What are the manifestations of market failure in health care services and health insurance market failure

Market failure:

1. Externalities. Due to the existence of positive externalities, providers of basic medical services are often faced with a situation in which the marginal cost is greater than the marginal benefit, which forces them to reduce the provision of basic medical services, resulting in a shrinking of the market and failing to meet the needs of the public.

2. Information asymmetry. Due to the lack of patients' knowledge of diseases and the monopolization of information by medical institutions in the price management system, patients are unable to make rational choices and tend to choose the most expensive medical services, so that the higher the price of medical services, the higher the price of competition.

3. Uncertainty of demand. There are two problems of adverse selection and moral hazard in the medical service market. Adverse selection refers to the medical services market, not all hospitals provide better quality medical services, but patients can only be based on their own subjective judgment, the quality of medical services in the market to estimate and pay the price in accordance with the average quality. In this case, the lower quality hospitals have the upper hand due to their cost advantage. When patients realize that the quality of care is not as good as they thought, they will lower their estimate of the quality of care in the market and thus lower the price they are willing to pay. The cycle repeats itself, eliminating the higher quality but higher cost hospitals and leaving the lower quality hospitals behind. Moral hazard is when a health insurer intentionally increases the likelihood of an illness by not taking proactive steps to prevent it from occurring, thereby increasing the amount of additional benefits paid by the insurer.

Government failure

1. Price controls. The government is difficult to approve the price of new medical equipment, medical technology and new medicines, which induces hospitals to introduce new technology and equipment, and prompts pharmaceutical companies to produce new medicines and try to raise their prices, leading to the coexistence of old technology and old medicines at ultra-low prices and new technology and new medicines at ultra-high prices in the government's price control system, resulting in the formation of the phenomenon of medicines supporting doctors and medicine at exorbitantly high prices.

2. Administrative approval. May cause rent-seeking behavior. Medical institutions and pharmaceutical companies try to get the right to produce drugs by paying bribes, but in the end, rent-seeking rents are transferred to consumers.

3. Financial input and subsidies. Insufficient government investment and uneven distribution, public hospitals, especially high-level hospitals, receive more subsidies, while county hospitals and township hospitals receive fewer subsidies. The purpose of government intervention in the field of health is to promote social equity, maximize the close to the Pareto optimal efficiency and make up for market failure, but there may be too much administrative intervention.