Examples of Financial Effectiveness

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1 GLOBAL FORUM ON INNOVATION IN HEALTH WATER SCIENCE PROFESSIONAL AND TECHNOLOGY EDUCATION BOARD Examples of Financial Effectiveness Understanding the Market Forces Joanne Spetz, University of California, San Francisco

2 A Model for Financing Health Professional Education Health Labor Market Population Health Needs Demand Supply Health Professions Education/Training and Career Choices Mismatch: underserved populations; expensive care vs. prevention Mismatch: underemployment & saturated labor market Mismatch: graduates do not meet population needs; unemployed with large debts;

3 Perfectly Competitive Market Many buyers: So many that no one can influence price Many sellers: So many that no one can influence price Homogeneous (identical) product Doesn t matter who you buy from Perfect information about providers, services, prices etc. Freedom of entry and exit Prices will naturally adjust to keep supply and demand in balance

4 All the ways this fails in a health care labor market Limited numbers of buyers of health professionals work Limited numbers of health professionals (sellers) Heterogeneity in jobs and workers Lack of perfect information No freedom to enter and exit Prices don t always adjust to balance the market

5 A Model for Financing Health Professional Education Health Labor Market Population Health Needs Demand Supply Health Professions Education/Training and Career Choices Mismatch: underserved populations; expensive care vs. prevention Mismatch: underemployment & saturated labor market Mismatch: graduates do not meet population needs; unemployed with large debts;

6 Mismatches between health needs and demand for workers Lack of health insurance People can t afford the care they need, even when the need is dire Health insurance incentives People want the care that is covered might seek more expensive services than really needed Public funding Health agency funds may be mismatched to needs (geography, types of services) High wages Agency / organization directors may hesitate to pay the market wage (or not have the budget)

7 What are the underlying market failures? Sources of revenue for hiring don t match population health needs Prices of services don t adjust (partly due to insurance) Prices of personnel (wages) don t adjust

8 A Model for Financing Health Professional Education Health Labor Market Population Health Needs Demand Supply Health Professions Education/Training and Career Choices Mismatch: underserved populations; expensive care vs. prevention Mismatch: underemployment & saturated labor market Mismatch: graduates do not meet population needs; unemployed with large debts;

9 Mismatches between demand and supply for workers Shortages Unemployment Underemployment Geographical mismatch

10 What are the underlying market failures? Wages don t adjust Wages limited by budgets Geographic mismatch Information issues How do you find an open job? General inefficiency Slow hiring processes

11 A Model for Financing Health Professional Education Health Labor Market Population Health Needs Demand Supply Health Professions Education/Training and Career Choices Mismatch: underserved populations; expensive care vs. prevention Mismatch: underemployment & saturated labor market Mismatch: graduates do not meet population needs; unemployed with large debts;

12 Mismatches between worker needs & education Graduate skills not aligned with population needs Graduates have high education debt Licensing exam requirements might not be what employers want

13 What are the underlying market failures? Different systems that don t share information Bureaucracies and licensing/accrediting requirements Each organization has its own master Access to loans increases student demand Imperfect information about future hiring prospects

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