Reimbursement Methods That Influence the Supply and Demand of Health Care Services

The healthcare sector has multiple players including insurance providers, physician and non-physician staff, patients, employers, pharmaceutical companies, and regulators who influence demand and supply. Reimbursement methods include Fee for Services, capitation, and bundled payments that influence demand and supply of health services. For instance, fee-for-service method matches a volume-based approach, which determines the number of human and technical resources available to patients. Patients also incur high out-of-pocket expenses due to providers’ malpractices in offering unnecessary exams and tests to increase reimbursement (Shrank et al., 2020). Capitation reimbursement entails paying a fixed amount per patient for a specified period by an insurance provider. In terms of demand and supply, capitation influence healthcare providers’ response to patients in different ways. For example, there is an option to use telehealth and other technologies that help reduce costs and enhance accessibility. However, capitation may lower supply due to healthcare providers’ decision to avoid handling patients with chronic conditions.

Conclusion

The demand and supply of services in healthcare and automobile sectors provide insights into the various factors that determine access to products. The demand for health services and automobiles depends on consumer income and the price of products and services. However, purchasing healthcare services is different from buying a car since the former is an essential commodity that determine individuals’ health and wellness. While both industries have insurance providers, high premiums in the automobile sector may limit individuals from purchasing cars. On the other hand, health insurance responds to the needs of lower income households, consequently increasing demand. The health care sector faces multiple challenges such as financial barriers, high turnover rates, and reimbursement costs that may reduce supply and expose patients to negative health-seeking behaviors. Reforms in the healthcare sector are necessary to achieve an equilibrium such that consumers, healthcare providers, insurance providers, and other stakeholders benefit from incentives and other mechanisms at the state and national levels.

References

Adaskou, M., Houmam, I., & Onbouh, H. (2021). Demand and supply of health care: Advances and theoretical models. International Journal of Accounting, Finance, Auditing, Management and Economics, 2(3), 66-85. https://doi.org/10.5281/zenodo.4785353