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Saturday, September 29, 2007

Candidate Position on a National Health Care Sytem

US election session is right around the corner and the candidates are trying to when over enough votes to take the White House. To win the candidates see only one issue: National/Universal Health Care as there ticket in. Some of the candidates even talk about balancing a budget cutting pork barrel spending and having a national health care plan (Fred Thompson on his website says just this, but other republican and democrats also have used this line in debates). But all the candidates, so far, haven’t said the best approach to the national health care plan. They also haven’t acknowledged the huge costs of the system, the problems of the system, and the economic impact of the system. That leads to the question: Would a national health care system be economically efficient?
First what kind of good is health care (or sick care)? Well the good is Rival, if I am being seen by the doctor you can’t be seen by the doctor. Next the good is excludable; the doctor can refuse to see any person he doesn’t want to. The only good that is Rival in consumption and excludable in consumption is a private good.
Does the government then have a right to provide a private good? According to the normative frame work of economic efficiency, the market will get the society to the efficient output of health care. Therefore from an efficiency point of view government control would not bring efficiency and people would be worse off because the Marginal Social Cost of the system would most likely be either over or under the Marginal Social Benefit (a really good chance of being over the MSB). If the government provides to much health care for the people the people could use that money spent in different areas to make themselves better off. However, even with health care being a private good there still may be a role for government.
Government should have one role in economic issues, fix market failure (again according to the normative framework of Economic Efficiency). Markets fail are to due to three main issues: Market Power, Externalities, Public Goods. For limited understanding of the markets internal issues I will not be discussing Market Power; if market power exists in the health care industry government would have a right to break the market power. With that exclusion and public goods covered this leaves Externalities. Does the health care industry have either negative or positive externalities? One agreed externality provided by the health care industry is vaccination, why? If a room of twenty people are vaccinated and another person not vaccinated enters that person is being protected by the other persons’ vaccinations and is therefore better off by other peoples decisions. This would be a classic condition of a positive externality, but does the rest of the market show this kind of externality?
I’m not sure. Does a heart transplant benefit a third party outside the market? Does mending a broken arm help others? Does therapy effect others outside the market? If certain procedures produce positive or negative externalities then I believe they may have a role for government, but I don’t see every procedure as a externality, and would therefore have to reject the National Health Care system based on economic efficient grounds, but not on possible other normative grounds.

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