Transcript Economic Security and the Economics of Life and Health

Health Care
Richard MacMinn
1
Friday, July 17, 2015
Copyright MacMinn.org
Objectives





2
Note the health care expenditures by country
Discuss the market imperfections that affect the
health insurance markets
Identify some of the circumstances leading to higher
health care costs in the United States
Note how health care providers have and can
respond to control costs
Describe the types of organizations set up for the
delivery of health care and insurance in the U.S.
MacMinn
0
3
United
Kingdom
Japan
Sweden
Spain
Netherlands
Australia
Canada
France
Germany
United
States
Health care expenditures as a
percentage of GDP
14
12
10
8
6
4
2
MacMinn
Health care market imperfections





This may or may not give rise to hidden information
problem. Doctors and other providers may have good
informationthe
about
the services
being provided
Measuring
benefit
of health
care but find
it very costly
to communicate
thatnot
information
to
is difficult
because
health is
a
consumers. Hence it is difficult at best for consumers
product
orinformed
service;
we purchase
to make
decisions,
to consider alternative
medical
service
to
improve
or to this
partial solution
problem is
Payingtreatments,
full cost etc.
for One
a service
provides
the
for the general
practitioner
actmay
as anthink
advisor to
maintain
health.
Hence
we
right
incentive
to select
the tolevel
of services
patients
Metric
Imperfect information
Moral hazard
Entry barriers
of health at
in the
partmargin.
as the output
a is
appropriate
Whenof
less
paid,
more
may
be demanded.
This isConsumers
the
production
process
that
establish.
The price of
services is
alsowe
a problem.
moral
hazard
problem
and
it applies
to incentive to
Economies of scale
not
paying would
the entire
price
do exercise,
not have theno
The
inputs
be
diet,
health care.
comparevaccinations,
even when it is possible.
In some cases this
smoking,
etc. The
argument applies to physicians as well, e.g., salaried
output
of thein production
process is
physicians
an HMO.
random.
4
Adverse selection can become a problem in health
insurance markets if consumers have an informational
advantage. Note what alleviates or exacerbates this
problem.
MacMinn
Other health care considerations




Medical technology
Inflation
Malpractice
Culture
–
–
5
Right versus privilege
Right implies rationing
MacMinn
The health care environment



Health care comparison
Medical care cost trends
Causes of health care cost inflation
–
–
–
–
–

7
Demographic
Malpractice
Technological change
Economies of scale
Cost shifting
Employer responses to rising health costs
MacMinn
Development of managed care

Characteristics
–
–


Differences between traditional insurance and
managed care
Growth
–
–
9
Managed care links insurance and the delivery of services
Capitation is a method by which providers are paid for
services on a per member, per month basis, as prepayment
whether the services are used or not. This places some
financial risk on the provider.
HMO have enrolled more that 20% of the U.S. population
HMO are becoming more diversified, e.g., include traditional
indemnity options, PPOs, etc.
MacMinn
Federal regulation







11
Age discrimination in employment act (1967)
Pregnancy discrimination act (1978)
Employee retirement income security act (ERISA)
Consolidated omnibus budget reconciliation acts
(1986, 1990)
Americans with disabilities act (1990)
Health insurance portability and accountability act
(HIPAA,1996)
Family medical and leave act (1993)
MacMinn
Post-retirement welfare costs

Financial accounting standards board (FASB) issued FAS 106
–
–
–
FAS 106 ended pay as you go accounting for non-pension benefits
Employers must calculate the cost of providing coverage to all
active and retired employees as a current lump-sum value and
begin expensing it
FAS 106 caused two changes


–
12
Some employers have lowered or eliminated retiree health care
benefits
Employers have explored methods to pre-fund retiree medical benefits
There is as yet no fully tax qualified vehicle available to pre-fund
retiree welfare plans
MacMinn
Health insurance providers





13
Commercial insurers
Blue Cross and Blue Shield
Managed care organizations
Self-insured plans
Federal or state governments
MacMinn
Questions




14
Compare and contrast market imperfections
in life and health insurance.
What are the cost and benefits of the current
health system in the United States?
Critique the current steps to control health
care costs in the United States.
What advantages can employers expect by
switching to self-insured health care plans?
MacMinn