Social Contract on Healthcare - Essay Example

 Social Contract on Healthcare Introduction The state of the healthcare industry can be best described as chaotic. There are so many stakeholders in it who are oftentimes at cross purposes with regards to delivery of healthcare as the various stakeholders have different aims and goals. The industry has exhibited rapid growth, especially with the graying of the population and longer lifespans such that a greater majority of the population is now skewed towards the older segments of the demographics. This shift puts a pressure on the way how healthcare is delivered on all its participants but more so on patients. It can be viewed as a service industry in which the consumers are patients who buy health services. In other words, the same criteria applies such as quality of service, reasonable costs and timely delivery of a needed health care service all determine whether a healthcare provider succeeds or not. An aim of this paper is to discuss relevant issues in this service industry, a form of social contract in which the government, the industry and citizenry all have a stake in its success. Discussion The United States health care system is largely a private enterprise and so is motivated mostly by the profit incentive (Porter & Teisberg, 2004, p. 1) unlike that of other countries like Japan or the United Kingdom, where the health care industry is almost socialist in its nature as it is a state-controlled sector of their economies. There is supposed to be healthy competition in this industry but experience shows otherwise; the quality has deteriorated and costs have risen greatly over the years due to distortions or externalities in the system. The famous “invisible hand” of the economist Adam Smith is not working in this industry, whereby individuals acting singly for their own benefit is supposed to improve society as a whole (Smith, 1776, p. 28). Some factors causing this market distortion is that the pricing system is not transparent. The right price is supposed to regulate the demand and supply in this industry, just like any other industry, where pricing is the mechanism by which free markets operate in a capitalist economic system. The health care industry is no longer what it once was, a perfectly competitive market, but replaced by an oligopolistic setup due to the mergers and acquisitions taking place where the industry continues to undergo further consolidation among the service providers. This is shown in the rise of large health care chains composed of doctors and hospitals, known as HPRs or the vertical integration of hospital-physician relationships. The primary reason for this is to reduce the risks in their business and financial investments but has given the impression of collusion and price-fixing as charges and fees are sometimes exorbitant (Shortell & Rundall, 2003, p. 18). The Five Forces Model of Competition by Prof. Michael Porter, composed of elements such as barriers to entry, supplier power and threat of substitutes have all been tilted in favor of the big hospital institutions and health insurance firms while the power of the consumer (patient) has been drastically reduced in terms of bargaining leverage (price of medical procedures and in the cost of a hospital stay) and switching costs (changing doctors, hospitals or insurance firm) as market forces are not working properly as they should in a free capitalist market. The lack of perfect information with regards to prices of medical procedures prevented patients from seeking the best quality care at the most affordable price while increasing medical technology complexities such as new laboratory tests, diagnostic processes, surgical procedures and high-tech equipment has allowed some doctors to practice opportunistically, recommending a lot of unnecessary expensive tests and often unproven medical procedures that bloat the costs. This is one of primary reasons for the passage of the Patient Protection and Affordable Care (PPAC) Act (Obamacare) to address this lack of transparency by the implementation in few years' time health insurance state exchanges, where insurance companies will post their prices at that exchange (like a stock exchange) and buyers or consumers (patients) can compare prices. Its objective is to improve the industry as a whole and do away with the old social contract wherein mostly private insurance firms held sway over the market and doctors make most of the decision. The reforms are intended to empower the consumer (patient) through universal health insurance that is transparent, affordable, without limits and no prior health condition exclusions. The new social contract implies government interventions because of market constraints or imperfections where competition has been stifled. In other words, the government requires a universal coverage for all citizens as part of its mandate which is its duty to take care of citizens in terms of their health and overall well-being regardless of financial capacity. The other social contract between the doctors, nurses and other health care professionals entails prompt, accurate and better quality of health services in the furtherance of an equitable or just system where all people are treated and cared for equally. Although still profit-driven, the new proposed set-up will minimize costs and maximize benefits through the use of economics in health care, such as managing the demand and supply of health care services. An example is to reschedule some minor operations to lean periods which results in better allocation of the scarce medical resources and services of harried doctors and surgeons. Traditional economic theories in health care can be utilized such as cost minimization, cost effectiveness, cost-benefit ratios and cost utility are some of the economic criteria applicable in this industry (Kernick, 1998, p. 116). Conclusion The new realities of the industry require that the old social contract be done away with in favor of a new social contract that empowers the consumers by giving them control of their health insurance policies and budgets (Dewar, 2010, p. 138). Due to the vertical and horizontal integration of the health care industry, there now exists an oligopoly in the market and this is the reason the government was compelled to intervene because of market failures (ibid. p. 75). Cost containment can still be achieved in conjunction with improved health care services despite the expected increase in the number of new or potential clients with the passage of the PPAC Law which now mandates health insurance coverage, estimated to be approximately some thirty million new patients (Pear, 2012, p. 1) based on the reforms which make health insurance plans more affordable and less variable in premium costs through greater price transparency. Reference List Dewar, D. M. (2010). Essentials of health economics. Sudbury, MA, USA: Jones and Bartlett Publishers. Kernick, D. P. (1998, May 30). “Economic evaluation in health: A thumb nail sketch.” British Medical Journal, 316, 1663-1665. Pear, R. (2012, July 11). “House votes (again) to repeal Obama health care law.” New York Times. Retrieved from http://www.nytimes.com/2012/07/12/health/policy/house-votes-again-to-repeal-health-law.html?hpw Porter, M. E. & Teisberg, E. O. (2004, June). “Redefining competition in health care.” Harvard Business Review, 1-14. Shortell, S. M. & Rundall, T. G. (2003). Physician-organization relationships: Social networks and strategic intent. In S. S. Mick & M. E. Wyttenbach (Eds.), Advances in health care organization theory. San Francisco, CA, USA: Jossey-Bass. Smith, A. (1869). An inquiry into the nature and causes of the wealth of nations. London, UK: MacMillan and Company (with a re-print in 1776). Read More