Free Health Dissertations - Moreover, In Most Countries, Health Care Is The Most Significant Component Of
Moreover, in most countries, health care is the most significant component of total government expenditures. Thus, increased concern over public sector deficits has been a strong impetus for health care reform. It is often difficult to disentangle fiscal realities from ideological pursuits, but a further factor contributing to calls for health care reform has likely been a rise in ideology, questioning the legitimacy and role of government in all sectors. This new ideology has not been the sole domain of neo-conservatives; governments of many political stripes have privatized and deregulated formerly government-owned industries, e.g., telecommunications, electricity, gas, broadcasting, airlines. In a number of countries, the final stages of reinventing government are resulting in re-engineering and/or partial privatization of social service systems such as education and health.
The moral hazard problem of third-party insurance in an unregulated fee-for-service system means that hospitals often do not have to compete for custom on the basis of price, but will seek to attract patients with the promise of high-quality care. Quality of health care may, however, be very difficult to measure because of information problems. Hospitals will therefore tend to compete with each other on the basis of what Donabedian describes as structural measures as surrogate indicators of quality, e.g. the actual buildings and beds, technology, and skilled labor employed (Donabedian, 1988). Hospitals will attract the allegiance of physicians (who refer or admit patients to the hospital) by providing the type of technology demanded by them in that region and amenities such as adjacent offices. Thomson notes that this type of competition increases hospitals’ costs as physicians like hospitals to have spare capacity to suit their needs and prefer the latest technological equipment and highly-trained support staff. A hospital that displays a high number of qualitative indicators does not, however, necessarily supply higher quality care or result in better patient outcomes. Therefore in areas where there are many competitors, contrary to what neo-classical economic theory would predict, prices may increase rather than fall in an unregulated fee-for-service market.
In response to the information asymmetry problem a government may intervene to control costs by restricting the number of inputs into the health system. This has been a common reform initiative in single-payer systems like Canada where the government has reduced the numbers of hospital beds, nursing staff, and technology in the hope that physicians, when faced with limited resources, will appropriately prioritize health needs and respond with the most cost-effective services possible. A government may attempt to change the financial incentives that physicians have to exploit their market power deriving from information asymmetries.
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