Role of Government in Health Care Provision

The government intervenes in the health sector with a general view of improving the health status of the people. In general governments have two roles viz.
(i) Preventing or correcting failures in the health sector markets
(ii) Ensuring equity.
Government participation to ensure that the health needs of the poor are metis an intervention in the market for health care. It is warranted as the poor are unable to afford costly health care and the private sector is not motivated as much as the government by social concern.

If the poor were to be given choice about what to purchase, the poor are more likely to spend money on improving their health through non-health purchase such as better sanitation, nutrition, and housing. Where income is still lower, the purchase of health care is diverted in favour of other primary goods such as food. This means relatively rich people spend a far higher amount on health (including health related expenditures like going to health clubs and other forms of sports which are both recreational as also health promoting). A significant percentage of their income on health thus goes towards maintenance of health. But some basic health care is a necessity for all. One way by which the government tries to improve equity is through intervention in the form of government subsidy or provision of low cost health care services.

The twin roles of correcting market failures and ensuring equity often overlap. For example, not only is the treatment of tuberculosis more likely to be a service needed by the poor but successful therapy produces a positive externality benefiting the patient as well as others.