Health Care: Market Or Government?

Health Care: Market or Government?

By Sojourner on 04-21-2008

A recent Wall Street Journal article pointed out the differences in the stance of various presidential candidates regarding the health care debate. It predicted that the greatest differences in the presidential debates in the fall will lie in recommendations regarding health care reform. Concerns regarding the health care system are not unique to the US. I just returned from a recent trip to North Asia. Health care is also a major concern in countries there, including Hong Kong and Greater China. Even though the context is different, the main tension lies in the challenge of providing widening access and medical insurance to a growing population yet maintaining efficiency and the ability to control health care costs.

In the US, the concern has been focused on filling in the gap for the 47 million uninsured. But insurance or any third-party payments in general increase utilization and health care expenditures because the end-users don’t bear the full costs of care. In economics, we call it “moral hazard” when individuals change their behavior after being insured. On the other hand, countries such as Hong Kong and Greater China have traditionally relied on predominantly publicly owned hospitals that are funded by the government. Since they are run on limited and fixed budget, most hospital administrators do not have any incentives to minimize costs and hence these public hospitals are quite often inefficient with large bureaucracy and high administrative costs.

Unlike other commodities, it is clear that we cannot ration health care according to willingness to pay, as that will be against principles of ethics and fairness. Nevertheless, the existing systems also face the opposing pressure of increasing medical costs and increasing access, as well as the tension between increasing insurance costs and rising medical utilization. Some clear cost-effective measures include preventive care and encouraging healthier lifestyle. Many countries and policy-makers are beginning to recognize the importance of promoting public health education and providing incentives for individuals to adopt behavioral changes.

On the other hand, proper health care interventions and appropriate direction for health care reforms are far from clear and uniform. For example, in the past, economists have advocated for policies that would create a regulated market for the buying and selling of human organs to solve the problem of organ shortage. Some economists also have proposed the legalization of illicit drugs. The World Bank has for a long time pushed for the privatization of public hospitals. These free market policies clearly raise concerns for rationing health care based upon the ability to pay rather than according to needs and equity.

Being an Idealist Economist, I am more wary of a free market system yet continue to wrestle with the inefficiency of the public system. Given the complexity and the multi-dimensionality of these issues, we will have to wait and see how the presidential debates unfold in the fall.

Posted by NoLimits on Apr 21, 2008

Let's hope our politicians come to grips with the need to address this issue sooner than later (I'm not going to hold my breath!) I can tell you that the commonly spoken wisdom our politicians spew - "Our American health care system is the envy of the rest of the world" - just is not true. My foreign friends marvel at a system that encourages over-consumption from the healthiest (the insured), and emergency-room (and very expensive) only utilization from the least healthy (un-insured) that causes our system to be the most expensive in the world.

Posted by Pat on Apr 22, 2008

Two things. First, insurance is a tool, only a tool. The end goal is health CARE. A network of clinics and hospitals, but most especially clinics, would probably be a lot cheaper. Second, while we need something to get us out of this crazy and unproductive system, there is one huge problem with both single-payer and with government-run health care. That is --- every institution in the entire world comes to the point where it wants to or has to cut costs, become more efficient, or God help us, decides it isn't making enough money. Then it starts acting just like your current HMO. And if it's sole-sourced, where else do you go? So we need something that guarantees everyone gets the sort of care they need, and especially we need to revive the concept of public health as hands-on care and prevention as opposed to these incessant campaigns of "education and awareness" nagging which cure no illnesses, but we also need far more flexibility than is built into any of the systems currently proposed.

Posted by thelostrenegade1967 on Apr 22, 2008

I am a veteran so I have health coverage. Most of the people in this country donot. The price of drugs is far to high. The companies are making millions of the drugs that sell and invest a fraction of that in to research for new drugs. We need to get no name drugs on the marked sooner to lower the cost. People need to get more exercise as well, stop smoking. That would make them healther in the long run, and there for need less medical coverage.

Posted by JackDermody on Apr 25, 2008

I think the biggest argument against government control over healthcare is that American culture simply does not really want or even expect competent management by the federal government, i.e., witness medicare, or the current prescription incentives for seniors. A fundamental philosophical underpinning of American culture is personal, individual freedom -- not group-think. Just about everything we do -- even service jobs -- "should" have an element of competition, enterprise, business-like management, and a some kind of brass ring. A successful healthcare system in the U.S. will necessarily be complicated and tied somehow to competitive business. Why go against our DNA?

Posted by RandyParent on May 5, 2008

I say cut out the insurance companies. Take their profit out of the equation and use that money to lower costs and/or provide care to more people. I say get the medical people out of the business of filling out all the forms for the insurance companies and put all their efforts into providing care. The cost and inefficiency of the insurance companies and their efforts to deny care and boost profits are the scourge of medical professionals and patients.

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Health Care: Market or Government?

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