Merit goods

Discuss whether the government should end free health care for people and make them take out private health care insurance like in the US?
Health care is a merit good. This means in a free market, it will generally be underconsumed. Firstly, people may underestimate the benefits of seeing a doctor, especially for a check-up.

If people have to pay for health insurance, some people may choose not to do it. This could lead to a rise in treatable diseases such as cancer. Secondly, health care is said to have positive externalities.

If people receive good health care treatment then they will be more productive and the economy will benefit. Therefore, if it is left to the market, there is a danger health care will be underconsumed leaving an underclass of people without health care and lower productivity. Also there is a powerful argument to say health care is an important public service and therefore everyone has the right to free treatment at the point of use. It is not a good like TV or cars; health care is essential to standards of living.

Making health care free at the point of use means there is equality of provision and everyone can get treated. If it is left to private health care, some people may not be able to get insurance.

However, it is argued private health care may be more efficient and give better quality services for patients. Because there is a profit incentive, firms will seek to offer good quality health care to get customers. However, it is debatable whether profit motives work in health care. Doctors are generally motivated by desire to help patients rather than financial gain.

Another argument in favour of private health care is that it would provide consumers with more choice. Also it would help reduce waiting lists which exist on the NHS. If people go private there is likely to be a fall in waiting lists. It would also enable the government to reduce taxes.

However, consumers would have to switch from paying taxes to paying private health insurance, and the poorest might not, and may therefore suffer a loss of welfare.