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Why Free Market Healthcare is Effective

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Are free market forces that follow supply and demand helpful to lower health care costs?

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Solution Summary

The discussion focuses on arguing for free market economy approaches to health care.

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Health care costs, like other operations costs in other industries, are subject to many external and internal forces. Free market forces can influence costs, either increasing or decreasing them, depending on many factors, including the laws of supply and demand One argument that suggests free market forces can drive costs down, is the example of the opposite, which is the Federal government involvement in health care. Government involved has served to drive costs of health care up first, through the development of restrictive Medicare and Medicaid guidelines, and through tax incentives. The adoption of the PPACA (Patient Protection and Affordable Care Act) 2010 is believed to serve as an additional external force, which will ultimately drive up costs (Capretta & Dayaratna, 2013). The assumptions of this theory are that health care organizations must meet Federal guidelines to receive reimbursement and that reimbursement rates are similar from one insurer to another.

Most Medicare and Medicaid recipients are enrolled in some type of managed care plan, where benefits and rates are essentially the same. Third party payers compete for patients, but not on costs and rates. Because reimbursement rates are limited and health care organizations must make up the differences ...

Solution provided by:
Beatrice Martino, MEd
Education
  • MEd, Jones International University
  • BSc, DeVry University
  • MPH, Walden University
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