Market mechanisms promote competition, efficiency, and consumer choice in healthcare.

Stephen, May 2020, “Why the Economic Aspects of Healthcare are not Unique,” NIH, https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7328842/

In considering the question of whether healthcare is a unique good with a market in need of a different means of understanding, a nuanced view is required because healthcare can be acknowledged as different in that it has its own important features and related challenges to solve. However, it is amenable to being analysed and managed with existing economic tech-niques and principles applied to other goods and industries. Pauly proposed that the question of difference can be considered in three parts. He stated that very few aspects of healthcare were not amenable to analysis with the usual tools, suggesting that the majority of healthcare’s characteristics can be treated the same or similar to other industries, and where those methods are not a perfect fit, they still work reasonably well. While the individual attributes of the healthcare market are not unique, Arrow said when “taken together, they establish a special place for healthcare in economic analysis”. However, Fuchs refuted this view, stating that “health care is, in many respects, similar to other goods and services. It is produced with resources that are scarce relative to human wants”. Healthcare exists as a market which can be divided into sectors or segments depending on the needs and preferences of consumers. This type of division is also found with other goods and shared characteristics between these markets are apparent. Thus, healthcare can be analysed using generic methods and tools that are applied across the entire market. Demarcating healthcare as unique inhibits the transfer of knowledge between healthcare and other sectors.

Conclusion

Despite claims to the contrary, healthcare and its production is not unique among other industries. Healthcare does not exist in a perfect market as no goods truly do. While healthcare has features that are particular to it, this is no different to other goods. Notable characteristics of healthcare that have been proposed as evidence for its distinctiveness are in fact common to various industries. Major elements such as agency, barriers to entry, externalities, information asymmetry and uncertainty can all be found in, for example, legal services. The aspects of adverse selection and moral hazard are outcomes of insurance rather than healthcare. The emotive argument of healthcare being a matter of life or death is both overstated and not exclusive as the aviation industry provides a product that carries the same risk with each flight. Change and complexity are characteristics of the modern workplace and are prevalent in ICT. Therefore, an approach considering the similarities of healthcare with other goods prevents it from unnecessarily being viewed in isolation from broader economic thought. The practical and policy outcomes of this view for Oman, or any country concerned about the growing demand for healthcare and the concomitant expenditure required to fund it, is to treat healthcare the same as other goods. Such a step would prevent unnecessary government intervention in the market in the form of price controls that can lead to over- or under-consumption. Instead, it is possible to rely on market mechanisms to improve competition, increase efficiency, decrease costs and offer consumer choice. Market mechanisms drive the production and distribution of other goods which are essential for life, such as food. Needy people can still be cared for because nothing about a market-based economy prohibits charity and philanthropy, and the combination of a market-based economy and charity is compatible with the views of Islamic society.