¶ … Health Care Economics Heath care economics

The health care sector in the United States is faced with a series of challenges given by the dynamic and changing features of the modern day society. Two notable challenges in this sense are represented by moral hazard and demand inducement. These are best explained below:

"First, because of the nature of insurance at that time patients demanded all medical services regardless of cost, even those offering an insignificant health benefit (moral hazard). Second, autonomous providers of the traditional health economy received fee-for-service payments. This creates the incentive for physicians to recommend the extravagant of treatments, even if those treatments are inappropriate to the patients condition (demand inducement)" (University of Canterbury).

In order to address these issues, the concept and practice of managed care have been introduced. The scope of this application is that of creating more efficiency within the health care provision sector. And based on the progress made so far, it can be concluded that managed care has indeed had some positive impacts of moral hazard and demand inducement.

At the level of moral hazard, managed care has sought to eliminate the incentives of the physicians in recommending and providing excessive medical services to their patients. In the reduction of demand inducement, the managed care organizations have decided to pay their physicians fixed salaries, regardless...

Additionally, the challenge is represented by finding the adequate balance between the provision of medical services and the containment of the costs.
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In an effort to reduce their costs with health care, namely with the medicine they have to take, the American citizens sometimes travel to Mexico or Canada and have their prescriptions filled in these countries. The process is normally completed by individuals for their personal use and it is referred to as re-importation of drugs.

These drugs had initially been produced within the United States, but they are sold at lower prices in Mexico and Canada. From the legal standpoint, the re-importation of drugs is illegal and the primary concerns of the FDA (Food and Drug Administration) refer to the safety of the drugs, in the meaning that the U.S. does not have the power to control the distribution systems in Canada and Mexico. Still, the FDA does not promote a policy of complete prohibition since it considers re-importation the lesser evil than people going sick because they do not afford the medicine they need (AARP).

The development and implementation of a policy regarding the re-importation of American drugs from Mexico and Canada would most likely be an ineffective measure and this is…