Health Care Market in Discussing the Market

Health Care Market

In discussing the market for a health care good or service, one must first understand that in speaking of "health care," one is actually speaking of the entire health care industry, along with each of the goods and services that are produced and exchanged within this market. From organ transplant operations and blood donation to therapeutic massages and nursing home activity programs, the span of health care goods and services is both vast and varied. Further, in viewing today's uncertain economy, the market for health care goods and services is one that brings with it many different questions that must be addressed in order for a stakeholder to fully comprehend what decisions need to made in order to turn a profit.

Scarcity of Resources

Scarcity of resources within this market significantly influences the decisions that stakeholders are forced to make. With scarcity of resources comes limited action and availability for certain goods and services to be offered with the health care field. In looking at the national economy as a whole, scarcity comes into play immediately. Even if the preference of the country is to spend more on health care, scarcity in funding limits how much of the national income that can be spend on its provision (Hy, 2011, p. 239). This type of issue trickles down from national government spending all the way to private facility spending. When funds are scarce, stakeholders must make decisions that will not only affect how the facility will run, but what kind of profit can be yielded in addition.

In the health care field, stakeholders are the providers, payers, employers, and patients, and with scarcity of funding and available programs due to financial cuts, these stakeholders are determined to maneuver in the market only when these maneuvers will not be economically detrimental to them.

Economic Flows

Economic flows can involve both money and services. Generally, a flow will summarize a transaction in which a service or commodity is exchanged for money (Jacobs and Rapoport, 2003, p. 36). Jacobs and Rapoport note that health care markets "often contain two sets of flows -- one for insurance and one for health care services" (Jacobs and Rapoport, 2003, p.37). These flows see a transmission of money through premiums, reimbursement and out-of-pocket payments between consumers, insurers, and providers.

In addition, economist Dan Fullerton notes that financial flows that make up the gross national product represent only a fraction of all economic flows, and the scope of economics encompasses the allocation and use of all scarce resources (Fullerton, 2008, p.433). In addition, the current state of the economy and the still unreliable status of health care are seeing both "losses in productivity and losses on an individual level" (Kovacs, 2007, p.A1). While the economic flows within the health care market remain the same, the amount of money being funneled through these channels has decreased significantly, especially in terms of government funding.

Supply and Demand and Pricing Decisions

Changes in supply and demand can affect both the equilibrium price and quantity of a good or service that is being distributed. Market equilibrium exists only when the quantity supplied is equal to the quantity demanded. Further, the equilibrium price is the price that "will generally prevail in a perfectly competitive market that is not subject to government intervention" (Case and Fair, 2007, p. 134). With changes in supply and demand also come changes in pricing decisions.