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21
Health Care
McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.
U.S. Emphasis on Private Health Insurance
• Patient Protection & Affordable Care Act (2009)
• During WWII employers offered insurance
• Continued as an employee benefit
• Led to overuse & higher prices
• Tendency to regulate industry
LO1 21-2
Costs and Access
• Costs increased rapidly
• Higher prices
• Increased quantity of services
• Projected to grow at 6.1% annually over next 10 years
• Access
• 46 million uninsured
LO1 21-3
Health Care Expenditures
Nursing Homes and
Home Health Care, 9%
Prescription Drugs, 10%
Program Admin, 7%
Dental, Vision, Misc., 22%
Physicians, 21%
Hospitals, 31%
Sources of Funds
Medicaid, 15%
Medicare, 20%
Military, Other Public Insurance,
13%
Other Private
Expend., 7% Copayments, Deductibles, etc., 12%
Private Health
Insurance, 33%
Health Care Spending
LO1 21-4
Health Care Spending
LO1
• Costs as a percentage of U.S. GDP
21-5
Health Care Spending
• Is the U.S. healthier?
• Longer life expectancies
• Most advanced medical equipment and technologies
• Half of medical research funding is in U.S.
• Increase in breast cancer mortality
• TB has reappeared
• AIDS epidemicLO1 21-6
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
LO2 21-7
Limited Access
• The poor are likely to be uninsured
• Make “too much” to qualify for Medicaid
• Waiting for treatment increases costs
LO3 21-8
Why the Rapid Rise in Costs?
• Peculiarities of the health care market
• Ethical and equity considerations
• Asymmetric information
• Positive externalities
• Third-party payments: insurance
LO4 21-9
• Increasing demand for health care
• Rising income• Role of elasticity
• Aging population
• Unhealthy lifestyles
• Role of doctors• Supplier induced demand
• Defensive medicine
• Medical ethicsLO4
Why the Rapid Rise in Costs?
21-10
• Role of health insurance
• The moral hazard problem
• Less prevention
• Overconsumption
• Government tax subsidy
• Rationing to control costs
LO4
Why the Rapid Rise in Costs?
21-11
Supply Factors in Rising Health Costs
• Supply of physicians
• Slow productivity growth
• Changes in medical technology
• Relative importance of supply and demand factors
LO4 21-12
Cost Containment: Altering Incentives
• Deductibles and copayments
• Health Savings Accounts (HSA)
• Managed care• Preferred Provider Organizations
(PPO)
• Health Maintenance Organizations (HMO)
• Medicare and DRG
• Limits on malpractice awardsLO4 21-13
Patient Protection & Affordable Care
• Preexisting conditions, caps, and drops
• Employer mandate
• Personal mandate
• Covering the poor
• Insurance exchanges
• Other provisions
• Taxes
LO5 21-14
Patient Protection & Affordable Care
• Objections and alternatives
• Greater inefficiencies in health care
• First step to national health insurance
• Lack of revenue sources
• Increased consumption
• Need to force consumers to weigh marginal benefits and costs
LO5 21-15