Chapter 21 - Health care. After reading this chapter, you should be able to: Convey important facts about rising health care costs in the United States, relate the economic implications of rising health care costs, discuss the problem of limited access to health care for those without insurance, list the demand and supply factors explaining rising health care costs, summarize the goals of the Patient Protection and Affordable Care Act and the major changes that it institutes.
Chapter 21 Health Care McGrawưHill/Irwin Copyrightâ2009byTheMcGrawưHillCompanies,Inc.Allrightsreserved Chapter Objectives Rising health care costs • Economic implications • Problem of limited access to health care for the uninsured • The market for health care • Potential reforms of the U.S health care system • Recent legislation 21-2 Health Care Facts • 16% of GDP in 2006, up from 5.2% in 1960 • 10% of U.S employment • Overall prices 3.3% higher each of last years • Spending to grow 7.3% per year next 10 years • 45 million uninsured 21-3 Health Care Expenditures 2006 Data Sources of Funds Health Care Expenditures Hospitals Nursing Homes Prescription Drugs Medicaid Private Health Program Insurance Administration 31% 23% Dental, Vision, Misc 8% 10% 7% Medicare 15% 34% 19% 21% 12% Copayments, Deductibles, Etc Doctors Other Private Expenditures 7% 13% Military, Other Public Insurance 21-4 Health Care Spending Percentage of GDP, Selected Nations, 2005 10 15 United States Switzerland France Germany Canada Australia Italy United Kingdom Japan Mexico Source: Organization for Economic Cooperation and Development 21-5 Economic Implications of Rising Costs • Reduced access to care • Labor market effects – Slower wage growth – Part-time and temporary workers – Outsourcing and offshoring • Personal bankruptcies • Impact on government budgets 21-6 Other Issues • Are we healthier? – Yes • Too much spending? – Maybe • Limited access – The uninsured 21-7 Why the Rapid Rise in Costs? • Peculiarities of the health care market – Ethical and equity considerations – Asymmetric information – Positive externalities – Third-party payments: insurance 21-8 Increasing Demand • Rising income – Role of elasticity • Aging population • Unhealthy lifestyle • Role of doctors – Supplier induced demand – Defensive medicine – Medical ethics 21-9 Role of Health Insurance • The moral hazard problem – Less prevention – Overconsumption • Government tax subsidy 21-10 Why the Rapid Rise in Costs? Insurance and the overallocation of resources to health care With Health Insurance Without Health Insurance P P S S b Pa Pa Pc a Efficiency Loss From Overallocation c D D Qa Q Qa Qc Q 21-11 Supply Factors • • • • Supply of physicians Slow productivity growth Changes in medical technology Relative importance of supply and demand factors 21-12 Health Care System Reform • Universal access – “Play or pay” – Tax credits and vouchers – National health insurance • Cost containment: altering incentives – Deductibles and copayments – Managed care (PPO and HMO) – Medicare and DRG system 21-13 Recent Laws and Proposals • Prescription drug coverage – Medicare Part D • Health savings accounts • Limits on malpractice awards 21-14 Mandatory Health Insurance • • • • • • • • Massachusetts in 2007 Proof of insurance or pay fee Eliminate free riders Expected to reduce cost for some Will increase demand State subsidy Neighboring state issues May not work for entire nation 21-15 Key Terms • • • • deductibles copayments fee for service defensive medicine • tax subsidy • “play or pay” • national health insurance (NHI) • preferred provider organization (PPO) • health maintenance organization (HMO) • diagnosis-relatedgroup (DRG) system • Medicare Part D • health savings account (HSA) 21-16 Next Chapter Preview… Immigration 21-17 ... maintenance organization (HMO) • diagnosis-relatedgroup (DRG) system • Medicare Part D • health savings account (HSA) 2 1- 16 Next Chapter Preview… Immigration 2 1- 17 ... Defensive medicine – Medical ethics 2 1- 9 Role of Health Insurance • The moral hazard problem – Less prevention – Overconsumption • Government tax subsidy 2 1- 10 Why the Rapid Rise in Costs? Insurance... D D Qa Q Qa Qc Q 2 1- 11 Supply Factors • • • • Supply of physicians Slow productivity growth Changes in medical technology Relative importance of supply and demand factors 2 1- 12 Health Care System