Markets and Health Care

The health care sector is distinct from most other industries in many ways: the product is ill-defined, the outcome is uncertain, large segments of the industry are dominated by nonprofit providers, payments are made by third parties, and government policies shape much of the industry’s operations. Yet, despite these differences, the health care sector is subject to all of the same economic forces as other industries. Moreover, the health care sector is unique in having to balance the legitimate expectations of multiple stakeholders with its ultimate objective—the improvement of human well-being.

Health care refers to the diagnosis, treatment, amelioration, or cure of disease, illness, injury, and other physical and mental impairments in people. It includes the activities of all health professions and allied disciplines, such as medicine, dentistry, pharmacy, midwifery, nursing, optometry, physiotherapy, and psychology. In addition, it covers a range of health support services, such as laboratory tests, ambulatory surgery centers and mobile units, and a variety of devices and equipment used for rehabilitation.

In addition, health care is a service of social value and is provided by the public, private, and nonprofit sectors in all countries. Governments provide a safety net for individuals with insufficient resources, such as the elderly and disabled through Medicare; employers provide employee benefits for some workers to ensure that their families have access to health care; and charities, churches, and other organizations help those with no access to insurance.

The goal of the health care system is to meet the legitimate expectations of all stakeholders while maximizing efficiency and maintaining a high level of quality. This means providing access to medical care, protecting patients from financial risk, and fighting error, fraud, and abuse. In the United States, the healthcare system has failed to meet its goals on all three fronts. The system is expensive, overused, and often mediocre.

Traditionally, health care has been regarded as a uniquely special industry, whose practices are not easily subject to market forces because of the importance of patient autonomy and dignity. However, a growing body of research suggests that market principles can be applied to improve healthcare delivery and outcomes.

For example, the movement toward release of provider-specific performance information is an effort to bring accountability into the healthcare arena. It is also a way to enhance the effectiveness of decision making by enabling consumers and their health care providers to compare and evaluate alternatives. This approach may also promote a more integrated strategy to improving quality by linking cost and quality and allowing the marketplace to reward good performers while penalizing those with poorer outcomes.

Finally, health care should be people-centred, which is to say that it should respond to individual preferences and values. This is a difficult standard to measure because it is influenced by factors that are outside the purview of health care providers, such as socioeconomic conditions. Still, it is an important principle that should guide all aspects of the health care system.

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