Health Care Is Differentâ€”Thatâ€™s Why
Victor R. Fuchs, PhD
HEALTH CARE EXPENDITURES IN THE UNITED STATES
have been increasing much more rapidly than
the rest of the economy over the past 30 years.
The average gap, 2.8% per annum, results in
health careâ€™s share of the economy doubling every 26
years.1 Why does this matter? Would it matter if expenditures for personal computers were increasing 2.8% per
annum more rapidly than the rest of the economy? The
appropriate response would be, â€œSo what?â€ Concern about
health care expenditures is often attributed to the large
role of these expenditures in the federal budget and the
effect on the deficit.2 But that is not the whole story. A dollar spent on health care is not a priori more fiscally toxic
than a dollar spent on transportation or education or any
other item in the government budget. Moreover, health
expenditures in the private sector have also been increasing rapidly. What matters most are the characteristics that
distinguish health care from other goods and services:
great uncertainty about an individualâ€™s need for care, the
essential nature of some care, and the ambiguous role of
competition. These characteristics help explain the distinctive institutional features of health care and their consequences.
Uncertainty About an Individualâ€™s Need for Care
In any year, the incidence of illness is distributed very
unevenly among the population. Many millions of individuals use no health care, while a small proportion, about
1 in 20, account for about half of total health care utilization.3 Much of an individualâ€™s high utilization is unforeseen: the sudden myocardial infarction, the diagnosis of
cancer, the nearly fatal automobile crash, and the like.
Individual demand for most goods and services is much
more predictable. Because individuals are at risk of generating health care bills far in excess of their ability to pay
from income or savings, there is widespread demand for
health insurance. In many countries this demand is met by
publicly supplied insurance; in the United States private
insurance (subsidized by government) is still the primary
mode, but public insurance such as Medicare and Medicaid and direct public provision of services through the Veterans Health Administration, county hospitals, and other
government agencies account for almost half the total.4
Insured patients tend to â€œoverconsumeâ€ health care relative to other goods and services.5 If there were third-party
payments for personal computers, expenditures for PCs
would surely be greater than at present. Even if consumers
did not purchase more computers, many would be
tempted to purchase top-of-the-line models. To offset
overutilization of health care, a variety of constraints are
attempted, including fixed budgets for hospitals and physicians, quantitative limits on supplies of personnel and
facilities, and alternative payment mechanisms such as
Essentiality of Care
Some health care can make the difference between life and
death or between a full functioning life and one of pain and
disability. Given the essential nature of some care, no developed country permits access to be determined solely by
individual ability to pay. Every developed country engages
in some redistribution; the poor who are ill obtain care paid
for by others. Personal computers are not viewed the same
way; if access to a computer were regarded as essential, computers would be subsidized for poor individuals. To the extent that government redistributes health care, it must increase revenues through taxes (or similar measures), which
have a negative effect on the overall economy by discouraging work, saving, and investment.6 Some redistribution
is sought through the private sector such as when insurance companies are required to charge healthy persons and
sick persons the same premiums.
The day after passage of the Patient Protection and
Affordable Care Act of 2010 (ie, â€œObamacareâ€), Leonhardt7 noted that the most important result of this act is to
redistribute care to the poor and sick with the wealthier
and healthier bearing the cost. To accomplish redistribution equitably and prevent â€œfree riders,â€ every country uses
some form of compulsory participation. Many do so
through tax-supported universal coverage; the Obama
reform does it through a combination of mandates, taxes,
income-tested subsidies, and regulation of private insurance.
Author Affiliation: National Bureau of Economic Research, Stanford, California.
Corresponding Author: Victor R. Fuchs, PhD, National Bureau of Economic Research, 30 Alta Rd, Stanford, CA 94305-8006 ([email protected]).
Â©2010 American Medical Association. All rights reserved. (Reprinted) JAMA, May 12, 2010â€”Vol 303, No. 18 1859
Downloaded From: http://jamanetwork.com/pdfaccess.ashx?url=/data/journals/jama/4511/ by a Hofstra University User on 07/13/2017
The Ambiguous Role of Competition
in Health Care
Expenditures for most goods and services are not of concern for public policy, in part because they are the result of
interaction between supply and demand in competitive
markets. Given sufficient competition, theoretical and
empirical research concludes that a commodityâ€™s price and
quantity reflect its real cost to producers and its real value
to buyers. That level of competition does not exist in many
health care markets. Furthermore, in numerous situations
it is doubtful whether society would benefit if it did.
For instance, economies of scale prevail in hospital care.
How many hospitals are needed in a community of 100 000
population for greatest efficiency? Probably only one with
about 225 beds. Even in a city of 1 million, where several
hospitals could efficiently compete in providing ordinary
acute care, quality of care would be higher and costs lower
if neonatal intensive care, open heart surgery, organ transplantation, and other specialized services were each provided in a single hospital. The production of personal computers also benefits from economies of scale, but because
the relevant market is national rather than local, it can sustain a sufficient number of producers to keep the market
Another example is the provision of physician specialty
care, such as urology, neurology, or interventionist radiology. Even if a community were large enough to require the
services of several physicians in each specialty, patients would
probably be better and more efficiently served if physicians
worked cooperativelyâ€”exchanging information, covering
patients for one another, sharing specialized technology and
assistantsâ€”than if each physician was an â€œindependent firmâ€
competing with colleagues. But without competition, it is
not possible to automatically assume that the price and quantity (and therefore, the level of expenditures) is socially appropriate.
The conclusion that a competitive market for a good or
service will result in an appropriate level of expenditures
usually assumes informed consumers. A special problem
for competition in health care is that consumers are frequently poorly informed. In most cases a patient has
symptomsâ€”such as fever, pain, or headacheâ€”but does
not know the cause or what treatment if any should be
undertaken. Given the complexity of the current medical
diagnostic and treatment options available, even welltrained physicians must make decisions while facing considerable uncertainty. Which of 4 different imaging
devices is the most appropriate for this patient? If the
diagnosis is hypertension, which of the numerous different drugs should be prescribed? Is hospitalization
needed, or can the patient be treated on an outpatient
basis? Which stent is more appropriate, bare metal or
drug-eluting? The notion that the typical patient, even
with a computer and an electronic medical record, would
be able to make these decisions correctly gives too much
credence to â€œfree market ideologyâ€ over the complexity
of health care. The fact that competition cannot be relied
on to result in a socially appropriate level of expenditures
for much of health care explains the widespread presence
of government regulation and self-regulation through
professional ethics.8 Neither solution is perfect, but competition alone is not a realistic option for many health
In summary, the distinguishing characteristics of health
care and the institutional features they induce are a more
fundamental source of concern about health care expenditures (private as well as public) than their role in the federal budget.
Financial Disclosures: Dr Fuchs reported receiving financial support for his research from the Robert Wood Johnson Foundation and Blue Shield of California
1. The long-term outlook for health care spending: a Congressional Budget
Office study [November 2007]. The Congress of the United States.
http://www.cbo.gov/ftpdocs/87xx/doc8758/11-13-LT-Health.pdf. Accessed April
2. Chernew ME, Baicker K, Hsu J. The specter of financial armageddon: health
care and federal debt in the United States. N Engl J Med. 2010;362(13):1166-
3. Cohen SB, Rohde F. The concentration in health expenditures over a two year
time interval: estimates for the US population, 2005-2006. [statistical brief No.
244]. April 2009. Agency for Healthcare Research and Quality. http://www.meps
.ahrq.gov/mepsweb/data_files/publications/st244/stat244.pdf. Accessed April 20,
4. National health expenditure data. Centers for Medicare & Medicaid Services. http://www.cms.gov/NationalHealthExpendData/02
_NationalHealthAccountsHistorical.asp. Accessed April 20, 2010.
5. Newhouse JP. Free for All? Lessons From the RAND Health Insurance Experiment.
Cambridge, MA: Harvard University Press; 1993.
6. Auerbach AJ, Hines JR Jr. Chapter 21: taxation and economic efficiency. In: Auerbach AJ, Feldstein M, eds. Handbook of Public Economics. New York, NY: NorthHolland; 2002:1347-1421.
7. Leonhardt D. In health bill, Obama attacks wealth inequality. New York Times.
March 23, 2010:A1.
8. Arrow KJ. Uncertainty and the welfare economics of medical care. Am Econ
1860 JAMA, May 12, 2010â€”Vol 303, No. 18 (Reprinted) Â©2010 American Medical Association. All rights reserved.
Downloaded From: http://jamanetwork.com/pdfaccess.ashx?url=/data/journals/jama/4511/ by a Hofstra University User on 07/13/2017
Get Professional Assignment Help Cheaply
Are you busy and do not have time to handle your assignment? Are you scared that your paper will not make the grade? Do you have responsibilities that may hinder you from turning in your assignment on time? Are you tired and can barely handle your assignment? Are your grades inconsistent?
Whichever your reason is, it is valid! You can get professional academic help from our service at affordable rates. We have a team of professional academic writers who can handle all your assignments.
Why Choose Our Academic Writing Service?
- Plagiarism free papers
- Timely delivery
- Any deadline
- Skilled, Experienced Native English Writers
- Subject-relevant academic writer
- Adherence to paper instructions
- Ability to tackle bulk assignments
- Reasonable prices
- 24/7 Customer Support
- Get superb grades consistently
Online Academic Help With Different Subjects
Students barely have time to read. We got you! Have your literature essay or book review written without having the hassle of reading the book. You can get your literature paper custom-written for you by our literature specialists.
Do you struggle with finance? No need to torture yourself if finance is not your cup of tea. You can order your finance paper from our academic writing service and get 100% original work from competent finance experts.
While psychology may be an interesting subject, you may lack sufficient time to handle your assignments. Don’t despair; by using our academic writing service, you can be assured of perfect grades. Moreover, your grades will be consistent.
Engineering is quite a demanding subject. Students face a lot of pressure and barely have enough time to do what they love to do. Our academic writing service got you covered! Our engineering specialists follow the paper instructions and ensure timely delivery of the paper.
In the nursing course, you may have difficulties with literature reviews, annotated bibliographies, critical essays, and other assignments. Our nursing assignment writers will offer you professional nursing paper help at low prices.
Truth be told, sociology papers can be quite exhausting. Our academic writing service relieves you of fatigue, pressure, and stress. You can relax and have peace of mind as our academic writers handle your sociology assignment.
We take pride in having some of the best business writers in the industry. Our business writers have a lot of experience in the field. They are reliable, and you can be assured of a high-grade paper. They are able to handle business papers of any subject, length, deadline, and difficulty!
We boast of having some of the most experienced statistics experts in the industry. Our statistics experts have diverse skills, expertise, and knowledge to handle any kind of assignment. They have access to all kinds of software to get your assignment done.
Writing a law essay may prove to be an insurmountable obstacle, especially when you need to know the peculiarities of the legislative framework. Take advantage of our top-notch law specialists and get superb grades and 100% satisfaction.
What discipline/subjects do you deal in?
We have highlighted some of the most popular subjects we handle above. Those are just a tip of the iceberg. We deal in all academic disciplines since our writers are as diverse. They have been drawn from across all disciplines, and orders are assigned to those writers believed to be the best in the field. In a nutshell, there is no task we cannot handle; all you need to do is place your order with us. As long as your instructions are clear, just trust we shall deliver irrespective of the discipline.
Are your writers competent enough to handle my paper?
Our essay writers are graduates with bachelor's, masters, Ph.D., and doctorate degrees in various subjects. The minimum requirement to be an essay writer with our essay writing service is to have a college degree. All our academic writers have a minimum of two years of academic writing. We have a stringent recruitment process to ensure that we get only the most competent essay writers in the industry. We also ensure that the writers are handsomely compensated for their value. The majority of our writers are native English speakers. As such, the fluency of language and grammar is impeccable.
What if I don’t like the paper?
There is a very low likelihood that you won’t like the paper.
- When assigning your order, we match the paper’s discipline with the writer’s field/specialization. Since all our writers are graduates, we match the paper’s subject with the field the writer studied. For instance, if it’s a nursing paper, only a nursing graduate and writer will handle it. Furthermore, all our writers have academic writing experience and top-notch research skills.
- We have a quality assurance that reviews the paper before it gets to you. As such, we ensure that you get a paper that meets the required standard and will most definitely make the grade.
In the event that you don’t like your paper:
- The writer will revise the paper up to your pleasing. You have unlimited revisions. You simply need to highlight what specifically you don’t like about the paper, and the writer will make the amendments. The paper will be revised until you are satisfied. Revisions are free of charge
- We will have a different writer write the paper from scratch.
- Last resort, if the above does not work, we will refund your money.
Will the professor find out I didn’t write the paper myself?
Not at all. All papers are written from scratch. There is no way your tutor or instructor will realize that you did not write the paper yourself. In fact, we recommend using our assignment help services for consistent results.
What if the paper is plagiarized?
We check all papers for plagiarism before we submit them. We use powerful plagiarism checking software such as SafeAssign, LopesWrite, and Turnitin. We also upload the plagiarism report so that you can review it. We understand that plagiarism is academic suicide. We would not take the risk of submitting plagiarized work and jeopardize your academic journey. Furthermore, we do not sell or use prewritten papers, and each paper is written from scratch.
When will I get my paper?
You determine when you get the paper by setting the deadline when placing the order. All papers are delivered within the deadline. We are well aware that we operate in a time-sensitive industry. As such, we have laid out strategies to ensure that the client receives the paper on time and they never miss the deadline. We understand that papers that are submitted late have some points deducted. We do not want you to miss any points due to late submission. We work on beating deadlines by huge margins in order to ensure that you have ample time to review the paper before you submit it.
Will anyone find out that I used your services?
We have a privacy and confidentiality policy that guides our work. We NEVER share any customer information with third parties. Noone will ever know that you used our assignment help services. It’s only between you and us. We are bound by our policies to protect the customer’s identity and information. All your information, such as your names, phone number, email, order information, and so on, are protected. We have robust security systems that ensure that your data is protected. Hacking our systems is close to impossible, and it has never happened.
How our Assignment Help Service Works
1. Place an order
You fill all the paper instructions in the order form. Make sure you include all the helpful materials so that our academic writers can deliver the perfect paper. It will also help to eliminate unnecessary revisions.
2. Pay for the order
Proceed to pay for the paper so that it can be assigned to one of our expert academic writers. The paper subject is matched with the writer’s area of specialization.
3. Track the progress
You communicate with the writer and know about the progress of the paper. The client can ask the writer for drafts of the paper. The client can upload extra material and include additional instructions from the lecturer. Receive a paper.
4. Download the paper
The paper is sent to your email and uploaded to your personal account. You also get a plagiarism report attached to your paper.