US Health Care Reform

Health Care Reform

FDR's New Deal and Lyndon Johnson's Great Society were early attempts for the United States government to play a broader role in creating more extensive social policies. More recently, when a recession pushed inflation to an all-time high, Ronald Reagan led a popular political campaign in which he pronounced that the federal government should have a smaller role in American society. He believed that socialism was an evil worth fighting. This sentiment undoubtedly caused the Clinton Presidency to fail when trying to enact a series of measures to reform Health Care. The debate has regained momentum with Obama who has enacted a health care reform bill known as the Affordable Care Act. Republicans who been vocal critics of the bill and have vowed to overturn in before its inception. This paper will introduce some of the economic mechanics that are responsible for fueling the debate.

Background on the Health Care Debate

Tens of millions of Americans are uninsured in regard to their health, many at least partly because of rising health care costs. It has been estimated that somewhere in the neighborhood of forty-five million Americans do not currently have health care insurance and many of these are children. These individuals are absorbing vast amounts of financial risk by not maintaining adequate health care insurance. For example, the leading driver of personal bankruptcies in the country is also due to overwhelming health care related financial burdens. Many families have lost their economic security by being burdened with illnesses that have treatments that are beyond what they are able to pay for.

Furthermore, many individuals seek treatment at emergency care centers because this is the only option available to them; which drives up the costs of health care for all health care consumers. This represents one aspect as to why the costs of health care have sky rocketed in the United States. When a patient seeks emergency care then the emergency room cannot deny care based on their financial ability to pay for these services. Therefore many of the bills that result in emergency treatment go unpaid. The hospitals or treatment centers are forced to absorb the costs of the uncollected revenues and these debts are offset by raising the rates for all health care consumers.

Many of the cases that end up in emergency treatment centers could be treated in less expensive routes. Some of these patients forgo seeking preventive care or basic care for treatable conditions. Instead of treating this conditions when they are relatively inexpensive to treat, those without access to affordable care will allow the conditions to worsen. When the conditions worsen the treatments and the related health care costs rise substantially. Therefore, there is an economic inefficiency that is created by individuals not having access to care that has driven up the costs of the entire system while simultaneously provided a level of care for the public that is substandard when compared to other nations.

If the central government plays a role in this arena it can work to effectively mitigate much of the risk for individuals and families. Insurance is one method of draying risk through market mechanisms and the government could potentially insure every American if it had the political support to do so. If every American was insured then this would provide millions access to preventive and basic care that could vastly improve public health on the aggregate. Many treatable diseases and conditions could be treated as soon as they are identified for millions of Americans rather than waiting until these conditions progressed and became more expensive. It is estimated that inefficient and poor quality health care costs the United States somewhere in the neighborhood of fifty to one hundred billion dollars annually in opportunity costs that could be gained by reducing waste.

Furthermore, there are also many administrative costs that could be reduced by centralizing much of the health care industry and providing access for everyone. For example, if everyone had access to health care then there would be less administrative costs associated with bill administration and collection. There would also be savings in the court system because the bankruptcy levels would lessen. Furthermore, there would also be savings that could be gained by allowing the government to negotiate with vendors such as drug companies which would lower the costs of prescription medication for the entire market. The cost per transaction would also lessen if the government took on the role of insurer for all because the transaction cost would benefit from reaching quantities of scale.

Despite all the potential benefits for the society on the whole, there are many groups that will be disadvantaged economically with the introduction of sweeping health care reforms. The drug companies for example could no longer charge premiums in the market place and would be subjected to more competition from different industry players. They argue that this would work to hamper the technological innovation that is present in the U.S. health care industry because companies would no longer have the same levels of revenue that are necessary to fund research and development. They would be subjected to more competition from the market as well and be virtually forced to lower their prices.