The health system is a significant part of the exam. It covers everything from public health and clinical research, policy and HIPAA, healthcare quality and data flows, and health economics and financing.
In this week’s question of the week, we’ll discuss the economics of health care delivery and how it effects the cost of health care in the US.
So let’s get into it:
Question:
What economic term used to describe a market where there is only one buyer and multiple sellers such as a single-payer healthcare system where the government or another entity is the only buyer?
- A. Monopoly
- B. Monopsony
- C. Oligopsony
- D. Oligopoly
Explanation and Answer
A. Monopoly – A market form where only one individual or organization is the only supplier of a commodity
B. Monopsony – A market form where only one buyer interfaces with would-be sellers of a particular product
C. Oligopoly – A market form where a market is dominated by a small number of sellers
D. Oligopsony – A market form where the number of buyers is small while the number of sellers in theory could be large
Therefore, the answer is B – monopsony.
Other Examples
In a monopsony, a buyer can dictate terms to the seller because of their power over the market. Other examples include Wal-Mart, who is notorious for setting often unrealistic expectations for price from those they buy from, and the military, space, and prison industries.
As fewer insurers exist in the health care market due to the costs of compliance with regulation and assuming that supply and demand remain static (doubtful by the way), a monopsony means a single buyer will pay less for for a lower quantity of services than the marketplace would support.
Sound good, right?
Wrong. Supply is likely to be reduced with fewer insurers and fewer providers while demand is likely to increase as boomers require additional care, so the assumption in a monopsony as described above is wrong. Supply and demand will not remain constant.
Source: American Thinker
This means increased prices, decreased availability of care, and fewer providers to pick from.
References:
Spiers, J. M. (2010). The Problem with a Health Care Monopsony. http://www.americanthinker.com/articles/2010/10/the_problem_with_a_health_care.html