Market failures in the healthcare industry happen when the market system results in unequal resource distribution (misallocation). The allocation is such that products and services which do not contribute to the betterment of society receive a larger share of resources than they require (Gronde, Uyl-de Groot & Pieters, 2017). The effects of misallocation may lead to full or partial failure of the healthcare market. The former is worse since getting the market to its normal operation can be impossible or may take longer. This is a common situation with pure public commodities, including street lighting, for which there is a requirement, but private persons are unwilling to pay. Supposing nobody is willing to pay, there will be no income and no profit; as a result, no corporation will get to the market.
Partial markets occur when market functionality is just optimal, but it provides an incorrect number of units or at the incorrect price. Partial loss can happen in a number of ways, including when some, though not all, aspects of market formation requirements are met (Iszaid, Hafizan, & Juni, 2018). This means that marketplaces will arise, but they will not develop and supply enough of a service or product. Markets are normally ineffective in the context of quality goods, such as education, as they under-supply these products and fail to address the community’s requirements. Once free calls oversupply both products and services, it could be because producers do not consider the entire cost of production to the community.
Externalities and detritus are examples of oversupply in open markets. Moreover, where self-regulation has failed, as in the occasion of the economic crisis. There are several commodities adjusted when market volatility increases and fails to attain equilibrium swiftly (Gronde, Uyl-de Groot & Pieters, 2017). All of these are examples of market failures that are only partially successful. Despite their contribution to economic development, healthcare markets are imperfect, and they often fail to perform successfully. Externalities, public goods, defective competition, defective knowledge, natural monopoly, and wealth inequity are the fundamental causes of these failures (“Market Failure in Health Care: A Review”, 2018). Externalities are costs placed on individuals who are not involved in the process which causes them. For instance, delivering the seasonal flu vaccine positively impacts persons who have not yet received the vaccine. Public goods are items with no competitors in terms of consumption (Sharma, Rorden, Ewen & Laing, 2016). Since these items are for general usage, this can lead to market failure and the healthcare system would face the “free rider” dilemma.
This indicates that the advantages of a public product can also be limited to those who have paid for this because non-payers would’ve been able to gain from usage. A market system in which “every producer has some market power” is inadequate competition (“Market Failure in Health Care: A Review”, 2018). In other words, producers fix prices so that their marginal revenue equals their cost. Inadequate information befalls when users have conflicting knowledge concerning a product, causing market uncertainty and instability. A natural monopoly is a market system that can be effectively served through a single entity, leading to an economic failure because these firms can profit from their position by selling their products at exorbitant prices. Inadequate allocation of resources may occur from market-based income redistribution.
Healthcare in the United States is confusing, and I believe it is one of the reasons for its failure. Trying to access healthcare services can be challenging for average Americans who do not understand how to navigate the intricate health system. Technology has brought several improvements and digitization of services. Therefore, it is necessary to conduct awareness campaigns to enlighten people on how to use different systems and health equipment. This is where government intervention is necessary to help reform the system.
References
Gronde, T., Uyl-de Groot, C., & Pieters, T. (2017). Addressing the challenge of high-priced prescription drugs in the era of precision medicine: A systematic review of drug life cycles, therapeutic drug markets and regulatory frameworks. PLOS ONE, 12(8), e0182613.
Iszaid, I., Hafizan, H. A., & Juni, M. H. (2018). Market failure in health care: A Review. International Journal of Public Health and Clinical Sciences, 5(5), 16-25.
Sharma, A., Rorden, L., Ewen, M., & Laing, R. (2016). Evaluating availability and price of essential medicines in Boston area (Massachusetts, USA) using WHO/HAI methodology. Journal Of Pharmaceutical Policy And Practice, 9(1).