Health Economics



Health Economics

Explain what market failure is and why it exists in healthcare. Provide specific examples from the U.S. healthcare system

Market Failure is essentially the phenomenon of asymmetric information. This is a situation where parties involved in the market transaction possess unequal knowledge. Furthermore, lack of information cannot be obtained through additional costs (McConnell, Brue, & Flynn, 2009, p. 348).

US healthcare system is prone to classic case of market failure. This is because in healthcare, patients are required to make decisions based on knowledge, only, possessed by the healthcare providers. This essentially means that patients do not actually know what type of treatment is best for their health care. The unusual situation places them in need of direct direction from their doctor and healthcare provider. The effect of this conundrum as well as delayed costs signals of actual treatment billings to patients; essentially create market failure. Through such market failure unethical healthcare professionals can ill advise patients for short sighted gains. Moreover, insurance providers also create market distortions and enhance the market failure in US healthcare (Donaldson & Gerard, 2005; Rice & Unruh, 2009).

Conventional solutions would not solve the U.S.'s cost, quality, and access problems in healthcare. Explain why

Vladeck & Rice (2009) argue that conventional solutions that target inefficiencies would not solve the U.S.'s access, quality and costs problems in healthcare. These scholars essentially suggest that this global problem of mismanaged healthcare systems should aim to mediate the resounding problems by focusing primarily on empowering purchasers i.e. the patients with market power. This proposal could essentially lead to more regulation and oversight in healthcare. Furthermore, it could be a catalyst to much need redistribution of resources. This redistribution should aim to shift the power to the taxpayers, families, individuals and employees and away from the healthcare and insurance providers ...