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    Add as FriendDemand for HealthCare

    by: Rogers

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    1 : Demand for Health Care October 19, 2006
    2 : Medical Care = M (HS, DC, ES, PF) HS: Patient Health Status DC: Demographic Characteristics ES: Economic Status PF: Physician Factors
    3 : Patient factors: Consumers must decide among the available alternatives designed to satisfy their desires for health care. Weigh benefits against costs of a good or service. Effective demand: Consumer must have the money to pay for alternative goods or services. Consumer must be able to rank alternative goods and services.
    4 : Health status: The acute care model of medical treatment follows an expected pattern – a patient develops a medical condition (illness, injury, pregnancy, etc.), seeks out a physician, seeks treatment, and either dies or recovers.
    5 : Health status: Chronic illness, defined as a condition where a complete cure is not possible, has become a major factor in health care spending. The condition does not go away. Some conditions are more likely as we age (Parkinson’s disease, CHD, Alzheimer’s disease, arthritis, diabetes, asthma, and emphysema are growing problems among the aged.) Not all chronic conditions are age related: e.g. HIV infections as well as other sexually transmitted diseases such as Chlamydia; and respiratory diseases such as tuberculosis and pneumonia, are increasingly resistant to traditional methods of treatment.
    6 : Demographic characteristics: A growing population An ageing population Sex – male or female (especially females during child bearing years) Men suffer more frequent health losses due to life style choices such as drinking, smoking and over eating. As more women enter the labor force and pattern themselves after men, these differences are narrowing.
    7 : Income, Education and Expenditures on Medical Care are positively correlated. Education is associated with higher levels of income. Education makes one a more informed consumer. Studies show that health status and income are closely related. The same holds for Education and health status. Economic standing
    8 : Insurance increases the demand for health care. In fact, the demand curve rotates to the right.
    9 : Docs prescribe drugs, admit patients into hospitals, and order tests. Principal – Agent relationship An agency exists when an individual (the patient, and in our case the principal) gives someone else (the physician, the agent) the authority to make decisions on his or her behalf. Problems arise when the interests of the principal and the agent diverge. Physician Factors
    10 : Physician Factors (con.) In medicine patients are relatively uninformed concerning alternative diagnoses and treatments. Patients trust Docs to make choices for them – because of the difficulty in gathering and understanding medical information. The Docs role as a supplier can create a conflict of interest. (i.e. Patients are their source of income) Key idea: Docs can influence the demand for medical care.
    11 : Summary A doc’s ability to induce demand is enhanced when patients have a difficult time gathering and processing information. Given this unique position, docs can serve as imperfect agents, serving their own interests over those of their patients. In other words, they have the ability to influence the demand for the services they personally provide. When faced with two alternative treatments that are equally effective, the physician can choose the cheaper alternative and save the patient money, or the more expensive alternative and buy a new flat screen plasma TV for the den.
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    13 : Principal agent problem Traditional economics: Increase supply and the price falls and the quantity increases. Price falls from P0 to P2. Supply induced demand would have supply increasing from S0 to S1 but as a result of the physician induced demand, demand would shift to D1.
    14 : Principal agent problem Fee splitting and self referrals (especially with imaging and lab work) Capitation and DRGs limit this practice (DRGs diagnosis related groups)

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