What will you do if you feel sick? Most of the people may go to hospital and seek the doctor. The demand leads to an industry–Medical care. Many people do not feel unfamiliar with medical care, but how about in economy view? In the market of the medical care, both supply and demand of the medical care, technological change, and the price of medical care have strongly effect in the whole industry.
Health care is the diagnosis, treatment, and prevention of disease, illness and injury, with the practitioners that providing primary care, secondly care, tertiary care, and public health. For example, people who undergo physical therapy or buy Tylenol for headache are both kind of medical care. Medical care keeps people’s health and prolongs people’s life. In recent years, people begin to realize the importance of health, the demand of the health care has increase, which mean the medical care is becoming more and more popular in our daily life. So when people start to demand medical care? After I do the research online, I found that most of people seeking for medical care only when they feel severity. When they get ailment, we will not seeking the doctor. I think this phenomenon is related to the opportunity cost, people unwillingness to the hospital when they only get ailment, it may waste time and money.
Medical care is very different between other goods or services in economy. Nobody willing to buy a drug when they are healthy, the demand of the medical care greatly depends on people who are healthy or not. Comparing with the other goods or services, health care is often considered to be an important determinant of the health of the people. In addition, health care requires more specialized knowledge and fund than the other industry. There is a large spending for the health care every year in every country cause of the professional, professed machine and materials. In American, Total expenditure on health per capital is $7960 in every year, which expenditure as 17.4 percent of GDP and Norway spend $5352 per capital and as 9.6 percent of GDP (NBC News). From the research, we could see that the expense of health care is greater than other many industry. Moreover, sometime medical care can be regard as an investment. People using medical care to prevent or stop disease exacerbation, it can save money and get a better health in the future.
Every market has demand and supply, market of the medical care is no exception. The supply of the market is who offer goods or services, such as Pepsi produce soda, so Pepsi is the supply of the soda. Demand is the customer who wants the goods or services. If you want to buy a soda, you are the demand of the soda in the market. So in the market of the medical, supply is the output being produced using a labor, capital, and intermediate inputs. For instance, hospital building, bed, diagnostic tools and the labor in a hospital such as doctor and nurse who offer health care to people. Demand is the patients or the people who want the health care.
In addition, paying the medical care is also different with other goods or services. In demand side, customer will buy the goods pay in once or Installment. When we buy an apple or get a haircut, we may pay the cash or credit card by ourselves, but most of us pay our medical care using insurance card. In America, health insurance is requiring for many groups. Such as student, employer, and employee. Mandated health insurance have a lot of benefits, people can get highest hundred percent cover of the medical care fee. As we know, medical treatment is very expensive in America. Insurance can let medical charges affordable. On the other hand, having insurance means patient only need to pay a part of the medical fee or for free. This phenomenon means that most of the patients willing to pay their medical fee no very matter whether they have high or low income. So we could see that the medical care is not a inferior good. The definition of the inferior good is the goods or services, which will decrease quantity bought as customer’s income increase. Also, the price elasticity of demand for medical care becomes inelastic. In this condition, hospital can raise the price of medical to achieve more profit. Berceuse people who having insurance cover does not very care about how expensive the charge are, in general, medical fee can be cover about 85%. Otherwise, when the patients are suffering from several diseases, they will ignore the pressure that is brought by the price and purchase expensive curative medicine. However, everyone wants to be healthy instead of sick. In the other word, the demand for health care is in part an expression of this preference. High preference will increase demand of medical care. Also, there are a lot of related goods in medical care industry. For example, mouth-muffle. Because the masks in hospital are disposable, and most of the medical staffs are require to wearing. Labor’s number in hospital relates to how much masks they need. Disinfectant water is also the related good to medical care. When the supply of the hospital building, bed increase, will cause the demand of disinfectant increase.
In the supply side, doctors is once of supply in medical care. Doctor is a labor who provides diagnosis service. Same as nurses, they take care of the patients and injection. But in the labor market of medical care, there are the barrier to entry this industry. Being a doctor or a nurse need a lot of professional knowledge and degree, it may take third to five year for study. The opportunity cost of the doctor or nurse is very high, so they will not change their industry easily. According to the table from National Center for Health Statistics, Health, United States, 2007,
Type of Health Service Site
2000
2003
2006
Physicians (offices and clinics)
1.4
1.7
1.8
Hospitals
5.2
5.6
5.7
Nursing care facilities
1.6
1.9
1.8
Total
12.2
13.6
14.4
The table Show that the breakdown of employment by health-service site for three years: 2000, 2003, and 2006. Here are some types of health sites. We see that the number of workers in this industry has increased from 12.2 million in 2000 to about 14.4 million in 2006. This increase is typical of many service industries and contrasts with manufacturing, where the number of workers employed is declining.
In technology, the development of technology has a large extent facilitated our daily lives. Now, we can use smartphone or computer to check and identify what disease we get when we feel uncomfortable. Even we can see the doctor online to treat the disease. Some of the demand can be supply it online, then it can be decrease the hospital and doctor. Makes maximum utilization of resources. Otherwise, technology develop solve many difficult miscellaneous diseases. Smallpox, a contagious disease caused by the variola virus, was the first disease to be eliminated from the world through public-health efforts and vaccination. It was the miscellaneous disease in the early years, but along with the technology, We invent vaccine of smallpox and conquer it. Also, the technology develop invent many useful medical machine such as X-ray can be used for fracture, tumour which in human body and we can not see by eyes. Technology makes medical care become more efficiently and lower expense. In addition, technology makes information of the market more transparency. People could check and share the information on the Internet, thus choosing the better hospital and doctor or price. On the other hand, technology develop could lead to specialization, different disease need different machines, different professional doctors. Companies need a large amount of investment for drug or machines research and development, if they have limited resource, the companies will tend to specialization.
Based on the demand and supply side, price determination is depend on the supply and the demand, although the consumer paying the price for the treatment are lower than the actual price cause of health insurance, they still need to pay a part of price, they need to pay higher price when the medical fee is higher. So base in price determination rule, when the demand increase will influence price increase, or supply decrease will also cause price increase. In usually, there are many patents in medical care, some of the health-care suppliers have significant market power. It means some parts of medical care that have patent are monopoly, which is a price-setter. However, health-care prices are not necessarily determined by supply and demand in practice. Government always influence on price. For instance, government will set a price ceiling to let medical fee affordability. Most of the hospitals are establish by government or no-profit organization, so they have not incentive to raise price to get the profit maximization. Moreover, the medical care fee could not receive all amounts from customer, insurance companies will also pay the fee to the hospital and doctor. Sometimes, people can also get the medical coverage from government, which is kind of subsidy. As the technological develop, we could get much information of the hospitals easier and faster. We could check the services and the Quality Reports of each hospital and price online if we want. According to the website –price point, we could find the price of the services very clearly. For example, Aurora Memorial hospital of Burlington that you treat Foot sprains & Strains (845.1), it will cost you the lower charge $722 to the higher charge $1012, if you want treat superficial injuries (910-919), you may pay $332 to $2070. Using the information above, the market of medical care become an open market, the hospital becomes price taker, if the hospital raise price to earn more profit, it will suppose to lost all of the demand if all hospitals are providing the uniform service.
In the price side, over last ten years, “the average cost of a family health insurance offered by an employer is $13,375. That’s up 131% over the last decade—a period in which inflation rate only 28%. And one estimate says that if costs continue on their current trajectory, premiums will go up another 166% in the decade ahead” (time business). First of all, as we can see, inflation rate of the last decade is only 28%, inflation increase will increase cost, purchasing power decrease, company need to raise price to maintain the same quality goods or services. Second, people become more and more serious about their health, demand increase will cause price raise up when ceteri airbus. Third, efficient treatment cause higher cost, professional machine have a large expense of R&D. Cost increase for a good will lead to supply decrease, then the price will increase. On the other side, young adults are do not buy insurance in past because they are less likely to work for employers who offer coverage, they may not qualify to get a public programs such as Medicaid; and the private insurance plans may be too expensive for student who has loan payments and credit card debt. Some of the young people willing spend their money on the other things instead of getting health insurance. To discourage that attitude, the Finance Committee bill will fine individuals who do not purchase insurance. It also causes demand of the medical increase, so the price and the quantity will increase. In general, the price, quantity of demand and supply are all increase in over last year.
In sum, medical care is developing with the technology, and most of their price is control by the government. Medical care protects our health, treatment and prevention the disease. Medical care may be a standard for people health or not. High medical care spending mean people are seriously about health, it also an index of people’s material life.