Introduction
The formation of market relations, with a priority on economic criteria, in modern systems of health care enforces a particular view of theorists and practitioners of such systems. Such view can be seen as the main focus of the discipline of the health economics, which is concerned with the problem of resource allocation in health care from the perspective of efficiency and equity. In that regard, this paper analyzes the subject of health care market, its characteristics, distinctions, and the process of decision making, in the context of health economics.
Health Market and Other Markets
The main distinctions of health market can be assessed in the context of competition. In terms of structure, the relation of supply and demand outlines the main difference between the structure of the health care market and other structures. In that regard, comparing the structure of health care market and perfect competition market, i.e. an idealized model of the real world, the main distinctions can be seen in the following (Mills and Gilson, 1998):
- Limitation on the number of suppliers and barriers for entry
- Heterogeneity of the services
- The difficulty in collating price and quality
- Uncertainty and the lack of information
- The large number of non-profit organizations
- The existence of a mediator between the supplier and the client
In terms of markets in general, the unique characteristics of the health market can seen in the following aspects:
- Having consumption and investment elements
- The costs are high in relation to income
- Clients are involved in the production
- Consumption or non-consumption decisions might be irreversible (Mills and Gilson, 1998)
Health care Market and Price Setting
The services provided by health care are not different from other goods, as they are also scarce and require allocations. However, an important factor that is considered, when setting the prices for health care services is the balance between efficiency and equity. In that regard, efficiency, i.e. “resources being used to get the best value for money” (Palmer and Torgerson, 1999), is a reflection of the price and the allocation of goods in a free market. On the other hand, the equity perspective in health care provides arguments against market-based considerations when setting the process and allocating the services and goods. The main arguments can be summarized as follows:
- Equity pursuit counterbalances inequality in income, while market exacerbates it.
- Market assumes self interest, while equity represents a concern for the well being of others
Thus, if assuming the market model with no intervention or equity pursuit, it will result in that those who are most likely to be sick being unable to afford health care.
Health Care Services and Decisions
It can be stated that, although equity, as an essential characteristic of health care market, is recognized, it is not of the main focus of health economists (Kernick, 2003), when making decisions regarding types and quantities of clinical research. In that regard, it can be stated that the main considerations in such issue are stemming primarily from the perspective of efficiency. Thus, the abnormality of the health care as a market do not largely affect the decision process, where economic evaluation is the main basis of efficiency choices in health care.
Conclusion
It can be concluded that despite the distinction of the health care market, the market rules are generally applicable to health care. In that regard, it can be stated that in reality a mixed approach toward health care is used, where the focus on equity or efficiency separately cannot be achieved.
References
KERNICK, D. P. (2003) Introduction to health economics for the medical practitioner. Postgraduate Medical Journal, 79, 147-150.
MILLS, A. & GILSON, L. (1998) Health Care: The State versus the Market. Health Economics for Developing Countries: A Survival Kit. HEFP.
PALMER, S. & TORGERSON, D. (1999) Economics notes: Definitions of efficiency. BMJ, 318, 1136.