Demand in health care

Outline ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Demand ,[object Object],[object Object],[object Object]

Demand for health care ,[object Object],[object Object]

Need Vs. want ,[object Object],[object Object],[object Object],[object Object],[object Object]

Need versus demand… ,[object Object],[object Object],[object Object],[object Object]

A model of demand for medical care ,[object Object],[object Object],[object Object]

A model of demand for medical care… ,[object Object],[object Object],[object Object]

Grossman’s demand model Individual/client factors [age, sex, education, occupation] Environmental factors (physical, economic, social, cultural) Health care resources factors E.g. supply, access, acceptability Prepayment factors E.g. private insurance, tax based health Insurance, national health system, Out of pocket payment Demand

Grossman’s demand model… ,[object Object],[object Object],[object Object],[object Object]

Grossman’s demand model… ,[object Object],[object Object],[object Object]

[object Object],[object Object],Grossman’s demand model…

Distinctive characteristics of health sector ,[object Object],[object Object],[object Object],[object Object]

Distinctive characteristics of health sector… ,[object Object],[object Object],[object Object]

Deriving a Demand Curve for institutional Visits ,[object Object],Price P 1 P 0 q 0 q 1 ,[object Object]

Other Economic Factors Affecting Demand ,[object Object],[object Object]

Other Economic Factors Affecting Demand… ,[object Object],1. Income q 0 q 1 Physician Visits Price P 0 D O D 1

Other Economic Factors Affecting Demand… ,[object Object],[object Object],[object Object],2 . Complements - 2 or more goods which are consumed together

Other Economic Factors Affecting Demand… ,[object Object],[object Object],2 . Complements Price Optometrist Visits Price of complement falls D 0 D 1

Other Economic Factors Affecting Demand… ,[object Object],[object Object],[object Object],3 . Substitutes - other goods which satisfy the same wants, or provide same characteristics

Other Economic Factors Affecting Demand… ,[object Object],[object Object],3 . Substitutes - other goods which satisfy the same wants, or provide same characteristics Price Brand name drugs Demand for brand name drug falls D 1 D 0

Equilibrium of supply and demand ,[object Object],[object Object],[object Object]

Equilibrium of supply and demand… ,[object Object],[object Object],[object Object],[object Object]

Equilibrium of demand and supply ,[object Object],[object Object]

Elasticity ,[object Object],[object Object]

Factors affecting elasticity of demand ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Elasticity of demand in heath care ,[object Object],[object Object],[object Object]

Elasticity Price # Visits A relatively flat demand curve implies that a small increase in price leads to a large fall in # visits demanded

Elasticity… Price # Visits In this case demand is considered to be relatively “elastic” with respect to a change in price

Elasticity… Price # Visits A relatively steep demand curve implies that a small increase in price leads to a small fall in # visits demanded

Elasticity… Price # Visits In this case demand is considered to be relatively “inelastic” relative to a change in price

[object Object],[object Object],Elasticity…

[object Object],[object Object],[object Object],[object Object],[object Object],Elasticity…

[object Object],[object Object],[object Object],Elasticity…

Elasticity… ,[object Object],[object Object],[object Object],If demand for physician services is inelastic, and if the price is raised, then I %  Q D I < I %  P I ,[object Object]

Insurance ,[object Object],[object Object],How does insurance affect the demand for care? 1. Coinsurance - Patient pays only a fixed % of the cost of each visit (often C = .20) e.g. If the visit costs $100 : patient pays $20, insurance pays $80

Insurance… ,[object Object],Price P cP q c q # Visits ,[object Object],[object Object]

Insurance… ,[object Object],[object Object],[object Object],Price P cP q c q # Visits

[object Object],[object Object],[object Object],Price Visits D 0 D 1 $150

Estimating Demand for Medical Care ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Empirical Evidence ,[object Object],[object Object],[object Object],[object Object]

Empirical Evidence… ,[object Object],[object Object]

Out-of-Pocket Payments in the U.S. ,[object Object],[object Object]

Total Expenditures and % Paid Out-of-Pocket, 2003 Out-of-Pocket Payments… ,[object Object],[object Object]

Empirical Evidence ,[object Object],[object Object],[object Object]

Applying Demand Theory to Real Data ,[object Object],[object Object]

Demand in health care

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Demand in health care