Supply and Demand in Healthcare

Subject: Healthcare Research
Pages: 7
Words: 1938
Reading time:
8 min
Study level: School


The economy in the healthcare sector is very different from the economy in any other: entertainment services, the production of technology, or the light industry. It is due to several factors, among which the principle of the public good occupies a fundamental place. Treatment and medical care are common goods granted to a person by the fact of birth. Currently, there are a variety of trends and proposals for the provision of medical care with unique reimbursement methods and insurance.

Comparison of Supply and Demand Mechanisms

The production of automobiles and vehicles occupies one of the critical places in the economies of most developed countries. The healthcare and automotive industries are opposites and serve very different interests of the same population. If a car is a dream, a sign of wealth for a family or a person, health care remains a fundamental need no matter how complex the procedures and surgeries are.

Demand Factors

Demand in the automotive sector is influenced by social and economic factors, local, emanating from individual families, and global, indicating the internal situation in the country’s economy. Demand factors are primarily the prices of other modes of transport, their ease of use (off-road or rural areas), and their popularity. Family income is also a demand factor, which makes demand elastic. Buying a car can always be postponed and not inconvenienced. Globally, inflation and the country’s relationship with significant suppliers affect the market. If the delivery of vehicles and spare parts is essentially reduced or stopped altogether, the purchase becomes impossible. Demand for health care is less elastic; factors include heredity and predisposition to diseases, marital status, and family size. Significant factor is insurance and education, age, and gender. It is essential, that “more educated and in urban areas, continue to have higher utilization than households that are poorer, less educated and in rural areas” (Parmar & Banerjee, 2019, p. 16). The most crucial factor is the ability to postpone going to the doctor: the stage of the disease still allows a patient to do this.

Thus, the demand for cars is much more elastic than the demand for health care, as people can defer it without loss or effort. There is a time delay in healthcare; however, as a rule, these are small intervals, and patients often pay more if they do not immediately come up with complaints. People very often tend to ignore their negative feelings: “Although the level of service need is low, service need exceeds service utilization” (Yu et al., 2020, p. 10). However, this usually turns out worse for patients: “This indicates that there are unmet needs on the demand side, and other relevant factors are having an effect on service utilization, apart from service need” (Yu et al., p. 11). This comparison shows that health care cannot be, like a car, a sign of wealth and the merit of only the wealthiest people and stable earners.

Supply Factors

The suppliers’ losses can significantly affect the supply on the market and, therefore, increase the price of the remaining cars. In addition, supply is affected by the labor involved in car assembly. Many workers did not receive many years of training because it was not required; however, a strike at the enterprise will significantly affect the supply. Automotive sales and production can quickly meet customers’ needs and meet their expectations. Supply-side factors in health care include pandemics or emergencies, medical education, and how young doctors learn. The COVID-19 pandemic has shown that the supply and demand for health care can be severely dissonant under some circumstances, impacting society tremendously. Some diseases are treated very hard, and doctors and nurses cannot put them on the conveyor (Berkowitz et al., 2018). It makes medicine more like an art than a factory production of healthy organisms.

Comparing the supply factors in the car market and healthcare, one can conclude that the healthcare sector needs highly qualified specialists whose training takes a lot of money and, most importantly, time. Demand and supply in health care are highly discordant during a period when supply is reduced, for example, due to low salaries for doctors or complex schedules. The harsh working conditions that nurses and doctors complain about are also often the result of this dissonance, showing how hard hospitals try to cope with all patients (Berkowitz et al., 2018). It is important to mention that the cooperation of patients and doctors could contribute to a speedy recovery.

Current Legislative Trends and Proposals in Healthcare

Collaboration between patients and doctors is becoming a modern trend that gives subjects many rights and makes them responsible for the course of treatment and doctors. It improves the service, as patients want to be treated in hospitals that listen to their opinions and talk to them. Thus, demand increases, but at the same time, if patients take responsibility for treatment, part of the burden on doctors is removed. Telemedicine is also a new trend taxed and insured differently, making it comfortable for people who don’t have the time or can be in the hospital more often.

In addition, patients reduce their expenses for transportation, hospital food, and ward equipment not being in the hospital. It is perfect for patients experiencing severe stress or those who suffer from mental disorders. Telemedicine favorably increases demand and, at the same time, convenience in treatment, satisfying demand. Other trends are trends in subsidizing healthcare and taxing citizens in this area. The government is committed to ensuring that more people get at least minimal medical care (Lee et al., 2019). Medicaid and Medicare programs are being developed, which help the elderly, the disabled, and low-income families.

Medicare and Medicaid

Medicare and Medicaid are complementary programs for people who may find it challenging to secure high-quality treatment when there is demand. Following Lee et al., (2019), “Medicare and Medicaid are the nation’s two largest public insurance programs serving adults aged 65+ years, people with disabilities, and low-income populations” (p. 190). These programs are designed to bridge the gap between high demand and underdeveloped supply. Such programs also help to avoid serious disparities in access to health services: “Therefore, inequity in utilization increased after the supply-side intervention and it reduced after the demand-side intervention” (Parmar & Banerjee, 2019, p. 16). Within the framework of these programs, not only doctors and nurses can be involved.

Social workers and psychologists who do not have a medical education but can support people according to their qualifications and obtained licenses. Low-income citizens, migrants, minorities, or people with disabilities from childhood or birth may be covered after receiving treatment (Galindo et al., 2021). In addition, an essential aspect of these support programs is not that they replace the entire amount, and this is their essence, but that they try to reduce the cost of medical care to those in need by preventive methods. The people who help patients through these programs recommend various activities that will protect them from costly surgeries and procedures.

Providing Medical Assistance to the Uninsured Population

Patients sometimes abandon their path to insurance coverage due to clerical complications. However, the hospitals themselves are usually interested in patients with insurance, so it is necessary to help people. Sometimes uninsured patients can take advantage of special programs, including veterans’ and cancer screenings. People do not know that they can be helped, so one can see the imbalance of supply and demand, need and direct use: “This may be an important reason why service need exceeds service utilization” (Yu et al., 2020, p. 12). Physicians should be aware that such patients need to reduce the cost of buying medicines and abandon ancillary or patented ones. Telemedicine can be a great way out for citizens who do not have insurance. Investigations show: “Within hospitals in New York City, Black, and Latina women are at higher risk of severe maternal morbidity” (Howell et al., 2020, p. 288). A developed system of electronic medical records usually also reduces the overall cost of a treatment since computer data requires the preservation and supervision of specialists and not the constant change of physical cards.

In addition, it is recommended to settle uninsured patients in cash in several stages rather than charging them a hefty bill after the treatment. It is always important to show patients that the lack of insurance is not a reason to refuse help and bring their bodies to a dying state (Howell et al., 2020). It is still difficult to care for patients without insurance, but it is possible thanks to modern technology and some workarounds.

Reimbursement Methods

Doctors and the administration can provide specific discounts at the patient’s treatment end. Have the patient read the check carefully and use the Charge Description Master (CDM) to trust the final billed amount. This discount is applied to the whole amount for the treatment; however, some services allow patients to pay or receive a refund for each specific procedure. With the fee-for-service model, the doctor or administrator, together with the patient, agrees on a particular amount for a separate medical manipulation (Galindo et al., 2021). It will be easy for the patient to manage all their expenses during long and comprehensive care.

Some models and reimbursement methods are based solely on the value of services rendered to the patient. It usually motivates the patient to achieve positive results to avoid high costs and recover faster. This method of reimbursement is suitable for the collaboration of patients and doctors (Whedon et al., 2017). In general, the American healthcare system provides a wide variety of reimbursement methods so that citizens can take care of their health on any income. Patients can easily control other reimbursement methods; they are all aimed at providing discounts or streamlining the payment process in such a way as to stretch it out over time without causing damage to the patient’s budget.

Stakeholders Paying for Medical Services

The main stakeholders are patients, yet they bear the brunt of paying for medical services. In modern realities, the state government also often acts as a stakeholder. The government is sincerely interested in a healthy nation with a high life expectancy. It is directly related to political and, even more strongly, economic factors. Healthy people can work in enterprises and develop creativity and business. They can travel and spend money, sell and buy, and consume as much as possible. Sometimes the stakeholders are pharmaceutical companies that want to provide a support program for patients with specific diseases: diabetes, obesity, and cancer (Whedon, 2017). In some cases, medical and healthcare institutions are also stakeholders.

The Impact of Payment Methods for Medical Services on Supply and Demand

Payment methods substantially impact supply and demand, allowing an inelastic scheme to smooth out rough edges and become more flexible. Alternative payment methods for low-income people help them get treatment, and programs like Medicare and Medicaid keep track of their health and well-being. Their most crucial benefit is preventive work and avoiding expensive procedures, surgeries, and drugs (Berkowitz et al., 2018). Non-payment methods also help to affect the elasticity of supply and demand positively. With their help, doctors support more complex patients and, at the same time, get less tired (collaboration, telemedicine, the implementation of complex technologies, and electronic services).


The balance of supply and demand in the healthcare market is unique and subject, above all, to the fundamental right of any person to receive treatment. Because of this, the state becomes one of the most important stakeholders that pays for treatment, and its citizens can live and develop in peace. Now there are many ways to reduce the burden of treatment costs, including discounts, Medicare, Medicaid, and telemedicine.


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