Question

why the supply of physicians is a major concern. Also answer the following questions: How would you expect the supply of physicians to affect physician’s incomes and the price and quantity of medical services provided? What is the actual evidence?

Answer 1

ANSWER: In the health care environment there is a clear link between supply of physicians and physician’s incomes. An increase in the supply of physicians causes a decline in physician incomes thus shifting the supply-demand balance and consequently the physician becomes an imperfect agent for the patient. The supplier demand theory makes an assumption that when the income of physician decreases, the physician will prefer to act as an agent of patient to prescribe extra-services with a motive to bolster their income; thus would play a role of an imperfect agent. As a perfect agent the physician would prescribe the appropriate amount of institutional care and therapy as dictated by the condition of patient. However when physician plays a role of imperfect agent, they will provide the misinformation to patient in order to encouraging the patient to demand higher number of services inappropriately. It is evident from the research from healthcare delivery in the 1970’s, when the supply of the physicians multiplied three times and aggregate demand also rose dramatically, confirmed such a behaviour. Despite physicians tripled in the supply, the income of practicing physicians did not change or there was a very slight fall