Introduction
According to the competitive market model, healthcare is an interactive system where customers can choose services from many competing suppliers. Blumberg, Holahan, and Buettgens (2014) argue that the Halbig v. Burwell ruling poses several implications for the Affordable Care Act coverage. The plaintiff, in this case, argued that a phrase within the act forbids low-income earners from receiving federal subsidies when purchasing private health insurance in Federally Facilitated Marketplaces.
If the ruling goes in favor of Halbig, funds designed for families earning less than 400% of the poverty level will suffer a $36.1 billion loss by 2016. Looking at both the long-term and the short-term impacts, we find that this decision will increase the number of families unable to afford insurance coverage. This in turn will affect the competitive market, as suppliers have to compete in an environment with a larger share of uninsured consumers.
Corlette et al. (2014) on the other hand predict that narrow provider networks will have a considerable impact on the competitive market in health and medical care. According to their analysis, while narrower provider networks offer low premiums to consumers, they limit the access to quality care and may result in higher direct payments. In the competitive health care market, insurance companies can choose to institute narrower plans to eliminate sicker individuals, while consumers face the risk of balance billing.
The competitive market model is very sensitive to price and utilization economic factors. Price and utilization equilibrium occurs when consumers are satisfied with what they have purchased, and when suppliers attain maximum profits. Higher prices limit the number of services demanded, as well as limit what suppliers can offer.
In a competitive market, the suppliers will decrease the price of services offered as well as the amount supplied. When this happens, the consumers will be able to afford the services offered and thus an increase in the quantity demanded will occur. This push and pull will continue until the quantity demanded will be almost equal to the quantity supplied.
Monopolistic Competition
Ingmar (2009) argues that monopolistic competition does not exist as it is a symptom of a shortage of information. Hicks (2014) however argues that medical services are diverse and that consumers choose their physicians based on a wide array of subjective factors. Considering both these arguments, I believe that monopolistic competition does indeed work within a healthcare setting.
We take a model where all consumers are insured, the demand for medical services is constant, and physicians have free market access. Considering this model, we find that in most cases, patients usually develop relationships with preferred medical suppliers. This in turn ensures that new providers have a very difficult time penetrating the market.
Apart from this, many employees have no choice on their health insurer as their employers only offer them a limited amount of health plans. In conjunction with this, most health care systems contain a government body that acts as a monopolistic health insurer. These factors show that monopolistic competition does exist in the healthcare setting.
Conclusion
The establishment of market competition in the health care industry has had both positive and negative consequences. Market competition affects both consumers and health professionals. Consumers are now able to choose among a wide array of health care suppliers. On the other hand, suppliers are facing decreased demands on their services and as such, have to improve the quality of health care provided, while at the same time changing the products offered to increase their competitiveness.
References
Blumberg, L., Holahan, J., & Buettgens, M. (2014). Halbig v Burwell: Potential Implications for ACA Coverage and Subsidies. Timely Analysis of Immediate Health Policy Issues. Web.
Corlette, S., Volk, J., Berenson, R., & Feder, J. (2014). Narrow Provider Networks in New Health Plans: Balancing Affordability with Access to Quality Care. Urban Institute. Web.
Hicks, L. (2014). The Economics of Health and Medical Care (6th ed.). Burlington, MA: Jones & Bartlett Learning
Ingmar, K. (2009). Monopolistic Competition and Costs in the Health Care Sector. IWH-Diskussionspapiere. Web.