"Need for system design in healthcare
5.11 Given these market failures, a free market where individual consumers purchase services from providers on their own while paying at the point of service leads to severely sub-optimal outcomes including demand that can be influenced and induced by suppliers, over-seeking of hospitalization and under-seeking of primary care/public health when compared to economically optimal levels, and catastrophic out-of-pocket spending in part due to the low preference for health insurance. Therefore,most well-functioning health systems are structured as oligopolies purchasing from oligopsonys instead of individual consumers purchasing from individual providers. The structure of the market has substantial implications for long term trajectory of the health system. Countries with more fragmented health systems tend to have lower performance as reflected in higher costs, lower efficiency, and poor quality. Therefore, in addition to providing healthcare services and financing healthcare, a key role for the government is to actively shape the structure of the healthcare market."
Economic survey, chapter 5, page 154.
Doubts-
- Can someone please explain the underlines phrase?
- What does it mean by health systems structured as oligopolies purchasing from oligopsonies?
- Is there any such system existing anywhere in any country?
- Would not an oligopoly be determinantal to the interests of the free market by preventing new players to enter?
- Would this system not kill innovation?
Thanks in advance!
