Introduction to Economic Thinking
Introduction to Economic Thinking
Aside from the obvious economic regulations of demand for health services, the existence of health insurance has effects on demand for health care goods as well as the services. Health insurance assumes the role of buffering between consumers as well as the healthcare costs goods and services (Folland & Stano, 2007). From the perspective of an insured consumer, healthcare goods as well as the services cost less because of providing full prices; the consumer might simply be in a position of paying, for instance, a co-insurance rate of 20 percent, after satisfaction to the deductible. For example, in case a surgical procedure in its normal cost is $10,000, an insured consumer might simply be in a position to consider the paying cost of $2,000 for surgery benefit because insurance company pays the rest.
Average Price of Health Insurance
Insured consumers generally do not have any sort of sensitivity to the cost of health care goods and services as uninsured consumers. Due to this fact, health insurance presence creates issues and one which can be depicted as moral hazard. Moral hazard can take place in various economic circumstances when consumers obtain goods or services than needed because they do not have to pay the total cost of obtaining the service or product (Albert Ma & Riordan, 2002). In relation to health insurance, moral hazard transpires in an instance when an insured consumer makes use of additional services than would otherwise be the case because some of the costs are insurance covered.
For instance, in case a consumer has $600 health insurance deductible, the consumer pays 100 percent of the initial $600 of the received healthcare. In case there is an amount of 20 percent co-insurance after the service, the consumer has to pay only $0.20 for every dollar they spend after $600. In case, the consumer has a value for a particular health care service such as preventive dental exam at 50 dollars but the cost of that same service is 100 dollars, there won’t be any purchasing done until the deductible is met. However, after the decidable is met, assuming the dental exam covered the benefit, will cost the consumer $20 which is the same as 20 percent of 100 dollars, so despite the fact that the consumer will purchase the service, it will be under the value of threshold of $50.
Supply for Health Insurance
In the same way that health insurance affects consumer demand for medical services as well as goods, is also the same way it might impact a healthcare provider’s readiness to supply goods and services (Ensor & Cooper, 2004). This is a complex situation because on a different view a provider is expected to act as a patient’s agent and therefore is expected to act in the best interest of a patient. In case providers encourage appropriate care only, there are positive impacts for insurance. However, providers can be faced with a financial incentive in either discouraging or encouraging health consumption of goods as well as the services.
Providers could see a recommendation against treatment due to financial constraints resulting from the absences or presence of health insurance. For example, a financial incentive that is realized in managed care can discourage providers from providing recommendations to specific treatments. In addition, in case a patient is both uninsured and not in a position to pay for services from their pocket, providers have a financial incentive not to provide possible appropriate services due the inability to receive payments.
References
Albert Ma, C. T., & Riordan, M. H. (2002). Health insurance, moral hazard, and managed care. Journal of Economics & Management Strategy, 11(1), 81-107.
Ensor, T., & Cooper, S. (2004). Overcoming barriers to health service access: influencing the demand side. Health policy and planning, 19(2), 69-79.
Folland, S., Goodman, A. C., & Stano, M. (2007). The economics of health and health care (Vol. 6). New Jersey: Pearson Prentice Hall.
