A Microeconomic Model of Healthcare Systems, Research Paper Example

Introduction

Under the supply and demand model increasing the number of people required to buy health insurance as well as those requiring insurance companies to sell health insurance to people with pre-existing conditions has a significant impact on the  the price of health insurance, but not in the way one might expect a market to be impacted by the traditional concept of supply and demand. The following will take a deeper look at this concept. The following will assess the impact of the health care law on insurance companies and the uninsured, and provide a microeconomic market analysis of the healthcare industry.

In a standard market the quantity of a good and its price stem from, and are based on, the concept of supply and demand. Likewise the price is reduced through competitions between companies within the market (Helligso, 6). Demand is developed based on the taste of the consumer and their specific preferences or available resources,  while supply is based on the quality of the good and the cost it takes to produce the good. Scarcity of resources also plays a major part in the demand of the product.  The price and quantity of a particular good depends on the the point where supply meets demand.  Helligso notes that, a good is considered a normal good, “if a rise in income raises the demand for a good…  But, in healthcare a very different relationship exists—there are two different demand curves” (Helligso, 6). Due to these differences in demand curves the healthcare industry responds differently to the impact of supply and demand. The first difference the author acknowledges is that consumer preference is not relevant within the industry as the first demand curve is not determined by consumer preferences or tastes, but is determined by ailment services, and specificaly just for those who have the money to afford the ailment services. He also notes that the government and population want to meet this theoretical demand and it can be proven by the fact that the general consensus among most countries is that healthcare should be provided for all. This is specifically in reference to those that require care, not just the ones that can’t afford it. If the healthcare market were a standard market in which traditional supply and demand applied, “wealthy, advanced industrialized states would have different healthcare options from poorer, pre-industrial states” (Helligso, 6). The main presmise the authors comes to is the conslusion that access to care would be limited to those can afford care if principles of supply and demand would be applied.

What would happen to the price of health care services when insurance companies cannot refuse to insure persons with pre-existing conditions likely to have? How?

The price of health care services will increase is companies cannot refuse to insure person with pre-existing conditions. This will specifically happen through the impact of policy proposals that seek to enhance “the taxation of employer-sponsored health insurance benefits. Specific examples include the Affordable Care Act’s excise tax, which levies a 40 percent tax on high-priced health plans; the tax exclusion cap set forth by the 2010 National Commission on Fiscal Responsibility and Reform” (Gould, 3). Another example of this can be seen with excise taxes that result in consumers paying higher out of pocket for the cost of comprehensive health care, as they would be less likely to to do this most individuals will seek minimal care plans. The act of forcing people into less-comprehensive healthcare plans places them in a situation where they have to pay higher out of pocket costs but are also in greater risk of having health problems. They are also more vulnerable to having “health-related financial shocks” (Gould, 1). As Gould notes that people place a significant value on protecting themselves from the impact of health related financial shocks. He notes that “people purchase insurance—so forcing them into less-insulating plans has a cost. Shifting health insurance costs onto workers, seniors, and their families may hamper their ability to maintain and secure affordable health care” (Gould, 1). Costs like these have already risen in recent years in response to the Affordable Care Act, which have resulted in an increase in out of pocket burdens for people to pay their medical bills. cent years, resulting in increased out-of-pocket burdens and difficulty in paying medical bills.

Conclusion

In sum, the supply and demand model, entails determinants of supply and demand, and rational self-interest as they relate to certain markets. Specifically in regards to health care, countries implement a diverse range of financing formats in respect to how healthcare is provided. The impact market forces have on these diverse financing specifically in their ability to provide access to quality affordable healthcare is a complex subject that places the healthcare industry within a category that extends beyond the basic model of supply and demand. Some of the diverging forces that work within the healthcare industry to enable financing include free-market healthcare systems which enable providers of medical services to set prices and single payer systems where the government sets the price for the medical service providers to accept. Within single payer systems, are universal single payer and socialized single payer. Data shows that “price negotiation in a universal healthcare system fixes the problems inherent in the healthcare market” (Helligso, 6).The difference between universal payer, as studies reveal is that universal single payer tends to set prices significantly higher than needed, which improves quality but makes for an economic inefficiency. Socialized single payer systems result in lower quality while saving the government money.

Works Cited

Gould, Elise, “Increased health care cost sharing works as intended. It burdens patients who need care the mostay” Epi.org., 2013

Helligso, Jesse Andrew Robert. A Microeconomic Model of Healthcare Systems: From Theoretical to Practical. Diss. University of Central Florida Orlando, Florida, 2007.

Walsh, Kieran. “Medical education: microeconomics or macroeconomics?.” The Pan African Medical Journal 18 (2014).