Managerial Economics Report: Medical Cost Analysis and Solutions

This report, rooted in managerial economics, investigates the escalating medical costs in the United States, particularly focusing on the period from 2007 to 2020. It examines the factors contributing to the rising costs, such as administrative expenses and excessive treatment costs. The analysis incorporates the concept of the indifference curve to illustrate how consumer budgets and preferences are affected by these costs. The report proposes policy recommendations to address the issue, suggesting that the U.S. senator leverage consumer power and review both private and public insurance policies to manage and control medical expenses. The report references statistical data from Statista (2020) and research by Dickman, Himmelstein & Woolhandler (2017) to support its findings and recommendations.

Running head: MANAGERIAL ECONIOMICS
Managerial Economics
Name of the Student
Name of the University
Author Note

1MANAGERIAL ECONOMICS
Discussion
According to the given statement, medical cost has exceeded the growth rate of consumer
costs over the last couple years. The paper attempts to incorporate the indifference curve to
explain how the consumer’s budget and preference get affected as a result of the soaring medical
cost and proposes its remedial approaches to the Senator of the USA.
Figure 1: Trend in medical cost in the USA (2007 – 2020)
Source: (Statista, 2020)
Referring to the figure 1, medical cost has exhibiting an increasing trend since 2017 and
has recently achieved the growth rare of 6% in 2020. In general, the USA government spends
about 18% of GDP on the medical sector. Overstated administration cost, excessive treatment
cost and per capita medical spending are core factors behind this soaring medical cost.
According to the indifference curve, the utility driven from the medical treatment will be
compromised if opportunity cost is relatively high (Dickman, Himmelstein & Woolhandler,

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2017). Everyone has a limited consumption power in relation to their budget constraints. Utility
level gets maximized through the trade-off between maximizing utility and minimizing
opportunity cost. The IC curve describes how much utility will be compromised in order to gain
more utility from other commodity. Medical cost in the USA is expected to exceed $6 trillion
benchmark within 2027. In this respect, the USA senator is proposed to leverage the accession
power of the consumers for their medical insurances. The insurance policies in case of both the
private and public domain need to be verified to control over the skyrocketing medical expenses
in the USA.

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Reference list
Dickman, S. L., Himmelstein, D. U., & Woolhandler, S. (2017). Inequality and the health-care
system in the USA. The Lancet, 389(10077), 1431-1441.
Statista. (2020). Medical cost increase U.S. 2007-2020
https://www.statista.com/statistics/720767/medical-cost-trend-in-us/