Creating a Monopsony in HealthCare

The rising cost of living is one that is much palpable across the world. Food prices at an all time high, accommodation becoming unbearable and day by day individuals having little or nothing in savings, healthcare is not left out from the inflation. Some Governments have increased the interest rates to help with the housing crisis and the hope is those economies do not end up in recession as those rates remain high.

Healthcare has been sold to be a public good for a while, let's explore the definition of public good and the requirements. A public good or social good is a good that is both non-excludable and non-rivalrous. A common example used to describe it is a lighthouse which is beneficial to the maritime community. Other examples include street lighting, flood control systems, public parks and some say knowledge. A lot of individuals and even some Governments try to fit Healthcare into that box but I am a strong believer it is not a public good but indeed a business and should be influenced by the laws of demand and supply.

That said, with individuals having less and less savings as cost of living increases exponentially, there is a need to create a monopsony for health care services if not catastrophic health spending might be the day even with the progress made so far. I will discuss why I think so shortly. But first what exactly is a monopsony, most people are familiar with monopoly which is basically the domination of a market by a single entity (or at least play the multi-player economics-themed board game). Monopsony on the other hand is a market situation in which there is only one buyer. Imagine a single individual in a market square or a marketplace like its popularly called now purchasing goods and services on behalf of everyone. That is a lot of responsibility right? who do you want to bestow such honors to? Some experts consider Amazon as one but in the real sense they are not, its such an enormous task to taken on really. The Government can however stand the test of this burden that needs to be taken off.

Now that I have described a monopsony, why do I think it is necessary that we go down that route? The high cost of living as described earlier cant seem to stop rising, however one thing that stays the same or cannot meet up with the inflation is income. People have to pay more for their food, mortgage, rent, car loans, and this continues to reduce the monies in their pockets. Some Health Insurance models support Co-payments and Deductibles which is a barrier to prevent moral hazard and supplier-induced demand. Individuals can get to the point they might not have enough for those fees and then might not get the care needed or when they do pay those fees it affects their purchasing power and even bankruptcy.

How will monopsony or a single payer system solve this conundrum? The major advantage of a creating one is that the buyer sets the demand and therefore controls the price. Monopsonies are not immune from inefficiencies but if the Government is the player it then sets a fair bargaining as will need adequate revenue from the suppliers also to boost the economy. This can also be done without subsidies that will burden the Government on the long run.

The Administrative work that needs to be put in is cumbersome, but the goal is to protect citizens and residents from become impoverished through a spending that one cannot shy away from when needed because of the consequence. An individual can decide not to own a home, buy a car, even eat on some days but with health care sometimes the alternative is unimaginable. I believe a public-private partnership can ease the barriers and the giant tech companies will have a say but it is achievable and the pressing points will be different across all nations.

Do you think this is achievable in your country or is it already in motion in your country. I will like your thoughts on this.

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Written by

Olusegun Isioye is the Special Program Manager Lagos State Health Management Agency where he leads strategy, innovation, and projects. Dental Surgeon and Health Economist with a knack for strategic consulting and Nation-building