Health Insurance

Background

Health insurance is a form of insurance that provides coverage for medical expenses and, in some cases, loss of earnings due to accident or illness.

Historical Context

The concept of health insurance first emerged in the early 20th century, with the goal of providing financial support for individuals facing substantial health-related expenses. The establishment of the Social Security Act in 1935 and the formation of Medicare and Medicaid in 1965 in the United States were pivotal moments in the wider adoption and institutionalization of health insurance schemes across various countries.

Definitions and Concepts

Health insurance can cover medical expenses such as doctor visits, hospital stays, surgeries, and prescription medications. It may also cover loss of earnings due to health-related issues. The insurance can be individual-based or extend to family members and dependants. It can take the form of compulsory schemes mandated by government policies or voluntary schemes opted into by individuals or employers.

Major Analytical Frameworks

Classical Economics

Classical economics does not extensively cover the topic of health insurance, primarily focusing on the functions of market equilibrium and government intervention in a freely operating market.

Neoclassical Economics

Neoclassical economics emphasizes the role of consumers and suppliers in the health insurance market. It examines premium calculations, adverse selection, and moral hazards, providing insights into market behavior under-informed and rational decisions.

Keynesian Economics

Keynesian economics suggests that government intervention in the health insurance market is necessary to ensure equitable access to healthcare and to address market failures like adverse selection and information asymmetry.

Marxian Economics

Marxian economics may critique health insurance through the lens of class struggle and inequality, analyzing how such schemes impact different socio-economic groups and labor relations within a capitalist society.

Institutional Economics

Institutional economics looks at the role of institutions, such as government policies and regulatory bodies, in shaping health insurance schemes. It assesses the impact of institutional arrangements on accessibility and affordability of insurance.

Behavioral Economics

Behavioral economics explores how cognitive biases and psychological factors impact consumer decision-making in health insurance markets, such as the reluctance to purchase insurance due to underestimating health risks.

Post-Keynesian Economics

This perspective would argue for more comprehensive government-sponsored health insurance to rectify imbalances and ensure wider access, emphasizing the social dimension of healthcare coverage.

Austrian Economics

Austrian economics focuses on the unintended consequences of government intervention, criticising compulsory health insurance schemes as potentially distorting market incentives and inefficiency.

Development Economics

In developing nations, health insurance schemes are critical for improving public health outcomes, fostering greater economic stability, and reducing poverty by protecting low-income populations from catastrophic health expenditures.

Monetarism

Monetarist perspectives would consider the impact of health insurance on monetary policy and inflation, particularly in how healthcare costs affect overall price levels and economic stability.

Comparative Analysis

Comparative analyses often look at the varying health insurance models across different countries, such as the single-payer system in Canada, multi-payer systems in Germany and Japan, and the mixed public-private insurance in the United States. These comparisons consider coverage breadth, costs, efficiency, and outcomes.

Case Studies

• The evolution of the Affordable Care Act (ACA) in the United States and its impacts on the insurance market.
• Comparing the National Health Service (NHS) in the UK with private health insurance in the USA.
• Analyzing the implementation of universal health coverage in countries like Germany and Japan.

Suggested Books for Further Studies

1. “The Economics of Health and Health Care” by Sherman Folland, Allen C. Goodman, and Miron Stano
2. “Health Economics” by Charles E. Phelps
3. “The Theory of Demand for Health Insurance” by John A. Nyman
4. “An American Sickness: How Healthcare Became Big Business and How You Can Take It Back” by Elisabeth Rosenthal

Related Terms with Definitions

• Adverse Selection: A situation where insurers are threatened by high-risk individuals opting into insurance more than low-risk individuals.
• Moral Hazard: Occurs when insured individuals take greater risks because they do not bear the full cost of the risk.
• Universal Health Coverage (UHC): A health care system in which all residents have access to health care services without suffering financial hardship.
• Premium: The amount an individual or employer pays for their health insurance coverage.
• Deductible: The amount paid out of pocket by the policyholder before the insurance provider pays the remaining covered expenses.