HEALTH CARE

Health care

Health care

Continual and significant price inflation has characterized the health care sector of the United States since the 1960s. In turn, the rising medical prices have contributed to increased health care costs. In fact, aggregate health care expenditures in the United States increased from 5.2 to 10.6 percent of gross domestic product (GDP) from 1960 to 1985 (Kaplan 2001 351-353). For the most part, policymakers have responded by advocating more competition in health care markets or increased regulations (e.g., the diagnosis related groups sys- tem for hospitals and relative value scales for physicians)' as a way of mitigating the spiraling medical care expenditures. 

At the same time, policymakers have become increasingly concerned that growing competition between health care providers and various regulations might lead to unwanted reductions in the quality of medical care, as health care providers respond to the market and regulatory incentives to contain costs (Park 2002 BI). The double-edged sword of higher medical prices and lower quality of care has alarmed and dismayed many influential groups in the United States. Attempting to shield themselves, many industry groups have called on government to shoulder more responsibility for health care financing whereas government, on the other hand. 

In response to the attempt to pass the health care buck, a number of physicians in the United States have endorsed a national health care program along the lines of the Canadian national health insurance program or the national health care system of Great Britain. Many argue that a national health care program can simultaneously contain medical prices and ensure an acceptable quality of care. For example, Handy (2003 25-63) point out those health care expenditures, as a fraction of GNP, are much lower in Canada (8 percent) and Great Britain (6 percent) than in the United States (nearly 11 percent). Despite those relatively lower health expenditures, however, Silva Whitman Margellos and Ansell (2001 484-494) note that “within a decade of the introduction of free access, a sharp decline in mortality occurred, so that the current levels in both Canada and Great Britain are slightly lower than those in the United States.” 

This paper examines government involvement in health care from both a theoretical and empirical standpoint. From a theoretical perspective, government involvement in health care matters may have an adverse impact on the quality of care. Numerous analyses of other sectors of the economy have found that both the quantity and quality of output suffers from public intervention and regulations. In particular, analysts use the postal system, local schools, rent control laws, and the pre-deregulated transportation sector as prime examples of areas in which government enterprise and regulations have inhibited efficiency.

Moreover, Canadian policymakers have recently begun to question the desirability of their own health care delivery system. From an empirical standpoint, the Himmelstein and Woolhandler view may be flawed because they draw their policy conclusions from a few limited and, perhaps, unrepresentative observations (i.e., the Canadian and British national health care programs relative to the health care system of the United States). Clearly, more than a few observations are required to draw a meaningful conclusion about the relationship between government involvement in health care and the performance of the health care sector. Also, other determinants of health care outcomes, such as real GDP ...