US HEALTH CARE MARKET
Why is the referred to as imperfect?
An ‘imperfect market’ does not meet the meticulous conditions ofan ideal market. It usually happens when the buyer or the seller(either individually or as a group) has an influence on the mainaspects of the marketplace, such as prices. Although a ‘perfectmarket’ is hypothetical, the health care industry in the UnitedStates is described as ‘imperfect’ (Folland et al., 2016).
In a ‘perfect market’, the demand and supply forces determine theprices of products or services. However, in the healthcare sector,hospitals, health insurers, pharmaceuticals industries, and equipmentmanufacturers can control the costs of the products. They canmanipulate the marketplace, by charging prices without obeyingmicroeconomic factors. Additionally, the government agencies can havedirect impacts on the cost of health care through policies and laws,which can be as a result of lobbies for regulations that protect theinterests of the public or the service providers (Musgrave, 2015).
The uncertainties associated with the health care products make itdifficult for the market to be perfect. For example, the patients ortheir families may have challenges making a choice on the mostappropriate treatment option. Additionally, the health providers arenot confident about the effectiveness of some products or services,and, therefore, cannot guarantee their clients that they will addvalue to their lives. In a perfect market, consumers make choicesbased on the price as well as qualities or attributes of the product.This is dependent on the information held by both the buyer and theseller. In the health care market, there is ‘informationasymmetry’, where doctors or hospitals have more knowledge andfacts about the service or product, compared to the patients(Musgrave, 2015).
Folland, S. et al. (2016). The economics of health and healthcare. New York, NY: Routledge.
Musgrave, F. (2015). The Economics of U.S. Health Care Policy: TheRole of Market Forces. New York, NY: Routledge.