Key health care policy choices Every policy choice involves a tradeoff between health,wealth and equity(otherwise it would be obvious and probably implemented already). The policy options that follow are thus presented as answers to the three broad questions that any national health care system must answer: How should insurance markets work? How should moral hazard be controlled in public insurance? How should health care provider markets be regulated? Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Key health care policy choices • Every policy choice involves a tradeoff between health, wealth and equity (otherwise it would be obvious and probably implemented already). • The policy options that follow are thus presented as answers to the three broad questions that any national health care system must answer: – How should insurance markets work? – How should moral hazard be controlled in public insurance? – How should health care provider markets be regulated?
HOW SHOULD HEALTH INSURANCE MARKETS WORK? Ch 15 The health policy conundrum
Ch 15 | The health policy conundrum HOW SHOULD HEALTH INSURANCE MARKETS WORK?
How should health insurance markets work? Several options: Completely private insurance markets Universal public insurance Compulsory insurance Employer-sponsored insurance Means-tested health insurance These are not mutually exclusive,and many nations employ several at once Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics How should health insurance markets work? Several options: Completely private insurance markets Universal public insurance Compulsory insurance Employer-sponsored insurance Means-tested health insurance These are not mutually exclusive, and many nations employ several at once
Option 1:Private insurance markets The Rothschild-Stiglitz model model predicts that in private markets,only the frail customers are insured fully and much of the population is underinsured. Under certain conditions,a completely private market can unravel completely,leading to uninsurance for everyone. This option minimizes government involvement,but it results in maximal adverse selection. Taxpayers are happy with low tax bills,but many citizens cannot buy full insurance. Instead they fret about the medical bills they might rack up if they become ill or injured. Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Option 1: Private insurance markets The Rothschild-Stiglitz model model predicts that in private markets, only the frail customers are insured fully and much of the population is underinsured. • Under certain conditions, a completely private market can unravel completely, leading to uninsurance for everyone. This option minimizes government involvement, but it results in maximal adverse selection. Taxpayers are happy with low tax bills, but many citizens cannot buy full insurance. – Instead they fret about the medical bills they might rack up if they become ill or injured
Option 2:Universal public insurance The government provides insurance to all citizens, and finances it with taxes. This policy option is appealing because it side- steps adverse selection and ends uninsurance. It also furthers the goal of equity because the poor pay little or nothing for coverage. However,with universal public insurance,steps must be taken to control moral hazard,which can explode the government budget if left unchecked. Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Option 2: Universal public insurance The government provides insurance to all citizens, and finances it with taxes. This policy option is appealing because it sidesteps adverse selection and ends uninsurance. It also furthers the goal of equity because the poor pay little or nothing for coverage. However, with universal public insurance, steps must be taken to control moral hazard, which can explode the government budget if left unchecked