The Analysis of Health Economics - Literature review Example

Health Economics Health economics are mainly concerned with matters of the effectiveness, efficiency, behavior and value of the production or consumption of health care in a country (Matthews 2005). The demand for health care is different from the demand for food since it is the responsibility of an individual to allocate enough resources to enable the employment and provision of health care services (Wieske & Matthews 2007). The government’s direct intervention in the provision of health care helps its citizens achieve various benefits. For example, through a risk pool created by a government, healthy enrollees may be able to subsidize on the cost of offering health care to the poor people within the society (Robinow 2004). The government may intervene in the markets in the matters of health care so that they can reduce the amount of health insurance subsidies obtained by the workers in an economy through their respective employers. This is mainly because allowing their employers to use their pre-tax incomes for buying health insurance usually lowers their net price for coverage, thereby increasing the coverage demanded by the workers (King, 2009). Through the subsidies that the government may allow in health care, self-employed people would not benefit, which means the services should be extended even to the jobless through the government’s direct intervention (Hunter, Cassell-Stiga & Doroshow 2009). This intervention may enhance people’s freedom in choosing the most appropriate insurance plans while enabling them to buy more insurance services from the providers. They may also be able to benefit by making important decisions for themselves while eliminating the problems associated with the portability of health care (Wachter 2006). According to Robinow (2004), the wedge that exists in health care between these marginal costs of providing extra health care and the lower prices that consumers pay has grown with the passage of time. He suggested that in the past, the additional costs that consumers incurred in acquiring health care have fallen by around 40% while the profits earned by insurance companies are constantly increasing. This implies that the government’s direct intervention may help reduce the costs incurred and improve the outcomes expected by consumers in the health care industry. Previous reports indicate that the conventional contracts signed for a long-term period may be ineffective in ensuring that long-term risks have been insured. Therefore, this implies that there is a great need for the direct intervention of the government for ensuring that short period contracts which are time consistent are signed. This is mainly because they may help ensure that patients with long-term risks are insured (Parente & Bragdon 2009). The providers of insurance cover may be forced by their country’s legislation to continue with an insurance relationship. However, the consumers of health care within a country cannot be forced into continuing that kind of relationship even despite the direct intervention of their government (Herzlinger 2004). Unlike in the health care sector, the relationship that may exist between a food supplier and his or her customers may persist through the government’s direct intervention. For instance, a supplier may be allowed to operate as a monopoly within the country, which means that all customers will come to this supplier to satisfy their needs (Hendel & Lizzieri 2000). The regulations placed on the operations of insurance companies supporting health care provision should be eliminated through the direct intervention of the government. These interventions may assist in increasing the number of customer’s choices, reducing the costs incurred while employing health care services, and promoting competition within the industry. In contrast, insurance companies’ roles in the food industry do not encounter as many regulations as their roles in the health care sector (Parente & Bragdon 2009). According to previous studies, where the health coverage for various groups is mandated by the government, the costs or cross-subsidies moving from the unhealthy people to the healthy people increase (Harris, Feldman, Schultz & Christiansen 2004). The government’s direct intervention may, therefore, help ensure that health cover is accessible to all insurance cover applicants irrespective of any changes that may occur to their health status (Graham 2008). The government’s direct intervention in health care additionally ensures that the approval process for drugs used in the industry is shorter and less expensive. For instance, in America the average time taken for a drug to be approved is eight and a half years, with the average cost of the process amounting to about $403 million. This makes it difficult for new pharmaceutical investments to be made by the large firms that exist in the country. These restrictions greatly limit the competition found in this industry, the entrepreneurial efforts and the quality of help that a consumer is likely to get. This is different from the approval process taken in foods within the country, since it is much shorter and less costly (General Accounting Office, 2003). There are many fears that health care providers and pharmaceutical companies may benefit unfairly by exploiting their customers, which means that governments should come in so that they may regulate their products. This also happens in the food industry though fewer instances of such exploitations have been reported in the past (Fries 2004). The government’s direct intervention in the provision of health care may also be urgent in order to avert any risks that may arise due to failures within the industry (Parente & Bragdon 2009). These failures may be more painful to bear than the failures that would be encountered by the inappropriate regulation of the food industry (Conover & Miller 2010). Additional studies warn that increasing the speed of inspecting the drugs released in the health care industry may, however, increase the risk posed by the consumption of these drugs (Bast 2007). The obligatory licensing standards that are enforced through the direct intervention of a government are advantageous to a population since they help reduce the uncertainty associated with consuming a certain drug. Their use may enable monopolies to grow due to the absence of competition, thereby leading to the production of low-quality products (Fries 2004). The government’s direct intervention in the health care industry may help protect the consumers against some of the worst capitalism forms though it may also invade their freedom. The intervention may help the industry by preventing issues such as inflation, depression and unemployment from hitting the industry, which is very important for the growth of an economy (Conover & Miller 2010). 2 Health care reforms within the United States have been instigated through the use of a recently established law. The law bringing reforms to the sector is referred to as Obamacare or the Patient Protection and Affordable Act (Thomas 2011). These reforms will help ensure that insurance plans cover prevention services while stopping the insurance companies from ignoring a sick patient. The major purpose of the legislation is providing health insurance affordable to all the citizens of the country. However, the passage of these reforms is not intended to replace the concepts of private insurance and Medicaid. The existing communal health centers will be improved with the aim of ensuring that health care is improved for people who are not able to afford health care privately (Morton 2011). To receive quality and affordable health care under these reforms, American families will be required by their authorities to pay the amounts of money they can afford (Gooding 2011). Under these reforms, in case an American family decides not to buy healthcare under the health care acts, such a family has an option of purchasing private insurance (Thomas 2011). However, the acts stipulate that individuals who decide not to participate in the reform process will be required to pay some penalties in the form of taxes in order to help their government provide health cover for the rest of the population (Gooding 2011). Tax credits will be availed under the reforms to over nineteen million American citizens to assist them in paying for their health care schemes (Pipes 2010). This move will enable the majority of the middle class citizens within the country to save thousands via the tax cuts that will be provided by their government (Thomas 2011). Through the Obamacare reforms, sick people will not be dropped by insurance companies and health care will not be denied based on any pre-existing conditions (Gooding 2011). All types of existing discrimination within the health care industry will, therefore, have been effectively dealt with by these reforms. However, the reforms on health care may allow a citizen to remain under the same health scheme that they have been using in the past (Pipes 2010). According to these reforms on health care, individuals who earn over $250,000 will be subjected to paying higher taxes, which will be utilized for funding the Obamacare. This move has brought outrage from the wealthy people though it will be advantageous to the poor people, who will additionally benefit from the option of receiving insurance cover (Maglione 2011). The laws on the provision of affordable health care have been created to focus not only on the insurance sector but also on reforming the health care sectors that are not working properly or cost much to the taxpayers. By maintaining the focus on the establishment of disease preventive measures in the reforms, the scheme helps save money and lives that may be lost to diseases. Normal Americans will be able to save their money under the Obamacare reforms, with the majority already paying less for employing health care services. It is also estimated that the implementation of these laws in the country will help the administration save over a hundred billion dollars in the first ten year period (Maglione 2011). Subsequently, it is estimated that over the next two decades the reforms will also help reduce the national deficit by approximately 1 trillion dollars. Through the health care reforms in the country, the government aims to make it easy for any small businesses within the country to indulge in providing health coverage to their workers (Pipes 2010). This may be achieved through the offers of tax credit that will be given to any employers who will have enrolled their workers into plans for private health care (Maglione 2011). A major goal of the health reforms in America is ensuring the provision of free preventive care for all insurance plans. The reforms will exempt any plans of private insurance that were grandfathered till these statuses are lost (Gooding 2011). To determine the level of success of the reform process, it will be evaluated against the benefits that the American citizens and various other interested parties are supposed to reap through the reforms in health sectors. For instance, small businesses offering coverage for health will get tax credits of up to 35% and rebates of $250 will be awarded to the beneficiaries of Medicare (Gooding 2011). The success of the program may also be evaluated through the effective implementation of end rescissions, the uplifting of life time bans on health coverage and the complete implementation of independent and new appeal processes (Pipes 2010). With the increased funding for health centers located at the community levels and an increased number of doctors providing primary care, the success of the reforms will depend on the number of patients that get treatment at minimal costs (Gooding 2011). Its success will also be evaluated through customer feedback for the purposes of ensuring that there are no instances of discrimination based on their salary scales. The uninsured people will be expected to get immediate medical attention under these reforms, a concept that might also be used in judging the progress made. This may be done by ascertaining the number of uninsured patients who have received help through their health care institutions despite the facts that they are uninsured. Reference List Bast, J 2007, Ten principles of health care policy, Heartland Institute, Chicago. Conover, C & Miller, T 2010, Why a public plan is unnecessary to stimulate competition, AEI Working Paper, American Enterprise Institute, Washington. Fries, J 2004, Health track: “Proven reduction of the need and demand for medical services, John Wiley, San Francisco. General Accounting Office, 2003, Medical malpractice: Implications of rising premiums on access to health care, GAO, Washington. Gooding, E 2011, Obamacare: Health debate in The United States, Webster’s Digital Services, Washington. Graham, J 2008, US index of health ownership, 2nd edn, Pacific Research Institute, San Francisco. Harris, K, Feldman, R, Schultz, J & Christiansen, J 2004, The buyers health care action group: Consumer perceptions of quality differences, John Wiley, San Francisco. Hendel, I & Lizzieri, A 2000, The role of commitment in dynamic contracts: Evidence from life insurance, National Bureau of Economic Research, Cambridge. Herzlinger, RE 2004, Consumer-driven health insurance, John Wiley, San Francisco. Hunter, JR, Cassell-Stiga, G & Doroshow, J 2009, True risk: Medical liability, malpractice insurance and health care, Americans for Insurance Reform, New York. King, D 2009, State health-care reform: A resource for state legislators, George Mason University, Fairfax, VA. Maglione, T 2011, Obamacare: a doctor’s guide to saving healthcare, Create Space, New York. Matthews, M 2005, Health care: the future of consumer-driven health care, Heartland Institute, Chicago. Morton, GT 2011, Passing Obamacare, Taylor, Levi & Associates, New York. Parente, S & Bragdon, T 2009, Healthier choice: an examination of market-based reforms for New York’s uninsured, Medical Progress Report No. 10., Manhattan Institute, New York. Pipes, SC 2010, The truth about Obamacare, Regnery Gateway, New York. Robinow, A 2004, The buyers health care action group: Creating incentives to seek the sick, John Wiley, San Francisco. Thomas, J 2011, Obamacare: Dead on arrival is close enough for government work, Createspace, New York, Wachter, R 2006, ‘The dislocation of US medicine: The implications of medical outsourcing’, New England Journal of Medicine, vol. 354, no. 7, pp. 661–65. Wieske, JP & Matthews, M 2007, Understanding the uninsured and what to do about them, Council for Affordable Health Insurance, Alexandria, Va. Word count - 2074 Read More