Healthcare Market Failure Essay

2979 Words6 Pages

Introduction
In economics, there are certain conditions which, theoretically, must be met for a perfectly competitive market to operate. In reality however, these conditions are never realisable. This is also true for the healthcare market. Conditions for the delivery of healthcare are not always optimal owing to many reasons; hence failure in the delivery of health care is prevalent. This work aims to discuss some of the reasons why there is market failure (monopoly, externalities, and sub-optimal investment in the delivery of public goods, asymmetry of information, moral hazard, and adverse selection) in the healthcare market. It also discusses some of the reason why the government may step in to minimize the effects of these failures. However, …show more content…

Government intervention in a market may not be sufficient enough, the government will want to provide a clinic for instance in a particular state based on political reasons and not for the sole purpose of fair distribution or equity, which the market may have failed to achieve. For that reason, government intervention may not always be efficient, political exigencies come to play.
Politicians normally do not act in public interest. They are normally driven by their own interest and political ambitions. They promote themselves with the motive of getting re-elected into office again so to win power, they indulge in things like building up to five clinics in one local government for instance while other places may have one which may not be able to cater for the population there. This is a major concern in Africa and most part of the world.
Ironically, government intervention may in itself create monopolies which as we have noted earlier affect the efficiency of the market. For instance, government can award subsidies to firms or hospital which may protect inefficient firms against competition and thus create barriers to entry for new firms/hospital because prices are kept ‘artificially’ low. Without competition, efficiency objectives may not be …show more content…

It does not meet all necessary or sufficient conditions for the ideal or perfect market. As a result failures are experienced thereby necessitating government intervention. Since markets do fail, it is necessary that government intervenes to correct some of these inefficiencies and move the market to equilibrium. Government needs to do this because as the popular saying goes ‘health is wealth’. Wealth cannot be created by an unhealthy population. To achieve its aim, government employs various means including, compulsory tax payment to the government, subsidies by government to firms to keep costs low and the transfer payments by government without anything in return. However, government intervention to resolve these failures can also create further inefficiencies to achieve a socially efficient allocation of resources due to the behavior of bureaucrats looking for short term solutions to the

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