Healthcare Economics

Question One

The government intervenes in the provision of healthcare, in an attempt to achieve efficiency and equity in the provision of health care. The interventions involve the following policies: expenditure, regulation and taxation. All these policies have economic effects on the provision of health care. In the expenditure policy, the government spends part of its revenues in the health industry either directly or indirectly. For example, the government may provide a subsidy in training physicians in order to increase the supply of physicians, who will provide health care services. Such a subsidy will create market imperfection in the provision of health care since there will be an increase in the supply side. This is likely to lower the quality of health care since there will be no incentive to work as the number of physicians will be overwhelming; physicians are likely to be paid less for their services since there will be more workers available to provide health care services (Lazar et al, 2004).

Regulation policy is also another form of government intervention that the government may use in the health care provision. The government may lower the cost of licensing physicians in order to lower the monopoly powers in the health sector. This will have an effect of lowering the cost of providing health care and at the same time lower the quality of health care provided because of increased competition. On the other hand, the government can raise the cost of licensing physicians in order to limit the number of practitioners in the health sector (Lazar et al, 2004). This increases the cost of providing health services and improves the quality of health care. The other form of intervention is taxation policy. The government may exempt individuals for employer paid health insurance, which increases demand for health insurance. This benefits individuals receiving higher incomes at the expense of low income earners. Hence, it is not efficient.

Question Two

Provision of subsidies by the government for the training of nurse midwives constitutes a supportive intervention by the government to the low income earners. The initiative is good since it is likely to increase the number of midwives that can offer the service. The number of individuals requiring the services of a midwife may be on the increase, but providing a subsidy for the training of midwives will help in matching the demand (Morris et al, 2007). On the other hand, offering of subsidy in the training of nurse midwives will help in the accessibility of the services since the trained midwives can be distributed to areas with scarcity of midwives.

A state mandate requiring all health insurers to include chiropractic services in their benefits is an expensive requirement since chiropractor services may be exceedingly expensive (Morris et al, 2007). However, lack of this mandate may increase the cost of health care and premiums of the health insurance. In case an individual having a medical problem seeks services without having the necessary health care, he may become sicker and require more expensive health services in the future. Hence, the mandate is expensive in the short run, but beneficial in the long run. Thus, it is a good intervention (Lazar et al, 2004).

An inclusion of psychologists as a covered provider under Medicare is not a good decision. This is because the decision is likely to increase the government expenditures while the service is not a necessity. Very few individuals will be in need of the service, which implies the government will be wasting resources in the provision of Medicare.

References

Lazar, H., St-Hilaire, F., Institute for Research on Public Policy., & Queen’s University (Kingston, Ont.). (2004). Money, politics and health care: Reconstructing the federal-provincial partnership. Montreal: Institute for Research on Public Policy.

Morris, S., Devlin, N., & Parkin, D. (2007). Economic analysis in health care. Chichester: Wiley.

Health Policy and the Legislative Marketplace. Delmar: Cengage Learning.

The Role of Government in Health and Medical care. Delmar: Cengage Learning.