UK Welfare State
Good health is an important factor to an
individual’s welfare. It is an
essential prerequisite for the enjoyment of
life. For this reason the importance
of healthcare to governments is great
and vast amounts of resources are
allocated to healthcare, for example in the
UK healthcare equates for 6% of GNP.
Some argue that Healthcare is a
social issue rather than economic but the
allocation of scarce resources and
the inelastic demand for healthcare lends it
self to economic analysis.
Equitable allocation of a commodity is one in which
everyone receives a
minimum standard and quantity. So in terms of full equality
in the society
everyone should consume the commodity equally. In healthcare this
argument
becomes complicated, should everyone receive a minimum standard
of
healthcare? Or should everyone get the best healthcare available? The
truth is
that hospital buildings, doctors and medical equipment all take up
resources.
The best standard of healthcare could only be given if all of
the government’s
resources were allocated to the provision of health. This
would be a foolish
thing to do, as other commodities would not be produced
which may be detrimental
to health and other aspects of life. Healthcare is
different from all other
products in that the (supplier) doctor knows more
about it than the (consumer)
patient. Consumers can distinguish between two
types of product and choose the
one, which gives them greatest utility but
with health care the patient is not
educated enough about medicine to choose
between two treatments and must
therefore go with what the doctor recommends.
This imbalance of knowledge gives
the healthcare industry suppliers monopoly
power. A healthcare supplier could
lower the standard of service and not fear
loss of customers. A doctor may also
recommend a treatment that is costly and
therefore will bring in higher profit
for himself without the average person
knowing any better.