Accordingly, a free market, Is one in which the exchange of goods/ services and money as In price takes place without the intrusion of the government of the particular country where the market operates. Any market has two important stakeholders, a buyer or consumer and a producer. A buyer or consumer is an individual or group of people who pay money (price) to receive satisfaction in the form of a good or service. Whereas, a producer or a manufacturer is one who produces goods or provides services to meet the consumer’s demand (Green, 2002).
Health economist and policy maker consider healthcare system as a market. However, before defining heal care system as a market, it is important to understand the concept of healthcare system and its arioso types existing in the world. A healthcare system is the organization and the method by which healthcare is provided. These systems differ from one country to another, and can be differentiated by the percentage of the finance that comes either foam public or private funds and whether the healthcare delivery Is controlled privately or by the government (Rotating, et al, 2005; Bolder, et al, 1997).
Healthcare systems can be divided In to three categories. In the first type, the state Is responsible for regulation, funding, and provision of services and INS is one example of this type. In such system, there is a proper hierarchical system, which implements the regulations (Rotating, et al, 2005). The second type is the social insurance-type healthcare system that negotiates between sickness funds and service providers. In such system, public providers, payment systems, non- governmental, and non-profit organizations offer services (Rotating, et al, 2005).
The third type Is the private healthcare system that Is characterized by private financing. Services are provided by private for-profit enterprises, and a limited amount of public regulation is Involved. The coordination between providers, financiers, and (potential) users is largely left to the market. Healthcare system in United Kingdom, Germany, and United States are considered the representative of a National Health Service (INS) system, social Insurance system and private Insurance system respectively (Rotating, et al, 2005).
In 1989, the National Health Services (INS) was going through major crises. People had to wait for admissions, the technology was not modern, and the hospitals as well as the health centers were not up-to-date. At that time, the then prime minister, Margaret Thatcher announced the need to reorganize ND to introduce market forces in the healthcare system (Newborn, 2005). N. H. S. Is neither a “free” service, nor an entirely tax-based. It is a comprehensive service that health to specialist care. People contribute to or buy their own National Insurance stamps.
In 1988-89, about 84% of the expenses were borne from the general taxation and about 16 % of gross from National Insurance contributions. Although people have to pay some amount of money to be able to use the services, it is cheap by international standards (Rivet, 2007; Marshall & Wilson, 2005). In addition, since it is ended by taxation, one does not have to pay at the time of use and people do not feel ashamed to use it. Doctors either are waged or have a contract with the INS and they are the one to decide who requires treatment and this is also a measure to control the level of demand. Solely, & Macmillan, 1995; Blend, & Donovan, 1989). In contrast to I-J, health is a neglected sector in my home country Pakistan. Although the government is the key supplier of healthcare, the publics expectation is that the private sector should work on increasing the level of healthcare provision. The artery care hospitals in urban areas and primary care facilities in rural areas are run by the government. In the provision of healthcare services, the private sector plays an important role, as it provides almost 80 percent of the outpatient services along with inpatient facilities especially in the urban areas.
According to the Pakistan Social and Living Standards Measurement Survey (PSALM) (2004-05), as many as, 77 percent households consult the private sector against only 23 percent to the public sector (Cram & Khan, 2007). In short, the healthcare system of Pakistan is based on he combination of social insurance and private healthcare system where either you accept the healthcare services provided by the state or non profit making organizations (which are often not very effective), or you pay for the healthcare service you want from the service provider you like.
Knowing the health sector of Pakistan and the background as why and how the market was introduced in the United Kingdom, now, I am going to discuss market and competition and if it improves the efficiency in the healthcare system. As mentioned earlier, economist and policy makers consider healthcare system as a market. They define healthcare market as the arrangement for the trading and exchange of healthcare (Green, 2002). As human beings, we are prone to get sick and thus would need medical treatment to restore health. In order to get healthy we would not mind paying the medical services to cure for illness.
This suggests that virtually every one of us is either an actual or a potential consumer of healthcare. Thus, all those working to cure illness, or restore health such as doctors, nurses, dentists, physiotherapists, pathologist, pharmacists and even healthcare assistants are sellers. It is stated earlier that presence of competition in a market is thought to be directly related with the efficiency of the market (Newborn, 2005). The question is if this statement is equally applicable to the healthcare system? Will market and competition improve the efficiency of healthcare production in a health system?
To be able to answer this question, one must analyze the stand from different dimensions. One needs to explore the impact of competition in healthcare market or vice-versa in relation to product, price, quality, equity, and efficiency patient responsiveness etc (Marshall, and Wilson, 2005). Product refers to the good or service provided to a consumer in exchange of a price (White and Weenies, 2006). It is the most important factor of any market, as without the product no exchange can take place. A product in the healthcare market refers to the (Bolder, et al, 1997).
The product has to be a right fit between the provider and the consumer. Health professionals are also the part of product and have an important role in building the market because the provision of service depends on these professionals, their skills to provide service and attitudes towards care. Availability of he product should be at a place where it is easily accessible to the end user. Accessibility has a positive impact on product, as most people would like to go to a health service that is available at their local area (Proper, Burgess, & Sausage, 2003).
Every product has a price when it is in market. Price is the way to identify which product is required, (White, & Winsomely, 2006; Agglutinin, Paul, & Madden, 1997) in what form and quantity. If there was no competition, there would be no means to know health services requirement. Since health service is a dynamic commodity that hanged each day followed by the congruent advancement in technology, the utilization of technology and its benefits to public in seeking health can only be identified and measured in the presence of market.
If there is no free market, there is no competition. Consumers will not have any choice to select from alternative treatment modalities in terms of treatment regime or advanced technology utilization. Instead, the health experts will impose the best treatment or health service on them. According to microeconomic theory, competition is the most efficient system of resource allocation. Merriam-Webster 2006 describes that competition causes agencies to develop new products, services, and technologies. This gives customers more choices and better options.
Variety of options to select from, usually lowers the prices of the products in comparison with the prices that would be if there was no or little competition. Cannon (2005) believed that market competition requires three key elements; producer and two types of consumers. Producer brings new ideas and improvements in the market. Between the two types of consumers, one are those who are independent to choose different products and he others who weigh the costs and benefits of those products. In the competitive markets, different agencies would be at the disposal of consumers’ choice.
In order to make the consumer able to choose from various options, agencies will promote their product I. E. Health service. They need to be convincing about high quality services at the best possible price that will give the consumer value for their money (Blithe, 1998). A healthy competition will enhance the quality in general. It would also enhance awareness and level of education in public that would enable them to make informed choice of best available healthcare according to their needs, suitability of access and affordability. Competition can have a diverse impact on client’s reaction and approach towards services.
In its presence, the healthcare system will also respond to the client’s demands more promptly (Marshall, and Wilson, 2005) for the reasons that if they do not do so, they would lose the customers. Quality in health care not only comprises of good health but will also include ill health and even death. Though healthcare services could not prevent death, it can promote quality of life of individuals and the means to enhance it. Saying, (2006) further suggests that quality may either raise or decline with increased competition when firms are setting quality and price.
In a price-regulated system, competition leads to increased quality. As the I-J moves to an increasingly market-based model for public service delivery, to ensuring informed policy decisions. Economic theory articulates that, competition should mean higher quality for consumers where price is regulated. However, when both are set by the market, as in private healthcare systems, the outcome is much sees certain suggesting that market-oriented public service reform should proceed with caution. Some studies prove that where there are more hospitals there is a strong competition amongst them.
For privately insured patients this competition leads to increased quality and thus leads to greater demand. On the other hand, other research shows a negative impact on quality in competitive markets. In studies of pro-competitive health reforms in the mid-sass in the I-J, it was noticed that due to competitive market there was an increase in the mortality rate for heart attack attains to such an extent that what could have been a positive influence in the provision of services turned out to be a complete disaster (Saying, 2006).
To sum it can be stated that presence of competition in a healthcare system will result in improve utilization of physical and human capital and will have a positive affect on information management system (Culler, Maynard, & Posted, 1993). Another group of people believe that there should not be any market or any competition in the healthcare system. There are several reason for this stand. First, illness is unpredictable and cannot be planned. Second, illness brings high risk if not attended promptly and third, healthcare service is expensive for common people.
Fourth, the competitive market requires an informed buyer who can choose from different options. Consumers in a healthcare market do not always have the liberty to choose the product before consuming. They cannot always obtain and comprehend information about their condition, as medical knowledge is complex, thus they have to rely or trust the service provider for appropriate decision of making the right choice. Fifth, the health service is not an ordinary product like other tangible goods, but is some thing elusive. Unlike other utilities, certain healthcare service delivery is inter-dependable community based interventions.
One of the popular examples of this is prevention from infectious diseases. If one customer decides to buy preventive measures from infection and another would not then the outcome of health intervention would not be the one, which is desirable (Morris, Devil, & Parker, 2007). Sixth, competition can lead to fragmentation of care and threaten the continuity of care, which are important for patients with long-term conditions. (Advert, 2005). And finally, there are consequences of competition that the sellers and he buyers have to bear. It is often assumed that competition reduces the cost.
It may decrease some management cost but expenses like billing and contracting will be higher. In such situation, the sellers will definitely have to bear the marketing cost as well. Here it is important to note that the healthcare providers are bound by their licensing and regulatory bodies to such an extent that they are even restricted to enter into the healthcare market. They are also bound to provide services to the consumer within the ethical boundaries and on the basis of clinical requirement ether than the paying capacity of consumer or financial interest of the provider.
Thus, the priority of the healthcare industry is not profit minimization but to sustain health and promote well being. (Morris, Devil, & Parking 2007). If there would be no standardization and rather free market, people will not receive treatment in to buy insurance that is not a simple solution either. The concept of equity, fair distribution to all, plays an important role here. If society agrees with the concept of equity, people will have standard insurance along with equal fulfillment of basic needs.
This ultimately means that healthy people will pay health subsidy and may find it worthless or very expensive (Ashcroft, 2007) it may also lead to over treatment in terms of prescription and interventions of clients by the health professionals with the assumption that the paying pocket would be ultimately of the insurance company. On the other hand, if society does not go with the concept of equity, insurance company will offer different premium rates according to the health risk one possess. Unfortunately, the people who could not afford to buy insurance would be the one in the most need of it.
According to Ham (1997), Private markets are not the greatest strategy of funding and offering healthcare if we want to achieve basic social goals. Access to medical care and providing equity are all social goals. This is the reason that governments are more and more involved in financing and regulating the healthcare services. When there is a market competition and the government has no or little say in regulating the price there is an increase in the quality of health services. Medicare patient in the United States is one of the examples for this as the state decides the fee for their treatment.
Evidence suggests that publicly funded clients gain from higher quality healthcare in more competitive markets. The basic economic theory explains that when the prices are regulated, suppliers compete for consumers on non-price dimensions, for example, quality. Moreover, if the set price is set above marginal cost at some baseline level of quality, then providers will raise quality to try to gain the market share. Discussing the positive as well as the negative aspects of having a market in the health care industry I personally believe that there should be a market for the health services but it should be regulated by mom governing body.