Government Intervention in Healthcare - Essay Example

? -Government Intervention in Healthcare- “In absence of govt. intervention, market resources allocated to health tend to be below the socially optimum level” Most of the developed countries see the biggest chunk of their government’s expenditure go to three major sectors; defense, healthcare and education. ‘Welfare state’ is the term coined to represent countries whose leadership aims at providing the masses with security, quality education and healthcare facilities. When the sole purpose of a government is to provide people with the above mentioned facilities, profiteering takes the backseat and the focus is on quality. However, this is only the case when a government is in question. There are several debates regarding the issue of giving healthcare in the hands of private sectors, but there is a speculation regarding the treatment of healthcare as that of a business with a sole purpose of achieving profits. On the other hand it is also said that in order to maintain a market share in healthcare, the private sector players will strive to provide the best type of technology, which would be more convenient and advanced, and heavy on the people’s pockets. A study of the importance of the role that a government intervention plays in the healthcare also brings to light the adverse effects of its absence. The concept of a socialist system of government believes that it is the government’s job to provide all basic facilities to the people in general with no disparities between income classes and backgrounds as long as they are all citizens of the same society. Basic necessities like education and healthcare should be provided to all, unlike the competitive markets for other consumer commodities. Multi-tier system offers different levels of quality but a single tier system is the true essence of a democratic socialist system where all people are equal when it comes to basic rights. The government provide healthcare through subsidies that are derived from the pool of general taxation. Where socialism is flexible in terms of existence of private entities too, it is often mistaken for a democratic system. The Healthcare system in the US has been center of much controversy for the past few years. This is because of the high costs of healthcare as a result of the influx of an array of private medical institutions and lack of government regulations to hamper their excessive profiteering. This has resulted in the emergence of insurance based healthcare, usually backed by employers as it is not affordable by the general public (Cfeps.org, 2013). The current government has offered incentives for a better system in place with maximum government intervention to ensure that the masses are provided with adequate healthcare reasonably. Healthcare is a major concern for the people all over and history proves that it is imperative for the government to have a regulatory body in place to ensure people’s satisfaction over this dire need of theirs. Private and publicly funded healthcare systems running in some countries in the world have been a point of controversy. This is because one side holds the notion that provision of healthcare should be government funded and be provided as a free service to the people from the government revenues. Whereas, public funded healthcare which is provided free, drawing from the pool of health tax imposed on the general public, has been seen as an effective system as well (Saltman & Busse et al., 2004). This is where the economic externalities come into play as well since not all the people are availing expensive healthcare facilities, and some of them who are, are those who have not paid fully for it, resulting in the negative externality for the former and a positive one for the latter. Government intervention in the private markets in the form of imposing regulations and restrictions have been viewed as a hindrance because this tends to de-incentivize the induction of new and more technologically advanced health based companies in the system (Lewis, 2000). This brings us to our point of argument, i.e. does lack of government intervention result in underutilization of healthcare resources. The major reason for this underutilization of healthcare resources is that in a capitalist economy, supply is matched with demand. The demand drives the market players to compete on the basis of quality, pricing, packaging etc. and soon, the main product is lost amidst the marketing gimmicks of who-is-better-than-who. If healthcare is given in the hands of private institutions without government intervention, there is bound to be a point of time where the main purpose of provision of quality healthcare will be lost amongst competitive marketing, misleading packaging and lack of clarity of information. The customers will lose their control over selection on the basis of price and so, the necessity of healthcare will be compromised for the financial gain of some institutions. The government needs to keep a hold on the provision of basic necessities because the purpose of every government is not to compromise on the welfare of the people. Social Cost and benefit analysis is a study that compares the resources expenditures with the benefit that they provide. The resources in a capitalist economy, with no government intervention, will be exhausted in a way that the financial gain is equal or more than the medical interest derived by the patients. Ultimately, not only the quality will be compromised but the patients may also incur costs that they have not necessarily benefitted from. The government is also likely to incur more healthcare expenditures due to the chain effect of non-payment from patients (due to lack of affordability) and also from the employers (due to lack of adequate resource allocation, resource wastage and insurance claims). The government is bound to be affected due to the disrupted system that is concerned with the healthcare needs and supply of the whole country in a capitalist form of governance. Government intervention, hence, is crucial to regulate both the supply and the demand side (Mckinsey.com, 2013). State control is also necessary to restrict the widening disparity between the rich and the poor, further escalation of cost and deteriorating quality of healthcare. Increasing government costs can be attributed to several factors highlighted by Jim Heskett in his article “What Is the Government’s Role in U.S. Healthcare?”. According to the author, wastage of resources, insurance frauds, high cost of new technology, large scale of prevalence of healthcare, uninformed patients and unnecessary tests and procedure due to the concept of ‘defensive’ medicine lead to the underutilization of resources. The society suffers in general due to the instability of a system that is associated with a basic need, giving birth to new problems like debts, low quality healthcare, social unrest due to the gap between the rich and poor etc. (Heskett, 2007). The first step in this regard would be to clarify whether healthcare should be treated as a public or private good. Public goods are meant to be for the masses and not for profit motives. Private goods allow excludable benefits to people on the basis of affordability and price paid. Many countries of the world have distributed stances on this classification. However, this paper is in favor of government intervention in healthcare, thus it will consider it as a public good. The reason behind this choice is that healthcare is a general need of every individual in the society. It may differ on the basis of frequency, time, costs and nature but it is not something that equal members of a democratic society can be deprived of. An analogy to explain the above stance is that of law enforcement agencies, like the police. They are a general need of the society to maintain peace but in case someone is robbed, murdered or threatened, they need the services of the police more. Similarly, a variation exists in the same sector in the form of private guards and bodyguards etc. these can be classified as private goods. The same can be applied to healthcare by having a general system in place for the masses. The people should also have a choice to avail exclusive or customized healthcare as a self-financed facility. A common misconception here is that the rate of government spending on healthcare depicts the effectiveness of the healthcare system too. This, however, is not so. To prove this point we will discuss the percentage expenditures of different countries in the world on their healthcare and their effectiveness. Optimal utilization of resources is dependent greatly on the interaction of demand and supply for healthcare and the factors that manipulate them, for e.g., monetary factors influence demands greatly when it comes to non-emergency health care needs of the people. The health care resources in an economy apart from the medicinal products, facilities and medical accommodation are the human resources i.e. doctors, nurses and other medicinal practitioners. Improper or inadequate utilization leads to not only underutilization of resources but also wastage of resources tha adversely affects the growth of any country’s economy. The members of OECD countries have little to prove the link between the healthcare expenditure and outcome through their economic spending history (Moon & Moi?se et al., 2003). However, there are several indicators that can help health policy makers to look into effective resource allocation and improving the existing health care systems. Since the market for health care is imperfect due to factors that can influence demand and supply, a mixed economy thrives in todays developed world. This imperfection of the market is based on improper flow of data between the people and the providers of the healthcare, uncertainty of the future need of healthcare and the health insurance phenomenon that do not allow all other factors to remain the same. The demand, hence, is influenced and a perfect market condition cannot be formulated. A mixed economy allows the government and the private sector to work together in contributing towards a sector. The government’s role, apart from allocating a portion of the budget to healthcare, is then usually limited to oversee the allocation of the resources and pass several regulations to ensure that the healthcare market is operating at an optimum level. In the United Kingdom, most of the healthcare is managed by the public funded healthcare system called the National Health System (NHS). It has ten subsidiary bodies that work under it called the Strategic Health Authorities (SHA) and these bodies are the actual providers of health care (Woolh & Ler et al., 2007). Many debates took place in favor of private system as well, which operates on a small scale in the UK, however, due to lack of facilities that are provided by them, the patients are ultimately taken to an NHS facility. Recent changes in the healthcare system shows an open trend in England towards private healthcare and adversely, Scotland is trying to hinder private practice altogether. A trend of healthcare spending shows an increasing trend since the past several years. The effectiveness of this spending can be gauged by evaluating the outcomes of these hefty expenditures. According to WHO Total % of GDP spent on health in the year 2011 was 9.3%. This is a massive amount as far as an economy is concerned, and it brings to light the important decisions that lie ahead of the government. (Who.int, 2013) There is no question about the potential market for health. The demand shows an increase due to several factors like increase in population, increase in national income and technological advances in the field of healthcare. Where there is an increase in population, there are bound to be health related concerns. People need to be ensured an environment that promotes and facilitates health living through affordable healthcare. This sector provides employment on a large scale, promotes influx of research and technology and results in economic growth as well. However, the government will undoubtedly look into the effectiveness of healthcare spending, willingness of people to be subjected to negative externalities and actual economic growth as a result of health related expenditure. The balance between the demand and supply of healthcare in the UK can only be determined by future patterns of the people, their willingness to support such a system and the governments cushioning to sustain such spending as a contribution towards NHS. According to John Appleby of The King’s Fund, healthcare contribution as a percentage of the GDP in the UK has increased from 3.4% to 8.2% in the last 50 years, and going by the same projections and trends, this spending is speculated to be 1/5th of the entire GDP at some point down the line (Appleby, n.d.). The question here is whether it is financially feasible for the UK government to be spending that much in the future. It is important to look into the threatening level of UK’s healthcare spending in the future and it implications like increased taxation, government borrowing and cut down in the spending in the other sectors. The increase in expenditure will most likely put the concept of diminishing returns into action and there will be a point where the additional cost will be more than the additional benefit of the facility or the compromised spending on the non-health sector. The drivers of this spending by the government on public healthcare are Demography, Income, Technology and costs. Increasing population, increasing government income, technologically advanced treatments and increase in medical costs are the factors that are likely to pressurize the UK government to increase healthcare investment at the same rate at which it has been going. Baumol and colleagues termed this hefty government expenditure as the ‘health care’s cost disease’. However, they also assumed an increase in the overall GDP due to the productivity of the other sectors can provide cushioning to this healthcare spending. As far as government intervention is concerned, Baumol projected that it is unadvisable because cost control will become the center of government’s focus instead of the quality of healthcare provided. This is put a question mark to the spending that doesn’t yield positive results in proportion (Baumol & De Ferranti, 2012). In the recent mandate issued to the NHS by the England government, it is stated that the healthcare revenues will amount to ?97,952 million for the year 2014/15 and will increase to ?99,909 for the year 2015/16. That being said, pressures to maintain public finances have made it imperative that productivity and efficiency level is brought up to the optimum level and compliance with the NHS Act 2006 Financial Directives to ensure that the spending is accountable and review of efficiency parameters helps the government adjust the spending accordingly. The excessive spending can be hampered by majorly two measures. Firstly, increasing the efficiency of the existing system instead of bringing in more money into healthcare. Secondly, by limiting the extent of services provided by the government i.e. letting individuals cover additional costs themselves. According to Bloom and Canning, healthcare expenditure should not be looked at as a cost as it yields good results in the society for a long time to come, like decreased unemployment rate, technological development, increased productivity and economic growth and better quality of life. The healthier the people, the more likely they are to be better and productive citizens of a society. References: Appleby, J. (n.d.). Spending on health and social care over the next 50 years. Baumol W, de Ferranti D, Malach M, Pablos-Mendez A, Tabish H, Wu LG (2012). The Cfeps.org (2013). An Introduction to the Health Care Crisis in America: How Did We Get Here?. [online] Retrieved from: http://www.cfeps.org/health/chapters/html/ch1.htm [Accessed: 18 Dec 2013]. Cost Disease: Why computers get cheaper and health care doesn’t. New Haven, CT: Yale Heskett, J. (2007). What is the Government's Role in US Healthcare?. HBS Working Knowledge. Lewis, M. A. (2000). Who is paying for health care in Eastern Europe and Central Asia. World Bank. Mckinsey.com. (2013). Accounting for the cost of us health care: a new look at why americans spend more. [online] Retrieved from: http://www.mckinsey.com/insights/health_systems_and_services/accounting_for_the_cost_of_us_health_care [Accessed: 29 Dec 2013]. Moon, L., Moise, P., & Jacobzone, S. (2003). Stroke care in OECD countries: A comparison of treatment, costs and outcomes in 17 countries (No. 5). OECD Publishing. Saltman, R., Busse, R. & Figueras, J. (2004). Social health insurance systems in western Europe. Maidenhead, Berkshire, England: Open University Press. University Press. Who.int (2013). WHO | The data repository. [online] Retrieved from: http://www.who.int/gho/database/en/ [Accessed: 18 Dec 2013]. Woolhandler, S., & Himmelstein, D. U. (2007). Competition in a publicly funded healthcare system. BMJ, 335(7630), 1126-1129 Read More