Deck 5: Understanding Health Insurance

Question 1

Consider each issue below and discuss whether you support Theory X, Theory Y, neither theory, or some combination of them.
Issue
Theory X
Theory Y
Your view about how an individual's health is determined
Whether a person is healthy or sick is determined randomly.
Whether a person is healthy or sick depends on lifestyle choices such as whether a person smokes, drinks, or wears a seatbelt.
Your view of medical practice
Medicine is a science, and experts will ultimately discover the best means for treating every illness.
Medicine is an art and there will never be one best way to treat every illness because illnesses are often patient-specific and because there will always be demand for lower-cost and less painful treatments.
Your view of medical care
Medical care is a unique commodity.
Medical care is similar to any other good or service.
Your view of the government's role in health care
Government regulations are necessary to protect this unique commodity, to control profiteering at the cost of patient care, to control the resources spent on health care, and to improve information sharing.
Government regulations are not necessary, technological advances and more services are desirable, and competition, not regulation, should drive the market.
Source: Gerald L. Musgrave. Health Economics Outlook: Two Theories of Health Economics. Bus Econ. 1995;30:7-13.

Answer 1

Issue 1:
Issue one deals with an individual's views on determining the health of a person.
The following is the theory supported by Mr. X:
Mr. X supports theory Y in the above issue. Theory Y states that the health of a person is judged by the way he leads his life. That is, his lifestyle is taken into account. It will be noted whether the person smokes or consumes alcohol. The habit of wearing seat belt is also taken into account.
Issue 2:
Issue two deals with an individual's views on medical practice.
The following is the theory supported by Mr. X:
Mr. X supports theory Y in the above issue. Theory Y states that medical practice is related to art. There are different ways of conducting tests. These preferences are based on the consumers. Some consumers prefer treatment to be less painful and they are ready to spend more. Such patients will get a treatment that is less painful. Hence, the treatments change accordingly to the preferences of the consumers.
Issue 3:
Issue three deals with an individual's view on medical care.
The following is the theory supported by Mr. X:
Mr. X supports theory Y in the above issue. Theory Y states that medical care is one of the other services such as consultancy services.
Issue 4:
Issue four deals with an individual's view on the role of government in health care.
The following is the theory supported by Mr. X:
Mr. X supports theory Y in the above issue. Theory Y states that the government regulations are not needed. The hospitals should make use of the advanced technologies that are available in the market.

Question 2

Some people argue that the government should not intervene in the case of a market failure because the government itself is inefficient and will simply create new problems to replace the ones it is trying to fix. In addition, critics contend that the government is usually less efficient than private sectors. Do you think the government is less efficient than the private sector? Does it depend on the issue involved? If you think it is inefficient in a particular area, does that lead you to recommend against government intervention or is there a reason that you would still support government intervention? If you think the government should intervene, which intervention options do you prefer and why?

Answer 2

Fact related to government in the market failure:
According to critics and few people in the country, the government is said to be inefficient. Instead of clearing the prevailing problem, the government creates new problem while trying to fix the previous problems.
Views of Mr. X on the government:
According to Mr. X, the government acts to be inefficient at some places. However, they provide funds and help the country in many ways. The government imposes rules that protect the public from the private people. Hence, they cannot be said as inefficient all of a sudden.
Determine if the inefficiency of the government depends upon the issue involved:
It is determined that the inefficiency of the government depends upon the issue involved. If the issue is easily solvable by the government, then it efficiently solves the problem. If the issue causes trouble to the government, then it cannot solve it.
Support on the government:
According to Mr. X, whatever the case may be, he supports the government. It provides funds and helps the country in many ways. The government imposes rules that protect the public from the private people. Hence, they cannot be said as inefficient all of a sudden.
The intervention of the government will be safe under all the circumstances. There will be a greater support for the people from the side of the government.
Intervention options of the government:
It is to be noted that the government should intervene in all the issues and problems of the people in the society. A private firm should also follow the rules and regulations of the government. Hence, all the companies and corporates must be under the guidance of the government for its support. It also helps in tackling the problems if any.