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By Ricardo A. Bitran

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Extra resources for A supply-demand model of health care financing with an application to Zaire: a training tool

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Users of the model can assess the effect on health care use and health facility financial performance of health financing policies such as: cross-subsidizing prices among any set of services in general and between curative and preventive care in particular; extending health insurance coverage; modifying the premium and copayment of the insurance plan; changing the free-care policy; changing price levels; and price discrimination (for example, based on income or distance to the facility). The model can also be used to study the effects of changes in other variables on demand and cost recovery performance, including: a devaluation or revaluation of the country's currency; changes in the degree of competition in the market for a particular health service; and labor substitution within the facility among different categories of health professionals.

If demand is inelastic (Îp > -1), the price increase will bring Page 10 about an increase in total revenue, a drop in total costs, and a higher net income. 10 Finally, if demand is perfectly inelastic with respect to price, a price increase (decrease) will result in a higher (lower) revenue. A Change in a Competitor's Price A competitor's health care services are assumed to be substitutes for those of the other competitors as well as for those of the focus health facility. 11 For example, if a competitor raises its price, two simultaneous effects take place.

5. The market value of many investments is tied to the rate of foreign exchange. S. dollars even if they were paid for in local currency. This is done to adjust upward or downward the value of the investments in order to reflect their real replacement value. Page 21 4 Demand, Costs, and Health Center Financial Performance: Simulations Chapter 3 was an explanation of the model's logic and basic assumptions. This chapter briefly describes the structure of the computer model and provides examples, for the case of ambulatory care, to illustrate some of the model's capabilities.

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