Deck 8: Inequality of Outcomes

Question 1

During a pandemic, explain how inequality of wealth may became inequality of health. What are the characteristics of groups of people that are in the most precarious position with respect to health outcomes? Why?

Answer 1

A pandemic exposes disparities of health outcomes between socio-economic groups. With less access to healthcare, individuals in lower income classes or marginalized communities experience negative health outcomes at higher rates than other members of the population. Although no one has natural immunity to a new disease, socioeconomic and structural disparities demonstrate what happens when a pandemic is layered upon entrenched inequalities.
Because of pre-existing medical conditions and less access to healthcare, those who are disadvantaged may experience infections at a higher rate than their percentage in the general population. During a pandemic, the working poor risk daily harmful health effects while those with higher socioeconomic status work from home. An inequality of health outcomes depends on precipitating events, the vulnerability of healthcare systems, and factors that determine the demand for healthcare.

Question 2

Explain why economists treat health like other investments that enhance future productivity. What is the implication of this approach?

Answer 2

Economists treat health like other investments that enhance future productivity. Michael Grossman's (1972) model of health demand views investment in health as the consumption of medical care. In this framework, individuals have a level of health that depreciates with age. They invest in the process because better health status leads to more time for both market and non-market activities. At any age, a person determines an optimal stock of health by equating the user price of investment in health with marginal efficiency. In this model, improvements in health increase human capital, the knowledge and skills embodied in work effort that lead to the creation of economic value. But the allocation of resources to enhance health reduces the money available to purchase other goods and services, resulting in lower levels of current consumption. The implication is that better health will increase future productivity, income, and consumption.

Question 3

Explain the model of derived demand in figure 8.1. In what sense is demand derived? How does a healthcare system determine Qm, the minimum health requirement? How does a healthcare system determine Qc1, the clinical quantity of care? To answer these questions, think about the provision of healthcare in terms of costs and benefits.

Answer 3

The demand for healthcare is derived from an individual's demand for health. It is inversely related to price. The demand for healthcare is defined in terms of what an individual is willing to sacrifice to obtain better health outcomes. Following the analysis of Henderson (2018), figure 8.1 depicts the demand for healthcare (D1), where Qm equals the minimum level of healthcare necessary to maintain a person's health status. An assumption is that society will not allow anyone's health fall below (Qm). In the model, the healthcare community guarantees a clinical quantity of care for each patient (Dc1) without consideration of cost. Policymakers and administrators use Dc1 to determine resource needs, including personnel, equipment, and facilities. Because the clinical quantity of care does not consider cost, Dc1 is perfectly inelastic: individuals demand a level of care (Qc1) regardless of price.

Question 4

For person j over time t, the demand for healthcare (HCjt) is written as a functional relationship between healthcare and its determinants: HCjt = f(Pt, Djt, Hjt, Sjt, Ijt). During a pandemic, how do the independent (right-hand-side) variables interact to impact HCjt?

Question 5

Explain how physicians serve as a determinant of the demand for healthcare. In your answer, discuss the principal-agent relationship. In the process of delivering healthcare, what motivates physicians? How does a pandemic alter the framework?

Question 6

With respect to the model of induced demand (figure 8.2 (in the text)), explain why an increase in supply leads to an increase in demand. Under what circumstance would price increase? During a pandemic, how is this model relevant?

Question 7

How do demographic characteristics of a population, including family structure, labor force participation, fertility, migration, and population, impact the demand for healthcare? During a pandemic, how important are these factors?

Question 8

In a pandemic, an increase in demand for medical services (figure 8.3) leads to an increase in the clinical quantity of care. What is the implication of this change in the clinical quantity of care with respect to costs, benefits, the surge in patients, and hospital capacity?

Question 9

Explain the link between education/income and healthcare outcomes. How do higher levels of education and income lead to better health? During a pandemic, how important are education and income in determining healthcare outcomes?

Question 10

What types of structural inequalities impact human health and the demand for healthcare? What are the roles of pre-existing conditions and a lack of resources for healthcare services? During a pandemic, how does structural inequality complicate the provision of healthcare?