Articles

The Policy Debate on Healthcare

By November 1, 2019 No Comments

The market for healthcare has quite a few key features that differentiate it from the concept of the standard market, such as the prevalence of externalities and the existence of the insurance market. These deviations often call for government policies to ensure that healthcare resources are allocated efficiently and equitably (1). In the United States, there are various economic, demographic and technological factors (including increased reliance on health insurance) that have led to a level of healthcare spending that vastly exceeds that of other OECD nations (1). Most of these ideas are widely accepted by the economists who study healthcare. Despite this consensus, there is an ongoing debate among U.S. policymakers about what role the government should play in the healthcare system (1).

Policymakers on the left of the political spectrum would like to see an expanded government role in healthcare. They argue that private insurance companies are particularly inefficient and too often put profit ahead of people (1). Some of the more ‘moderate’ on the left are pushing for a public option in the healthcare system—that is, a government-run insurance program that any person can buy into instead of purchasing private insurance (2). Theoretically, the public option would be more affordable for consumers because the government could use its power to negotiate lower rates with doctors and hospitals and to reduce costs. Of course, the effectivity of this option would greatly depend on its execution (2). Others on the left would like to move toward a single payer system in which the government pays for healthcare for everyone out of tax revenue, as Medicare now does for the elderly. They point to Canada as a successful model (1). A centralized system run by intelligent administrators, they argue, is best able to reduce administrative inefficiency, eliminate wasteful treatment, bargain with providers for lower costs, and allocate healthcare resources most equitably to where they are most needed.

On the other hand, those on the political right would like to reduce the government’s role in the healthcare system (1). They acknowledge that the market for health insurance needs to be regulated, but they would like the regulation to be less heavy-handed than it is now. They believe that the best healthcare is likely to arise as private insurers and providers compete for consumers. They worry that a centralized government-run system would limit individual freedom, excessively ration care, and stifle innovation. They view Canada not as a role model but as an example of what could go wrong. Waiting times for medical procedures can be long in Canada, and those who can afford it sometimes choose not to wait and instead come to the United States for medical procedures (3).

The debate over health policy should also be understood as part of the larger debate over income inequality and the role of government in society. When the debate about the health of the nation is limited to a conversation about health care, upwards of 80 percent of the factors that actually contribute to the nation’s health are being ignored. According to the County Health Rankings, only about 20 percent of health outcomes can be credited to access to health care (4). The other 80 percent is collectively known by public health professionals as the social determinants of health, and includes factors such as access to educational, economic, and job opportunities, public safety, social support, residential segregation, access to parks and sidewalks, indoor and outdoor air quality, and weather (4).

References

  1. Mankiw, N. (2017). The Economics of Healthcare.
  2. Luhby, T. (2019, July 31). Health care explained: Medicare for All vs Public Option vs the ACA. Retrieved from https://www.cnn.com/2019/07/30/politics/health-care-explainer/index.html.
  3. Barua, B. (2017, February 21). Retrieved from https://www.fraserinstitute.org/article/when-compared-to-similar-countries-canadas-health-care-wait-times-are-the-worst.
  4. Johnson, K. (2019, April 4). We need to think more holistically about the health-care debate. Retrieved from https://thehill.com/opinion/healthcare/437441-we-need-to-think-more-holistically-about-the-health-care-debate.

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