principles of health care demand and health care utilization patterns

1. Demand for Healthcare
• Investment?
– Traditional focus on the supply side
• Price/reimbursement controls
• CON and other limits
– Need to focus on demand!
• Productivity, health status
– Increased demand for good health
– Demand inversely related to price this way
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2. Factors Influencing Demand
• Patient Factors:
– Need
• Needs are self defined
– Demand
• Demand is OUR sacrifice for meeting the need
– Information
• Patients rarely have info to make informed decisions
– MD ‘agency’ relationship
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3. Factors Influencing Demand…
• Patient Factors …
– Health Status
• Patient initiated to acute care trigger
• Chronic condition
– Demographic Characteristics
• Population growth
• Single parents
• Age
• Gender
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4. Factors Influencing Demand…
• Patient Factors…
– Economic standing
• Higher income = higher care demand
• Not really true anymore w/3rd party payers
• Financial risk
• Co-insurance and deductible
– Ability to pay even these
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5. Factors Influencing Demand…
• Physician Factors
– Gatekeepers
– Agency relationship
– Physician-induced demand
• Personal experiences?
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6. A Model for Demand for Medical Care
• Demand of healthcare is derived from demand for health
– Healthcare is both a consumption commodity and an
investment commodity
– Demand for healthcare will increase with age and with
the person’s income
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7. Determinant of the demand for medical care
• Factors affecting a patient’s demand for medical care
– Actual and perceived illness or desire for prevention
– Individual's age
– Gender
– Martial status
– Number of person in the family
– Levels of education
– Cultural-demographic factors are important. Such factors
are not subject to sudden changes, nor are they generally
impacted by public policy
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8. Economic Factors Contributing to the demand
for Healthcare
• Income
• Price
• Value of the patient’s time
• Need estimates of “elasticity”
– Price
– Substitution/complementary
– Income
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9. Elasticity
• Price Elasticity
– Percentage change in Quantity divided by the
percentage change in Price
• Ep = % change in Quantity
% change in Price
– Answer always negative
– If greater > then 1.0 then elastic
– If equal to 1.0 unitary elastic
–If less then < 1.0 then inelastic
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10. Elasticity continued
• Income Elasticity
– Percentage change in Quantity divided by the
percentage change in Income
• Ei = % change in Quantity
% increase in Income
If the answer is < 0 then these are basic foodstuffs
If the answer is between 0 and <1.0 then this is a normal goods and
services
If the answer is greater then > 1.0 then this is a cyclical normal good like
autos, housing
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11. Elasticity continued
• Cross price elasticity
– Epx = Percentage change in Quantity of “A”
Percentage change in Price of “M”
– If the answer is positive then the two are
substitutes for one another
– If the answer if nagative then the two are
complements for one another
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12. Role of the physician in the demand for
medical care
• Patient’s “agent” or “supplier’
• With the spread of insurance, the price of services became
less important to both patient and physician
• Physician may not always act in the best interests of the
patient
– The dual role impacts physician decisions
• Over prescribe to avoid lawsuits in an example
– By increasing patient knowledge the physician is less able to
create demand
– By involving the physician in the financial outcomes of their
decision, you can also reduce demand for healthcare services
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13. Measuring Demand
• Estimating demand functions
– Price elasticity
• and cross elasticity
– Typically through regression analysis
• Most studies conclude no real relation between $ and
demand
– Way too many variables
• Income elasticity of Demand
– Relation between income and affordability
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14. Principles of health care demand
1. Health care needs
• Designing of HSOs based on needs
• Effective pricing
• Better communication
• Improved distribution
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15. Mechanisms
• Identify needs or wants and desires of targets (know
customers and constituents)
• Creation of new existing services/ products
• Environmental surveillance-market and needs
• Evaluation of present services in relation to the
needs
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16. 2. Health Care Demand
• Much of the demand of services arises from illness
(unpredictable and irregular’s causes)
• The patient can’t test the services provided by the physician
before consuming it (trust)
• Agency relationship -physician (agent) and the patient
(principal)
• Uncertainty in quality of the products-recovery from diseases
as unpredictable as incidence
• Asymmetry of information between consumer and producer
• Non-existence of market for risk bearing in complete
insurance markets
• Barriers to entry to medical professions
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17. 3. Utility
• Utility is the satisfaction of people getting from consuming
(using) a good or service
• Utility varies from person to person
• Some people get more satisfaction from eating chips than others
• Even the same person can gain greater satisfaction by eating
chips when hungry than when he has lost his appetite
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18. Utility
• Health policy
• Financing
• Education
• Manpower
• Organization
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19. Enabling factor
• health insurance status, family size, occupation, education,
and income
Predisposing factors
• Such as attitudes of the individual to wards health care, health
services, and physicians
• Health behaviors and knowledge of the existence of various
services
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20. Accessibility factors
- Distance and or time of individual from facility
- Appointment delay
- Waiting time
- Availability of medical and physician services
- Regulars source of care
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21. The Basis of Health Economics
- Demand for health care is infinite
- Resources are scarce
- Prioritization is required
- Costs and benefits must be compared.
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22. Economic policy
There are three types of economic policy
- Free market
- Command system
- The mixed system
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23. Demand and quality of services
• When demand increases the quality of service increases
• When the society is educated the quality of services increase
• When the country is developed, demand and quality of
services increases
• When the technology getting a demand then demand and
quality service increases
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24. Discuss the following terms:
Availability
Accessibility
Acceptability
 Quality
 Equity
 Utilization
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25. Availability, Access, Quality, Acceptability
•Availability of adequate health care infrastructure (e.g.
hospitals, trained personnel), goods (e.g. drugs), and services
(e.g. primary care, mental health care) in all geographical areas
and to all communities.
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26. Availability, Access, Quality, Acceptability
•Access to healthcare must be universal, guaranteed for all on
an equitable basis. Health care facilities, goods and services
must be affordable and comprehensive, and physically
accessible where and when needed. They must be distributed
equitably, with resources allocated and accessed according to
needs and health risks.
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27. Availability, Access, Quality, Acceptability
•Quality of all health care must be guided by quality standards
and quality control mechanisms. Care must be medically
appropriate and provided in a timely, safe, and patient-oriented
manner.
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28. Availability, Access, Quality, Acceptability
•Acceptability and Dignity: Health care facilities and services
must respect dignity, provide culturally appropriate care, be
responsive to the needs of women, older people, all ethnics and
to those with different ways of life and abilities, and protect
confidentiality.
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29. Analysis of Demand and Need
• Demand is an economic concept which describes the quantity
of a good or service per unit of time (example, aspirin per
year) that an individual or a household will purchase or
consume given the price of the good or the service, price of
alternatives or related item, income of individual or
household, preferences, and other factors.
• It must be a quantity which the individual will be willing and
able to buy.
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30. Analysis of Demand and Need
• Demand is distinct from need which, in context of health
projects, can be seen as level of health services which good
medical opinion deems necessary to meet particular health
targets.
• Problems arise in health planning when demand and need do
not coincide. Individuals who demand health care when
medical opinion suggests that they do not need it will waste
resources. On the other hand, if individuals do not demand
health care when medically they require it, they will be
jeopardizing their own health and that of others, if their
condition is communicable.
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31. Analysis of Demand and Need
• Private sector providers are market-driven and plan on the
basis of demand, while public sector projects are initially are
designed on the basis of perceived need.
• But even when the need provide the idea behind a project, it is
also necessary to consider the individual or household
demand for the services of the project.
• This is because even freely available services, for which there
is no user fee, are not cost-less to individuals.
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32. Analysis of Demand and Need
• An important distinction that arises in the analysis of health
sector activities is the difference between utilization and
demand.
• Utilization refers to the actual use of health services and
facilities.
• An analysis of utilization looks at trends in use while an
analysis of demand attempts to explain behavior patters.
• Demand that differs from utilization will be unsatisfied. For,
example there are more households who would like to visit a
clinic than who can actually do so.
• Planning, therefore, should aim to avoid unsatisfied demand,
provide the demand corresponds with the perceived medical
care.
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33. The Health Effects of Social and Economic Policy
• It is increasingly hard to justify not considering potential
health impacts of policy change given the range and size of
potential health outcomes that flow from all policy, including
policies that are seemingly unrelated to health.
• Non-health related policies may have positive consequences
for health that are equally or more important than the
outcomes they were originally designed to produce. Thus,
health effects can be central factors in decisions concerning
changes in policy seemingly unrelated to health.
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34. The Health Effects of Social and Economic Policy
• Health research and policy should shift towards models
recently adopted, and consider and evaluate the health impact
of all policy, not just health policy.
• Social and economic policy can present alternatives to
increased health care spending for maintaining and improving
health.
• By considering the health impacts of public and private
policies not directly related to health care as mechanisms for
promoting health and preventing or alleviating disease, the
cost-effectiveness of non-health policies can also be greatly
enhanced.
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35. The Health Effects of Social and Economic Policy
• A brief historical review is helpful in understanding why and
how social and economic policies may be just as important as
health policies in maintaining and improving population
health.
• A greater and more specific focus on the actual and potential
health effects of social and economic policy could strengthen
scientific understanding of the determinants of health as well
as their amenability to change via public policy.
• Social and economic policy may be a more cost-effective way
of improving population health.
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36. The Health Effects of Social and Economic Policy
• Many public policies strongly impact health because they
strongly impact the socioeconomic, psychosocial, and/or
environmental determinants of health.
• Very few policy makers have considered health in either
formulating or justifying public policies. It is hoped to change
this state of affairs by encouraging a proactive identification-
and perhaps also mitigation or enhancement-of the health
impacts of social and economic policies
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37. The Health Effects of Social and Economic Policy
• A growing body of evidence suggests that
social and economic policy and practice may
be the major route to improving population
health.
• In Making Americans Healthier: Social and
Economic Policy as Health Policy, eleven
chapters are devoted to examining the
linkages between population health and
several ostensibly “non-health” policy arenas.
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38. The Health Effects of Social and Economic Policy
• Six key policy areas with potentially sizable effects on health
are addressed:
– education policy,
– income-support policy,
– civil-rights policy,
– macroeconomic and employment policy,
– welfare policy, and
– housing and neighborhood policy.
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39. Quiz 2
1. What are the key non-health policy areas with potentially
sizable effects on health? List at least three of them.
2. Describe the difference between need and demand in health
care planning.
3. What is externality?
4. What is pure pubic good? what are the features that describe
its purity?
5. What are the factors that affect a patient’s demand for
medical care? List at least five.
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