Health Economics: Healthcare Goods Essay


Describe about the Health Economics for Healthcare Goods.


There is the characteristic difference between the healthcare and other types of good. Generally, healthcare is not a demand because healthcare services can be both pleasurable and unpleasurable. Even if there is the demand for healthcare, it would be for the improvement in the health. Healthcare is generally is considered as the need of the people. Economist generally considered healthcare need as the capability to get maximum benefit from it. Healthcare demand can be analyzed in the similar way as any other good, however there would not be change in the market of healthcare due to more demand of the healthcare service. Demand and need of healthcare affects healthcare in three different areas. These areas are: purchasing of different requirements for healthcare, individual and population based treatment strategies and lastly resource allocation. In purchasing issue there would be burden on the planning and development, if demand is more as compared to the need of healthcare. As a result, there would be possibility of loss of sensitivity of the service development. Community based healthcare provision is being followed in most of the places. However, there is possibility of shifting this approach towards individual based approach due to high demand as compared to the need of healthcare. There would be impairment in the resource allocation practice due to high demand of healthcare as compared to the need. In health care system, there are not enough resources available to meet all the needs of the people. Hence, in healthcare there should evaluation of the needs which are met and which are not met (Feldstein, 2012; Jones, 2012).

If there is more demand for health service, there is burden on the national economy in the respective country. Survey was conducted in the United States for total joint replacement and its relation to the national economy. This survey was conducted for the joint replacement therapies for the period of 1993 – 2010. It is evident from this study that there was economic downturn due to increased demand in the joint replacement therapy. This study raised questions for the expansion of the joint replacement therapy (Kurtz et al., 2012). Prevention in the chronic illness would definitely reduce both need and demand of healthcare service. Consequently, there would be fewer burdens on the healthcare cost. In healthcare practice, there is the possibility of self-management for few of the diseased conditions. This self-management also would be helpful in reducing total healthcare cost. This self-management was studied in case of cold and cold condition can be effectively controlled on oneself. If patient with cold doesn’t visited hospital and managed on oneself, there is the possibility of saving cost for cultures, x-ray films, and antibiotics (Fries et al., 1993).

Principle of margin can effectively differentiate cost of hospital stay based on the need and demand of stay in the hospital. Cost of hospital stay due to the surgery can be effectively controlled based on need and demand. Generally hospitals calculate average cost of inpatient stay in the hospitals based on the average cost of the one day. However, cost of the inpatient at the beginning of the stay is more as compared to the last few days of stay in the hospital. Cost at the beginning is more due to requirement of more intensive care. Patient can effectively control this marginal cost of last few days by not demanding to stay in the hospital in the later days of the treatment. If there is need to stay in the hospital, this cost would definitely increase. Technical and economic efficiency get affected due to need and demand of healthcare service. For example, there is need of one doctor and two nurses for providing technically efficient care to 20 patients a day. If they provide care to 15 patients, it would be regarded as technically insufficient. In this case demand for more staff is not advisable. In the same scenario, if there is the demand of two doctors and one nurse for providing care to 20 patients, it would not be economically efficient because cost of the doctor would be definitely much higher as compared to the cost of the nurse (Walburg, 2006; Wickramasinghe et al., 2013).

Reducing the need and demand for healthcare services would reduce the cost of healthcare and at the same time provide better health for the individual.


Feldstein, P.J. (2012). Health Care Economics. Cengage Learning.

Fries, J.F., Koop, C. E., Beadle, C.E., & Cooper, P. P. (1993). Reducing Health Care Costs by Reducing the Need and Demand for Medical Services. New England Journal of Medicine, 329, 321-325.

Jones, A.M. (2012). The Elgar Companion to Health Economics. Edward Elgar Publishing.

Walburg, J. (2006). Performance Management in Health Care: Improving Patient. Psychology Press.

Wickramasinghe, N., Al-Hakim, L., Gonzalez, C., & Tan, J. (2013). Lean Thinking for Healthcare. Springer Science & Business Media.

Kurtz, S. M., Ong, K. L., Lau, E., & Bozic, K. J. (2014). Impact of the Economic Downturn on Total Joint Replacement Demand in the United States. The Journal of Bone and Joint Surgery, 96(8), 624-30.

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