Question

Imperfect competition is the norm, so healthcare markets cannot work. Analyze this comment and explain your answer.

Answer 1

The market for health care services is taken into consideration a imperfect market due to the fact Health care is a heterogeneous product, because the patient can experience a variety of outcomes.Sufferers who are insured have third party payers protecting their direct medical expenses.A "market rate" is missing, i.e.no feedback. In the health care sector it isn't feasible to reach the pareto efficiency via the competitive market. This due to the fact there are a number of "imperfections" together with the excessive presence of externalities, the reality that goods are not homogenous, asymmetry of information and dealer induced demand, all traits that prevent the fulfilment of a pareto equilibrium with the aid of the market itself. In United states, health care services are governed with the aid of the market via the presence of insurance companies, but the insurance market is not efficient because of the presence of adverse selection and moral hazard, two phenomenon are mainly connected to the imperfect competition in the health care sector.