Healthcare Economics Question One

The government intervenes in the provision of healthcare, in an attempt
to achieve efficiency and equity in the provision of health care. The
interventions involve the following policies: expenditure, regulation
and taxation. All these policies have economic effects on the provision
of health care. In the expenditure policy, the government spends part of
its revenues in the health industry either directly or indirectly. For
example, the government may provide a subsidy in training physicians in
order to increase the supply of physicians, who will provide health care
services. Such a subsidy will create market imperfection in the
provision of health care since there will be an increase in the supply
side. This is likely to lower the quality of health care since there
will be no incentive to work as the number of physicians will be
overwhelming physicians are likely to be paid less for their services
since there will be more workers available to provide health care
services (Lazar et al, 2004).
Regulation policy is also another form of government intervention that
the government may use in the health care provision. The government may
lower the cost of licensing physicians in order to lower the monopoly
powers in the health sector. This will have an effect of lowering the
cost of providing health care and at the same time lower the quality of
health care provided because of increased competition. On the other
hand, the government can raise the cost of licensing physicians in order
to limit the number of practitioners in the health sector (Lazar et al,
2004). This increases the cost of providing health services and improves
the quality of health care. The other form of intervention is taxation
policy. The government may exempt individuals for employer paid health
insurance, which increases demand for health insurance. This benefits
individuals receiving higher incomes at the expense of low income
earners. Hence, it is not efficient.
Question Two
Provision of subsidies by the government for the training of nurse
midwives constitutes a supportive intervention by the government to the
low income earners. The initiative is good since it is likely to
increase the number of midwives that can offer the service. The number
of individuals requiring the services of a midwife may be on the
increase, but providing a subsidy for the training of midwives will help
in matching the demand (Morris et al, 2007). On the other hand, offering
of subsidy in the training of nurse midwives will help in the
accessibility of the services since the trained midwives can be
distributed to areas with scarcity of midwives.
A state mandate requiring all health insurers to include chiropractic
services in their benefits is an expensive requirement since
chiropractor services may be exceedingly expensive (Morris et al, 2007).
However, lack of this mandate may increase the cost of health care and
premiums of the health insurance. In case an individual having a medical
problem seeks services without having the necessary health care, he may
become sicker and require more expensive health services in the future.
Hence, the mandate is expensive in the short run, but beneficial in the
long run. Thus, it is a good intervention (Lazar et al, 2004).
An inclusion of psychologists as a covered provider under Medicare is
not a good decision. This is because the decision is likely to increase
the government expenditures while the service is not a necessity. Very
few individuals will be in need of the service, which implies the
government will be wasting resources in the provision of Medicare.
Lazar, H., St-Hilaire, F., Institute for Research on Public Policy., &
Queen`s University (Kingston, Ont.). (2004). Money, politics and health
care: Reconstructing the federal-provincial partnership. Montreal:
Institute for Research on Public Policy.
Morris, S., Devlin, N., & Parkin, D. (2007). Economic analysis in health
care. Chichester: Wiley.
Health Policy and the Legislative Marketplace. Delmar: Cengage Learning.
The Role of Government in Health and Medical care. Delmar: Cengage

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