<< Chapter < Page Chapter >> Page >

U.s. health care in an international context

The United States is the only high-income country in the world where most health insurance is paid for and provided by private firms. Greater government involvement in the provision of health insurance is one possible way of addressing moral hazard and adverse selection problems.

The moral hazard problem with health insurance is that when people have insurance, they will demand higher quantities of health care. In the United States, private healthcare insurance tends to encourage an ever-greater demand for healthcare services, which healthcare providers are happy to fulfill. [link] shows that on a per-person basis, U.S. healthcare spending towers above other countries. It should be noted that while healthcare expenditures in the United States are far higher than healthcare expenditures in other countries, the health outcomes in the United States, as measured by life expectancy and lower rates of childhood mortality, tend to be lower. Health outcomes, however, may not be significantly affected by healthcare expenditures. Many studies have shown that a country’s health is more closely related to diet, exercise, and genetic factors than to healthcare expenditure. This fact further emphasizes that the United States is spending very large amounts on medical care with little obvious health gain.

In the U.S. health insurance market, the main way of solving this adverse selection problem is that health insurance is often sold through groups based on place of employment, or, under The Affordable Care Act, from a state government sponsored health exchange market. From an insurance company’s point of view, selling insurance through an employer mixes together a group of people—some with high risks of future health problems and some with lower risks—and thus reduces the insurance firm’s fear of attracting only those who have high risks. However, many small companies do not provide health insurance to their employees, and many lower-paying jobs do not include health insurance. Even after all U.S. government programs that provide health insurance for the elderly and the poor are taken into account, approximately 32 million Americans were without health insurance in 2015. While a government-controlled system can avoid the adverse selection problem entirely by providing at least basic health insurance for all, another option is to mandate that all Americans buy health insurance from some provider by preventing providers from denying individuals based on preexisting conditions. Indeed, this approach was adopted in the Patient Protection and Affordable Care Act, which is discussed later on in this chapter.

(Source: 2010 OECD study and World Fact Book)
A comparison of healthcare spending across select countries
Country Health Care Spending per Person (in 2008) Male Life Expectancy at Birth, in Years (in 2012) Female Life Expectancy at Birth, in Years (in 2012) Male Chance of Dying before Age 5, per 1,000 (in 2012) Female Chance of Dying before Age 5, per 1,000 (in 2012)
United States $7,538 76 81 8 7
Germany $3,737 78 83 4 4
France $3,696 78 85 4 4
Canada $4,079 79 84 6 5
United Kingdom $3,129 78 83 5 4

Questions & Answers

what is price surveillance?
Berry Reply
what is demand
Oluchi Reply
what are two classical macroeconomics and what're their theories say about their equations?
what is the formula for calculating elasticity
aza Reply
what is elasticity of demand?
Rita Reply
Causes of economic growth
pierre Reply
What is elasticity of demand
What are the causes of economic growth
economic growth, establishment of industry, encourage of investor's, farm productivities, creation of institutions, construction of good road etc
elasticity of demand can be said to be the responsiveness of demand to a change in prices
impact of collusion in the economy referring to inefficiencies illustrated by means of graph
nondumiso Reply
The Factor price will determine the choice of techniques to produce.Expantiate
what is elasticity of demand?
Etta Reply
state and explain two types of demand
Institution involved in money market
Gande Reply
what is Economics
Kwame Reply
Economic is the study of scarcity
Economics is the study of a lot of things. It is split up into two areas of study, Microeconomics and Macroeconomics. Microeconomics is the study of an individual's choices in the economy and Macroeconomics is the study of the economy as a whole.
Economics is a science that studies human scarcity
What is Equilibrium price?
Equilibrium is the market clearing price. The point at which quantity demanded equals quantity supplied. The point at which the supply and demand curves intersect.
Equilibrium price*
Refers to the study of how producers use limited resources to satisfy human unlimited wants
why is economics important
Derrick Reply
What will you do as a consumer if you are not at equilibrium?
chukwu Reply
am new I will like to know about the graph relationship
Gloria Reply
comment on WTO principle on trading system. trade without discrimination
Omben Reply
optimize z=f(x,y)=6x²-9x-3xy-7y+5y²
Alex Reply

Get the best Principles of economics course in your pocket!

Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Principles of economics' conversation and receive update notifications?