Market Control in Healthcare

Paper Summary:

In this article, the writer discusses that unlike the food market, the healthcare market is incapable of self-regulating. The writere explains that for a market to completely self-regulate five ideal conditions must be present. The writer notes that, firstly, the consumer must be in a position of certainty in relation to what is needed, when it is needed and where it can be obtained. Secondly, there must be an absence of externalities produced as an unintended consequence of production or consumption. Thirdly, the writer points out that consumers must possess perfect knowledge with respect to what options are available in terms of competing products, the relative quality of those products and what those products will contribute to their self-interest. Fourthly, the consumer must be able to act free of self-interested advice of producers. Finally, the writer states that producers should be able to compete primarily in terms of price alone. The writer then explains that,
whereas the market for food meets each of those conditions to varying degrees, the market for healthcare fails across the board. The writer concludes that there are good economic and not merely ideological reasons why the UK has a National Health Service and not a National Food Service.

Outline:
Risk and Uncertainty
Externalities
Asymmetry of knowledge between service users and providers
The purpose and necessity of governmental intervention in healthcare
(b) Efficiency and equity as the measures of evidence-based medicine
Social bias in the production of EBM
Social bias and the application of EBM
Conclusion

From the Paper:

"Moral hazard refers to the change in attitude that occurs on the part of both service users and service providers when responsibility for the cost of healthcare is born by a third party in return for a premium. On the demand side this can lead to over-use since consumers have no need to worry about costs once premiums have been paid. On the supply side there is little incentive for keeping costs low since insurance companies are responsible for the costs of healthcare and not the end user. The result is one of increased cost and decreased efficiency."
"A second problem arising from the role of private insurance is that of 'diseconomies of small scale'. Instead of one central body dealing with the administration of healthcare costs, lots of small competing insurance companies shoulder the burden of administrative costs individually. This in turn decreases efficiency and increases the costs of insurance premiums."

Sample of Sources Used:

• Birch S. 1997, 'As a matter of fact: evidence-based decision-making unplugged.' Health Economics 6, 547-559.
• Donaldson C. & Gerard K. 1993, Economics of Health Care Financing. The Visible Hand. MacMillan, Hampshire 1993.
• Gupta M. 2003, 'A critical appraisal of evidence-based medicine: some ethical considerations.' Journal of Evaluation in Clinical Practice 9(2), 111-121.
• Guyatt, G. et al. 2002, 'The philosophy of evidence-based medicine. In G. Guyatt & D. Rennie, User's Guides to the Medical Literature: a Manual for Evidence-Based Clinical Practice. AMA Press, USA, pp. 3-47.
• Sackett, D. & Strauss, S. E. 1988, 'Getting research findings into practice: using research findings in clinical practice', British Medical Journal, vol. 317(7154), pp. 339-342. Sackett, D. et al. 2000, Evidence-Based Medicine. 2nd edition. Churchill Livingston.

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