Government Intervention in the Health Care Industry
Or, the government could decrease the use of contractors in its operations and perform more of those functions in-house, but that would result in higher direct costs. In either case, the cost of providing services will continue to increase, which will increase the amount of cost to taxpayers.
When President Clinton proposed prescription drug coverage under Medicare in mid-1999, the health care industry moved to combat the proposal, which it considered amounted to price controls on the industry (Stone, 1999, p. 2082). From an economic perspective, the increased lobbying effort will likely lead to an increase in the cost of doing business for drug companies, and consumers are likely to see an increase in prices as a result. Prescription drugs have a relatively inelastic demand schedule (even generic drugs can vary significantly from their ethical counterparts), and some conditions can only be treated effectively with a single product. Lacking widespread substitute goods, suppliers in this industry are able to pass along any increased costs (such as might be associated with lobbying to protect the industry's interests) to consumers. The price increases will most likely be felt in the form of increased premiums or in decreased availability of particular drugs since insurance companies will be the direct