Page 194 - Effective healthcare cost containment policies Using the Netherlands as a case study - Niek W. Stadhouders

Chapter 8
will use block grand negotiations as default, but this can be adjusted to specific settings. So far, these equilibriums focus on the supply side. However, the number of patients (v) is also dependent on the demand for care. Supply side reductions may have implications for the demand side. Therefore, we introduce a fourth equilibrium equalling supply and demand.
Supply, in terms of number of patients helped in the healthcare sector, depends on the number of providers, the budget per provider, the average treatment intensity and the average reimbursement rate, obtained by rearranging the budget identity:
The demand side is assumed to depend on the needs of the patient and the price patients pay for care (cost sharing). Patient need is a subjective measure, imperfectly related to health status. This means that not all patients that should visit the hospital based on health status do so, and not all patients that visit the hospital have a health status that would require care. However, demand for care is expected to increase when health status deteriorates. Secondly, we assume that patient demand is influenced by the height of the copayments, where higher copayments reduce the need for care. Again, the relationship is individual and subjective, which means that personal preferences and sentiments (and income) influence the relation. Therefore, we assume that demand depend on needs, copayments, and waiting lists, but do not make further assumptions on the precise relationship. We return to this issue later. Mathematically, Demand (D) is a function of patient needs (N) and the price that patients need to pay for health (C):
Where is increasing in and decreasing in . In healthcare, supply may be limited by the total budget constraint, which may cause excess demand (waiting lists ):
The equilibrium implies the following provider responses. If the supply of care is reduced, for example by reductions in the provider budget ( ), without addressing the demand side, then excess demand increases, which will result in increased waiting lists . Reductions in the demand side without interventions on the supply side result in five response options: (1) the number of providers declines; (2) the budget per provider declines; (3) the treatment intensity increases; (4) the reimbursement rate increases; (5) waiting lists are reduced.
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The patient market equilibrium