ABSTRACT
The chapter provides a framework for assessing the role of governments in health care markets. It explores the conventional approach favored by economists, which emphasizes market failure as the rationale for government intervention. The chapter also provides historical review, including examples of federal, state, and local involvement in the health economy. It focuses on regulation of the hospital sector, one of the major cost drivers in all advanced economies. The chapter evaluates government programs with a more critical eye, provides discussion on government failure to identify impediments in developing effective programs. It suggests that government spending accounts for a substantial portion of all health care spending, governments are deeply involved in producing as well as financing health care services, and governments regulate the health care industries. The potential for monopoly power exists even in markets characterized by a large number of sellers, as in the markets for doctor and dental services.
