Health Care and Public Policy

Health Care and Public Policy

David Reisman

Health Care and Public Policy is a comprehensive and intelligible cross-disciplinary account of the objectives of health care policy (medical, social, economic) and of the policy-tools that government can employ (cost–benefit analysis, entry barriers, competition) in order to ensure that scarce resources are not wasted nor needy social groups deprived of basic and affordable care.

Chapter 4: Payment for Health

David Reisman

Subjects: economics and finance, health policy and economics, politics and public policy, public policy, social policy and sociology, economics of social policy, health policy and economics


Medical care costs scarce resources. The mode of payment influences the quantity that changes hands and the price that the demanders can afford to pay. It also has an impact on the extent of sharing and redistribution in society. The mode of payment is a topic in who and not just in what. Effective demand is social interaction. It is not just the theory of price. Effective demand always marches out in front. Money makes the market go round. True in all exchanges, the proposition is twice as true in the market for health. The reason is that the market for health is very frequently not single but twinned. The final market is care: the patient pays the doctor to make him well. The intermediate market is protection: a third-party is prepaid to share the risk. This chapter examines the contribution of the insuring agency to the purchase of care. The first section addresses the principles of pooling. The second and third sections explore the private and then the public alternatives. The final section, on payment beyond insurance, is a reminder that health care can be affordable even if there is no third-party to share the risk. 4.1. The Logic of Insurance The future is unknown and the cost is uncertain. People are fearful both that their good health will go and that they will be exposed to financial burdens which will exhaust their wealth. Few other areas of social life cause more sleepless nights than do the possibility of...

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