Supply and Demand in Healthcare, Research Paper Example

The healthcare industry is made up of delivery structures comprised of various healthcare facilities such as medical/dental, long-term care, home health, outpatient, mental health, hospitals, and clinics. These facilities provide healthcare services that are governed by private or public agencies (which are overseen by the government) (HRSA, 2013). Within each healthcare entity, many issues can arise that pertain to supply and demand in the industry. For example, hospitals often have a shortage of nurses during business admission seasons. This means that there are only a few nurses available on staff to care for more than a normal share of patients. This is disproportionate and may leave room for problems. Another example of this is a shortage of patient admissions, causing hospitals to have too many empty beds. These two situations cost money and go against the profits of the medical facility.

Effects on Healthcare Profits

According to Yu (2007), supply and demand in healthcare depends on a correlation between health care expenses and per capita income. This means that increases in per capital income causes increased demand. Consequently, the opposite may also be supposed true. For example, with healthcare coverage increases in coverage does not necessarily translate into increased healthcare access for some people. In other words, an increase in demand will not likely increase supply (Peterson, 2012).

Current Healthcare Issue

Currently, one of the most popular topics trending about healthcare in America is Obamacare, which is also called the Affordable Care Act. This healthcare program is designed to allow people with no healthcare to have it (Fox, 2013).

Obamacare represents a major change in government policy and regulations and according to Bevin (2009), experts say that this change could reduce healthcare spending significantly. However, it is also stated that the Obamacare program will eventually cause the government to ration healthcare by reducing the level of services provided within the system. This will be due to how supply and demand interact with each other. Below is an illustration (Bevin, 2009) of supply and demand as it relates to Obamacare.

This chart shows the result of expanding the healthcare market by 50 million people who are currently uninsured. This would cause a shift in the demand curve in an outward direction (shifting the blue line toward the red line), which would cause increases in healthcare costs and supply.

This would result in problems because of healthcare expenditures and the supply of qualified healthcare professionals in the market would not necessarily expand. This means that supply does not necessarily comply with governmental changes.

In regard to the supply curve, the chart shows that it will shift backward along the curve, instead of actually moving (as indicated by the red star in the illustration). The rationing, predicted by experts with this program of nationalized healthcare, will occur because of artificially expanding demand against natural reductions in supply (Bevin, 2009). If this were to happen, then there would exist another healthcare industry problem that would need to be addressed as quickly as possible.

What’s Price Have to Do with It?

Demands for healthcare will decrease in response to rises prices of the healthcare. However, this is relative as people with insurance pay less than those who do not have any insurance. This is known as marginal costs which drives public healthcare spending for those with insurance or governmental health subsidies. The government significantly influences healthcare prices; therefore, supply and demand does not necessarily drive healthcare prices (Creative Commons, 2012).

This is why Obamacare may cause some issues in the long-run. Requiring the majority of Americans to obtain health insurance or be fined is a drastic change in the U.S. healthcare system. This also includes prohibiting insurance companies to turn people away with pre-existing conditions. This is significant because it means that lives will be saved and conditions and complications from them avoided.

The Affordable Care Act (Obamacare) will also mandate an expansion of Medicaid to people who currently do not qualify. The means that many of those who suffer the consequences of not having insurance will be insured (Fox, 2013).

Conclusion

It appears that the current issue of Obamacare has a mixed audience. Some people are against the program because it is believed that it may look all well and good in the beginning, but Obamacare will eventually end up causing more costs and less delivery of care. On the other hand, those who are for Obamacare say it is a way overdue plan to take care of all Americans and not just those with money. Advocates of Obamacare feel that healthcare access is a right and not a perk because one has a lot of money.

As it relates to supply and demand, as mentioned above, may not work so well in the healthcare industry. This is because demand in healthcare could be limitless, particularly if cost is of no object to people. If people did not have to worry about the cost of healthcare and insurance, then they would demand so much more of the system. This would put a strain on healthcare providers, as healthcare specialists would start running scarce and not be able to keep up with the increasing demand.

According to Creative Commons (2012), demand in the healthcare market could be inelastic as well. This means that the amount of demand is not really related to price changes, and this is significant, because this means no problem for a competitive market.

References

Bevin, M. (2009, July 27). ECONOMICS OF OBAMACARE. Retrieved from WND: http://www.wnd.com/2009/07/105088/

Creative Commons. (2012). 16.1 Supply and Demand in Health-Care Markets. In Economics: Theory Through Applications.

Fox, M. (2013, July 10). What’s to come with Obamacare. Retrieved from NBC News Health: http://www.nbcnews.com/health/whats-come-obamacare-6C10553860

HRSA. (2013). What is a Health Center? Retrieved from Health Resources and Services Administration: http://bphc.hrsa.gov/about/index.html

Peterson, L. (2012, June 29). Health care shakeout begins. Savannah Morning News (GA). Retrieved from Savannah Morning News (GA).

Yu, T. H. (2007, May 20). Is health care really a luxury? A demand and supply approach. Applied Economics, 39(9), 1127-1131.