Supply and demand are fundamental concepts of the market economy. They explain how the final price is determined in a competitive market and have led to changes in the delivery of healthcare services within the framework of the Patient Protection and Affordable Care Act (ACA). It is a federal statute enacted by the President in 2010 and presenting the most comprehensive U.S. medical reform since the introduction of Medicare and Medicaid in 1965. The aim of the essay is to analyze the impact of the ACA on supply and demand and the healthcare cost and spending.
To determine the correlation between supply and demand and healthcare spending, it is necessary to assume that visits to physicians, pills, and hospital bills are units of health care. When the individual pays for each of the latter, the consumer behavior increases with a reduction of prices (the demand curve). It is possible to produce large amounts of products and provide healthcare services (Quantity) only when the funding is substantial (the supply curve). Market participants interact and meet at a certain point of Equilibrium for the Quantity and Price. No other points are possible. For example, a bigger market price will lead to excessive supply, and a lower one results in greater demand.
The ACA was signed into law six years ago, which is a short term in medicine. Moreover, insurance provision started only in 2013. Yet, some primary effects are already evident. Since 2010, from 7 to 17 million adults previously uninsured gained medical help. It is expected that more than 26 million uninsured individuals will eventually have medical insurance when the ACA is fully implemented. The ACA has addressed the supply pattern, whereby hospitals with high readmission rates and complications receive financial penalties, ambulatory, inpatient and postacute care services are encouraged to integrate, and primary care physicians are fully paid by Medicaid for two years. However, the expansion of coverage is not synonymous to an increase in the provision of actual care in medicine. The Affordable Care Act does not help to raise the number of nurses and physicians, since this process takes years and decades. Thus, the shortage of healthcare givers in the supply pattern is underestimated.
Victor R. Fuchs discusses that it is urgently needed to reform the supply pattern of the American healthcare by reducing the basic medical education term from eleven to nine years. One of the reasons for the shortage of physicians is complex and long education overwhelmed with information or impractical time management. For example, front or final years of medical school can be combined with training. In many developed countries, medical education is eight years long, while the quality of health care is not imperfect. Professor Fuchs also considers the acceleration of some specializations. As a result, supply can be boosted with a further shift of the healthcare Quantity to the right.
The concept of healthcare as a commodity is a scientific model created for economics. Although the principle the lower the price, the higher the purchase is intuitively logical and has support from the market experience, in reality, it does not always work perfectly. The self-regulating market that meets the equilibrium point easily and painlessly for individuals is nothing but a model unlikely to be found in practice. The healthcare market consists of numerous submarkets that should be competitive, namely research institutes, pharmacies, educational centers, physicians, and hospitals. In reality, many of these components are not competitive. For example, it is expensive to build hospitals and fill them with modern technologies. Does an underpopulated town need many competitive hospitals? Probably no, so in such areas, there will be no competition at all, and in some regions, the supply pattern will be monopolistic. The demand component is patchy in healthcare. Some patients ignore physicians recommendations and waste resources, others go to the doctor with flu, while the rest do not. Many persons buy pills against a headache, but ignore stomachaches.
The supply and demand curves are not independent from each other. In other words, they may be interdependent in medicine. For example, if the price for a consultation at a general practitioner increases, he may cut down the number of visits and still earn the same money. The Quantity here is reduced, when the Price does the opposite to the theoretical model. It means that the supply and demand curves simplify practical healthcare structures and cannot be applied as a commodity. At the same time, the supply and demand model is a sound educative instrument to use basic healthcare definitions.
The demand for physicians is currently growing faster than supply. A shortfall in 46,000 to 90,000 physicians is expected by 2030 in the United States, and both primary care and specialized doctors will be in need in the nearest decades. However, it is uncertain how the future patterns will be altered by possible retirement deadline changes. Payment cuts may influence the shortfall picture. The future doctors may have different expectations and demands. The ACA creates additional tensions in physicians workflow challenging the supply pattern in the healthcare commodity model.
The supply and demand approach in medicine contains clear concepts, which cannot be applied recklessly. The Affordable Care Act has boosted demand (health insurance in the United States has become more affordable, especially in the sphere of primary care) and supply (the rate of spending on health care has lowered). However, it is untimely to state about final positives and failures of this law due to the short term of the program and the complexity of health care in general, which need future research and analysis.
Alex Seed is an editor at the advanced plagiarism checker https://plagiarismsearch.com/ . He conducts researches on various issues. The most interesting cases are on modern politics and business development.