Being an economist, I believe that an economic approach is very useful, not only for understanding the forces pressing for change in health care but also for explaining why the health system has evolved to its current state. Even the political issues surrounding the financing and delivery of health services can be better understood when viewed through an economic perspective, that is, the economic self-interest of participants.
For these reasons, I believe that an issue-oriented book containing short discussions on each subject and using an economic perspective is needed. The economic perspective used throughout is that of a `market` economist, namely one who believes that markets—in which suppliers compete for customers on the basis of price and quality—are the most effective mechanisms for allocating resources. Of course, at times markets fail or lead to outcomes that are undesirable in terms of equity. Market economists generally believe that government economic interventions, no matter how well-intentioned or carefully thought out, can neither replicate the efficiency with which markets allocate resources nor fully anticipate the behavioral responses of the economic agents affected by the intervention. In cases of market failure, market economists prefer solutions that fix the underlying problem while retaining basic market incentives rather than replacing the market altogether with government planning or provision.
Health care reform has been an ongoing process for decades. At times, legislation and regulation have brought about major changes in the financing and delivery of medical services. At other times, competitive forces have restructured the delivery system. Both legislative and market forces will continue to influence how the public pays for and receives its medical services. Any subject affecting the lives of so many and requiring such a large portion of our country's resources will continue to be a topic of debate, legislative change, and market restructuring. Hopefully, this book will help to clarify some of the more significant issues underlying the politics and economics of health care.
For this third edition, in addition to updating each of the chapters, tables, and figures, five new chapters have been added. These chapters address several of the more topical issues in health care. One new chapter discusses how the Internet is likely to affect health care and how providers and health plans can use the Internet to gain a competitive advantage. A chapter on whether nonprofit hospitals behave differently than for-profit hospitals was added because of concerns that conversion of nonprofit hospitals to for-profit status may not be in the public interest, and that mergers of nonprofit hospitals need not be subject to the same guidelines as for-profit hospitals.
Four chapters now discuss prescription drugs and public policy proposals. This greater emphasis on the drug industry reflects both the public's and, consequently, politicians' concern over the high cost of drugs and the financial burden placed on certain population groups. The first chapter on prescription drugs discusses the concern about and reasons for the high prices of new drugs. The second discusses the role of the Food and Drug Administration (fda) and the tradeoff between increased drug safety and efficacy versus the `costs` of delays in access to innovative new drugs. The third discusses whether (and if so, why) the same prescription drugs are sold at lower prices overseas and legislation to deal with this issue, such as reimportation. Last is a discussion of various proposals for a Medicare prescription drug benefit, which has been much in the news and will likely to continue to be a contentious political issue.
To help the reader focus on important points related to each issue, a list of discussion questions for each chapter appears at the end of the book. A glossary is also included.
I thank Thomas Wickizer, Jerry German, Jeff Hoch, and several anonymous reviewers for their comments. For this third edition I also thank Elzbieta Kozlowski and Mary Alice Pike for the collection of data, construction of the figures and tables, and preparation of the manuscript.