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THE PROPER ROLE OF GOVERNMENT IN HEALTH CARE REFORM – PART 2: CREATING A HEALTH CARE MARKET

I wrote in Part 1 that medical care is an economic good. More specifically, it is a consumer good delivered directly to patients, primarily in the form of services. Experience has taught us that the most effective, efficient, and fair way to create and distribute consumer goods and services is through open consumer markets that allow each customer to determine a product’s value before deciding whether to purchase it with her limited available funds. Such value assessments require consumers to consider the answers to two fundamental questions:

  1. Which sellers’ are offering me products and services that will provide the best quality for my needs?
  2. Of those best sellers, which offers the lowest price?

In (slightly) technical terms, value equals quality divided by price, meaning that the higher the quality and/or the lower the price, the higher the resulting value. The challenge in getting higher quality, lower priced health care, therefore, lies in creating a consumer market for it. Actually, it means creating two markets, one for health insurance and one for medical services. But if we do the insurance market right, the second will naturally follow.

Posted in Government vs Markets, Health Costs, Health Insurance, Health Reform Goals, Medical Quality | Tagged , , , , | 7 Comments