Thursday, May 16, 2013

Health care markets v. public health care

Marc Roberts et al. on why health care markets fail:
Moreover even where there are markets, they are often imperfectly competitive, and physicians can determine much in the way of patient behavior.  Given these departures from the competitive ideal, it is not surprising that microeconomic theory has offered few explanations for macro-level health outcomes or for the rate of growth of national health expenditures.  
But also why government health care fails:
Poorly run government bureaucracies and inefficient state-owned companies have proliferated, in part because of their political advantages.  Using the public sector to provide patronage rather than service, employment rather than output, allows government to build up a political base.  Workers are identifiable, easy to organize, and often grateful to political leaders for their employment.  Customers, on the other hand, are harder to identify and organize and are likely to have less at stake.  These factors often lead to an overstaffed, poorly managed, high-cost public sector, with unhelpful staff, crumbling facilities, and poor service.  
So where do they come down on the issue?  They fudge:
Because (the privatization movement) is so widespread, we want to let readers know our view of such matters.  Whether new arrangements will perform better than current practice is a complex empirical question.  As we argue throughout this book, in predicting outcomes, the devil is often in the details--especially when it comes to how organizations are managed and governed.  In our view, the applicability of the market model to health care varies with specific circumstances: Is a given market large enough to support a reasonable number of efficient, independent competitors?  Do customers know enough, or can they be given enough information, to choose intelligently?  Will the savings that result from the competitive pressures be greater than the resources used up through higher transaction costs?  In our view, health reforms should answer such questions before deciding on policy.  

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