What is the medical care system?

In this modern world, good health is one of the most crucial assets for society. Maintaining good health in the present environment is a big task for both medical care providers and sick persons. It is the high cost of medical care services that makes the whole system more complex. To simplify the medical care system, various entities, such as insurance companies, the government, and investors have become a part of it. In broader terms, the medical care system is the health care system in which various peoples, institutions, organizations, and other resources provide healthcare services to meet the desired health needs of target populations.

Importance of medical care systems

The main aim of the healthcare system is to enrich the health of the population most efficiently in light of a society’s available resources and competing needs. Thus, health care is an important determinant to promote the general mental, physical, and social well-being of people around the world. A robust medical care system ensures a mentally and physically healthy population, resulting in increased productivity and economic growth. So, its main purpose is to avail primary health care to all patients continuously and comprehensively. 

Health economics is also based on the demand and supply relationship. The supply of healthcare services depends on the kind of treatment of the patients' diseases. Furthermore, it contributes positively toward raising the economic growth of a nation in multiple ways. A robust medical care system ensures a mentally and physically healthy population, resulting in increased productivity and economic growth.

The elements of medical care systems

In the medical care system or healthcare system, there are mainly eight elements that complete the entire process. They are as follows:

1. Health and its value

Health valuation is related to the perceived attributes of the health of a person, how they value their own life, and the utility received for keeping themselves healthy. 

2. Influences on health (other than health care)

Various factors that influence the health of a person include occupational hazards, consumption patterns, genetics, education level, income, family background, human capital, physical capital, et cetera.

3. Demand for health care

Both values of health and their influential factors have an impact on healthcare-seeking behavior. Patients are the ones who pay for the health care services and are the ones who need those services. They pay price paid to receive the care that acts as a huge entry barrier for patients receiving care. Private insurance companies add security to the patient who becomes ill by charging a premium of a minimal amount. Public insurance companies are associated with government employees who provide health services to government employees only. 

4. Supply of health care

Physicians, doctors, and nurses are the major provider of both primary and secondary treatment a patient requires. But, these physicians, doctors, and nurses spent a sum of money to receive their academic and physical training so the production of health care has some costs associated with it. Furthermore, with an ever-changing environment, they all require various technological advanced equipment and inputs for the proper care of patients.  

5. Market analysis

Market analysis is done to determine the potential cost and benefit to provide health services. So both cost time cost and monetary cost are considered during the analysis. The waiting to get the treatment and the price rationing mechanism are used to determine different effects in the market of providers of health care services and hospital services.  

6. Microeconomic appraisal

In this approach, the cost-benefit analysis, cost-effectiveness analysis, and cost-utility analysis are done to find alternative ways of delivering care. Hence, the mode, place, amount, and timings of treatment are determined in all the phases of detection, diagnosis, and treatment.

7. Planning, budgeting, regulation, and monitoring

After pursuing all the above approaches, the evaluation process took place to determine the effectiveness of the instruments available for optimizing the system. This approach is used to determine the interplay of budgeting, regulation, manpower regulation, and incentive structures.

8. Evaluation at the whole system level

Different financial methods are used to find equity and allocative efficiency criteria to bear both market analysis and microeconomic appraisal. Thus, it helps to determine both inter-regional and international comparisons of performance.

The Affordable Care Act

The Affordable Care Act (ACA), also known as Obamacare, was implemented by President Barack Obama in March 2010. The main aim to design this act was to extend health coverage to millions of uninsured Americans. To avail of this health insurance, lower-income families qualify for subsidies for coverage purchased through the marketplace. This act expanded Medicaid eligibility, created a health insurance market, prevented insurance companies from denying coverage due to pre-existing conditions, and required plans to cover a list of essential health benefits.

Failure in the healthcare market

1. The problem in this market occurs when decisions are delegated to a person who is supposed to act strictly in the interest of an agent, but doesn’t.

2. Another problem is associated with the limited potential competitors. For instance, pharmaceutical patents are an accepted public policy. Hence, during the life of the patent, no competitors are allowed to enter the market.

3. The limited supply or shortage of physicians in both primary care and hospital-based restricts the competition and distorts the whole system.

4. The problem of asymmetric information exists in this market as physicians have more information about patients’ health. This makes it difficult to have a meaningful market relationship among buyers and sellers that is implicit in the market mechanism underlying the ACA.

Importance of Insurance

Many economists and scholars state that the current healthcare market is inadequate in all countries globally wherein no country has a perfect medical care system. Since maintaining sound health keeps a person spending out-of-pocket, buying insurance is the best solution for this. A person can even pay for health insurance monthly in the form of a monthly premium. This is low-cost and affordable so it improves the well-being of citizens.

Context and Applications

Medical care system is significant in the professional exams for both undergraduate and graduate courses, especially for Bachelors in Commerce, Bachelors of Arts in Economics, Bachelors of Business Economics, and Bachelors in Environmental Science.

Practice Problems

1. Which one of the following is not part of the market failure?

  1. Market equilibrium
  2. Asymmetric information
  3. Moral hazard
  4. Imperfect market

Answer: a

Explanation: Market equilibrium is determined by the intersection of the market demand and supply curves. So, it makes the market clear.

2. What is the major problem in the medical care market?

  1. Limited availability of physicians and other staff.
  2. High price of medical treatment.
  3. Lack of quality treatment.
  4. All of these.   

Answer: d

Explanation: The health market suffers from many problems like low-quality treatment, high hospitalization and care charges, and limited availability of doctors and other caring staff.

3. The main purpose of ACA is _____.

  1. To avail housing and food facilities.
  2. Aware citizens of a balanced diet.
  3. To provide extended insurance coverage to uninsured Americans.
  4. None of the above.

Answer: c

Explanation: The affordable care act was initiated to reduce to burden of total health care expenses from patients to insurance companies.

4. Like other markets, the healthcare market is also based on cost-benefit analysis. In this market, the cost is related to ____.

  1. The fees paid to the physician.
  2. The expense that a patient incurs in terms of both explicit and implicit cost.
  3. The money is forgone to receive healthcare services.
  4. Time spend to make a person healthy again.

Answer: b

Explanation: It includes both monetary and non-monetary spending.

5. Which of the following is related to asymmetric information?

  1. When one party has higher information than the other.
  2. When one party takes advantage of another in making a decision.
  3. The demand for a product is higher than its supply.
  4. The supply of a product is higher than its demand.

Answer: a

Explanation: When either the buyer or seller has a higher knowledge related to a given product/service than another, there exists information asymmetry.

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