1 Illustrate the trade-off between administrators and medical staff using an isoquant/isocost graph. Explain the economic principles involved in obtaining an optimal situation. How would this situation be affected by an increase in the pay of doctors and nurses?
Then there is the micro question of where and how this money should be spent, and this issue
essentially concerns factor substitution and
and some examples are discussed in the following paragraphs.
1. Beds versus equipment. Treatments are much more capital-intensive than they used to be in past
decades, owing to improved technology. This has the effect of reducing hospital-stay times, and 60
per cent of patients are now in and out of hospital in less than a day compared with weeks or months
previously.This can reduce the need for beds compared with equipment.
2. Drugs versus hospitals. Health authorities may be under pressure to provide expensive drugs, for
example beta interferon for the treatment of multiple sclerosis. This forces unpleasant choices.
Morgan, chief executive of the East and North Devon Health Authority, has stated ‘It will be
interferon or keeping a community hospital, I can’t reconcile the two.’
3. Administrators versus medical staff. In recent years the NHS has employed more and more
administrators, whilst there has been a chronic shortage of doctors and nurses. This was partly
related to the aim of the Conservatives when they were in office to establish an internal market . The
health secretary, Milburn,was trying to reverse this trend; in a ‘top-to-toe revolution’ Milburn
appeared to want a new modernization board of doctors and nurses to replace the existing board of
civil servants. The NHS’s chief executive, Langlands, resigned. In the hospitals also there were more
administrators, and these took over much of the decision-making previously done by doctors
regarding types of treatment. This became necessary because of the clash between scientific
advance, increasing costs and budgetary constraints. It became increasingly obvious that rationing
had to take place. Related to this issue, nurses were also having to do a lot more administrative work
which could be performed by clerical workers. This happened for the same basic reason as before:
more information needed to be collected from patients in order to determine the type of treatment.
4. Hospital versus hospital. Because of the piecemeal structure that theNHS inherited it has tended to
provide healthcare in an inefficient way. Hospitals and other facilities are not only old and in need of
repair, but in many cases small, separated geographically, and duplicating facilities. Division of
labour is often non optimal.In Birmingham, for example, there is an accident and emergency unit at
Selly Oak Hospital, whereas the brain and heart specialists who might need to perform urgent
operations on those involved in car crashes or suffering heart attacks are at the neighboring Queen
Elizabeth Hospital. Thus the issue often arises whether it is preferable to concentrate facilities and
staff by building a new and larger hospital to replace a number of older facilities.
5. Area versus area. At present there is much variation in the services provided by different local health
authorities. For example, some restrict, or do not provide, procedures such as in vitro fertilization,
cosmetic surgery and renal dialysis. This has led to the description ‘postcode prescribing’. Much of
this has to do with the differences in budgets relative to demand in different areas, and is another
example of the greater visibility of rationing.
Questions
1 Illustrate the trade-off between administrators and medical staff using an
isoquant/isocost graph. Explain the economic principles involved in obtaining an optimal
situation. How would this situation be affected by an increase in the pay of doctors and
nurses?
2 What problems might be encountered in determining this solution in practical terms?
3 Illustrate the hospital-versus-hospital trade-off using an isoquant/isocost graph and
explaining the economic principles involved in obtaining an optimal situation. In what
important respects does this issue differ from the issue in the previous question?
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