by James C. Capretta, Kevin Dayaratna
The Heritage Foundation
January 09, 2014
Backgrounder
Through overly restrictive policies, Medicare, Medicaid, and tax subsidies, the federal government has dominated the operation of the U.S. health care system for the past half-century. It is mainly federal policies that are responsible for driving up costs and making health insurance unaffordable for so many Americans. The argument over the future of U.S. health care is essentially an argument over how best to allocate scarce resources in this large and important sector of the national economy. Many economists believe that health care is inherently different from other industries and cannot operate in a traditional marketplace. They argue that governmental regulation, however unsatisfactorily administered, is better than allowing a dysfunctional marketplace to misallocate resources and create inequities. They are wrong. Two health policy analysts explain why the market can not only work in health care but can also provide substantial benefits to the American consumer.



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