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.ß39).
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 role in the health care industry and also expands its use of contractors, the proportion of errors and fraud may well remain the same without increased government oversight. Or, the government could decrease the use of contractors in its operations and perform more of those functions in-house, but that would result in higher direct costs. In either case, the cost of providing services will continue to increase, which will increase the amount of cost to taxpayers.
When President C...