What do you mean by health care? Beállítások

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health care is different from other goods and services: the health care product is ill-defined, the outcome of care is uncertain, large segments of the industry are dominated by nonprofit providers, and payments are made by third parties such as the government and private insurers. Many of these factors are present in other industries as well, but in no other industry are they all present. It is the interaction of these factors that tends to make health care unique. Even so, it is easy to make too much of the distinctiveness of the healthcare industry. Various players in the industry—consumers and providers, to name two—respond to incentives just as in other industries.

Federal and state governments are major health care spenders. Together they account for 46 percent of national healthcare expenditures; nearly three-quarters of this is attributable to Medicare and Medicaid. Private health insurance pays for more than 35 percent of spending, and out-of-pocket consumer expenditures account for another 14 percent.1Traditional national income accounts substantially understate the role of government spending in the health care sector. Most Americans under age sixty-five receive their health insurance through their employers. This form of employee compensation is not subject to income or payroll taxes, and as a result, the tax code subsidizes employer purchase of employee health insurance. The Joint Economic Committee of the U.S. Congress estimated that in 2002, the federal tax revenue forgone as a result of this tax “subsidy” equaled $137 billion.2

Risk and Insurance
Risk of illness and the attendant cost of care lead to the demand for health insurance. Conventional economics argues that the probability of purchasing health insurance will be greater when the consumer is particularly risk averse, when the potential loss is large, when the probability of loss is neither too large nor too small, and when incomes are lower. The previously mentioned tax incentive for the purchase of health insurance increases the chances that health insurance will be purchased. Indeed, the presence of a progressive income tax system implies that higher-income consumers will buy even more insurance.

The 2002 Current Population Survey reports that nearly 83 percent of the under-age-sixty-five population in the United States had health insurance. More than three-quarters of these people had coverage through an employer, fewer than 10 percent purchased coverage on their own, and the remainder had coverage through a government program. Virtually all of those aged sixty-five and older had coverage through Medicare. Nonetheless, approximately 43.3 million Americans did not have health insurance in 2002.3

The key effect of health insurance is to lower the out-of-pocket price of health services. Consumers purchase goods and services up to the point where the marginal benefit of the item is just equal to the value of the resources given up. In the absence of insurance, a consumer may pay sixty dollars for a physician visit. With insurance, the consumer is responsible for paying only a small portion of the bill, perhaps only a ten-dollar copay. Thus, health insurance gives consumers an incentive to use health services that have only a very small benefit even if the full cost of the service (the sum of what the consumer and the insurer must pay) is much greater. This overuse of medical care in response to an artificially low price is an example of “moral hazard” (see insurance).

Strong evidence of the moral hazard of health insurance comes from the RAND Health Insurance Experiment, which randomly assigned families to health insurance plans with various coinsurance and deductible amounts. Over the course of the study, those required to pay none of the bill used 37 percent more physician services than those who paid 25 percent of the bill. Those with “free care” used 67 percent more than those who paid virtually all of the bill. Prescription drugs were about as price sensitive as physician services. Hospital services were less price sensitive, but ambulatory mental health services were substantially more responsive to lower prices than were physician visits.4