Should the government or the private sector provide access to healthcare?
I would prefer a mixed system, and this is why:
The question could apply to the provision of health insurance and/or to health services. Let us first assume health insurance.
Without going into the math, there is a line of reasoning as to why unregulated private health insurance would not cover an entire population.
- Given a number of private firms providing health insurance, they will be competing and attempting to maximize profits. Profits derive from the premia (or deductibles, or co-payments, etc.) which they receive from their customers, minus the total amount in claims which these firms pay out to individuals.
- As firms compete there will be, roughly speaking, a limit on how much they can charge in premia (for various policies) without having customers defect to other insurance companies. Which brings our attention to costs.
- To limit the total claims payable firms will try to select less risky individuals from a population. A person who, by family history, is clearly prone to cancer or heart attacks will not be desirable, and firms will avoid taking on that risk by charging much higher premia to those who they know to be risky
- No one firm will want to have a greater proportion of risky customers than the others. This will make it difficult for those who are at higher health risk (such as the elderly and chronically ill), who arguably need the insurance more, to get insurance.
Furthermore, no one has perfect information about just how risky a person’s health is. Your healthiness will only be revealed over time, and this will make it very difficult to have any long-term insurance contracts; companies will not want to sign on a 20 year old, no matter how healthy-seeming, for 30 years. By the time they are 45 that person may have developed a health problem.
Then the company would be receiving premia acceptable to a healthy 20 year old, in exchange for covering the costs of an ill 45 year old – a fall in profits.
For the above reasons, countries which have private health insurance (such as the Netherlands) regulate their insurance markets. Although various private firms provide insurance policies, the government may do one or many of the below;
- mandate that insurance companies have a percentage of risky customers in their portfolio (in proportion to the population)
- subsidize the premia of high risk individuals
- provide a fund which will compensate insurance companies with a higher number of risky people in their portfolio
- set the cost of a basic insurance package
The list goes on; there are ways to make private health insurance work, given government regulation. And as insurance would still be private, when people must pay more for more coverage they will have incentives to pursue healthier behaviour.
Public health insurance is a shorter story. By receiving taxes, and then insuring a population out of those funds, public insurance does two things. There is the transfer of resources from the healthy to the sick, which is present in all health insurance systems, and then there is a transfer from the wealthy to the poor. Even if the poor pay as much healthcare taxes (which is not realistic; most healthcare taxes are progressive), they will likely receive more healthcare out of the system.
Low income is associated with poorer health. Public insurance is preferred in countries where they wish to ensure that poorer individuals (and high health risk individuals), who likely need healthcare more, can certainly afford it.
However, individuals cannot customize their insurance coverage according to their needs/desires. Also, guaranteed coverage will not give individuals the incentive to make healthier, preventative choices.
Now to consider the provision of health services.
Again, let us assume private provision of health services first. Whether the government pays for/subsidizes individuals’ use of private health services, or whether individuals pay for their use of health services,
- private provision implies competition – this will almost certainly lead to greater efficiency in the use of resources
- there will be a variety of health services available at different prices
If individuals pay for private health services,
- some will not be able to afford services
- some will be able to purchase higher quality services than would be offered under a public system
If the government pays for private health services,
- it will be difficult to control costs. The government will be reimbursing/partially reimbursing providers, while individuals use whichever private services they choose/can afford
Now assume public provision of health services. This will necessarily be publicly funded. The services provided will be available to all the public at approximately the same quality standard.
- there will be no competition – this implies lower efficiency, the “run-away-costs” that you can sometimes see in government
- there will be rationing – there are no prices in public health care, so this is the restriction to use
- there may be a lower quality of service, due to lower efficiency with a given amount of funding
- some people may overuse the “free” services
Overall, public provision implies longer waiting lists and possibly lower quality services than private provision; however, services are provided equally and costs can be controlled directly by the government.
In conclusion, completely private healthcare cannot function well.
However, with government regulation private elements (particularly in provision) may bring greater efficiency to a healthcare system, while remaining more accessible to the public.
Completely public health care can function well, but will have efficiency (cost) drawbacks in favour of greater equity.
In response to this prompt: my preference would be for a mixed public-private system. I would like the security of comprehensive public health insurance, with a provision for supplementing/opting-out with private insurance, as well as the greater efficiency of mixed public/private provision.
As a Canadian, I’d like to see public health insurance standardized across the country, and expanded to include areas we currently don’t cover (at least in Ontario), such as dental and eye care.
The drawbacks to my choice are:
- limited customization of insurance coverage
- need for construction of economically viable opt-out/supplementation
- partial incentive toward healthy choices, given viable opt-out/supplementation
- initial friction between public and private providers
- the political backlash (in Canada) to any private healthcare provision. The wealthy will likely opt-out or supplement, and even as this eases the burden on public services it will mean they get better service than low-income individuals