Sample Paper on Health Care in the US

Health Care

Health care in the U.S accounts for approximately a sixth of the whole economy. Most Americans would feel that having the universal Canadian health care system might dawn some surprising gains especially on the citizens’ life quality, big reductions in the medical and expenditures on healthcare. It is also approximated that there would be average 5400 decrease in deaths of infants. Also about dollars amounting to 1.3 trillion of expenditure in health care will be cut. And the overall effect is approximated to be about 57 million lesser people will not access medical care because of the high costs.

Maybe what the American citizens need to take note of is that free medical care is not really free because of the increased taxes and the monthly or annually contributions that would follow. But there would also be need to incur extra costs for the services that are not insured (Boettke, 2006.)

The pros can be summarized as;

  1. Access to health care by everyone. As long as a person is a resident they will be able to get medical coverage. The overall health of citizens will be improved. The access will also be easy and equally provided this will in return lead to a reduction in disease in the country and hence more productivity in the economy.
  2. It will be easier to administer health education programmers since the healthcare system is universal.
  • Excellent primary care. Treatment of major diseases will be handled better. This will cut back diseases and reduce death rates and hence more productivity.

The cons on the other hand can be summarized as:

  1. Poor health services. This will be characterized by long queues and waiting times. This can make the patient’s condition becoming worse or even lead to death.
  2. In most cases the medical fees will not take into consideration the cost of living. The health care providers will be limited to charge what is provided for by the government. They might be forced to charge lower than what is sufficient to maintain their living standards. This will result in medical practitioners not working to their full potential or even giving poor services.
  • There might result unequal distribution of health care services especially to the people in rural areas. Rural areas because of lack of access might experience high mortality rates and very little access to health education. It can also be a challenge for practitioners to treat in these rural hospitals since they may be required to have patients transferred to better and more equipped hospitals.


If the town decides to enact the law on price ceilings the town will be run as a planned economy whereby major and most economic decisions are made by the state or the government. Any decision regarding the allocation of resources will be determined by the planning organ. The state will therefore determine the factors of production on behalf of all consumers and producers. In this case the rent price will be fixed at 350 dollars per month instead of being freely determined by the market forces of demand and supply (Fortune, 2009)

Such fixing of prices can be advantageous and at the same time disadvantageous. The pros include

  1. A locative efficiency. There will be less dramatic differences in the distribution of income because there is less concentration on making luxuries for those who can afford them and greater emphasis on providing a range of goods and services for all the population.
  2. Elimination of natural monopolies. Price setting is the best way of eliminating monopoly power where suppliers of goods will charge very high prices relative to the marginal cost of production.
  • Public services. By setting the rental price at a fixed rate it will reduce relative poverty because most people will afford the housing service who would otherwise not have had it due to the price.
  1. Reduction of price inflation on housing. Setting of rental prices will help reduce the tendency of continuous uncontrolled price increase.

The disadvantages of rental price setting include:

  1. Rental shortages. Cheap rents are likely to leave most people homeless this is because the demand for housing will exceed its supply because of the maximum price set. Hence most students are unlikely to get housing at all.
  2. Emergence of black markets. Since the maximum price set will lead to housing shortage other people will take advantage of this by buying the product at the fixed maximum price then reselling it at a higher price which is above the set price. This will encourage illegal trading on housing since it can be highly lucrative since there are those consumers who will be willing to pay a higher price.
  • In the long run the housing will become less profitable. The college might opt for less investment or even reduced supply. This is because having price controls on rent is likely to reduce the incentive of landlords to build more houses let alone letting them out.
  1. Increased centralized control. Increase in such bureaucratic controls may lead to inefficiency in planning. . Furthermore, government officials can become over privileged and use their position for personal gain, rather than for the good of the rest of the society.

Ideal economic efficiency is when the market outcome is optimal. In this situation any improvement has to leave someone worse off hence no pareto improvements can be made. Also it can be viewed as a way in which resources will be best allocated to minimize both wastage and inefficiency. That is for any initial distribution of assets to individuals in society how can some individuals be made as well off as possible without hurting anybody.

Economic Efficiency can be analyzed from three dimensions i.e

  1. Production efficiency this is concerned with, when using any level of raw materials or methods of mixing the inputs to cause the productive activities how do we get the most of any given level of inputs in terms of productivity.
  2. Consumption efficiency this is concerned with, given any level of output how will the goods be distributed across all potential consumers in society making some to be totally well off without hurting anybody.
  • Output efficiency. This is concerned about how much of each good should be produced economically without hurting anybody.

However, in most cases the market usually fails to attain this ideal market efficiency since sometimes the market will fail to provide a supply of a good that is socially optimal hence the good ends up being under produced or over produced and sometimes the price fails to be an account of all the benefits and costs associated with the good. The market inefficiency problem can be traced to;

  1. Externalities
  2. Monopolies or lack of competition
  • Lack of proper information
  1. Public goods.

Externalities can be considered as benefits or costs that befall a person who did not choose to incur them. Part of the government’s role as many economists would argue is to make sure the respective costs and benefits are internalized as much as possible to ensure they befall the concerned individual in society. For example, the costs incurred in cubing pollution impact all individuals in society and not only had those in manufacturing that caused the pollution. Some economists (neoclassical) argue that externalities, under plausible conditions will hinder the society from attaining results of an ideal economy. This is regardless of whether it is a positive or negative externality.

As a payoff to reduce negative externalities the market has to reduce the profits as a repair to the damage that reduced efficiency. For positive externalities, lesser goods should be produced to a level that is more optimal for the society.

Public goods are those in which there is no rivalry in consumption hence it is difficult to eliminate those who cannot afford the good. This will cause a market failure because of the difficulty to link between the cost incurred and the amount consumed and also the payer and the one receiving the good.

Lack of competition or existence of monopolies will always generate fewer surpluses since they do not feel the need to compete with others. Market failure will occur since the pricing mechanism will fail to take account of all the benefits or costs of providing that particular well. Monopolies will always attempt to maximize profits and minimize output.



Boettke (2006.)  Katrina and the Economics of Disaster, podcast on EconTalk.

Grampp, W. S(2007). “Some Effects of Rent Control.” Southern Economic Journal (): 425–426.

Datta-Chaudhuri, Mrinal (2010). “Market Failure and Government Failure.” Journal of Economic Perspectives, 4(3): 25-39.

Journal of Commerce, quoted in Dan Seligman, “Keeping Up,” Fortune, February 27, 2010.