Economic Issues in Health Care Systems

Some of the thorniest issues in health care involve not medical care itself, but economic issues. Resources of health care systems, such as physicians and hospitals, are finite by nature, placing the issue within the realm of economics, which concerns itself with the allocation of limited resources. Issues in contemporary health care reform, such as universal coverage, rising medical costs, and government versus market-based financing, are examples of the economic issues involved.

Universal Coverage

• The principle of providing health insurance for all individuals in a society has been one of the key issues surrounding health care reform in the United States. Historically, the U.S. has been the only industrialized nation that does not provide a system of universal health coverage. Most nations that provide universal coverage do so through a single-payer system, in which the government covers all residents and pays all medical claims. In other nations, the government not only finances health coverage, but owns health care facilities and employs physicians and other providers. Britain's National Health Service is an example of such a system, referred to by some as "socialized" medicine. The U.S. health care system, in contrast, is a kind of patchwork quilt of multiple private insurers and some private programs, such as Medicare. This system has left millions of Americans without health coverage. Political scientist Michael D. Reagan, in his 1999 book, dubbed U.S. health care “the accidental system."

Health Care Financing

• A related economic issue revolves around how to finance a health care system that covers all, or most, people. Most nations have achieved this through a government-financed single-payer system, something the U.S. has resisted, even though the Medicare system for the elderly operates as such a system. Most Americans with health care coverage obtain it through their employers, who pay a portion of the premiums. However, many employers do not provide health care coverage. A government-financed system, such as a single payer, may require higher taxes on individuals and businesses. If government does not raise sufficient revenue to fund a health care system, lower-quality care or even rationing of health services could result.

Rising Costs

• Most people want all the medical care they require for good health, from the best providers, at the lowest cost. Economics, however, recognizes a trade-off between quality of care and cost. Scientific and technological advances in medicine have resulted in greater medical knowledge, new medications, improved technology and more advanced procedures--all of which cost money. Rising medical costs lead to higher health insurance premiums. For a system dominated by private insurance, such as that of the United States, rising medical costs pose a heavy burden on businesses that provide health insurance as an employee benefit. Government-financed systems must cope with rising medical costs, as well, but the government has greater leverage, as the sole payer of medical claims, to negotiate prices for medical services and prescription drugs.