Economics In Society

Can a society provide Healthcare solely through “Market system” or by total ownership and provisions by state? The question above challenges the ability on whether a state or private run market system can provide an efficient allocation of resources, with regards to social and economic efficiency within the healthcare sector. The rationale behind free healthcare is twofold; firstly, healthcare is considered by society to be universally desirable and to ration it through the price mechanism is seen as inequitable. This is taken from the moral standpoint of democratic governance and underpinned by welfare economics. Social indicators such as the public quality of life index (PQLI) illustrate the increase in public well being through the allocation of healthcare on the basis of need and not simply income or wealth. For example Healthcare system in UK is run by the government and is called the National Health Service (NHS); the system has been in place since 1950 and provides free healthcare for all. It was based on the proposals made on Beverage Report in 1943. Whose concept refers to “the state's provision of public measures and support to achieve basic living standards and help those in need across society”. There are fundamental problem with a publicly provided healthcare system, for example, the NHS, in that demand for healthcare is greater than supply; and in the absence of the price mechanism, demand is rationed through waiting lists. The answer to the ‘waiting list crisis’ or rather the excess of demand over supply would appear to be the provision of an increase in NHS resources. However, a publicly provided healthcare system, such as the NHS generates revenues through public taxation and government budgetary revenues. The problem with that it has been limited by government funding constraints and public sector pay freezes have reduced the attractiveness of the medical professions to NHS system and have pulled them towards private sector. This is due to under funding that has resulted in lacking the facilities and infrastructure to cater for the rising demand. Staff shortages are the result of poor working conditions and pay, which discourages prospective GPs and ancillary medical staff. These shortages of skilled labour will contribute to the waiting list problem and, due to the extra workload for GPs, significantly reduced morale1. The main reason that private sector will not provide public goods to people are because they cannot be confident of making a profit The advantage of healthcare being a public good is that in theory it is available to everyone and the consumption of a public good by one person does not decrease the availability of the good to others. It is free at the point of use, so one does not directly pay for it; e.g. if one cuts oneself and requires stitches one will go to the local hospital and the doctor or practical nurse will stitch up the cut and the person will not have to pay at the point of use. Therefore this is a benefit to the person whom requires medical attention the person does not need to pay at the point to gain healthcare. However this is not the case in America where their health service works on the private sector basis. 1

An indication of the poor morale is shown in the recent General Practitioner Committee's ballot in which 56% of all GPs voted to hand in their resignations next year if a new contract with the Government is not reached.

Also as there is a great demand for public healthcare within the UK, therefore the government needs to accommodate this demand and therefore more doctors, nurses, practical nurses and all the staff required for a hospital are needed this generates and creates more jobs and decreases unemployment rates in the UK, this again is an advantage. Public healthcare clearly benefits the poor; not taking the “free riders” aspect into perspective it benefits the poor whom may be ill and require medical attention. This is not a great economical advantage because it has being debated that diseconomies of scale might due to large bureaucracy that management beign unable to control costs and utilise resources efficiently. However it shows democracy, equality within the country and between all peoples of all natures and positions, which generates a external benefit to society, decreasing discrimination and prejudice within society Taking into account these advantages the disadvantages of a public healthcare service healthcare is non-rivalry in consumption non-payers can take a free ride and enjoy the benefits of consumption (“free riders”), this creates market failure as smaller amount of money is being regenerated into the health service so there is less money for the government to invest into the health service which results in hospitals having out of date equipment, decrease in hospital beds due to cut down in hospital jobs, this is a great drawback. As Dr Reggler argued in a debate that “market forces were part of everyday life and therefore understood by the majority’. He believes that without market forces incentives to change would not be established. Furthermore he added that even though the government for over 50 years had controlled the NHS it was judged worse than every other health care system in Europe. Privatisation that is meant to increase competition but this might not be the case, as seen USA where privatisation creates monopolies with high barriers to entry. These firms have significant economies of scale that new firms cannot compete with, and the start up costs can be colossal. For example HCA one of America’s largest health care firms is already feared to be trying to created a private monopoly in London (Cohen 2000). If the health is Privatised firms will make decisions on profit maximising, whereas the government run system will makes decisions based on the public interests. If the government wants to focus on the reducing poverty then production can be organised appropriately. Privatisation though reduce long run average costs however the strive for productive efficiency can have problems. The more highly developed the technology gets the more maintenance that may be needed. In US private health system is know to be greedy as Gibbs, inspector general of the US department of health describes the freeish market as pervasive fraud. Where as government run healthcare has no interest in performing pointless operations whereas according to the British medical journal in 1993 at least one third of private hysterectomies were unnecessary and the number of useless removals of tonsils was an epidemic (Cohen 2000). The advantage however for private healthcare is that typically you expect better doctors and staff as all the staff are more motivated to work as your are directly paying for the healthcare provided. The waiting lists are a lot shorter. Furthermore private hospitals are more up to date and consist of all the latest medical equipment

and technology. The big drawback is that it is very expensive however offers high quality medical treatment in terms of doctors, nurses, medical equipment etc. These advantages however come at a high price, as people have to pay at the point of use on top of their general taxes; therefore only a minority of people can afford private healthcare. The foreseeable problem with a healthcare system wholly dominated by a pricemechanism would be social unfairness with regards to providing healthcare to poorer people and the fear of under-consumption of healthcare due to its merit and public good properties; notwithstanding over consideration of the profit motive to ‘cut corners’ within healthcare, for example, the NHS repeats the AIDs test three times whilst private health companies in the UK carries out the test only once on the same blood sample. Healthcare is considered as merit good is a socially desirable good as it is a positive externality to society i.e. it benefits society; as social benefits exceed private benefits,so it is important to consider the impact of changing to solely one healthcare system. I think a price system within healthcare would therefore demonstrate to an extent the presence of economic, that would productively efficient. Resources would be used in an optimum way to gain maximum utility with production at the lowest possible cost i.e. efficient production. A private healthcare sector would also be dynamically efficient through innovation and investment in research and development due to greater revenues generated as a result of the price mechanism. The introduction of the profit-motive into the healthcare market would result in competition through pressure to lower costs of production and lead to subsequent competition in the factor market for healthcare; economic theory suggests that adjustments will occur in each related market with a corresponding change in resource allocation until a position of general equilibrium is obtained. This corresponds to labour and capital costs of healthcare. Perhaps a ‘private-public partnership’ would provide greater social efficiency whereby only certain elements of healthcare were co-ordinated through the price mechanism and the majority publicly provided. One idea, adopted in Sweden, is to charge patients for appointments. As well as providing an additional source of income for the NHS, it would also decrease the number of time wasters in GP waiting rooms. This charge would also encourage patients to make more use of services provided by pharmacies and NHS Direct thereby reducing the workload of GPs. To ensure that the poor and elderly aren't discouraged from seeking treatment, exemptions could be made based on income or age. It is good to have both private and public healthcare within a country. Public healthcare offers an effective health service to everyone and is paid by general taxation, however if one dislikes the current public healthcare service; then one has the chance and freedom to go private.

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Reference:Website:- 28/April/09 http://www.privatehealthadvice.co.uk/does-private-healthencourage-social-inequality.html http://www.skyminds.net/politics/inequalities-in-great-britain-in-the-19th-and-20thcenturies/the-beveridge-report-a-revolution/ http://www.lse.ac.uk/resources/LSEHistory/beveridge_report.htm