SUPPLY AND DEMAND OF HEALTHCARE
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Introduction
Health economics is a branch in economics that addresses effectiveness, efficiency, values, and behavior in health and healthcare production and consumption. It is an essential branch because it promotes positive health outcomes and a healthy lifestyle by studying healthcare providers, managed care, hospital and clinics, and public health promotion activities (Guinness & Wiseman, 2011). Like most of the other markets, healthcare is also affected by the supply and demand of the services. However, healthcare prices are not necessarily determined by supply and demand.
Basically, economics defines demand as consumers’ desire and ability to pay a price of goods or services. Usually, when the prices increase, the demand decreases while a decrease in price increases the demand. However, in healthcare, an increase in demand does not always mean a decrease in prices. This is because, currently, healthcare demand is increasing while the prices are still high. For instance, the United States of America reports an increased rate of obesity; this means that there is a demand for obesity treatment irrespective of the prices. This means that an increase in demand for healthcare can be influenced by the prevalence of initially avoidable healthcare conditions.
Nonetheless, for production to occur, there needs to be resources such as raw materials and labor that are later transformed into goods. The resources include labor, capital, land, and raw materials. In healthcare, the production process is influenced by other mediating factors such as ownership to result in quality goods and services ready for consumption. Often when there is a gap between the supply and demand, several issues are bound to arise, such as delay in meeting patients’ needs, waste generation in the system, and increased healthcare costs.
The Demand for Healthcare.
The law of demand states that an increase in prices causes a decrease in demand. However, this may be affected by health care insurance. When patients have healthcare insurance, the prices might be much lower than the actual cost of healthcare. This allows one to purchase multiple health services because health insurance companies minimize the prices. Therefore, depending on the number of patients with health insurance, the prices might be higher, with the demand still high (Henderson, 2012).
Additionally, whether the prices are high or not, when one gets sick, he/she has to seek medical attention. Even though health care disparities exist, a larger percentage will always seek health care even if it means trading off some precious items to afford healthcare. This is evident through the various articles of people running bankrupt due to medical expenses and organizing funding activities for people who cannot afford healthcare.
The demand for health care is also influenced by its necessity in human life. It is a basic need for everyone, and people are working hard to invest in it. No one likes being sick, and therefore, if there are medical processes that could keep one safe from future healthcare conditions, then most tend to invest (Phelps, 2016). For instance, vaccination is one of the means that helped curb certain illnesses and wipe them off in particular nations. Illnesses like polio are no longer rampant because people chose to invest in vaccination and reduce their children’s probability of getting sick in the future. There is adult vaccination that people are investing in to avoid future treatment costs.
The demand for healthcare increases with aging. With an increased number of the aging population, the demand for health care might increase. This is because the aged are much more vulnerable to health conditions than the younger population. Irrespective of the prices, the aged are likely to consume more health care to improve their health.
Demand for health care is also affected by available information. This is because an ordinary person may not quantify the quality of healthcare services provided. Therefore they will depend on the information made available by health care providers, health insurers, and experts in the medical field. From the information provided, individuals will try to understand and use the advice to make informed decisions. Patients will always use the medical field experts with the thought of them having the best interest at heart for their patients. The same applies to the health care insurance companies where one would find more than 20 health care options to choose from (Henderson, 2012). Such can be overwhelming to a large population because of the complexities that come with the insurance offers. Therefore individuals would often opt for the health care insurance option that the healthcare is advocating for.
Unlike other goods, health care has unique characteristics. The first one is that healthcare is not usually demanded because it pleasurable, but it is demanded to improve one’s health. It cannot be traded, less tangible than other goods, and cannot be passed from one person to another even though diseases can be transmitted. Additionally, it is difficult to quantify the quality of service in health care before experiencing it. It is not like a car or an electronic that you can for specific details to determine its quality. In healthcare, one has to go through the treatment process to determine the quality based on the outcome.
Supply of Health Care
Usually, supply happens after production. Production is influenced by factors such as labor, capital, and intermediate inputs. In hospitals, the labor includes surgeons, doctors, physicians, technicians, nurses, orderlies, administrative staff, janitors, and other workers, while the capital entails the hospital building, diagnostic tools, and hospital beds. On the other hand, intermediate inputs include pharmaceutical products and wound dressings.
Healthcare is one of those industries that never strike an equilibrium between the service provider and the patient. In most cases, the patients are more than doctors and other healthcare providers (Phelps, 2016). Becoming an efficient and effective doctor requires skills and knowledge. This means the doctor must go through training for multiple years, go through internships, and start operating in the hospitals after graduation. Generally, in most countries, doctors have to receive a license to practice medicine. As stated earlier, it is challenging to quantify the quality of service and, therefore, the need to have the doctors certified by the government after fulfilling different requirements.
Healthcare is entrusted with so many people’s lives, and therefore without qualified doctors, the supply of health care could be jeopardized. The more qualified doctors there are, the better the supply system in healthcare. Unfortunately, studies lately indicate that most of the doctors have received undertraining that affects the quality of service provided, leading to poor health outcomes and decreased demand levels. Doctors have a critical role in ensuring that the supply of health care is effectively maintained. No one wants to entrust his life to a quack.
Additionally, the other healthcare workers, such as nurses, dentists, and pharmacists, play an essential role in achieving the medical goal. For instance, the nurses are not meant to replace the doctors but compliment them and work together to improve the patients’ health. This calls for enhanced skills and knowledge. A smart, skilled nurse supplies her skills to the patients effectively, thus improving the health of various individuals instead of mortality rates. Skilled and trained medical workers should not be biased too. With the current global pandemic, it is unfortunate that racial disparity is heightening in the medical field (Tai et al., 2020). This has led to increased mortality rates among the blacks, which is against the Hippocratic Oath. When doctors are biased against a particular race, then the nationwide health status might not improve.
In health care, capital is also essential. In this case, capital entails hospitals, nursing homes, clinics, doctors’ offices, and other healthcare facilities. Compared to other facilities, hospitals employ much medical staff because they are large and likely to attend to a higher population than others. The availability of medical facilities in a region ensures an adequate supply of services. However, this is also influenced by the availability of other resources needed for treatment. Diagnostic tools and hospital beds are factors that could influence the quality of service offered in the hospital. They are part of the capital stock that determines the quality of service offered.
Another capital factor that influences the supply of health care services is ownership. Health facilities are usually public or privately owned. The public hospitals aim at improving individuals’ health while the private-owned are profit-oriented. This means the accessibility of medical services can be different from the economic aspect. With private hospitals, access might only be for the few financially stable people in society, while in the public hospitals and facilities, more individuals could access the facility. Nonetheless, how they are differently run significantly influences their service delivery or supply of services.
Health care supply cannot be complete with capital and labor only, and therefore, intermediate inputs are also needed. Mostly the intermediate inputs revolve around technological processes and procedures (Henderson, 2012). With advancements in technology, most of the tests have been facilitated with different machines, such as X-ray machines, high-speed drills, and MRI machines. Compared to the past, such machines were not as advanced as they are lately, which has facilitated the provision of health care globally. It has made treatment efficient and effective. Also, technological advances have fostered innovations because surgeons can now perform some of the operations that were not performed in the past.
Health care supply is facilitated by the inclusivity of three factors, capital, labor, and intermediate inputs (McPake et al., 2020). When one is missing, the quality of health care offered might not be offered when all are present. However, labor comes with different factors tied along with it, such as professionalism, quality training, and sufficient staff, skills, and knowledge in the medical field. With the capital such as hospitals, geographical location is also essential. For instance, rural areas do not have much of the health facilities as in the urban areas. Though the population difference is significant, the rural areas’ health care facilities are not equipped or adequate for the people within the location. This leads to a limited health care supply. Additionally, technological advances call for an adjustment in knowledge. Without adequate skills and knowledge, technology may be of no use in health care, creating a significant gap in health care demand and supply.
In summation, it is clear that the economic demand and supply pattern does not entirely govern the health care system. Different factors come into play in determining the demand for health care and the supply of the same. Health care also has unique characteristics that differentiate it from other products. It is not standardized or equal to everyone because people are treated differently. Whatever may work for someone else might not work for another. Health care cannot also be transferred or evaluated before using it to determine the value.
References.
Guinness, L., & Wiseman, V. (2011). Introduction to health economics. McGraw-Hill Education (UK).
Henderson, J. W. (2012). Health economics and policy (with economic applications). Cengage Learning.
McPake, B., Normand, C., Smith, S., & Nolan, A. (2020). Health economics: an international perspective. Routledge.
Phelps, C. E. (2016). Health economics. Routledge.
Tai, D. B. G., Shah, A., Doubeni, C. A., Sia, I. G., & Wieland, M. L. (2020). The disproportionate impact of COVID-19 on racial and ethnic minorities in the United States. Clinical Infectious Diseases.