The Impact of Government Intervention in Healthcare Economics
Question One: How do government interventions such as expenditure, regulation, and taxation affect the provision of healthcare?
The government intervenes in the provision of healthcare in an attempt to achieve efficiency and equity in the provision of healthcare. The interventions involve the following policies: expenditure, regulation, and taxation. All these policies have economic effects on the provision of health care. In the expenditure policy, the government spends part of its revenues in the health industry, either directly or indirectly. For example, the government may provide a subsidy for training physicians to increase the supply of physicians who will provide health care services. Such a subsidy will create market imperfection in the provision of health care since there will be an increase in the supply side. This is likely to lower the quality of health care since there will be no incentive to work as the number of physicians will be overwhelming; physicians are likely to be paid less for their services since there will be more workers available to provide health care services (Lazar et al., 2004).
Regulation policy is another form of government intervention that the government may use in the health care provision. The government may lower the cost of licensing physicians in order to lower the monopoly powers in the health sector. This will have the effect of lowering the cost of providing health care and, at the same time, lowering the quality of health care provided because of increased competition. On the other hand, the government can raise the cost of licensing physicians in order to limit the number of practitioners in the health sector (Lazar et al., 2004). This increases the cost of providing health services and improves the quality of health care. The other form of intervention is taxation policy. The government may exempt individuals from employer-paid health insurance, which increases demand for health insurance. This benefits individuals receiving higher incomes at the expense of low-income earners. Hence, it is not efficient.
Question Two: What is the impact of government policies like subsidies and mandates on healthcare services and costs?
The government’s provision of subsidies for the training of nurse midwives constitutes a supportive intervention for low-income earners. The initiative is good since it is likely to increase the number of midwives who can offer the service. The number of individuals requiring the services of a midwife may be on the increase, but providing a subsidy for the training of midwives will help match the demand (Morris et al., 2007). On the other hand, offering of subsidy for the training of nurse midwives will help in the accessibility of the services since the trained midwives can be distributed to areas with a scarcity of midwives.
A state mandate requiring all health insurers to include chiropractic services in their benefits is an expensive requirement since chiropractor services may be exceedingly expensive (Morris et al., 2007). However, the lack of this mandate may increase the cost of health care and premiums of health insurance. In case an individual has a medical problem and seeks services without having the necessary health care, he may become sicker and require more expensive health services in the future. Hence, the mandate is expensive in the short run but beneficial in the long run. Thus, it is a good intervention (Lazar et al., 2004).
An inclusion of psychologists as a covered provider under Medicare is not a good decision. This is because the decision is likely to increase the government expenditures while the service is not a necessity. Very few individuals will be in need of the service, which implies the government will be wasting resources in the provision of Medicare.
References
Lazar, H., St-Hilaire, F., Institute for Research on Public Policy., & Queen’s University (Kingston, Ont.). (2004). Money, politics and health care: Reconstructing the federal-provincial partnership. Montreal: Institute for Research on Public Policy.
Morris, S., Devlin, N., & Parkin, D. (2007). Economic analysis in health care. Chichester: Wiley.
Health Policy and the Legislative Marketplace. Delmar: Cengage Learning.
The Role of Government in Health and Medical Care. Delmar: Cengage Learning.
Frequently Asked Questions (FAQs)
How do government expenditure policies affect healthcare provision?
Government spending, such as subsidies for training physicians or midwives, can increase the supply of healthcare providers but may also lead to market imperfections, such as lower quality or wages due to oversupply.
What is the effect of regulation policies on healthcare costs and quality?
Regulation, such as adjusting licensing costs for physicians, can either reduce healthcare costs by encouraging competition or increase quality by limiting the number of providers.
How do taxation policies influence healthcare demand?
Taxation policies, such as exempting health insurance from taxes, can increase demand for insurance, benefiting high-income earners but potentially creating inefficiencies for low-income groups.
What are the benefits of government subsidies for training nurse midwives?
Subsidies for training nurse midwives can help meet the growing demand for their services, improve access in underserved areas, and provide more affordable care to low-income individuals.
Is it beneficial to include psychologists as Medicare providers?
Including psychologists under Medicare may lead to increased government spending without substantial demand, making it an inefficient use of resources.