communication systems. This will increase the efficiency and quality of the care provided. It will also reduce the cost of care in the long term.

An improvement of the quality and efficiency in care provision will help in eliminating or reducing the provision of unnecessary care and this will in turn reduce the cost of care resulting from the unnecessary care provided.

It is crucial that the compensation rates for the physicians are revised such that the emphasis is laid on the quality of work rather than the volume. This will help prevent the provision of unnecessary care and as a result reduced care costs.

Government involvement is crucial in controlling the cost of care and this could be seen from the success of Medicare that is under the control of the federal government.

In order to reduce spending on care it is important that the emphasis is laid on the prevention of the diseases rather than treating them once they are established.

It may be crucial that the consumers of the medical services are involved in the purchase of such services. This is because when the consumers are informed on the real costs of the care services then chances are high that they will tend to be more sensitive on the prices of the services they acquire and as a result this will save individual and employers a lot of money on unnecessary care.


Economic principles are important in health care since they govern the operations of the health care operations by; determining the supply, availabity, choice and cost of health care services.

They normally define the direction taken by nursing by determining the employment and reimbursement of physicians and cost of the health care services.

The concerns in nursing at the moment include the shortage of nurses, the high cost of health care, lack of modern technology in the health care system, to focus on prevention of the diseases and to involve consumers in purchasing the services.

The solution is therefore to advocate for the employment of more physicians, control of the health services costs, introduction of modern technology in running the health care system


An, J. et al. (2009). Rising Health premiums growing problem for consumers. Web.

Langer, G. (2004). Health care pains: Health care growing concerns fuel cautious support for change. Web.