Demand and Supply of Medical Care

You have read in your course on microeconomics that demand is governed by the utility derived from the consumption of goods and services. This is true in case of demand for medical care also. Two related questions viz. why medical care is needed and whether the basic factors which go to influence the demand for medical care are relevant in this context. They help us to explain variations in utilisation of health services among population groups and between areas. It also enables forecasting the future health requirements more accurately.

Planning of health facilities is based on estimates of 'need' for medical care in the population. The reason for using 'need' as a basis of public policy for medical care is that it happens to be the principal determinant of hospital and physician use. From this point of view, need is defined as the amount of medical care that experts believe a person/population should receive to remain as healthy as possible. In developing countries like India, for every 5000 population residing in rural areas there is a norm that there should be a primary health centre (PHC). Such a norm is based on factors like existing conditions in the area, current medical knowledge, etc. Evidently, such factors are subject to change depending on developments in the
medical field and the local conditions.

Demand for health care can be viewed from two angles viz.

(i) The time devoted to preventive and curative measures of health care and

(ii) The cost of establishing the health care services which depends upon the infrastructural needs.

In the light of this, the demand for health care, like in education, acquires connotation both as a consumption good as well as an investment good. It is a consumption good because its consumption makes the consumer feel more able and better. It is an investment good because it helps in acquiring a state of health decreasing the number of sick days thereby increasing the quality of life.

Given the natural process of ageing, one of the important factors which influences the demand for health care is age. As the stock of health depreciates with age, people spend more on health care to offset the consequences of old age disabilities. However, such expenditures on medical care is strongly related to the income levels of persons. An yet another factor contributing to demand for health care is the educational level of persons. Education has a negative relationship with the
demand for health care as knowledge of health care reduces the incidence of disease which in turn leads to lower demand for health care.