Utrecht University School of Economics (USE), P.O. Box 80125, 3508 TC Utrecht, the Netherlands
This article aims to address the lack of transaction costs economics (TCE) studies in health economics. It provides a content analysis of ObamaCare and 25 lawsuits that challenge the 2010 reform. It shows that the cultural environment determines the strength of features of governance structures and in line with this the strength of their instruments. Following Williamson's TCE model of governance structures, the zero transaction costs criterion is supplanted by the remediableness criterion. Assuming that ObamaCare might be ruled to be constitutional, the regulation of healthcare is found to be a comparative efficient governance structure in addressing adverse selection. However, the TCE analysis also reveals that ObamaCare itself is subject to some flaws in efficiency and effectiveness, namely: unbalanced adaptation mechanisms, unbalanced incentives and weak enforcement devices.
(Online publication June 07 2012)
I acknowledge the very helpful comments of Johan den Hertog (associate professor at USE), Gerwin van der Laan (assistant professor at USE), Geoffrey Hodgson (editor) and two anonymous reviewers. The author alone is responsible for any remaining errors.