Health care economics

Write 7-9 pages that compare different models of supply and demand, as well as analyze how legislation and reimbursement methods impact supply and demand for health care.

As we take a closer look at the demand side of economics, we will consider how need versus demand is different and how this impacts planning and policy in the health care environment. Demand is typically initiated by the patient; however, provider involvement significantly impacts demand. Since the patient is dependent on the provider for expertise and medical opinion, there is a risk that demand will be increased. This is unique to the health care industry since consumers are not typically as dependent on the supplier of a service in other industries when making a purchase.

Another important driver of demand is the insurance company. Patients initiate the health care service but are not responsible to pay the bill—and this has the potential to skew the demand curve. This is one of the ideas behind high-deductible health care and the effort to control the consumption of services by making the patient responsible for a higher percentage of the overall bill. Finally, you will be offered an opportunity to think about the implications of free medical care and how that may impact the demand for health care services.

Like the demand curve, the health care field presents unique and interesting challenges to the supply of health care. You will be introduced to the concept of economic efficiency and the impact of inefficiencies on cost. The production function will be further explored, which is the relationship between the output of a product or service compared to the resources used to produce it (Feldstein, 2012). Competition, market structure, market performance, and public policies as they relate to the supply of health care services will be discussed as well.

The evolution of health care insurance has impact aspects health care economics such as price competition, medical loss ratios, and risk. As you prepare to complete the assessment consider the role that copays, coinsurance, and deductibles play on the demand curve and reflect on your opinions related to the effectiveness of high-deductible health plans in controlling the demand of health care services.

Reference
Feldstein, P. J. (2012). Health care economics (7th ed.). Clifton Park, NY: Delmar.

Demonstration of Proficiency
By successfully completing this assessment, you will demonstrate your proficiency in the course competencies through the following assessment scoring guide criteria:

Competency 1: Analyze historical perspectives and current trends in the health care industry.
Explain current legislative trends that influence the supply and demand of health care.
Competency 2: Assess the United States health care system from an economic perspective.
Compare and contrast the demand of health care services with the demand of an automobile.
Compare and contrast the supply of health care services with the supply of an automobile.
Competency 3: Analyze the evolving economic reimbursement trends, methods, and technology.
Analyze reimbursement methods that influence the supply and demand of health care services.
Competency 5: Communicate in a manner that is scholarly, professional, and respectful of the diversity, dignity, and integrity of others and is consistent with expectations for health care professionals.
Write following APA style for in-text citation, quotes, and references.
Write clearly and logically, with correct use of spelling, grammar, punctuation, and mechanics.
Context
The basic economic laws of supply and demand do not work the same way in the health care industry as they do in other industries. A few of the contributing issues include: demand cannot be restricted to only those with an ability to pay since health care is considered a basic human right (need versus demand), demand is increased due to a third party (insurance or government) that pays for the service, and our supply is limited based on a highly skilled human resource variable (physicians).

Instructions
In this assessment, you will consider these contributing issues and others that you identify in your research as they relate to the free market. Compare and contrast the laws of supply and demand of the health care industry with that of the automobile industry and explain how the economic structure of the health care industry is different from other industries. Reviewing the following media pieces may help to solidify your understanding of the economic concepts and industries relevant to this assessment.

Health Care Supply and Demand | Transcript.
HEALTH CARE SUPPLY AND DEMAND
INTRODUCTION
As you’ve seen in your readings about microeconomics, price, demand, and supply of consumer goods are interrelated. Each affects the other in a free market. The law of supply and demand applies across the spectrum, whether the product in question is an iPhone or an airplane. As a result, supply-demand curves in consumer goods tend to look similar.

But health care in the U.S. is a different story. Because market realities are slightly different for health care than for consumer goods, supply-demand curves for health care tend to look different.

HEALTH CARE SUPPLY AND DEMAND
At Maximum Supply
You can’t increase supply anymore, because it takes a long time to train doctors and nurses. Especially in periods of high demand, supply is much less flexible than it is for consumer goods.

At Minimum Demand
You can’t decrease demand anymore, because people who are sick or injured don’t have a choice not to consume health care. If they don’t consume it at the point of sickness or injury, they’re likely to consume it later when the condition becomes critical.

Consumer Health Care
Price Transparent Not transparent
Payer Consumer Third Party
Optional or not Optional (with the exception of food) Not optional (care deferred simply leads to more needed care later on)

Supply, Demand, & Reimbursement | Transcript.
Supply, Demand, and Reimbursement
Knowledge Check
What is the impact of an aging population on supply and demand of healthcare services?
Decrease supply
Feedback: As the population ages the number of people leaving the health care workforce will increase, thus lowering the supply of health care services.

Increase demand
Feedback: In general, older individuals require more and more complex health care services

Your answers are b and c.

The correct answers are b and c.

What is the impact of increased consumer earnings on supply and demand of healthcare services?

Decrease supply
Feedback: With increased consumer earnings comes and improved ability to pay for health care services. So, the number of practitioners with available appointments will decrease.

Increase demand
Feedback: As consumer earnings rise their ability to afford health care services will also increase, making the demand for services greater.

The correct answers are b and c.

What is the impact of educational grants to fund provider education on supply and demand of healthcare services?
Increase supply
Feedback: The main impact of an educational program is to improve the health of populations, which would lead to less demand, which in turns frees up resources and appointments at local health care providers.

Decrease demand
Feedback: Education is generally seen as a health promotion/disease prevention approach. Good education typically leads to improved health which decreases the demand for health care services.

The correct answers are a and d.

What is the impact of technology in the health care industry on supply and demand of healthcare services?
Increase supply
Feedback: Technology helps to improve efficiencies for health care providers, this enables them to increase their supply of available practitioners to see patients.

Decrease demand
Feedback: Technology makes it easier for patients to access information or preliminary interactions with health care professionals. This would decrease demand for services overall as patients used technology to answer preliminary health care questions themselves.

The correct answers are a and d.

In some cities, like Denver, the population is growing at a very fast rate because many people are moving to Colorado. What happens to demand and supply in this situation?

Supply decreases and demand increases
The correct answer is d.

Population increases drive demand up as more people are in an area that needs specific products and services. When this population growth is very fast, producers cannot raise their supply production at the same rate and the supply will then decrease.

In some cities, like Denver, the population is growing at a very fast rate because many people are moving to Colorado. What happens to demand and supply in this situation?

Supply decreases and demand increases
The correct answer is d.

Population increases drive demand up as more people are in an area that needs specific products and services. When this population growth is very fast, producers cannot raise their supply production at the same rate and the supply will then decrease.

What kind of solution might you suggest when there is a shortage of physicians and nurses in Denver after the population has grown?

Increase supply

The correct answer is c.

The best solution would be to increase the number of health care practitioners so as to increase the ability of organizations to supply health care services. This could be through driving training efforts or recruiting from areas outside of Denver.

When there are more than enough physicians and nurses in the area to provide health care services, what is the impact to demand and the price of care?

Price decreases and demand decreases
The correct answer is c.

If there are more practitioners than are strictly needed in an area than demand for each organization will typically decrease as patients will have more choices. Additionally, as demand decreased, prices will also decrease to attempt to retain the patient base that organizations already have.

Also, make sure to consult the scoring guide to make sure you are meeting the communication criteria and achieving at your desired rubric level.

Compare and contrast the demand of health care services with the demand of an automobile (Competency 2).
Identify the key contributing factors that determine demand of health care services.
Identify the key contributing factors that determine demand of an automobile.
Compare and contrast the similarities and differences of the demand curve of these two industries.
Compare and contrast the supply of health care services with the supply of an automobile (Competency 2).
Identify the key contributing factors that determine supply of health care services.
Identify the key contributing factors that determine supply of an automobile.
Compare and contrast the similarities and differences of the supply curve of these two industries.
Explain current legislative trends that influence the supply and demand of health care (Competency 1).
Explain how Medicare and Medicaid impact supply and demand of health care services.
Discuss the impact of the uninsured population on the supply and demand of health care services.
Analyze reimbursement methods that influence the supply and demand of health care services (Competency 3).
Identify the stakeholders who pay for health care services.
Analyze the impact of different reimbursement methodologies and payment models on the supply and demand of health care services.
Write following APA style for in-text citation, quotes, and references (Competency 5).
Determine the proper application of APA formatting requirements and scholarly writing standards.
Assess the relevance and credibility of information sources.
Write clearly and logically, with correct use of spelling, grammar, punctuation, and mechanics (Competency 5).
Apply the principles of effective composition.
Determine the proper application of the rules of grammar and mechanics.
Submission Requirements
Written Communication: Prepare an assessment free of errors that detract from the overall message, with writing that is clear, precise, and scholarly. Concepts flow in a logical order.
References: Cite at least three references from peer-reviewed journals, in addition to your text.
Length: Submit 7–9 pages.
APA: Use correct APA style and formatting. You may wish to use or consult the following:
APA Style Paper Tutorial [DOCX].
APA Style Paper Template [DOCX].
APA Style and Format.

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