Question

identify the ways in which the healthcare system of the other developed country(s) that you investigated is better/worse than the US healthcare system. What explanation do you have for these differences?

. Schneider, Eric C., et.al., “Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better U.S. Healthcare,” Commonwealth Fund, July 2017.

.Schneider, Eric C., and David Squires, “From Last to First – Could the U.S. Health Care System Become the Best in the World?” July, 2017, NEJM.

. Squires, David and Chloe Anderson, “U.S. Health Care from a Global Perspective: Spending, Use of Services, Prices, and Health in 13 Countries,” The Commonwealth Fund, October, 2015.

Answer 1

Comparison of Healthcare Systems: US and UK

The UK and the US health care services are great examples of publicly funded and privately funded health care systems respectively. By assessing and analysing key findings from a microeconomic standpoint, we can see a significant difference between the two approaches to health care provision.

First, the role of government interventions in the provision of healthcare is to balance the demand and supply of the services; as well as prevent market failures in the form of monopoly, price-fixing, and exploitation. Insurance system is also introduced to avoid information asymmetry in the market. We then look into the UK health care service and see that a public-funded system will attempt to discourage market failures by avoiding information asymmetry, negative externalities and regional monopolies. However, the National Health Service (NHS) suffers from allocation and productive inefficiencies. The US system benefits from a competitive market model, this having higher levels of economic efficiency, innovation and quality of service. On the other hand, the US model is often criticised for not offering equal welfare to society, in addition, it leads to waste and the dominance of insurance companies. Finally, we will assess the role of a regulator when ensuring efficiency and competitiveness as well as discouraging market failures; whereas the role of a market form will ensure better allocative efficiency in healthcare provision.

In the UK, the NHS has existed for over fifty years and offers health care that is free at the point of delivery for everyone. This service is funded by taxpayers for the benefit of those same taxpayers. However, the option remains available for people to purchase private health insurance if they so choose. In the US, the majority of citizens have health insurance that is related to employment or purchases directly. The federal government only ensures public access to emergency services, regardless of an individual’s ability to pay. They also have publicly funded health care programs that cater to the elderly, the disabled and the poor.

Health care is a complex, unique good and everybody demand it but it faces problems if it is distributed through a free-market system and not a state-funded system. Market failure can occur for many reasons and the problem of asymmetric information is one of these. This is when producers and consumers within a market have access to different levels of information, whereas a characteristic of a completely competitive market is when all economic agents have access to all information. This is the case between doctors and patients as patients have minimal information (individuals cannot treat themselves). They expect doctors to act in their best interests but this may not happen in a free market. A doctor working for a company motivated by profit may act in the best economical interests of the company when deciding how to treat a patient. The US health care seems to favour private business over public services. However, it also creates jobs and saves money for its customers which could lead to an increase in average disposable income.

The demand for health care, when it is provided at no cost to consumers, exists at a maximum level. The supply of health care, provided by the government, is determined by a number of variables, including the costs of production and the level of funding received through taxation. When health care is provided at positive cost consumers enter into contracts with insurance providers, this creates a situation where policy intervention becomes necessary to ensure all parties enjoy the benefits of information symmetry and properly defined contracts.

The UK model benefits from a service that is provided when needed and is not based on an individual’s ability to pay. The lack of a profit-maximising incentive within the institutions providing health care results in aid provided primarily to heal the injured rather than efficient operation becoming more important than the quality of service. However, because prices play little role in incentivising agents, inefficiencies can occur in the UK system of health care provision and is the main disadvantage of the model. The competitive market for health care in the US means that the provided level of health care is likely to be closer to the socially optimal level of provision given the demand and supply for health care. It is also a much more contestable market, with fewer monopolies, further increasing economic efficiency. However, the positive cost of health care creates the social and political issue of whether your access to health care should be a function of your disposable income.