The health care delivery system in the United States is unique when compared with delivery structures in other developed countries. In most developed nations, the government manages the national health insurance programs. These programs are financed through taxes collected within the country. Approximately all the citizens of such nations are entitled to insurance services paid by the government (PAHO, 2014). In America, such an insurance policy does not exist. There is a slight difference in the health care structure of various states in the country. This paper is set to analyze the health care structure, compare, as well as contrast the major determinants of the healthcare market power. Besides, it analyzes the major factors that determine prices, supply, as well as demand. It also covers the quality of care and providers compensation. Further, the paper evaluates both the positive and negative aspects of Health Maintenance Organizations (HMO), managed care, provide an analysis of who should bear the financial risk in capitation payment system as well as assess the efficiency of economic incentives available to providers.
Virginia State is within the United States of America that is situated within the South Atlantic region. It is the 37th largest state covering approximately 40,000 square miles. It has a population of nearly eight million people. It is one of the fastest growing states in the U.S (Denton, 2014). Moderate growth in the economy is experienced in the state. The Gross Domestic Product of Virginia was 445.9 billion U.S. dollars in 2012 (Denton, 2014). The economy of Virginia is regarded the tenth largest economy in the United States. The population health of Virginia is comparable to that of the country. United Health Care Foundations report ranked Virginia as 26th regarding overall population health in the United States (Gray, 2013). Population health in Virginia varies from county to county with counties West of Richmond performing better than the cities of Norfolk as well as Richmond.
The Virginia health care structure has a network of private clinics, public hospitals, public health professionals, physicians, as well as health insurance companies. The system has levels that provide different kinds of services. The level of care refers to the type as well as the extent of medical care that a patient receives (Boccia, 2015). Currently, Virginia has approximately seventy general hospitals for acute care. These serve the communities in major metropolitan centers as well as in the suburbs. Most of these can accommodate a large volume of inpatient flow.
Level one of the system offers primary health care with the primary care physician being in charge. These physicians treat ailments that are not complex. The complex diseases are referred to higher levels. Level two, which are the specialty care, offers special services. In these centers, specialist physicians attend to patients referred from level one. These have advanced technological equipment to perform certain tests that cannot be done in level one. Level three and four are regarded as advanced levels in the system. These are considered like referral hospitals. They perform complex tests and have very specialized doctors who attend to patients.
Determinants of Market Power and their Influence
In order to understand competitive forces in a given market, George Porters model must be used (Reynolds, 2015). According to the model, the competitive forces in any market include competitive rivalry, pressure from substitutes, the threat from novel entrants, bargaining power of buyers, as well as bargaining power of suppliers. There has been an intense rivalry in the health care sector. The increasing number agent care centers have led to serious competition with the hospitals. These agent care centers provide quick services. For that reason, the demand for their services is high. This reduces the profits of the hospitals as well as raising the cost of health care services. In the pharmaceutical industries, the race to develop new drugs has been the main driving force. The first company to develop a drug gets the patent and has the power to determine its price. After a patent is given to a rival company, the other companies will strive to provide a substitute of the dug produced. Once they are successful, they will be able to affect the price of the first drug. This may reduce demand for the initial drug while leading to increased supply of both drugs (Goldacre, 2014)
When a new competitor gets into the health care market, the rivals are always shaken. The rival companies will then try to upgrade their services as well as goods in order to compete with the new entrant. This improves the quality of service provided and the prices. In the health care sector, the bargaining power of buyers is often lower. When one gets sick, such a person has no alternative other than seeking health care services. This may make the providers determine the cost of treatment. It usually occurs during emergency services where the providers are the sole deciders of cost. Bargaining power of suppliers (physicians) heavily affects the quality and prices of health care services. They determine the price at which they can provide their services. They can as well determine the quality of services provided as long as all other factors remain constant.
Health Management Organizations
Affordable Care Act (ACA) created state-based marketplaces. In these markets, the American citizens who are not insured are allowed to buy health insurance covers. Several health insurance covers are available in these markets. Health Management Organization (HMOs) is the most common. Providers who form a network of these plans offer a range of health care services. The patients get access to certain hospitals, doctors, as well as other providers found within a particular network. A typical network consists of providers of health services who agree to offer their services to members at pre-negotiated rates.
An individual is covered only if he or she gets health care service from a provider within his or her network. In cases of emergency cares, the patient can seek services from other networks. HMO members are often required to choose a physician offering primary care. A Primary Care Physician (PCP) always directs almost all the health care needs of a subscriber. When a particular service is not available in a given network, the subscribers of the network are allowed to access healthcare services from another network. Apart from the payment of a premium, the consumer may also be requested to pay certain coinsurance or deductibles for particular services.
The HMO plan has several advantages that have contributed to its popularity among the uninsured American citizens. It enables individuals to access health care services from a given network of hospitals, physicians, as well as doctors at a subsidized cost. It also ensures that there are always specialists in the network thereby making their services easily accessible. There is no pre-authorization required for treatment to commence, which helps in preventing unnecessary delays in treatment and laboratory tests. In the case of authorization, the primary care provider takes care of such cases. Due to coordination of care, deductibles, cost sharing, as well as monthly premiums are always lower as compared to other plans (Kongsvedt, 2012).
Apart from all the advantages of the plans, it comes with a few disadvantages that the critics of HMOs usually highlight. The plan restricts the subscribers’ freedom of choice since they can only access healthcare services from the providers within the network. It also has a potential of frustrating patients since they cannot be allowed to perform tests that are not recommended by the primary care provider. Additionally, the HMO does not cover any treatment received from providers outside a particular network. For that reason, it implies that if a patient’s preferred provider outside the network, the patient cannot see them unless he or she pays for the full cost of the service provided. The subscriber is always required to do a thorough research on providers. This is because the HMOs offer a narrow network of providers in an attempt to save cost.
HMOs offer the providers a constant flow of clients since only the patients in that particular network can access health services. This enables them to have a close patient to physician relationship, which is essential in a primary health care system. Additionally, it provides the physician with a consultative network of physicians and doctors giving the physician a platform to always consult. A major disadvantage of the HMOs to the physicians is that it has a rate of payment of remuneration that is based on the demand and supply of services (Salihu, 2014). It assumes that the health care sector is a perfect market. Health economists always regard health care service market as an imperfect market and as such there should be no fixed price for health care services but negotiable prices.
Incentives Available to Physicians
In the use of incentives, physicians are always encouraged to offer their best to their patients. This is because if they offer more services, they are guaranteed of more revenue. These incentives are always regarding finances. Capitation payment, bonus distribution, as well as withholds, are the most common incentives available in the health care system of Virginia. In bonus payment, a provider is given an additional amount of money apart from personal remuneration for his or her contribution to the promotion of health. Payment withholds refer to a certain deduction from the contractual payment that is channeled to a more risky pool (Salihu, 2014). These deductions are given to the provider or the client depending on the cost of services offered or received (Jones, 2012).
Capitation System
Under this system, the government pays physicians in advance a certain amount of money with no regard to the type and number of services provided. The main issue in this type of system is the question of who exactly should bear the risk (Jones, 2012). When providers are paid in advance, it has implications for the patients, payers, and providers. The patients may overuse health care services by requesting unnecessary procedures. When patients are covered, they tend to seek health care services even for minor ailments that can be managed at their homes. This may result into the physician using more resources than the pre-paid sum. Similarly, if the patients fail to use the resources, the provider can take all the prepaid money without offering services. Since providers stand a chance of losing money, they are capable of incompletely treating a given disease or ailment. The risk should be borne by the provider since he or she had agreed to the terms and conditions of the capitation agreement.
The health care system of Virginia is complex and is affected by various forces in the market. Several forces determine the quality, price, demand, as well as supply of the health services in the system. These factors should be considered by the stakeholders in the market to ensure that not only one stakeholder bears the financial risk. However, in a capitation agreement, the provider need to bear the risk since the health or life of an individual is considered supreme to the economic side of such an agreement. Provision of incentives to physicians to improve the quality of care should also be encouraged.
References
Denton, L. M. (2014). Unionists in Virginia: Politics, Secession, and Their Plan to Prevent Civil War. Stroud: The History Press.
Goldacre, B. (2014). Bad Pharma: How Drug Companies Mislead Doctors and Harm Patients. London: Faber & Faber.
Jones, A. M. (2012). The Elgar Companion to Health Economics. Cheltenham: Edward Elgar Publishing.
Kongsvedt, P. K. (2012). Essentials of Management Health Care. Burlington: Jones & Bartlett Publishers.
Pan American Health Organization. (2014). Investment in Health: Social and Economic Returns. Washington D.C: Pan American Health Org.
Reynolds, G. (2015). Information Technology for Managers. Boston: Cengage Learning Publishers.
Salihu, H. (2014). ObamaCare Simplified: Your Go-to Guide for Understanding ObamaCare. Nahville: WestBow Press.
Stefania Boccia, P. V. (2015). A Systematic Review of Key Issues in Public Health. New York City: Springer Publishers.
Virginia Gray, D. L. (2013). Interest Groups and Health Care Reform across the United States. Washington, D.C.: Georgetown University Press.
