Reasons why private insurance companies might fail to provide efficient insurance levels
Noteworthy, government intervention in providing health insurance services might be to overcome market failure and to boost equity (Burchardt 1979).Due to the fact that private health services are provided by private parties makes the market power solely fall on them. Private health services can be monopolized due to the fact that the private health care givers are responsible for determine the type of treatment and the cost for the treatment without any consultations (Burchardt 1979).This market power can be abused in the sense that lower quality services can be rolled out to the public despite the high costs. Also, the provision of healthcare services can be withdrawn or undersupplied to the public thus making the health care industry inefficient. Also, due to the high cost of health care, few individuals might afford the services thus leading to underutilization of private health care services .Under this type of health cover, there is limited flow of information between the providers and consumers of health services thus contributing to its inefficiency. Usually, private health providence quality against cost ratios are not at equilibrium thus making the system inefficient. The quality to cost ratio of private health services is diminishing, despite the high cost of treatment, the quality isn’t always lived up to.
How the government’s provision of health care and welfare payments can overcome some of the problems that would arise if the private sector were to provide these (insurance-like) services
Through government intervention in health care service provision, market failures can be addressed (Culyer1989).Primarily, market failure in the healthcare sector is characterized by limited flow of information, market power thus the need for intervention through public provision of health care services. Under government care, there is free flow of relevant information between providers of healthcare service and the consumer’s .In addition, through public provision of health services, equitable access to health services can be achieved as compared to private health care services where few individuals can benefit due to the relatively higher costs. Typically, public or social insurance is provided by the government thus the affordability and equitable advantage to all persons. Public health care system offer a redistributive allocation of health resources as compared to private health services. Usually, public health care services are affordable and of quality as compared to private health services thus the advocating of public health care insurance services as opposed to private social insurance.
Burchardt, T. (1979).Boundaries between public and private welfare: A typology and map of services .London, School of Economics.[Online].Available at https://eprints.lse.ac.u/6534//Boundaries_between_Public_and_Private_Welfare_a_typology_and_map_of_services.pdf[Accessed 17 May 2018]
Culyer, J.A.().The Normative Economics of Healthcare finance and Provision .Oxford Review of Economy Policy ,Vol 5,No.1[Accessed 18 May 2018]