Government Intervention in the Health Care Industry

Health care is a concern for many Americans as the baby boomers age and there is increased demand for medical services. The government regulates much of the health care industry through agencies such as the Food and Drug Administration, and government subsidies (including Medicare) are an integral part of the health care delivery system in the United States. This research considers the economic effect of government intervention in the health care industry and ways in which policy decisions may affect Americans in the future.

Medicare is a government health insurance program administered by the federal government which primarily serves elderly recipients of Social Security. The government has chosen to outsource the processing of claims generated through Medicare to outside agencies; this was presumably done to increase service levels and decrease costs to the government. However, it has been found that many of the claims processed through these contractors have been processed incorrectly. This results in additional cost to the government not only in auditing the problems, but in incorrect claims which are either overpaid or not paid appropriately in the first place. In some cases, the actions by the contractors were considered fraudulent (Pretzer, 1999, p.�39).

The effect of the inefficiencies and possibly fraudulent actions taken by government contractors is to increase the cost of delivering Medicare services. If the government expands its r

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164] observation that "successful planning in areas of expensive and sophisticated technology requires that the state underwrite costs, including the costs of research and development, and that it insure a market for the resulting products." Federal policies ensured that consumer demand for health care services would continue to rise, for unions were encouraged to bargain for health insurance and other nonwage "fringe benefits" in lieu of additional compensation during the wartime economy of the 1940s to slow inflationary pressures on wages. Private health insurance coverage expanded rapidly during the 1950s, prompting many critics of national health insurance to suggest that comprehensive federal reform was no longer needed [Hackey 1997]; by the mid-1950s, more than 100 million Americans were covered by private health insurance [Stevens 1971]. Health care financing during this period illustrates Galbraith's [1971, 299] observation that "the line between public and private authority in the industrial system is indistinct, and in large measure imaginary." Over the course of a decade, hospitals succeeded in securing federal subsidies for new construction projects, lowered the cost of charity care, an

Category: Government - G