Asymmetric information in healthcare industry
Nowadays, increasing attentions are paid towards individual’s health as it is one of the most important aspects for a person’s well-being. Healthcares are highly demanded after a person gets sick or even before they get sick. Information about individual’s health condition can only be interpreted by well educated and professional such as doctors. Without the interpretation from a doctor, a patient can hardly understand his own health condition. Therefore doctor become patients’ top choice when seeking treatment or healthcare advice. However, due to the large imbalance in education level, there is a huge asymmetry in information between doctors and patients, and doctors may use this asymmetry to manipulate information they delivered to patients thus make patients pay more than they need.
When doctors or healthcare providers deliver information about individual health condition to patients, they can phrase their words in a severe way so overwhelmed patient may seek for treatment that is unnecessary but can increase profit gain by doctors or healthcare providers. Patients often are so respectful to their doctor and follow their advice without doing any additional research. Therefore, the asymmetric information could not be balanced thus patient end up paying more to doctor than they actually need.
Moreover, a number of healthcare product company use asymmetric information to market their product. Since most people do not have a very accurate assessment of their own health condition, they are very likely to ‘diagnose’ themselves according to the advertisement of healthcare product. Especially in the market of nutrient supplement product, most people do not know what nutrient they might be lack of and need nutrient supplement to enhance their health. They may simply look at the description of the product which usually utilize the usage of general symptom that everyone might have, and decide they indeed need to purchase. However, in most cases additional supplements are unnecessary for people to maintain their health. But with limited knowledge, people may spend extra money on product that have neither benefit nor harm to their health.
In conclusion, huge imbalance in information about individual’s health condition has led to patient’s large unnecessary expenditure on health care product. To reduce this excess spending, people should seek for a second opinion or do some additional research before decide to follow their doctor’s advice or purchasing health care product. Nevertheless, in case of emergency or severe cases, following the instruction from doctor is always the best choice with no harm.
When Healthcare is a “Lemon”: Asymmetric Information and Market Failure
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