Missing Markets - Department of Economics

Missing Markets J Mick Tilford March 29, 2013

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Standard analysis • Tilford is an outstanding health economist … and an alumnus of this department. Has been in Arkansas all his professional career. • Arkansas is a pretty conservative place. • How does he frame his analysis?

Beer and Pizza • Notes that we do most of our analyses with “widgets”, or in a pinch, beer and pizza. • We get markets – people use their preferences. • Firms enter or exit as profits dictate.

Arrow

Can you think of other missing agree markets?that

• 1963 article noted that all would health insurance for the elderly was beneficial, but … • Insurers would have trouble marketing insurance to people with (generally) high expenditures and (generally) low incomes. • Missing markets are inefficient. • Creation of Medicare filled the missing market.

Medicare  old; Medicaid  poor • Tilford argues: • When someone says the cost of expanding Medicaid to cover the healthcare needs of poor citizens is something we can’t afford, • … they’ve “placed a value on poor people’s lives, and it is low.”

HIV/AIDS in Africa • George W. Bush was persuaded, largely by Evangelical leaders that “all of God’s children deserved help”. • Increased US financing from $500 Million to $3 billion per year. • Emergency Plan for AIDS has been very successful, although the economic costs of HIV/AIDS in Africa are still enormous.

Arkansas Legislature • Tilford notes that the poor cannot buy health insurance because they lack the income to do so … competition won’t do the trick. • Health quality in Arkansas is low, and costs are high. • “Health security for all Arkansans will come by helping public and private payers achieve the most efficient outcome.” • “Students of health-care economics know that truly is best for Arkansas”.