Healthcare Economics

Question 1

What does Mankiw say about why healthcare is hard to regulate?

Answer 1

• Bigger Externalities than other markets
• Asymmetric Information- Prices based on population-level information whereas choices are based on private information
• Healthcare is tough to know when you’ll use it
• Cannot try out healthcare in advance

Question 2

What does Cochrane say about why healthcare isn’t hard to regulate?

Answer 2

• Other markets have under-funding and externalities (not healthcare specific)
• Professionals are relied upon in different professions

Question 3

What are the 4 types of healthcare systems? Why can the US employ a different one?

Answer 3

• Beveridge system (UK)- ‘free at the point of use’
• Bismarck system (France, Germany)- ‘Private Sector Provision’
• NHI Model (Canada, South Korea)- ‘Private Sector but paid by Government’
• Out of Pocket System (Congo, Nicaragua)- ‘no real system’
• Due to the sheer size of the US, it can employ a mixture of all 4 systems depending on your strata of society
• Cheaper, Easier and simpler to stick to one method