Governement intervention in Markets/Different kinds of healthcare systems Flashcards
What is laissez faire economics?
In a free market system, governments take the view that markets are best suited to allocating scarce resources and allow the market forces of supply and demand to set prices.
The role of the government is to protect property rights, uphold the rule of law and maintain the value of the currency.
Competitive markets often deliver improvements in allocative, productive and dynamic efficiency
But there are occasions when they fail – providing a case for intervention.
What are the main reasons for government intervention in markets?
The main reasons for policy intervention by the government are:
To correct for market failures
To achieve a more equitable distribution of income and wealth
To improve the performance of the economy
Type of Market Failure: Factor immobility
Consequence of Market Failure -
Structural unemployment
Example of Government Intervention -
State investment in education and training
Type of Market Failure -
Public goods
Consequence of Market Failure -
Failure of market to provide pure public goods, free rider problem
Example of Government Intervention -
Government funded public goods for collective consumption
Type of Market Failure -
Demerit goods
Consequence of Market Failure -
Over consumption of products with negative externalities
Example of Government Intervention -
Information campaigns, minimum age for consumption
Type of Market Failure -
Merit goods
Consequence of Market Failure -
Under consumption of products with positive externalities
Example of Government Intervention -
Subsidies, information on private benefits
Type of Market Failure -
Imperfect information
Consequence of Market Failure-
Damaging consequences for consumers from poor choices
Example of Government Intervention -
Statutory information / labeling
Type of Market Failure -
High relative poverty
Consequence of Market Failure -
Low income families suffer social exclusion, negative externalities
Example of Government Intervention -
Taxation and welfare to redistribute income and wealth
Type of Market Failure -
Monopoly power in a market
Consequence of Market Failure -
Higher prices for consumers causes loss of allocative efficiency
Example of Government Intervention -
Competition policy, measures to encourage new firms into a market
Is healthcare in the uk devolved?
As in Scandinavia, healthcare in the United Kingdom is a devolved matter, meaning England, Northern Ireland, Scotland and Wales each have their own systems of private and publicly funded healthcare, generally referred to as the National Health Service (NHS).
With largely public or government owned providers, this also fits into the ‘Beveridge Model’ of health care systems, sometimes considered to be single-payer, although unlike Scandinavia, there is a more significant role for both private coverage and providers.
Who was William Beveridge?
William Beveridge, the daring social reformer who designed Britain’s National Health Service. In his system, health care is provided and financed by the government through tax payments, just like the police force or the public library.
What is the beveridge model?
Many, but not all, hospitals and clinics are owned by the government; some doctors are government employees, but there are also private doctors who collect their fees from the government. In Britain, you never get a doctor bill. These systems tend to have low costs per capita, because the government, as the sole payer, controls what doctors can do and what they can charge.
What countries use the Beveridge Model?
Countries using the Beveridge plan or variations on it include its birthplace Great Britain, Spain, most of Scandinavia and New Zealand. Hong Kong still has its own Beveridge-style health care, because the populace simply refused to give it up when the Chinese took over that former British colony in 1997. Cuba represents the extreme application of the Beveridge approach; it is probably the world’s purest example of total government control.
What is the Bismarck model?
Named for the Prussian Chancellor Otto von Bismarck, who invented the welfare state as part of the unification of Germany in the 19th century. Despite its European heritage, this system of providing health care would look fairly familiar to Americans. It uses an insurance system — the insurers are called “sickness funds” — usually financed jointly by employers and employees through payroll deduction.
In what way does the Bismarck model differ from the U.S. insurance industry?
Bismarck-type health insurance plans have to cover everybody, and they don’t make a profit. Doctors and hospitals tend to be private in Bismarck countries; Japan has more private hospitals than the U.S. Although this is a multi-payer model — Germany has about 240 different funds — tight regulation gives government much of the cost-control clout that the single-payer Beveridge Model provides.
What countries use the Bismarkc model ?
The Bismarck model is found in Germany, of course, and France, Belgium, the Netherlands, Japan, Switzerland, and, to a degree, in Latin America.
what is the National Health insurance model?
This system has elements of both Beveridge and Bismarck. It uses private-sector providers, but payment comes from a government-run insurance program that every citizen pays into. Since there’s no need for marketing, no financial motive to deny claims and no profit, these universal insurance programs tend to be cheaper and much simpler administratively than American-style for-profit insurance.
Name some advantages of the national health insurance model.
The single payer tends to have considerable market power to negotiate for lower prices; Canada’s system, for example, has negotiated such low prices from pharmaceutical companies that Americans have spurned their own drug stores to buy pills north of the border. National Health Insurance plans also control costs by limiting the medical services they will pay for, or by making patients wait to be treated.
What countries use the national health insurance model?
The classic NHI system is found in Canada, but some newly industrialized countries — Taiwan and South Korea, for example — have also adopted the NHI model.
What is the out-of-pocket model?
Only the developed, industrialized countries — perhaps 40 of the world’s 200 countries — have established health care systems. Most of the nations on the planet are too poor and too disorganized to provide any kind of mass medical care. The basic rule in such countries is that the rich get medical care; the poor stay sick or die.
Why is the US system of particular interest?
The United States is unlike every other country because it maintains so many separate systems for separate classes of people. All the other countries have settled on one model for everybody. This is much simpler than the U.S. system; it’s fairer and cheaper, too.
Arguments for a minimum price for alcohol
it makes people pay the social cost of alcohol.
The Institute for Fiscal Studies, suggests that approximately 70% of shop-bought alcohol is priced below the 50p a unit. (Economist)
It is not a panacea, but a higher minimum price can be a factor in dealing with the very high social costs of alcohol abuse.
It can particularly discourage young drinkers from overconsumption
It will have a positive effect on the more ‘upmarket’ alcohol brands and pubs. People may go out to a pub and spend there, rather than ‘preloading’ on cheap alcohol from supermarkets.
Arguments against minimum price for alcohol
Some politicians have argued it would reduce living standards for those on low incomes. The minimum price is highly regressive and will affect those on low incomes the most. There is already a substantial tax on alcohol.
A higher minimum price could encourage people to switch to illicit ‘home brews’ and replacement alcohol. This is potentially dangerous as it leaves people exposed to alcohol of an unknown quantity and composition.
It will be an easy way for supermarkets and firms to increase their profits. Demand for alcohol is price inelastic – if all firms are forced to increase their prices, it will be an easy way to increase prices and profits
The government would be better off just increasing the tax on alcohol so that society pockets the extra cost rather than supermarkets and alcohol producers. Then the tax revenue raised could be used to fund the cost of treating alcohol-related diseases.
Economics of minimum price
A simple supply and demand model suggests a minimum price above the equilibrium could cause a surplus (supply greater than demand). This did occur with the minimum prices of the Common Agricultural Policy (CAP).
