Examining competitive market models and competitive forces in health care economics.
In this assignment you will examine competitive market models and competitive forces in health care economics. Prices, supply and demand, quality of care, consumerism, and provider compensation are affected by the competitive forces found in health insurance and in the labor market. There is a direct relationship between insurance models, the labor market, and the financial performance of health care systems. You will write a paper about the economics of health care market models, health care delivery structures, provider compensation, and financial risk for health care systems.
Instructions
Write at least a 3 page paper in which you:
Analyze your state’s current competitive market model in health care.
Compare and contrast the market power of monopolistic and monopsony markets in health care.
Analyze the main competitive forces and the major factors that influence the fundamental manner in which the competitive forces determine prices, supply and demand, quality of care, consumerism, and providers’ compensation.
Evaluate the positive benefits and negative aspects, respectively, of HMO-managed care from the provider’s point of view—i.e., a physician and a health care facility—and from a patient’s point of view. Provide a rationale for your response.
Assess the efficiency of the types of economic incentives available to providers in the delivery of health care services in your own state.
Sample Solution
The competitive market model in health care is an important factor when it comes to influencing the quality of care, cost & accessibility of services. In the state of California for example – there’s a mixture of both monopolistic and monopsony markets at play – with different levels of power depending on which particular area we look at (California Healthcare Foundation, 2020).
For instance, in regards to hospitals then their market power tends to be more monopolistic due their ability to create barriers for entry & exit that prevent new providers from entering the marketplace. This allows them greater power over pricing negotiations since increased competition can help drive down costs which may reduce their overall profit margins.
Conversely however, when it comes to insurance companies then their power is generally more concentrated – as evidenced by the numerous mergers that have taken place throughout recent years. Here high levels consolidation has enabled these firms dictate terms more aggressively whilst also having greater control over premium rates & coverage options available.
Similarly, this is also true when looking at physicians too where they are often able set lower prices than what insurers will reimburse them – leading many times to out-of-pocket expenses rather than relying on insurance plans alone. However unlike hospitals or insurers medical professionals tend not benefit from economies of scale or any other advantages that come with being part big organization meaning they must find ways compete solely through providing quality outcomes despite tight budgets restraints (Chalasani et al., 2018).
Overall then, while each type of provider holds its own unique level market power here in California – ultimately all participate in some form or another within same system whereby success largely depends how well organizations manage cost structures without sacrificing patient safety/care standards going forward.
