Competition's flawed perspective on the health care market and an alternative approach

Bernard J. Reilly and Joseph P. Fuhr

Social Science & Medicine, 1983, vol. 17, issue 12, 795-801

Abstract: This article contends that competition advocates have treated the public market as peripheral to the development of a private allocative efficient market based on price determinations. A system which omits 40% of distributive resources, 30% of its users and over 50% of hospital revenues sets the stage for cost/charge spirals that promote greater inefficiencies than those which presently exist. The government in the sixties set a goal of universal quality service for medical care. However, this goal has not been achieved and the sky-rocketing cost for medical care is putting an increasing burden on the government. The authors attempt to provide a basis for the incorporation of the concept of the mixed market through a definition of public and private reimbursement systems. The public sector, rather than paying directly for care, purchases it in an efficient market which it helps to form. The government working with other health insurance companies in the private market attempts to set reasonable charges for reimbursement for medical services. Any price above the competitive level will be paid directly by the consumer. However, quality care is guaranteed to the consumer at the reasonable charge by insurance company referred physicians.

Date: 1983
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