Economic Issues Policy - Jacqueline Murray Brux Health Care We must address the crushing cost of health care. This is a cost that now causes a bankruptcy

Economic Issues & Policy- Jacqueline Murray Brux

Health CareWe must address the crushing cost of health care. This is a cost that now causes a bankruptcy

in America every thirty seconds. By the end of the year, it could cause 1.5 million Americans to lose their homes. In the last eight years, premiums have grown four times faster than wages. And in each of these years, one million more Americans have lost their health insurance.…. [The budget] includes an historic commitment to comprehensive health care reform – a down-payment on the principle that we much have quality, affordable health care for every American.

—President Barack Obama, Address to the Joint Session Of Congress, February 24, 2009

1© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

PowerPoint slides prepared by: Andreea Chiritescu

Eastern Illinois University

U.S. Health Care Expenditures and Outcomes

• Total health care expenditures• In the United States• Not adjusted for inflation• 1960: $28 billions• 2009: $2,555 billion

• Inflation• An increase in the average price level

© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 2


Table 8-1: National health expenditures, selected years, 1960 to 2009 (current dollar amounts in billions)


• Gross domestic product (GDP)• A measure of the total output (and income)

produced in a nation in one year• Health care expenditures• As percentage of GDP• US: 15.3%• Increased over time



Table 8-2: National healthcare expenditures as a percent of GDP of the Western industrialized countries and Japan, 2006


• Increased health care expenditures• Allocate more resources to health care• Trade-off: allocate fewer resources to produce

goods and services• Life expectancy• The age to which a baby born in a particular

year can be expected to live on average



Figure 8-1: Production possibilities curve for health care

As we have moved from point A to point B, we have obtained more health care, but we havegiven up other goods and services. At point C, we are using our resources inefficiently.


• Infant mortality rate• The number of infants who die before their first

birthday per every 1,000 live births• Quality of health care in the United States• Varies among racial and ethnic groups

• Life expectancy • White males: 76 years• White females: 81 years• African-American males: 70 years• African-American females: 77.1 years



Table 8-3: Life expectancies and infant mortality ratesa for the western industrialized countries and Japan, 2007


Table 8-4: A Comparison of infant mortality rates in the United States by gender, race, and ethnicity, 2003

U.S. Health Care Problems

• Escalating health care costs• A growing demand for health care • Waste and inefficiency

1. Physician sovereignty• A medical doctor’s control over the demand

for medical procedures2. Fee-for-service• The charging of a specific fee for provision of a

specific health care service



3. Malpractice insurance• Insurance carried by health care professionals

to protect themselves from large malpractice damage awards

4. Defensive medicine• The ordering of unnecessary tests and services

by health care professionals solely to protect themselves from charges of malpractice



5. Third-party payment• A health care payment made by someone

other than the patient or the patient’s family6. Rapid technological change• Highly specialized equipment• New pharmaceutical products



7. Cost shifting• The practice of recovering the unpaid costs of

some patients by charging higher prices to other patients

8. Attitudes of patients • Demand excessive care without much regard

for cost



Figure 8-2: Increased demand and supply of medical care

Because demand has increased more than supply since 1960, medical care prices haverisen as we have consumed a greater quantity of health care.


9. Waste and inefficiencies• Unnecessary tests and medical procedures• Unnecessary surgeries and drugs• Extremely expensive equipment• Paperwork costs• Patients forgo cost-effective preventative

health care interventions• Prenatal care; blood pressure checks• Child immunizations



• Lack of access to health care• Health insurance or program• Private insurance• Purchased from a private insurance company• Through place of employment

• Public health coverage • By the government: Medicare, Medicaid

• 15% of population have no health coverage



Table 8-5: Percent of people without health insurancecoverage, by race and ethnicity, 2008


• Medicaid• A government program providing medical

coverage for eligible low-income people• Medicare• A government program providing medical

coverage largely to elderly people


Private Insurance

• Patient • Pays a portion of the cost: • Premiums• Deductibles• Coinsurance payments

• Premium• A payment to purchase and keep in force an

insurance policy


Private Insurance

• Deductible• A payment on an annual or per-service basis

that must be made by the insured person before the insurance company’s payments begin

• Coinsurance payment• A percentage of medical expenses that the

insured person must pay over and above the deductible


Private Insurance

• Regressivity• A situation in which a larger percentage of

income is taken from low-income people than high-income people• Could be eliminated if premiums and other

payments were tied to income• With health insurance• Out-of-pocket expenses may still be high


Medicaid

• Designed to pay for medical services • For the nation’s poor• For medically indigent persons• Have such high medical expenses that,

whatever their income, they cannot afford their medical care

• Eligibility • Depends on the family’s income• Medicaid is means-tested


Medicaid

• Is national in scope• Administered by the individual states

• States • Free to establish their own eligibility

requirements and benefit levels within certain federal guidelines• Have the option of supplementing federal

financing with state revenues


Medicaid

• Means-tested• A way of determining who is eligible for a

program, based on the person’s low-income status and possibly low asset ownership

• Eligibility and coverage• Varies considerably by state• Other factors: age, disability, and assets


Medicaid

• SCHIP• State Children’s Health Insurance Program• Federal program• Health care coverage for children in low-

income working families whose income • Is too high for the children to qualify for

Medicaid• But too low for the family to afford private

insurance


Medicaid

• SCHIP• Jointly financed by the federal and state

governments• Administered by the states• Include immunizations and care for healthy

babies at no cost


Medicare

• Eligibility• Almost all elderly persons over the age of 65

years • Certain categories of disabled people• Not means-tested• Both rich and poor are covered alike

• Medicare hospital insurance (Part A)• Financed by required payroll taxes on workers

and employers


Medicare

• Optional Medicare medical insurance (Part B) • Physicians’ services, certain treatments, and

other medical services and supplies• Financed through • Monthly premiums• Co-payments• Deductibles

• Federal government finances a large share of these costs


Medicare

• Prescription drug coverage (Part D)• Recipient pays• A monthly premium• Deductible, Fee (co-payment)

• Provided entirely by private companies• Increasingly expensive program• Rising medical costs• Increasing proportion of elderly people in our

population


The Rationing of Health Care

• We ration health care • On the basis of income and health insurance

• What should be covered?• Educational and lifestyle programs?• Stop-smoking clinics, nutritional counseling

• Preventative care?• Checkups, immunizations, prenatal visits

• Curative programs? • Surgeries, organ transplants


The Rationing of Health Care

• Who should be covered?• 15% of population• Entirely without private or public health

insurance• Those without high incomes, without access

to private insurance, and without access to public insurance in the form of Medicaid or Medicare


Alternatives for Health Care in the U.S.

• Privatization & increased competition, supply side of health care• Could result in lower costs• Hospitals • Not run on a “for-profit” basis• Offering quality overall care• Utilizing the most advanced technology• Specializing in particular services



• Privatization & increased competition, supply side of health care• Privatization of government-owned and

government-run hospitals• Increase competition among hospitals• Pay more attention to the bottom line• Eliminating a great deal of inefficiency

• Advertising within the health care industry



• Increased competition, demand side • Well-informed consumer• People’s choices are constrained by • Insurance coverage, the availability of

providers accepting Medicare and Medicaid• Curtailment/elimination of Medicare,

Medicaid• Rising health care costs: demand that is not

tempered by the usual norms of frugality



• Medical Savings Accounts• Insurance • The purchaser makes payments into an

account that can be drawn against in times of illness• Monies not spent for medical care are

returned to the insured person



• Health maintenance organizations (HMOs)• Health insurance plans• The covered care is limited to designated

providers• The use of services is coordinated by a

patient’s primary care physician• Encourage preventative care



• Preferred provider organization (PPO)• Health insurance plan• A group of medical providers contract to

provide the insured patient’s medical care at discounted rates

• National health insurance• Government program ensuring universal

coverage of the population



• The Massachusetts Plan• Requires all citizens to have health insurance• It fines those who do not• The state offers subsidized insurance plans to

low-income residents • Generous definition of low income

• Problem: many of the people with the state-subsidized plan are being turned away from medical providers



• President Obama - health care reform• Temporary provision of health care coverage

to those who have lost their jobs• Reauthorization and expansion of the

Children’s Health Insurance Program• Computerization of the nation’s health care

records



• President Obama - health care reform• Development and dissemination of

information on effective medical interventions• Temporary increases in funding for Medicaid

and new spending for prevention and wellness programs• Eight principles



Figure 8-3: President Barack Obama’s eight principles for reforming America’s health care system

1. Guaranteed Choice. The plan should provide Americans a choice of health plans and physicians. People will be allowed to keep their own doctor and their employer-based health plan.2. Make Health Care Coverage Affordable. The plan must reduce waste and fraud, high administrative costs, unnecessary tests and services, and other inefficiencies that drive up costs with no added health benefits.3. Protect Families’ Financial Health. The plan must reduce the growing premiums and other costs American citizens and businesses pay for health care. People must be protected from bankruptcy due to catastrophic illness.4. Invest in Prevention and Wellness. The plan must invest in public health measures proven to reduce cost drivers in our system—such as obesity, sedentary lifestyles, and smoking—as well as guarantee access to proven preventative treatments.


Figure 8-3: President Barack Obama’s eight principles for reforming America’s health care system5. Provide Portability of Coverage. People should not be locked into their jobs just to secure health coverage, and no American should be denied coverage because of a preexisting condition.6. Aim for Universality. The plan must put the United States on a clear path to cover all Americans.7. Improve Patient Safety and Quality Care. The plan must ensure the implementation of proven patient safety measures and provide incentives for changes in the delivery system to reduce unnecessary variability in patient care. It must support the widespread use of health information technology with rigorous privacy protections and the development of data on the effectiveness of medical interventions to improve the quality of care delivered.8. Maintain Long-Term Fiscal Sustainability. The plan must pay for itself by reducing the level of cost growth, improving productivity, and dedicating additional sources of revenue.


• Health Care Reform Bill controversy • Should the government role in health care be

expanded or reduced? • Should there be a “government option”?

• Should pharmaceutical firms and insurance companies be forced to reduce their profits? • Should businesses be required to provide

coverage for their workers or else contribute to a government insurance fund?



• Health Care Reform Bill controversy • Should citizens be required to have health

insurance? • Should the government subsidize businesses,

or low-income citizens—or all citizens, for that matter? • Should we place a surcharge (tax) on the rich? • Should we tax the health insurance benefits of

workers?



• Health Care Reform Bill – new ideas:• Private, consumer-owned cooperative• Affordable plan to compete with private

insurance companies• Onsite clinic for employees in their workplace• Provided by their employer• Including services for family members

• Free clinics for basic health screening and preventative care


Conservative versus Liberal

Liberals• Market has done a poor job of

allocating medical care• Special characteristics of health

care make it unlikely that the market will ever reach a fair and equitable solution

• Favor policy ranging from bolstering Medicaid and Medicare to developing national health programs on the order of those in other industrialized countries

Conservatives• Strongly oppose national

health programs • Expansion of the

government’s role• Privatization and increased

competition• Trimming of Medicare and

Medicaid,• Development of medical

savings accounts• Stronger role for the

unregulated market© 2010 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 47

Documents

Economic Issues Policy - Jacqueline Murray Brux Health Care We must address the crushing cost of health care. This is a cost that now causes a bankruptcy