Key Theme 5: NHS and Merit Goods

Introduction:
The central provision of healthcare since WWII under the NHS follows the themes of:

• equity - where every individual has the right to a certain level of care regardless on income
• merit good - where the state deals with failures in the form of information issues related to externalities and an underestimation of private benefit
• asymmetric information: doctor have all the information thus may make decisions motivated by financial goals
• moral hazard: insurance markets have difficulty dealing with the unique challenge of affordable healthcare cover.

Analysis:

Policy:

• subsidy

• zero price provision

Conclusion:
the NHS has delivered effective care for the UK population for over 60 years but is facing a triple threat:

• increased demand from an ageing population
• increasing costs from ever more complex drugs, technology and procedures
• austerity challenging total expenditure in the face of the above two issues

Efficiency gains through reorganisation and the use of private sector providers on partnership with the public sector is seen as a model to provide healthcare for the 21 century but is proving difficult to achieve both practically and politically.