The Island Clinic's Vanishing Waiting List
A small island of 4,000 residents has one publicly funded clinic offering free walk-in consultations. Average waiting time has climbed from 20 minutes to 95 minutes over three years. The clinic employs 6 physicians; each can see roughly 30 patients per day, so capacity is about 180 visits daily, while demand averages 240 visits daily. Residents who cannot wait travel by ferry to the mainland at a personal cost of about $60 and a half-day lost. The health ministry proposes three options: (a) charge a $15 copay per visit, (b) add two physicians at $180,000 each per year, or (c) leave it unchanged because 'healthcare is a right.' A local newspaper argues the waiting list proves the clinic is underfunded, not that care is scarce.
1. Using scarcity and opportunity cost, evaluate the newspaper's claim that the waiting list reflects underfunding rather than scarcity. Which of the three options does standard economic reasoning favor, and on what condition?
Read the worked answer
The newspaper sets up a false dichotomy. Scarcity means wants exceed available resources at a zero price; the clinic has 180 slots and 240 claimants, so 60 visits of demand go unmet regardless of budget. Funding is one constraint, but the waiting list itself is the rationing device - time is the price being paid. The relevant opportunity cost of a free visit is the 95 minutes plus the forgone alternative, and for those who ferry to the mainland it is roughly $60 plus half a day. So scarcity is real and independent of the budget line.
The three options ration differently: (a) a copay rations by willingness to pay, (b) expands capacity, (c) rations purely by queuing. Standard reasoning does not pick one universally - it asks which rationing mechanism has the lowest total cost. If the copay is small relative to the $60 ferry cost, option (a) could cut the 60-visit excess at modest equity cost, but it may deter genuinely poor patients. Option (b) removes the gap but costs $360,000/year, which must be compared with the ferry costs and lost productivity borne by residents. A defensible answer: favor (b) if the annualized social cost of queuing and ferry travel exceeds $360,000, and favor (a) with an exemption for low-income patients otherwise. Option (c) is only defensible if the ministry can show the waiting cost is genuinely lower than either alternative - which the 95-minute queue and $60 ferry cost make unlikely.
2. Suppose the ministry introduces the $15 copay and visits fall from 240 to 200 per day while capacity stays at 180. Is the waiting list eliminated? What does this reveal about price as a rationing tool?
Read the worked answer
No - demand of 200 still exceeds capacity of 180, so a 20-visit queue remains. The copay reduced quantity demanded by 40 visits but did not clear the market. This illustrates that price rations only to the extent it moves demand to capacity; a price set too low leaves a residual shortage. To clear the market the copay would have to rise until quantity demanded equals 180, which may be well above $15 and may raise equity concerns.
The case also shows the difference between movement along the demand curve (the copay changes quantity demanded) and a shift (population growth or new illness changing demand at every price). The original 240 was a quantity at a zero price, not a fixed need. A good answer notes the residual 20 visits and recommends either a slightly higher copay, a capacity increase of one physician (about 30 slots), or a priority rule for urgent cases - and recognizes that any of these is a rationing choice, not an elimination of scarcity.