Government Intervention in Health Care

Topics: Health care, Health economics, Health insurance Pages: 6 (1864 words) Published: January 30, 2014


Government Intervention in Health Care Increases Cost and Decreases Quality

Government intervention is a regulatory action taken by a government in order to affect or interfere with decisions made by individuals, groups, or organizations regarding social and economic matters. Government intervention sometimes is necessary to correct situations where the market fails to allocate resources efficiently or distribute income fairly. The reason why government usually intervenes in the market economy is to provide public goods, correcting externalities, redistributing income, and regulating the marketplace. Government intervention in health care has been a major debate in the United States. There have been over 90 years of government interference that caused the debate and controversy we have today. Government intervention in the health care system was and still is being blamed for the rapid rise in health care cost. There are a few historical events of government intervention in health care that help understand where we went wrong.

Health care costs for a family of four have doubled in less than a decade from $9,235 in 2002 to over $19,000 in 2011. The graph above is showing how the cost in health care is continually rising from 2002 to 2011. It started in 1932 when Blue cross was established. The American medical association and the American heart association lobbied for their exemption from insurance regulations and taxes which is an unfair competition. A 3rd party reimbursement procedure was established and that caused inflation in the health care cost. In 1965 Medicare passes. Federal government became the largest single purchaser of health care. Hospital spending doubled. Medicare and Medicaid are constantly spending government dollars. There is an increase in personal health care expenditures. The demand for service increased due to the fact that patients have no incentives to control costs. In 1973 Health Maintenance Organizations (HMO) Act was passed by congress to address the rising costs of health care. Instead of fixing the problem by removing the controls and incentives and restrictions, this required that all companies with employees of twenty five or more offer traditional plans also had to offer HMO plans. This is repealed in 1993. In the year 1992 Resource Based Relative Value Scale (RBRVS) is established. Creates relative value for doctors in family practice, internal medicine and obstetrics; while lowering fees for surgeons and radiologists. It also set a limit of the amount of money doctors would be able to charge above what Medicare allows. This skews the demand for different types of physicians while the government encourages students to become family practitioners and fewer to become surgeons which lead to shortages in certain areas of the medical industry. 2010 Obama care passes requiring insurance companies to cover every person regardless of pre-existing conditions also would require every person to have a certain amount of health care coverage. Obama care requires that all insurance plans cover preventive services and stops insurance companies from dropping you when you are sick, as well as offering a number of other reforms and protections for the patients. This will make the cost of service go up because people will now go to the doctors for unnecessary ailments and illnesses. This paper will be discussing the two major reasons why government intervention increases health care costs in the United States and will touch up on how it also decreases the quality of care. The major reasons are regulations and emergency rooms. Regulations have the potential to change price quantity or quality of medical service and can thereby affect or promote efficiency of resources available. This type of regulation is justified because market imperfections exist that cause inappropriate allocations of society’s resources. Government regulations effects...
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