Facing such cost increases, businesses are forced to not only reduce worker compensation but also reduce investment in areas such as product development and marketing. This continual increase in healthcare costs has not seen any increase in the quality or quantity of services provided to the customer, however. As a matter of fact, out-of-pocket expenses for individuals and their families have increased while access to routine and preventive healthcare services has decreased significantly.
This system, however, is highly inefficient because consumers who are unable to afford some form of health insurance coverage must access the medical system by the most expensive means available. They will either go to the emergency room which is one of the most expensive costs to hospitals; or they will go to some non-profit or governmental facility that is subsidized by tax dollars thus putting the burden back on the tax-base. Another point against universal healthcare is the potential “free-rider” problem that “free” or universal healthcare may cause. Universal healthcare has the potential to over-burden the medical system if consumers overuse services for minor medical issues.
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Given these concerns, the need for some form of universal healthcare still seems to make good sense if examined from an economic standpoint. Healthcare, given its nature, is an inelastic service that consumers would willing pay any amount to obtain. The marketplace is far from perfectly competitive because of the varied and unique skill sets required to fill the various healthcare positions as well as the training time involved in developing a healthcare professional. Another extremely important influence on the competitiveness of the healthcare marketplace is the fact that there is a large difference in the knowledge base of consumers and providers concerning medical matters. This gives healthcare providers an undue influence on consumer choice concerning a particular issue. Given all these facts, there seems to be a need to tilt the market towards equilibrium so as to reduce the growing negative externalities of healthcare costs on consumers.
Comprehensive healthcare would have measured effects on the economic growth of America. As more workers become insured productivity will increase because workers are able to take advantage of preventive services reducing loss-time. An increase in preventive healthcare would reduce the need for more expensive and intrusive procedures which would lead to a decrease in average total costs for the industry over the long-term. Furthermore, by reducing the incidence of major procedures it also reduces the need for specialized professional services. This would allow universities and medical schools to allocate resources to more general areas of health education producing more frontline professionals. Development of medical specialists requires a disproportionate amount of resources and time so a small decrease in the need for specialists would represent a large increase in the production of more needed workers such as nurses and general practitioners. A universal healthcare plan would also help reduce developmental delays often experienced by children due to health issues. The quantitative effect of universal healthcare would be to extend worker life and productivity helping to provide all sectors of the economy a sound employee base thereby reducing long-term market risk.
Looking at the healthcare issue from an economic standpoint is helpful when dealing with such a hot-button issue. The issue of healthcare is muddled with societal norms and concerns that are actually separate from the concerns at hand. This is evidenced by the fact that, in general, Americans see the need for a strong healthcare system that can provide for the needs of all consumers. The problem comes in when the discussion turns to paying for and administering the system. By using economics to break the situation down to the costs that are being paid, it becomes apparent that it is not a choice between developing a tax-based subsidy system or not to supplement healthcare, but it is more of a choice of acknowledging the subsidy system already in place and working to make it more efficient.
“The Impact of Rising Health Care Costs on The Economy.” National Coalition on Health Care, November, 2008.
Oron, Ruth. “Health Care-Based on Good Will, Not Profit.” Southwest Digest, October-November, 2002.