Should the government intervene in healthcare?

When appraising the economic debate regarding government intervention in healthcare, it is vital to consider three areas of impact: individuals, firms and the wider UK economy as a whole. These areas will be affected directly through potential new access to health care provision and related price changes, and also indirectly through impacts on wider incentive mechanisms and market structures.

Highlighting the main arguments, the anti-intervention position rests upon the supposed merits of the free-market’s ability to direct resources to those that value the services – via price signals. Additionally, the anti-intervention argument suggests that any government intercession in the sector will likely “crowd-out” more cost efficient private firms from the health care market, whilst spending public funds that could be more effectively used elsewhere.

The pro-intervention position highlights that because of the unique nature of health care, an efficient allocation of is far from certain. Therefore the government should intervene to guide the market to a correct level of demand and supply of health care services. Elsewise, in a free market, many individuals may not use health care even though it would be in their best interest due to imperfect knowledge of the long-term value of health care. Nor importantly, individuals may not potentially have access to vital services purely because of high health care costs. Moreover, as the government would not be solely reliant on market signals to guide its actions, its intervention can consider a wider range of factors than price when debating provision – e.g. the positive impact on the overall economy of having a uniformly healthy workforce on national productivity.

Read the rest of this entry »