Examination of the Reasons Why the Government Intervenes in the Provision of National Health and Education

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Examination of the Reasons Why the Government Intervenes in the Provision of National Health and Education Both National Health care and Education are considered to be merit goods. This means that not only are they a basic human right but also, a service or good that has varying positive externalities associated with it. (Important to define both merit good and positive externality at this early stage) Without government intervention in healthcare, this sector would be a free market and so everything would have to be purchased straight from the source (i.e. doctor's surgery or hospital) also if this system was to work then people would have to take out private health policies from insurance companies so that they may be able to pay for all the medical treatment needed in their lives. An example of where healthcare is provided in a free market is the US; as a result, nearly 40 million citizens have no access to healthcare. There are various reasons why a free market in healthcare will not work well for an economy. As patients are not usually doctors, there will be unequal balance of information known between the doctor and patient. This is called a situation of asymmetric information. Therefore, the patient cannot make a rational and informed decision on what treatments should be made for the ailment, as the patient has no medical knowledge. As a result, exploitation will occur in the form of over-prescribing drugs or unnecessary operations in order for the doctors/hospitals to be maximising profits. Therefore more resources will be allocated to healthcare than there would be in a regulated system. For the free market system to work an effective insurance system must also work alongside this. However, there are problems with insurance as well. There is the moral hazard that if people are covered by insurance for certain treatments they may change their behaviour (e.g. become more reckless) so that they are more likely to require that treatment. For example, a rugby player who has private insurance in case of sports injuries may become a more careless player than one

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