De Economist

, Volume 141, Issue 3, pp 419–431 | Cite as

Health care system collapse in the united states: Capitalist market failure!

  • Sam Mirmirani
  • Richard N. Spivack


When compared with other industrialized free-market economies, the United States has the highest per capita health expenditure, yet, Americans are the least satisfied with their health care system. This industry has been confronted with serious problems resulting in a departure from the ‘Pareto efficient’ conditions. There are many circumstances under which this departure may occur, one such cause is ‘market failure.’ Sources of market failure in the health care industry are identified as: 1) lack of competition; 2) insufficient information; 3) inadequate access to health care services; 4) presence of externalities; and 5) a persistent disequilibrium in the hospital, physicians, and nurses markets. The pricing of physician's services has often been described as that of a discriminating monopolist. Through market segmentation and patient demand manipulation the physician is able to charge different prices for virtually identical services. One form of market segmentation is that of physician specialization and sub-specializations thus contributing to the explosion in medical costs. This paper concludes that America's health care industry has reached a crossroad. A national health insurance is needed including the implementation of uniform pricing and the discouragement of ‘sub-specializations’ with its price discriminatory practices. But National Health Insurance comes with a price of its own, the possible development of a ‘medical-industrial complex.’


National Health Insurance Health Expenditure Market Failure Market Segmentation Uniform Price 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Stenfert Kroese 1993

Authors and Affiliations

  • Sam Mirmirani
    • 1
  • Richard N. Spivack
    • 2
  1. 1.Associate Professor of Economics, Coordinator of Health Care ManagementBryant College, SmithfieldRhode Island
  2. 2.Professor of EconomicsRoger Williams University

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