At the intersection of public medicine and welfare economics lies the field of Health Economics- it explores equitable healthcare policies and allocation measures that disperse these services to maximise societal welfare.
Despite being an important and useful service, a significant proportion of the population does not have access to health insurance, and even when they do, they refuse to purchase it. A 2022 study by the Becker Friedman Institute for Economics at The University of Chicago found that around 62% of Indian households paid healthcare costs through out-of-pocket expenditures compared to 11% in the the United States. Perhaps the most prevalent reason for this is the inequitable distribution of resources in the economy, leading to the inability of several economic classes to afford insurance. While this is certainly true, empirical studies have found other reasons as well.
Market failures can lead to higher insurance premiums in certain regions due to a lack of government regulation. This makes households redirect their spending patterns to other essential commodities. Government-regulated price-caps, subsidies to low-income households, or correcting these asymmetries of information in the insurance market by regulating private sellers are effective mitigation measures. Another market failure happens in regions where prices of basic commodities are higher. This could be due to several reasons, but again requires government intervention through private market regulation. Most economists, however, attribute the low coverage of health insurance to an amalgamation of both price and income-related factors.
Perhaps one reason that is being explored more and more is simply the preference of people to purchase other essential commodities over insurance- this is explained through the field of Behavioural Economics. Any economic decision is based on a trade-off between costs and benefits. When people choose to forego health insurance, it is either because they perceive costs to be higher, or they perceive the benefits to be too low. One cost associated with insurance purchase is the transaction cost, which involves the extensive research, analysis of complex policies and choice overload that customers face when they go to purchase insurance. Another theory offered to explain low take-up rates is the Prospect Theory- people tend to give higher weights to lower probabilities and lower weights to higher probabilities, thus undermining the risk of fatality and foregoing the purchase of health insurance.
Through all these different explanations, the conclusion is clear; the government needs to proliferate health insurance policies, either through redistribution of resources, fixing market failures or changing public perception through reward systems or incentive programmes- The Insurance Regulatory and Development Authority of India (IRDAI) has already pledged to the goal of Insurance for all by 2047. As the field of Health Economics continues to evolve, researchers must remain vigilant in exploring innovative solutions to the complex challenges faced by healthcare systems globally.
Amazing work!!