The Health Care Debate

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Health care reform has been a hot topic lately especially since President Obama promised health care reform once he was elected into office. It is no secret that our health care system is flawed and reform is necessary but what type of reform will be best for every American? The President promises affordable health care for every American by establishing a national health plan. There has been plenty of debate on why this resolution is or isn’t a good idea. Many of the idiosyncrasies of this current system are a result of the values and beliefs underlying the American culture.

The delivery of health care in the United States is chiefly driven by the medical model, which emphasizes illness rather than wellness and is characterized by a patchwork of subsystems developed either through market forces or the need to take care of certain population segments.  

 It is important to remember that the current health care delivery system in the United States is predominantly private and because of this private delivery and financing system the majority of hospitals and physician clinics operate independent of government involvement (Shi et al, 2005). President Obama’s health care plan challenges this type of system by giving government more power and thus taking that power away from insurance plans and drug companies. 

 Over the last 20 years and continuing into the future, the profession of practicing medicine has changed dramatically, with decreasing reimbursement and an emerging consumer demanding a more comprehensive “value proposition” than previous patients have demanded. The increased use of the internet has made patients savvier about their treatment and care hence demanding more from their physicians.

 One can not talk about health care without discussing costs. Cost containment is a major policy concern because a substantial portion of national income is spent on health care. It is important to look at the concept of supply and demand in health care and how it plays an integral role in cost. For many years, employers and third-party payers in the U.S. have been preoccupied with controlling the increase of health care costs. Health care is one of the few services for which a third party, not the consumer pays the greater part for most of the services used. As a result, the traditional rules of supply and demand don’t apply.

Conventional economic principles are based on various factors, one of which is perfect competition. A perfectly competitive market has a multitude of buyers and sellers and no particular driving force directing the exchange of goods. In a perfectly competitive market, a homogeneous product that cannot be modified or altered by individual producers in an effort to charge a higher price must exist. Barriers to entry do not exist in this type of market and readily available market information allows market players to make educated decisions about their choices. In perfect competition “there is a fully defined system of property rights in which ownership of all products and productive resources are assigned”. (Scott et al, 2001 Vol. 7, No.2)

The characteristics in health care differ from those that describe perfect competition, thus making health care an imperfect market. For example, in health care, the product is heterogeneous where the patient can experience an array of different results. Secondly, insured patients are covered by third-party payers that are responsible for covering the direct medical expenses of the patient. In a free market, the patient would be responsible for bearing the cost of the services received.  In health care there is no set market price that is indicative of the value of the resources used. Economic theory is based on choice. The daily choices made by consumers, producers, and investors determine supply and demand. It is through there interaction that the supply and demand curves are drawn for every product. The intersection of these curves represents the equilibrium price of a given product. Excess supply occurs when prices are greater than the equilibrium price and excess demand occurs when prices are lower than this level. What ultimately draws the supply and demand curves is the market itself. People, in their millions of decisions each day, set prices.
 

In a free market, patients should be able to choose their provider based on price and quality of services. Patient choice would then determine prices by the unencumbered interaction of supply and demand. In health care however, theoretically speaking, prices are negotiated between payers and providers and because in many cases the payer is not the patient but a Managed Care Organization (MCO), Medicare, or Medicaid the traditional relationship of supply and demand does not apply. Since prices are set by agencies external to the market, they are not freely governed by the forces of supply and demand. Thus, resulting is sky high premiums, deductibles, and co-pays.Moreover, as health care costs continue to increase it is likely that the number of uninsured individuals in the United States will also continue to grow.

The United States already has a large uninsured population and with the current state of the economy more Americans are finding themselves uninsured as a result of corporate downsizing and layoffs. The uninsured population has an enormous impact on society. There is a public cost to large numbers of people without insurance. The uninsured often turn to publicly supported hospitals and clinics for help. They delay care and have more acute health care needs when they show up. They go to hospital emergency rooms because they worry that they will be turned away if they try to get care in other settings. The cost of providing health care services for the uninsured, when they access it, is borne by the government, health care professionals, and the insured population which results in increased insurance premiums and higher health care costs. Given these facts, would a national plan that promises to cover every American really be a bad idea? Or would a national plan limit access, deny necessary diagnostic tests, and affect quality? I guess no one really knows the answer yet but what we do know is that we have over 47 million uninsured and the current system is not working.

 Health care providers, patients, health care administrators, payers, local and federal governments, and the local community are all stakeholders when it comes to health care access and delivery. Each group has its own interest but all groups must work together in order to provide health care. When it comes to providing health care to the under and uninsured everyone agrees that it is important not only for the individual but for the overall health of the country. Healthy people put less of a strain on the already strained health care system. The big debate is who will pay for the services provided to these individuals? But the reality is that in the end we all pay one way or another.

 

 

 

 Scott, R.D, & Solomon, S.L. & McGowan, J.E. (2001). Applying economic principles to health care. Centers for Disease Control and Prevention, Vol. 7, No. 2.

Shi, L. & Singh, D. (2005). Essentials of the U.S. Health Care System. Sudbury, MA: Jones and Bartlett Publishers. 

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