US Politics Mega-thread - Page 256

Obviously, health care markets do not function like the ideal economic market. These markets do not meet all necessary or sufficient conditions for the ideal economic market. Therefore, there are numerous market failures and inefficiencies due to such failures. Moreover, the distribution of health and health care is not at a desired level. As a consequence, there have to be interventions in these markets to close gaps and improve efficiency. However, issues of economic efficiency, market structure, and whether the government has any role in the health care of its citizens can be a cause of bitter and divisive political debates (e.g. 2010 US Health policy reforms). Such debates tend to use economic theory without full disclosure of the assumptions made about the market. This is particularly true of arguments that support the market economy blindly without due consideration for market failures and their impact on economic efficiency and social welfare. The result is statements that sound true to a non-economist, but are totally false given that the wrong assumption has been made.

There is evidence that government control in health care can have desirable results in the form of better and equitable access to care and good health outcomes. Some of the more successful health care systems are government controlled with little influence from the market and others are very tightly regulated. A good example of a government controlled health care system is the Cuban system. It is built on a strong primary care foundation. It provides comprehensive health care to all its residents with nobody falling between the cracks.

Despite Cuba being a poor country, it attains health outcomes that are comparable and sometime better than those of rich economies such as the USA. For example, Cuba enjoys higher vaccination rates (99.9%); an excellent ability to control and quell epidemics effectively; high life expectancies (78–84 years), and low infant mortality rates. Despite being under a trade embargo, Cuba has developed a unique methods of treating illnesses such as Parkinson’s disease, retinitis pigmentosa, multiple sclerosis and other neurological disorders. It exports medical products such as vaccines. Consequently, Cuba attracts about 20,000 health tourists annually.

Cuba sends doctors to provide services all over the world and trains doctors from other countries through a programme of international giving and support. One fundamental difference between the Cuban system and market-based systems is the philosophy on which the system is built.

The philosophical question for any health care system is, “Should health care be traded for profit?” a question that relates back to an even more fundamental question, “Should health be treated as a human right or as a commodity that can be traded for profit?” The Cuban system is built on the belief that health care is a human right that should be accessible to all. Based on this belief, the system is set up to make sure that health care is accessible to all Cubans.

The fundamental philosophy governing the health care system in any country is reflected in the kind of system that is in place to provide care. If a country treats health and access to care as a basic human right for its citizens, then the question of profit maximisation would be a non-issue. The health care system would have a different objective function with a slightly different focus. Efficiency in health care markets would be judged by a different standard because then the objective function of the health care system would be different from a typical economics objective function. The structure of the health care system and its distribution patterns and channels would also be different and would reflect the system’s basic philosophy about health and health care.

Efficiency in health care does not always lend itself to market forces because health care takes on properties of merit goods. Consumption of such goods is desirable because the social benefits exceed the private benefits, i.e. there are positive externalities. Like education, health can be viewed as capital stock or human capital. According to Grossman, each individual is endowed with a stock of health which depreciates over time, but the individual has the ability to increase this stock through healthy behaviour such as good diet, accessing health care and preventive measures.

The stock of health is a merit good because an individual’s health has an effect on the rest of society. A healthy population provides a productive labour force that builds a country’s economy. An individual sees the benefits of being healthy, but might not necessarily see the benefits of his/her good health to the rest of society, i.e. the private benefits of good health are less than the societal benefits. So an individual’s decision about the optimal level of their health might be less than optimal considering the larger societal benefits. This is also true of education and that is why the governments play a big role in it. If merit goods are left to the private sector—or the market, there is under-consumption (e.g. vaccination) and therefore, inefficiency.

Moreover, other desirable features in a country might not be attainable through market forces alone. For example, if health and health care equity are desirable features, there might be need for government intervention because these qualities are not easily attained through the market. Government involvement in health care is often necessary because there are many market failures in health care and the market is not always able to correct such failures.

The public policy and current political action around changing the system overlooks two important technical fallacies:

(1) That health care is most efficiently distributed by a free market mechanism; and,
(2) That medical services are an ordinary commodity.

The commercial market model is a failing economic and public policy ideology used to rationalize and justify corporate control of the health care system to profit from the enterprise. Medical services are not an ordinary commodity but more like a “public good” which should be financed using a regulated public utility model.

A “public good” is a product or service which benefits everyone in the community. Public goods are characterized by: (1) value that has benefit to the community as a whole beyond any purchase price paid, (2) often requiring large initial investment costs that are generally too expensive for any individual or private corporation to afford and earn a reasonable return, (3) requiring a higher level of administration than any individual or company can arrange and (4) having value that accrues over time and is difficult to price properly. Public goods have “externalities,” that is, value that accrues to people who benefit by other’s consumption of them without paying for it themselves.

It is crucial to know the epidemiology of medical expenses. In fact, 1% of the total population consumes 25% of medical care (by cost), 5% of the population consumes 49% and 50% of the population consumes only 3% of medical care by cost. Since relatively few people incur rare, huge, often catastrophic costs on a largely unexpected basis, pooling of risk is necessary. And the bigger the insurance pool is, the better it functions economically.

By definition “public goods” are not well distributed by market mechanisms. Americans are very accepting of some public goods, i.e. police and fire departments, national military forces, the GPS system, water distribution and sewage treatment plants, education, radio frequencies and the internet. Looked at from an economic and a public policy perspective, health services are the epitome of a “public good.” This is what is meant by the phrase “Health Care is A Human Right!” Hospitals, ambulance systems, mosquito control, TB control, restaurant inspections, sanitation, and vaccines are all good examples.