In the previous article, Cora and I left you stranded somewhere on the Production Possibility Frontier (PPF) with some economic realities in the health care sector. The PPF deals with the point at which a nation's economy is most efficiently producing its goods and services, and we discovered that America's health care system currently doesn't operate at peak efficiency. Although this conclusion may not seem surprising, there are so many areas where a shortage of health care has created an impact that it might be tough to keep up with them all.

Take, for instance, a story about overcrowded hospital ER (emergency room) facilities reported by Robert Brazell for NBC Nightly News on 14 June from Maimonides Medical Center's ER in Brooklyn. While Meimonides expanded their ER three times in the past few years, Brazell illustrated how crowded these facilities remain today. This overcrowded and overburdened situation was created by people who don't carry health insurance, as these individuals now use the hospital ER as their primary care facilities. Hospital ER facilities usually don't turn people away if they don't carry insurance. But this overcrowding has caused several hospitals across the country to close doors to ER care, as they often aren't reimbursed for their "open arms" policies.

As a response, the National Academy of Sciences published a report (PDF file) on the actions needed to bolster this nation's emergency care system on the same day that Brazell produced his report. The press release for this report summarizes the report:

"Despite the lifesaving feats performed every day by emergency departments and ambulance services, the nation's emergency medical system as a whole is overburdened, underfunded [sic], and highly fragmented, says a new series of three reports from the Institute of Medicine of the National Academies. As a result, ambulances are turned away from emergency departments once every minute on average, and patients in many areas may wait hours or even days for a hospital bed. Moreover, the system is ill-prepared to handle surges from disasters such as hurricanes, bombings, or disease outbreaks, said the committee that wrote the reports."

And, the press release ends with the solution that federal agencies need to take note of the situation and that regional collaboration (among competitive hospitals) needs to be implemented. Since this solution seems impossible to implement overnight, Cora and I decided that this delay allows us time to explore how this scenario would fit into the economic "supply and demand" theory:

1. Demand = how much (quantity) of a product or service is desired by buyers
2. Supply = how much the market can offer
3. Demand Relationship = the relationship between price and quantity
4. Supply Relationship = correlation between price and quantity of a good or service offered to the market

In the previous article, Cora and I explained how national health care problems have been exacerbated by lack of health insurance, and that Congressional bills for the alleviation of this problem usually have been defeated. The law of demand states that when a product goes up in price, less and less people will want it because many people won't be able to afford it. But, since Americans who lack health insurance haven't received relief for their demands, they found a solution for their health problems by visiting hospital ER facilities. This solution is centered on a supply relationship, because there's a direct correlation between people who need health care and who can't afford it and their entrance into hospitals that welcome patients who cannot pay.

This relationship is complicated by the hospital, a service that has now entered the "demand" queue because their supplies are limited by lack of funds. Hospitals aren't in the "supply" queue, because the law of supply states that as more people want a service the more that they're willing to pay. Instead, the price of care is passed on to other patients, or the hospital absorbs the costs and, in some cases, the hospital shuts doors because costs are already exhorbitant. Additionally, these costs are increasing because of litigation over poor service, and the poor service is increasing because of the workload.

In other words - paraphrasing the National Academy of Sciences - hospitals are in dire straits because the supply side to the law of supply and demand in the health care sector is missing.

I'm not going to be an apoligist for litigation, because some cases against health care are legitimate; additionally, a campaign that has saved 122,400 lives within the past eighteen months validates my stand. This report shows that: 1) hospital facilities are very competitive; 2) hospitals aren't necessarily the safest places in the world, and 3) that some hospitals have attempted to meet demand by supplying better quality service, but that fragmentation among health care and emergency services still runs rampant. With that said, other less legitimate claims against hospitals tend to rip hospital budgets to shreds. As hospitals close doors, the demand for health care will increase while the supply dwindles further.

So, what is the solution for the national health care problem? What may happen, as one doctor stated in Brazell's report, is that "things will get worse before they get better." If hospitals continue to shut doors, then the people who cannot afford health insurance might find another alternative solution. Cora and I are doubtful that this will happen, because alternative solutions are at a premium in both price and supply. From an economic perspective, then, this country needs to maintain an equilibrium between supply and demand through the guidelines suggested by the National Academy of Sciences. Part of this solution is for Congress to supply $50 million dollars to implement their suggestions.

Are there other solutions? We'll let you know in the next article, when Cora and I look at economic "elasticity."

Until Then,
Linda Goin