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Trade-Off in Healthcare

Free «Trade-Off in Healthcare» Essay Sample


The patterns dominating in modern healthcare market have invoked a debate over trade-off between efficiency and equity. To achieve success on their market positions, healthcare organizations resort to economic mechanisms of efficacy instead of applying the equity guided and responsible approach to patients. The role of trade-offs in healthcare is a vexed question, and the judgements surrounding it include the government intervention in the form of reforms and recommendations. The emergence of a large number of private clinics in the healthcare market has sharpened the focus on the need to increase effectiveness of such organizations. However, ethical considerations call for a more detailed in-depth analysis of the issue of effectiveness along with the mission of organizations to provide equity. Modern market relations facilitate a trade-off in healthcare between efficiency and equity, which is caused by the need for organizations to compete and meet high standards of healthcare services provided.


Trade-offs are inherent to any business, including the field of healthcare regulated by the market laws and strict standards of quality imposed on medical services. The role of efficiency is to address the competitiveness of a healthcare organization on local and national levels. On the other side, such competitiveness is preferred by those patients who have appreciated medical services. However, not all segments of the population can get equivalent and equal treatment and care. This aspect forces either to choose the path of economically profitable servicing of a wide segment of population by the medical services of questionable quality, or to improve quality with the increase in price and automatic narrowing of the market segment (Wonderling 2011). The trade-off has emerged due to the fact that the organization’s economy confronts with the ethical tone of the mission of medical services.

The debates over equity indicate its social nature and dependence on common justice system within the country. Thus, Braveman et al. (2011) indicated that equity emerged in conditions where the field of healthcare addresses mostly health disparities that require governmental intervention. As health differences of socially disadvantaged groups of patients reflect social differences, equity plays an important role in finding a compromise with efficiency and common social reforms in the country (Marmot & Allen 2014). The U.S. public organizations denote health equity as the human  right fundamentally positioned in any democratic society. Furthermore, the weight of health equity is greater due to the interpretation of health as capacity and ability to realize personal rights. The point is that equity can be considered one of the crucial factors and criteria of efficiency. Therefore, healthcare economists and observers should cease to separate it from the general concept of efficiency in regard to healthcare organizations.

As any social field, equity is challenged in the healthcare field due to the gap in servicing different social groups. Thus, Fleurbaey and Schokkaert (2011) address equity in the healthcare field as the condition and factor that indicate common social equity and shared approach to healthcare services. The scientists claim that equity in healthcare varies depending on age, gender, income level, and type of healthcare sector. Equity or inequity is assessed as its horizontal and vertical types. The first type stands for the in-depth dependence of equity on socioeconomic equality, regional healthcare conjuncture, and ethnic disparities, while the second type links different levels of healthcare needs to different volumes of relevant services in the given sector. Such suggestions not only raise a number of new questions regarding the actual allocation of services but also complicate the trade-off with efficiency. The peculiar balance between these concepts cannot be easily achieved, as equity tends to establish its rules and appeals in regard to the mission of health organizations rather than their effectiveness.

Financing of equity is disturbed due to the socio-economic context of the country, which also affects the efficiency of healthcare organizations and the entire sector. The examination of financing mechanisms in the healthcare field of Ghana, Tanzania, and South Africa indicated that even non-employment contributions related to health insurance are different in these countries (Mills et al. 2012). Furthermore, distribution of healthcare benefits favoured people with high level of income, while the illness burden was greater for people with low level of income (Mills et al. 2012). Such non-equity is inherent to all developing and even some of the developed countries. The examination of this issue raises the question of universal coverage of healthcare accessible to the people in need. However, the efficiency of healthcare organizations requires government support in the form of subsidies and reforms.

Trade-offs inevitably accompany healthcare through the establishment of relationship between organizations and patients. Clinicians as well as their organizations make day-to-day trade-offs between potential risks and positive outcomes, meanwhile their administrators are forced to balance the needs of patients and personnel with financial and economic solvency. Patients make trade-offs between the offered healthcare options and their belief in recovery. A separate issue is the trade-off between the choices of private and public healthcare organizations. Their efficiency differs according to the price level, quality delivered, options offered, and market segments served. The main choice refers to the affordability of services to patients and the quality of healthcare services provided, echoing the balance between the equity of patients and the efficiency of healthcare organization. However, efficiency does not always mean a high price for services. Instead, quality assurance rests on the shoulders of government spending, which can provide coverage of the related costs. However, in this case, the financial burden becomes heavier than taking on the medical insurance. And this can lead to the increase in taxes. Therefore, the trade-off between equity and efficiency is a continuous and crucial issue.

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The equity is challenged by market failures that may require governmental intervention. While targeting market failures, insurance and healthcare markets lack informational symmetry, agent presence and performance, as well as market capacity. Healthcare services may be additionally provided for through private sector or government intervention. Nevertheless, even such support not always results in equal distribution of quality healthcare, because private organizations are dependent on price rationed for their quality of services. Therefore, not everyone can afford paying such bills in the case of serious and/or long-term outpatient treatment (Thoma 2009). At least, equity in information delivery should favour the patients’ treatment, such as information about doctors, illnesses, required type of drugs, etc. Market conditions need regulation based on market principles ensuring both efficiency and equity for the larger audience of patients. Government support varies from simple creation of appropriate conditions on the healthcare market to direct intervention, depending on the healthcare condition in the given country.

Public and private sectors of healthcare demonstrated different results in regard to the trade-off between equity and efficiency. Measuring the healthcare outcomes in middle- and low-income countries, the research indicated that performance of private organizations is more efficient, sustainable, and accountable than that of the public sector (Basu et al. 2012). Meanwhile, public hospitals and related organizations showed more equitability and care based on evidence. Therefore, the trade-off between the sectors creates the gap differently due to price charged and associated costs. Both sectors have shortcomings in service provision, but they adopted different approaches to their own problems.

The approach to efficiency may include equity under market conditions. The exaggerated expert thought suggests that the effectiveness of organizations in the healthcare industry should depend on their ability to provide health services to all patients according to the equity principle (Health Knowledge 2017). If the healthcare organizations prioritize efficiency as maximization of health benefits through minimized resources, they would not compromise equity in the form of fair allocation of medical resources. Market economists apply the trade-off between equity and efficiency, but both of these concepts are reported to evaluate sufficiency of a healthcare system (Reidpath et al. 2012). The main point lies in reconsidering healthcare as a field that provides aid and treatment to people with diseases rather than from the perspective of sole market relations. The emergence of commercialized healthcare in the private sector has complicated such outlook. However, healthcare should ensure fair distribution of resources and maximum health benefits and gains (Folland, Goodman & Stano 2016). For example, the payments to the UK practitioners given from each screened woman on the steady unequal rates of social participation may be distributed according to the equity in participation of all socio-economic categories of patients. This is how the focus on equity may coincide with general efficiency.

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The triangle of equity, cost and efficiency is considered when applying the Beveridge or Bismarck model of healthcare regulation by the governmental forces. Equity is viewed as access of people to healthcare judging by their needs but not an ability to pay, while efficiency is a generation of socio-economic incentives to improve quality and reduce expenditure (Bevan, Helderman & Wilsford 2010). They reflect the outcomes and nature of healthcare policy in any European country that uses Beveridge or Bismarck approaches. The governments in Denmark, England, and Sweden control healthcare costs and limit their patients’ choice, because healthcare is financed through taxation system and provided with general practitioners functioning as gatekeepers and coordinators. The governments in France or Germany follow mainly the Bismarck approach. They are characterized by weak control of total costs on healthcare, free choice of practitioners, and no choice of insurance agents. However, Netherlands that follow Bismarck approach succeed in controlling total healthcare costs, insurance choices, and information saturation in terms of the choice of healthcare providers. Governmental interventions demonstrate various options applicable to certain circumstances, in which efficiency and equity are differently compromised (Caro et al. 2010). Assessment of healthcare systems may ease the trade-off between these aspects by means of governmental interventions.

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Despite a continuous debate dedicated to the trade-off between equity and efficiency and proper attention to socio-economic equity, many countries view spending as the component of total healthcare efficiency. According to the empirical evidence, OECD countries make efforts in the local healthcare field to manage costs efficiently through radical measures and improvement of reforms (Joumard, André & Nicq 2010). They adopt the best examples of policy practices and borrow the most successful settings and elements from other socioeconomic systems. Despite the importance of equity, OECD countries are more focused on the value delivered efficiently rather than on given financial resources. Taking into account such cohesion, a wide range of countries may adjust their policies and institutions to the beneficial practices. Altogether their efforts would be approved by governments and international practice. Despite this fact, international cohesion is expected to raise the issue of equity as a valuable concept in terms of justice and fair distribution of good. Consequently, governmental intervention through regulation is expediently and unobtrusively required to enhance the healthcare field and turn it into a more efficient system.

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An important solution to the problem of trade-off between organizational efficiency and equity is the inclusion of both categories in the same context of healthcare assessments. Thus, research of health inequalities among Indian children showed that efficiency should be viewed as an average health level along with equity as another crucial goal of health policy (Arokiasamy & Pradhan 2010). The elements of aforementioned trade-off should be reconsidered and united to ensure healthcare advancements. For example, in India, it should benefit the poor people. Governmental interventions in child healthcare are necessary and prioritized. Despite that economic status being among the determinants of nutritional status in this case, Indian rich households still continue to benefit from immunization coverage. Therefore, socioeconomic and health-related inequalities should be also addressed as the criteria for efficiency.

Certain forms of partnership may help to address the socioeconomic issue of efficiency-equity trade-off. Thus, the examination of cross-sectoral collaboration in the UK revealed that partnership between public organizations is the most beneficial and easiest solution generated (Andrews & Entwistle 2010). Distinctive advantages of public, non-profit, and private organizations allow them to cooperatively solve the crucial social issues such as the trade-off between equity and efficiency. Public-public cooperation works best in enhancing effectiveness, equity and efficiency so that it would help to reach the most successful decision in healthcare. Therefore, one cannot neglect direct or indirect governmental intervention. Compared to other combinations such as a non-profit and private partnership with public organizations, their efficiency would have more probability to contradict equity.

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Despite interrelations and dependence of equity and efficiency in the healthcare field, these concepts still remain controversial for policymakers in certain countries. For example, investigation of heath priorities in the developing countries with evident healthcare disparities demonstrated that Nepal and Norway groups of policymakers prefer efficiency criteria rather than equity ones with a significant gap between these criteria in the analysis of multi-criteria decision-making processes (Mirelman et al. 2012). Instead, a Cuban group demonstrated stronger preferences for equity dominating efficiency. According to the findings, outlined social disparities and economic positions of policymakers are among the guiding forces that direct government interventions in different countries.

Equity is reported one of the quality signs of efficient healthcare. Considering the impact of financial incentives on healthcare quality, a number of scientists defined equity as one of the objectives in terms of healthcare quality provided by primary care physicians (Scott et al. 2010). Their efforts in making improvements put equity next to safety, timeliness, effectiveness, patient-centred approach, and efficiency. Therefore, financial improvements in differentiated payments may lead to equity as their desired outcome. The review also linked the quality of physicians’ work with equity as a measure of healthcare. According to this practical evidence, accessibility of healthcare and its efficiency can be combined on the local (enterprise) level.

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Setting priorities in healthcare adjusting the guidelines of the World Health Organization includes equity criteria. International norms regulating healthcare have drawn additional attention to equity placed among assigned priorities for improvement. Any interventions in this sector should be supplemented with equity. This refers to national and local-level priorities, especially in regard to the analysis of cost-effectiveness (Norheim et al. 2014). The governments are obliged to pursue equity in their development programs and superpose it with healthcare interventions made. However, even such reinforced meaning of equity in regard to cost-effectiveness influences differently their trade-off up until some more detailed explanations will be given.

The central aspect of the trade-off between efficiency and equity refers to resource allocation. Governmental intervention refers to this kind of compromise due to public ownership on resources and possible managerial influence on the final decisions. Directions of health policy depend on numerous criteria that are being researched and applied (Guindo et al. 2012). They also view equity, cost-efficiency and common efficacy/effectiveness as the evidence of their importance for healthcare interventions. According to the researched data, the frequencies of mentioned equity and efficiency were 32 and 29 accordingly (Guindo et al. 2012). On the other hand, geographical perspective of this trade-off also puts efficiency and equity in the same position if patients are satisfied with the optimal location of hospitals (Burkey, Bhadury & Eiselt 2012). Such facts demonstrate that both categories acquired almost the same meaning for priority-setting and decision-making in healthcare. Finding a balance between them should be as accurate and careful as possible, because they play significant roles for healthcare quality.


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The trade-off between equity and efficiency in healthcare is caused by market relations being unable to address the needs of patients and organizations to completely meet healthcare standards. Socioeconomic nature of trade-offs is related to common justice in the country, economic conditions of diverse population groups, various types of equity, and relationships between patients and healthcare organizations. The balance between economic solvency and equity requires appropriate insurance support, governmental regulation, and the relevant choice of specialists. Empirical studies and literature reviews emphasize the need in a differentiated approach to the trade-offs in healthcare addressed through governmental interventions. Correlation of public and private sectors demonstrated different approaches to efficiency and equity, namely from the perspectives of Beveridge or Bismarck models. Improvements in healthcare may be initiated more efficiently through the partnership between public organizations, which could address and unite all socioeconomic issues associated with the trade-off between equity and efficiency.

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