The Exceptional Nature of Health Care as an Economic Good

Health care reform proposals often differ on the appropriate balance of free market incentives versus government involvement. Often neglected is a basic question: is health care, desirable and scarce, similar to other economic goods? This perspective describes eight characteristics inherent in health care that make it exceptional as an economic good, not only in the USA but also in other rich countries. These are the following: disparity in knowledge between patient and provider; disparity in negotiating power; poorly defined "goods"; insurers acting as purchasers for patients; skewed concentration of expenses across individuals; the magnitude of costs and consequences; limits on the supply of health professionals; and an unavoidable moral dimension. The resulting complexity creates many opportunities to take financial advantage of patients. Even without taking advantage, market forces have predictable consequences, such as denying care to those unable to pay. While excesses traditionally have been constrained by professional ethics, concerns are growing that monetizing medicine has gone too far. Addressing these concerns with greater government involvement brings its own issues, however. Intervention can be inflexible, political, legalistic, costly, and one size fits none. Market forces can also work well when products and services are well defined, information sources are good, purchasers have time to choose carefully, and barriers to entry are modest. Health policy is hard because the right balance between free markets and government involvement is elusive. Anyone advocating changes to markets - one way or the other - must take into account the exceptional nature of health care as an economic good.