Econ paper - Changes brought with Government-run health...

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Changes brought with Government-run health insurance A bill under recent discussion in the American government is concerned with health insurance, and changing the way it has traditionally been managed in our country. An article recently published by the Mercury News titled “How would government-run health insurance affect California” by Mike Zapler on November 17 th, discusses some of the affects this new proposal could have on California’s economy in particular. The main issue of the article is the effects a public option could have on the market for health care. It is currently being debated if a public option could help lower premiums and increase options for the general public. In the following paper I will attempt to discuss the effects a public option would have on the economy, and how a government choice could help or hurt the current health care market. Traditionally the health care market in America has been handled by private insurance companies, and limited government options for the retired. According to the article, there are “five major firms…and several other smaller firms” that provide health care in California. This amount of health care providers is not often seen in other states, in that it is a larger amount than in most (Zapler 1). However, it is still a limited amount of available options in proportion to the population of California. Many reasons influence the price of premiums and costs to consumers, one of which is the limited number of choices available to choose from. A monopoly is when there is “a single firm that is the sole seller of a product without close substitutes” (Mankiw 312). And a competitive market is “a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker” (Mankiw 290). Since there is more than one producers in the health insurance industry it is not a monopolized market, but because there is such a limited amount of companies it is not much of a competitive market either. Due to this kind of market, there is not much incentive for companies to give the lowest possible price. An
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This note was uploaded on 09/08/2010 for the course ECON 1B at San Jose State University .

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Econ paper - Changes brought with Government-run health...

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