Supply-Side and Demand Side Cost Sharing In Healthcare Article 2022

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Supply-Side and Demand Side Cost Sharing In Healthcare
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Supply-Side and Demand Side Cost Sharing In Healthcare
In their article, Ellis and McGuire (1993) discuss the supply-side and demand-side cost
sharing in healthcare. They suggest that, in the health market, the fee paid by patients when they
demand services can be separated from the price paid to healthcare providers when services are
offered. Specifically, they propose two strategies aimed at controlling the cost of healthcare to
the concerned parties. One alternative involves the demand-side cost sharing, in which
consumers of healthcare pay more in deductibles and co-payments (Gupta, Joe and Rudra, 2010).
The second alternative involves the adoption of the supply-side cost sharing which intends to
modify the incentives of healthcare providers towards offering certain services. Generally, it can
be noted that Ellis and McGuire’s propositions are well supported with evidence from previous
research done by scholars in the field, and their analysis portray a great mastery of the subject
matter and, therefore, offer a logical recommendation that may be applied to improve the overall
welfare of both consumers of healthcare and the healthcare providers.
Ellie and McGuire’s (1993) central argument is that any healthcare system should focus
on protecting its clients against the financial risk of excessive costs, be fair to providers and
consumers and encourage competence in the delivery of health care services. In addition, they
review the underlying principles, comparative advantage, and limitations of the two cost sharing
techniques in healthcare both over the short run and the long run. They were also keen on
examining the consequences of cost sharing as regards to the fairness of the system of healthcare.
It can be noted that while discussing these issues, the authors deduce their arguments from a pool
of well researched journal articles, thereby making their arguments strong and agreeable.
Another major strength of this article is that the authors have utilized a simple language free

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from scientific and economics jargons that can confuse the reader. As a result, it is easy for the
target audience to comprehend the message that the researchers are relaying in the article.
It is critical to point out that although they do not provide a section for the conclusion, the
authors provide recommendations on the techniques that can be adopted to improve the welfare
of patients and reduce their financial risk as well as reduce cost to healthcare providers.
Specifically, they suggest that the government can modify incentives to encourage the
acceptance of supply-side cost sharing through the reduction of the tax subsidy on health
insurance premiums. As such, reducing the tax subsidy might push more consumers to pick
health maintenance organizations, preferred provider organizations and other networks that
utilize supply-side incentives. Alternatively, they suggest that the regime could also promote
supply-side cost sharing through provision of better tools to the private sector. Indeed, the
recommendations offered by the study are all practical and can go in a long way in helping the
healthcare system enact healthcare reforms that will help in the attainment of the three main
goals.
As one goes through the article, it is easy to note that the work of Ellie and McGuire
(1993) is extensively researched and supported by evidence and analysis. From the beginning,
the scholars draw their information from the research conducted by other researchers on the
subject of healthcare. In particular, they refer to the work of Burner et al. (1992) for information
regarding the total number of institutions that provide in-patient care and the total cost of
national healthcare. They also refer to the work of Arrow (1963) as regards to the concept of
moral hazard and how it is predominant among individuals with insurance cover. Furthermore,
they are informed by the research of Zeckhauser (1970) on optimal health insurance. All these