Question

Describe your thoughts on the government's involvement in health care regulation. Do you think there should be more or less than what exists today? Why in

Answer 1

Government's responsibility to protect and advance the interests of society includes the delivery of high-quality health care. Because the market alone cannot ensure all Americans access to quality health care, the government must preserve the interests of its citizens by supplementing the market where there are gaps and regulating the market where there is inefficiency or unfairness. The ultimate goal of achieving high quality of care will require strong partnerships among federal, state, and local governments and the private sector. Translating general principles regarding the appropriate role of government into specific actions within a rapidly changing, decentralized delivery system will require the combined efforts of the public and private sectors.

Scientific advancement in healthcare has allowed human beings to double their life spans and effectively address lethal diseases such as malaria, cholera and the plague that have in the past wiped out entire civilizations. While there is no disagreement among policymakers on the importance of healthcare, a key area of debate relates to the relative role of the government and the market in the provision and financing of healthcare.

The first goal is access to health care. The expectation is that taxpayers will ensure that people are not denied necessary health care. What poor people need are clinics that are convenient to where they live. Ideally, clinics would succeed at pro-active outreach and promoting issues of public health, including vaccination and disease prevention. Government can establish these sorts of clinics for poor neighborhoods, or it can offer subsidies to the private sector to provide these services.

The position of the market purist is that since people can buy all the services that they want, the invisible hand of the market will produce the best possible outcomes. If some people do not have enough money, the purist would argue that the government needs only to tax the rich and transfer cash to the poor so that they too are able to freely participate in the market for healthcare services. In their view, any other intervention using the heavy hand of the government will only serve to make everybody less happy than they could have been if they were left alone.

Another way for taxpayers to help people with low incomes is to provide vouchers that could be used to purchase health insurance and to pay for health care. Vouchers would be means-tested. In other words, the poorest families would receive large vouchers, but the size of the voucher would decline as income rises. Health care vouchers would work like food stamps. Food stamps allow poor people to shop at the same grocery stores as everyone else. There are concerns with food stamps, including high obesity rates among the poor, but on the whole they work relatively well in delivering benefits to the intended recipients.

Early on, it becomes clear that markets, however well-functioning, do not by design have the ability to provide public goods such as a well-functioning legal system or a pest control programme, which have the general characteristic that it is not possible to deny access to individuals who choose not to pay for them and whose consumption by one does not reduce its availability for another.

High-risk pools are for people who have expensive medical conditions that make it impossible for them to get low insurance rates. In states that offer high-risk pools, private insurers cover people with pre-existing conditions, with premiums subsidized by the taxpayers of that state. High-risk pools are a reasonable way to help people who otherwise might fall through the cracks of the insurance system.

One good thing that the government can do about health care quality is to gather, analyze, and disseminate information. Statistics that pertain to the risk and effectiveness of common medical procedures would be very helpful. In addition, information on how outcomes of procedures vary by hospital and by doctor could be quite useful.

We all know that despite being in the best of health, there is a possibility that any one of us could have a serious accident or have a mutation in our genes resulting in cancer. Medical science knows how to treat these rare diseases but the treatments are very expensive and can lead to catastrophic levels of expenditures for families. The mechanism of health insurance offers an obvious market-based solution. In some cases, a health insurance agency might also play a role to fill the knowledge gap between the provider and the patient.

The problem of restraining health care costs is quite acute. I believe that cost is the most urgent issue of all for health care reform. It is impossible to envision making progress in dealing with access or quality without doing something to address cost.

All of our health care finance systems are under stress. The government system is completely unsound—the Titanic headed toward the iceberg of unfunded liabilities. Employer-provided health insurance is a questionable concept in theory that is unraveling in practice. The individual insurance market is a disaster, with something like 3/4 of all families who do not get insurance through work or government electing to remain uninsured.

A good way to help bring down cost is to provide patients with better information on the benefits and risks of medical procedures. As we have seen, this information will help with quality as well. In addition, consumers should be given transparent, advance information about the costs of alternative treatments using alternative providers.

A bad idea for dealing with cost is “cost containment.” What that means is cracking down on the prices and incomes of doctors, hospitals, and drug companies. Government attempts to do this run afoul of organized political opposition. Moreover, it is very difficult to implement heavy-handed negotiations on price without at some point stifling innovation and hurting quality. When it is allowed to operate, the market generally does a better job of cost containment. The example of laser eye surgery is frequently cited to support this in health care.

The purist view is that since such a solution is available and individuals are free to purchase it, no intervention by the government is necessary. However, because as human beings we characteristically undervalue insurance when we are healthy, there is an inadequate demand for such voluntary insurance. And, even if people demanded it, the market worked against them because insurers worked hard to exclude those who needed insurance the most.

A view, therefore, began to gain currency that the government needed to intervene either to require that everybody buy such insurance or to use some of its tax resources to do this for the poor instead of handing over the amount to them as direct cash benefit transfers. However, while this does address some of the problems, it does not by itself result in a good health system design without the benefit of several other complementary interventions which change the manner in which healthcare is purchased and how providers are paid. And, don’t forget, the invisible hand works only in so far as price serves as the signal to direct resource allocation. For that to happen, the price has to be set at or near the cost of production.

Given all of these features of healthcare, it is now clear to all countries, including almost entirely free-market based economies such as the US, that policymaking based on a simplistic understanding of the role of the government and that of the functioning of markets is likely to lead countries seriously astray and result in equilibria that are neither efficient nor welfare maximizing. However, it is not the case that the only alternatives to market fundamentalism are full financing of the healthcare system from general tax revenues or the full provision of all healthcare by the government.