I understand that this question may be interpreted this way- u2018Should economics be applied to Health Care (HC)?u2019, or u2018How to apply economics to HC?I am making an attempt to answer both aspects in one reply. I would like to address the first aspect from an ethical point of view with some history of the American Health Care system. Todayu2019s insurance based system is a transformation of the simple Charitable, not-for- profit health care providing, localized system. That system had its roots in the religious institutions providing charitable care. The principle sources of revenue in those systems were the donations, grants and endowments. There was some fee for service revenue stream available on a sliding scale. Such a system obviously by its nature, was not focused on the financial bottom lines but on the providing community health care. The administration of course worked on the efficiency of operations and quality of care but it did not use economic models to make the financial decisions and was not affected directly by the cyclical events of national and global economics, although the local economics affected their financing. It all changed in the early to middle period of 20th century when Life Insurance companies began to offer free Health insurance as a supplement to attract the Life insurance client.After some time, when it became evident that the HC insurance was getting popular, it became an independent product line. With that for profit model, all aspects of economics(Supply-Demand dynamics, high skilled labor availability and the forces of market competitions etc.) became important and the risk management entered in the equation of profitability projections. The pros and cons about its effect on the HC in the US is obvious. For the pros- It became an industry by itself and growth of better services, more efficient and innovative research became a norm, and a modern HC we take for granted emerged out of the Not- for Profit, religious system. Population in general, has benefited by it and government sponsored and paid HC programs came in existence.The negative aspect (con) is, human morbidity and treatments became a lucrative commodity for the corporations to make wealth and the third party payer-the Medicare & Medicaid systems became part of the fast growing expendable budget item that brought the higher taxes.Now discussing the moral aspect of applying economics to HC for the citizens, we will have to take in accounts the ethical issues like, should a corporate for profit entity make money and distribute profits to its stock holders, pay high salaries and benefits to the top management while charging substantial amounts to patients and deny care to those who cannot afford to pay?Not doing so, will adversely affect the profits and from the point of applying the fundamental principles of economics, that is a not acceptable situation for the survival of the business entity itself. To choose an appropriate system that would fit in the moralistu2019s concept of Government supplied or religious, not for profit HC systems and also retain the current, Capitalist principle based (which the American population believes in)business model, is a paradoxical dilemma which the nation is trying to get her arms around since the first HMO act was enacted during the Nixon era. Building a template for how to apply economics to the National Health Care system will require lot more space than the space, time and expertise.
