4-Demand for Healthcare.pptx

8/17/2019 4-Demand for Healthcare.pptx

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Demand for Health Care



Need Want Demand

Need: What is objectively best suited to their medicalcondition. Commonly judged by a doctor, but doctors areonly as good at judging need as their training, equipmentand abilities allow, and they may be inuenced by factor

other than need, such as ability to pay or the views of theirpatients.

Wants: are what the patient believes to be best for them!li"e a fast acting drug#

Demand: is what they are willing to purchase at a given

price. $his is inuenced by medical opinion, commonly butalso by other factors, such as whether they can a%ord therecommended treatment or whether they are convincedby the advice o%ered.



Needs Wants

Demands



&ur aim is to meet people's health needsas far as possible.

$o do so we need to improve the ability ofmedical sta% to recogni(e and respond toactual needs !through training, support,payment systems etc#

)qually we need to inuence wants anddemand so they overlap as much aspossible with needs !by public educationabout treatments, li"e ensuring thatappropriate treatments are accessible anda%ordable.



Healthcare as an *nvestment

Demand for healthcare is not based solelyon the desire to feel better, but also on the

desire to increase productivity.Consumption Component + *nvestment

Component.

eople who invest in their health, desire to

have more healthy days available toproduce income and leisure.





rice actors

Opportunity Cost:

$he true cost of good or service is the cost

of other goods or services that must begiven up in order to purchase it.

Hence, the cost of ma"ing a health servicevisit i.e total no of resources !cash / valueof time# e0pended for that visit.

*ncludes1 price paid to medical facilities, formedicines, to use services !direct# and in

terms of time !indirect#.



(a) Transportion Cost:

2arge proportion of total bill for getting medical treatment indeveloping world is transportation costs.

3 study in 4ajasthan found that 56 7 of total cash outlays

for treating child health problems in government facilitieswere for transportation.

Cash price of a trip is a small part of total real cost oftransportation.

Distance is inversely proportional to use of health services.

$ravel time is usually much larger percentage of the totalcost of a visit. Hence, patients at free government clinicsare more sensitive to time cost of transportation thanprivate clinic patients.



(b) Waiting Time:

&pportunity cost in waiting for service in a clinic.

-ic" people often accompanied by another individual.

$he cost to the household of consuming healthcare maybe signi8cant in terms of foregone earnings of all peopleinvolved in the visit.

&ften after long initial visit, may come to "now thatsupplies or personnel are not available, so travel had tobe underta"en another day.

2ab tests might require several days, then time for drugs.

or rural people, lengthy waits force overnight stays tocomplete treatments.



Cash Price:

*n some cultures, healthcare is considered of a low quality if itdoes not came up with a price tag. eople feel health isvaluable, hence should be worth some price.

ayment methods also a%ects true cost to patients. 9uali8eddoctors require payment all at once, while quac"s accepts it ininstalments. 3lso, you "now the charges in advance for quac"sso you can budget for them, however, it is contrasted withmodern practitioners who charge for each treatment and totalcost may be unpredictable.

$here are also unreported payments. :overnment doctors andnurses often conduct private practices. Hence, public clinicsmay be used to refer patients to after hours privateconsultations. 3lso side payments or gifts before treatmentsare accepted by them.



atient actors

Health status:

3n individual's demand for medicaltreatment is usually triggered by the onset

of an illness.

3nd the desire to remain healthy increasesthe demand for preventive care.

3geingChronic *llness

*nfectious diseases



Demographic Characteristics:

:rowing population

-ingle parents

Wor"ing women2ater marriages

ewer children per family

:reater mobility

3ll this translates into fewer opportunities fordirect family care, and a greater reliance onmedical providers.



-e01*n early life cycle, both spend same amount on

medical care.

During child bearing years, women spend ;67

more than men do.Women get hospitali(ed more often while if men

get hospitali(ed, they remain so ;67 longer.

<en are able to substitute home healthcare,

having wife at home to ta"e care of them.<en su%er more frequent health losses due to

lifestyle choices, drin"ing, smo"ing and over=eating



conomic !tanding:4ise in income is e0pected to increase the

consumption of healthcare, as the capacity topurchase increases.

However, income may be spent on unhealthfulconsumption which tends to increasehealthcare needs in longer run.

3lso income level are highly correlated witheducational levels, which in turn ma"es aperson better consumer of medical care.

)ducation improves a person's ability torecogni(e early symptoms, when treatment isless e0pensive.

3lso better education has healthier



hysician actors

-uppose you are a buyer in a mar"et with inadequateinformation about the good > service ? @ou are at ris"

Hence, you 8nd someone who "nows better than youabout the mar"et and is willing to ta"e decision on your

behalf, called as agent.3gency relationship.

Clearly, agent has his own economic interest, which heis supposed to ma0imi(e.

*n many cases, interest don't conict hence trying to

ma0imi(e client's interest ? erfect 3gency relationship.-o the agent is perfect if ta"es e0actly same decision

which client would have ta"en if was fully informed.



Aut agents may be imperfect, trying to ma0imi(ehis interest even at the e0pense of client's interest.

3 lawyer deliberately dragging your case.

3n astrologer ma"ing you spend a hefty amount on

fa"e stones.*n healthcare, hospitals and doctors are our

agents. 3 perfect agent who is e0tremelycommitted to provide quic"est possible relief atlowest possible cost.

&f 5 treatments are equally e%ective, physiciancan choose the cheaper alternative or moree0pensive one to buy a new 2)D for his den.



!upplier "nduced Demand:3 situation when the arrival of a new supplier

automatically creates additional demand to feed on.

When a healthcare provider induces more demand in

an unethical way.Demand and supply curve are independent of each

other. 3 given increase in supply results in a newequilibrium reached by moving down a stationarydemand curve. $he equilibrium price falls and more

output is purchased and supplied. $he idea of -*D isthat a given e0ogenous shift in supply cause a shift indemand as providers advise their patients to buymore medical care.



Aeginning with demand curve D6, when supply curve -6,equilibrium is at point 3 and price and quantity are 6 and96.

3 shift in supply to -B would be e0pected to result in a newequilibrium at point A with 5 and 95. $he new equilibrium

will be at a lower level of total spending i.e 5095 6096.<ore physicians and lower overall spending translate into

lower average income unless demand shifts at the same time.

$he demand inducement hypothesis recogni(es thatphysicians rather than allow their incomes to fall mayrecommend additional procedures, perform more surgeries

and schedule more follow=up visits ? 3ll increasing thedemand for their services.

$his shift in demand curve to DB results in a new equilibriumat point C with B and 9B and an increase in total spending.



D#

D$ !$

!#

P# C

P$ %

P& '

$ & #



<echanisms that serve to support demand inducementinclude fee splitting and referral fees that provide a meansfor a referring physician to share in the service charges byspecialists and hospitals. -elf=referral is another practicewhere physicians have patients tested and treated infacilities where they have 8nancial interest. $heir ownershipor commission is prevalent in diagnostic imaging andtesting labs.

We cannot e0pect to reduce the price of medical care byincreasing the supply of physicians, surgeons and pathologylabs. <ore doctors means more doctoring and higher fee.

*t also e0plains why doctors do not move to rural areas evenwhen the urban mar"et apparently gets saturated and lessattractive.



"nsurance and Demand orhealthcare

ncertain health status imposes a number of ris"s onindividuals1

2oss of health

4is" of incurring large 8nancial costs associated with

medical treatments aimed at maintaining orimproving health

Health deterioration can reduce the ability to wor" orproductivity while wor"ing, hence lost wages.

*ndividuals may be less able to enjoy other form ofconsumption !sport etc#.

$hey may su%er the psychological and emotionaltrauma associated with physical deterioration.



3ll these consequences are uncertain in both si(e andoccurrence.

Way to reduce it is, 8nd somebody who will share yourris" in e0change of some price ? :enesis of healthinsurance.

*ts e%ect on demand for medical care1o 3vailability of insurance increases demand for

healthcare by lowering out=of=poc"et payments ? *oralHa+ard. Hence, health insurers o%er Deductibles andco=insurance to reduce this ha(ard

o Deductibles: *nitial amount the policy holder must paybefore insurance coverage begins paying.

o Co,insurance: ercentage of total spending the policyholder pays.



D;6 D6

DB66

o

B>5o

6 9o 9B 95



DB66 represents the demand for medical care withno insurance, paying full price o and demand only

9o.

D;6 is same person's curve with ;67 co=insurance ,and demands 9B at o.

*n the case of complete insurance, demand curvewould rotate to vertical and become Do and quantity

demanded would be equal to 95.

*nsurance to a degree, has distorted the medical

mar"et by creating a bias towards acute careinstead of preventive careE specialty care instead of

primary care and hospital care instead of home care.

4-Demand for Healthcare.pptx

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