Market forces and efficient health care systems

Abstract

The "market forces" to which economists ascribe the ability to motivate improvement in quality and efficiency are largely nonexistent in U.S. health care. One thus might ask, "Could market forces be made strong enough to deliver efficient health care systems?" There is some evidence to suggest that the answer is "Yes." This paper offers a short list of some changes that would be needed to create such a health care economy. Continued increases in costs and in the numbers of uninsured people will likely make a universal coverage model based on Medicare a politically popular choice, but such a model would not deliver efficient health care systems because it lacks sufficient incentives for consumers to choose less costly options.