Resources Allocation in the Healthcare Sector

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Table of Contents

Introduction
The Effects of Increased Coinsurance Rate
Effects of Increased Coinsurance on Hospital Merger
Conclusion
References

Introduction

Resources allocation in the healthcare sector involves some economics, representing a comprehensive equity analysis. This analysis ends in decisions that either directly or indirectly impact healthcare stakeholders such as members (Klonschinski, 2016). An example of healthcare decisions is when a coinsurance rate increases from 0% to 10%. Raising coinsurance by 10% implies that an individual who buys health-related insurance will incur 10% of hospital bills, as the insuring firm pays 90%.

The Effects of Increased Coinsurance Rate

Increasing the coinsurance rate from 0% to 10% has various impacts. First and foremost, members of the insurance firm (members out-of-pocket) are affected tremendously. They become responsible for paying 10% of the hospital bills. Indeed, members’ expenses are expected to increase as the coinsurance rate surges, which is the response needed in question (Q1). Secondly, an upsurge in coinsurance rates will not affect hospital-based emergency services. Its members access emergency services from a hospital without paying attention to the shift in the coinsurance rate (Lee et al., 2017). As required in question (Q3), effective healthcare services presumably include pre-planned surgeries and consultation against life-threatening health issues. Ideally, the rise in the coinsurance rate is expected to lower the demand for healthcare services. People may seek healthcare services in the future, especially when they anticipate a decline in the coinsurance rate. In responding to question (Q4), researchers argue that fair health insurance is associated with zero net payoffs (Nyman et al., 2018).

The rise in the coinsurance rate will reduce insurance premiums because consumers bear a significant portion of medical costs. Consequently, healthcare service consumers will prioritize paying lower premiums today than in the past. As suggested, the rise in the coinsurance rate by 10% will make life insurance plans less appealing. Newly registered members will demand few insurance plans due to hefty expenses. Therefore, as required in question, a few new members will be attracted to the health plan (Q5).

Effects of Increased Coinsurance on Hospital Merger

The merging of the two hospitals would create a situation similar to the monopoly, where the joint firm knows it has no other rival firms. Essentially, the price would rise with the merger of the hospitals (Q6). As noted by Velić et al. (2018), the merged organization knows that it has no other competitors in the industry and will charge a higher price than its marginal cost (MC). Reasoning from the compensation point of view needed in question (Q7), the combined organization would provide low wages to hospital workers. The lack of potential workplace options will force employees to work for reduced wage rates without questioning or quitting. The higher negotiating power of the merged firm results in low wages for the workers. As required in question (Q8), the joint firm’s profits would rise due to the merger. Profits resulting from the merger are calculated by the formula expressed in Equation 1:

Equation

With the merger, the firm charges a higher price for its product, culminating in a higher revenue yield—the so-called TR. With the union, the organization specializes in taking advantage of knowledge sharing, resulting in lower operating expenses, TC. The joint entity profits improve due to increased revenue and low expenditures. Therefore, the merger may negatively impact the quality of the care provided by the merged organization (Q9). The merger reduces competition, which is often the drive for delivering quality care services. As a result of the consolidation, the actuarially fair insurance will rise (Q10). A lack of competition fuels the exaggeration of emergency health services charges. A higher price charged by hospitals is transferred to the premium charges for insurance firms.

Conclusion

Increasing the coinsurance rate from 0% to 10% has various impacts. To begin with, increasing the rate of coinsurance resulted in a less appealing insurance plan in the market. Secondly, the demand for new members’ insurance plans will reduce because they are responsible for bearing the cost. Lastly, it will lead to the organization’s relaxation due to the assumption that individuals have no alternative but to utilize their services.

References

Klonschinski, A. (2016). The economics of resource allocation in health care: Cost-utility, social value, and fairness. Routledge.

Lee, H. J., Jang, S., & Park, E. (2017). The effect of increasing the coinsurance rate on outpatient utilization of healthcare services in South Korea. BMC Health Services Research, 17(1). Web.

Nyman, J. A., Koc, C., Dowd, B. E., McCreedy, E., & Trenz, H. M. (2018). Decomposition of moral hazard. Journal of Health Economics, 57, 168-178. Web.

Velić, I., Cerović, L., & Maradin, D. (2018). Monopoly exploitation and rent-seeking as an inevitability of capital concentration. Asian Economic and Financial Review, 8(4), 552-564. Web.

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Resources Allocation in the Healthcare Sector

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