Healthcare systems: Are markets the answer - Essay Example

Healthcare systems: Are markets the answer affiliation Healthcare systems are crucial in social and economic development. For various decades, the debate has been centered on a balance between equity and efficiency. The introduction of competition and insurance plans in healthcare systems was a strategy that emerged during the past century, as a result of escalation of costs and the economic impact of the sector. In this paper, I will evaluate if the use of markets and competition in health systems increase inequalities and weaken efficiency. First, I will introduce the two models for health care reforms, and then I will critically review both advantages and disadvantages. Healthcare systems: Are markets the answer Public policies and interventions are one the most important tasks for governments around the world. Health systems have been a critical topic for the past two centuries, since the adequate balance between health and illness is a prominent variable of social development, economic growth, and general welfare. The Insurance theory states that the objectives of health insurance plans are to decrease financial risks, improve access to services, and create economies of scale. In Germany, Otto von Bismarck introduced a social insurance program in the 1880s, and this was the first approach to social security, where a health insurance plan was first provided for workers (Eurofund). In the United Kingdom, William Beveridge wrote an influential report with several recommendations, based on which the National Health System was created in 1946. Musgrove (2000, p. 845) considers this system "the pioneer of universal, publicly financed health insurance". Beveridge (1942) was convinced that the wages had to be "paid from a Social Insurance Fund, built up by contributions from the insured persons, from their employers, if any, and from the State". So, we disclose two different organization strategies for healthcare systems: a welfare system, where the public sector is responsible for offering health services, based in principles of universalism, social rights, and redistribution, among others; and insurance markets, supported by demand and supply laws, neoliberal policies, and efficiency principles. Critics of market systems state that this model grew up with capitalism's technological and financial globalization, and that it was a result of the crisis of socialism and the welfare state, and model where the state provides a comprehensive and universal welfare for its citizens (Hernandez, 2001). Health care markets are not perfect and a free market is not possible. Enthoven (1988) was aware of this from the beginning of his managed competition alternative. The author acknowledges that "health plans and consumers may use strategies that lead to inequity and inefficiency". The Social Risk Management theorists (Holzmann & Jorgensen, 2000) declare that public interventions should be established for aiding people, households, and community, for improving their risk management, and to provide support to those in extreme poverty. Policies derived from this model should avoid inequity and provide insurance plans to prevent, mitigate, and overcome times of great stress. In Saudi Arabia, the healthcare system can be described as a national health system, in which the government provides health care services through a number of government agencies. The Ministry of Health is the major agency, and is responsible for the management, planning, financing, and regulating of the health care sector. It is apparent to various authors that, in order to achieve adequate health levels and contribute to social development, income growth is not enough. In the Utilitarianism Theory, social groups seek for benefit maximization, at someone else's expense and jeopardy; as a result, health would not be improved in all society's members. Amartya Sen (2002) has stated that people's expenses in goods and services depend on their income, but that they are also interested in other personal, familiar, social, and environmental issues; in other words, individual capability, as the aggregate of multiple life attainments, is the real freedom, and income is just one component. Furthermore, inequalities in welfare and goods, plus inequalities in capability and freedom, finally lead to a social justice problem. Health inequities would definitively lead to capability loss. As I previously stated, Saudi Arabia's Ministry of Health, a government agency, would be the health provider for the entire population, but there are also other agencies, which deliver health care to specific enrolled security and armed forces population: Military hospitals, Security forces hospitals, and National Guard hospitals, among others. However, welfare systems bring some problems, which include supervision deficiencies, since everyone will receive assistance and government is not seeking profit. State policies might be in favor of certain professional groups, not necessarily the most suitable for health management, so public resources could not be efficiently used. In medical health markets, consumers must decide which services to purchase with their incomes, because an inverse relation exists between the price and the quantity demanded. In some cases, the demand for one health service would be related to the change in the price of substitutes (Folland, et al. 2006). A welfare state, where the government provides all services for free, could lead to moral hazard, so the population will increase their medical care consumption, and resource availability will be compromised. In theory, Markets lead to quality, because supply and demand produce competition, which in turn leads to price equilibrium; the previous statement could work in a perfect market. As we previously said, healthcare is not a perfect market, and consumers may have to rely in other parties to decide which service to purchase; moreover, buyers and sellers have different levels of information. The so called Asymmetric Information (Folland et al., 2006), encompasses situations where the patient is poorly informed about his condition, expected outcomes, etc. This problem could be surpassed by a free public service, where information would not be an issue, regarding purchase decisions. Adverse Selection is another obstacle for health insurance markets, because people who are insured will spend more on healthcare than the uninsured; lower and higher risk groups will face different utilities when looking for an affordable premium. Folland (2006) shows us that group insurance is a useful tool to reduce adverse selection, because insurers implement experience rating. The Saudi system, as many others in the world, has faced management difficulties, including unavailing planning. Resources are limited and cost constraints, advances in technology, increased consumer knowledge, and the raise in chronic conditions make systems untenable. As a result, some think that healthcare is an enterprise, and should be managed as the rest of organizations. Management deals with planning, organizing, directing, and controlling resources. Hospitals need trained managers, in order to improve allocation of financial and staffing resources (Lawson, et al., 1996). Control of finance can help to improve prevention programs and policies, without waiting for chronic diseases to appear. In Saudi Arabia, the solution became to privatize the health care system, and establishing health insurance policies. These new strategies will help to relieve the financial pressure on government, because, at this moment, the unlimited demand for healthcare services is more than the government can handle. Not all Saudis are insured and it' is too early to see measurable variables that help us evaluate results. However, it is expected that the quality of healthcare services will improve, since a larger volume of patients will make private hospitals to recruit qualified staff. It is vital to address the impact and coverage of this new model; insurance coverage rises with the level of wealth, so economic inequities may become apparent; some insurance models have established preexistences, and put some barriers to aging or high risk individuals, such as serious access obstacles and high premiums. On the other hand, patients may seek an insurance plan in the private sector, because they see a more efficient service, easier accessibility, short waiting times, flexible appointment, enhanced staff's attitude, and greater confidentiality. It is clear that several advantages do exist, but as technology move forward and new developments arise, costs and resources will turn into an unsustainable model; this is where management strategies become particularly important. In conclusion, two healthcare systems have been described: welfare system and insurance markets. For years, the debate has been centered on a balance between equity and efficiency. Basically, some argue that governments are responsible for health services, so a public supply is to be implemented. Insurance markets were introduced in order to reduce costs and improve efficiency, but inequalities may arise, because of barriers, asymmetric information, and adverse selection, among others. For decades, the healthcare system of Saudi Arabia has been on government's hands; now, insurance markets are being introduced. Time will lead to rigorous evaluations and results will definitively show if an efficient and equal system is established. References Enthoven A. 1988. Managed competition of alternative delivery systems. Journal of Health Politics, Policy and Law, vol. 13, no 2, pp 305-321. European Foundation for the Improvement of Living and Working Conditions. 2007. "Bismarck's Social Security Legislation". Available at: http: // www. eurofound. europa.eu / index.htm Folland, S., Goodman, C., Stano, M. Equidad. 2006. Economics of Health and Healthcare, 5th edn. Greenberg, W. 1988. Competition in the Health Care Sector: Ten Years Later. Duke University Press. Hernandez, M. 2001. The sociopolitical approach for the analysis of sanitary reforms in Latin America. Revista de la Facultad Nacional de Salud Pblica, vol. 19, no. 1, pp. 57-70. Holzmann, R. Jrgensen, S. 2000. Social Risk Management: A New Conceptual Framework for Social Protection and Beyond. Social Protection Unit Human Development Network, The World Bank. Available at http://www.worldbank.org/sp. Lawson, J. Rotern, A. Bates, P. 1996. Major Hospital and Health Service Issues and Challenges. in From Clinician to Manager. McGraw-Hill, Sydney. Londoo JL, Frenk J. 1997. Structured pluralism: towards an innovative model for health system reform in Latin America. Health Policy, vol. 41, no. 1, pp. 1-36. Musgrove, P. 2000. Health insurance: the influence of the Beveridge Report. Bulletin of the World Health Organization, vol. 78, pp. 845-46. Sen, A. 2002. Why health equity. Health Economics, vol. 11, no. 8,pp. 659-666 Social insurance and allied services. 1942. Report by Sir William Beveridge. London, HMSO. Read More