government and the market for health care chapter 10

21
GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

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Page 1: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

GOVERNMENT AND THE MARKET FOR HEALTH CARE

Chapter 10

Page 2: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Uses of Health Care Funds in the U.S. (2010)

Source: Centers for Medicare and Medicaid Services [2012c].

10-2

Page 3: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Sources of Health Care Funds in the U.S. (2010)

10-3

Source: Centers for Medicare and Medicaid Services [2012c].

Page 4: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Private Health Insurance

• The Implicit Subsidy for Employer-Provided Insurance– World War II era price controls– Federal tax subsidy

10-4

Page 5: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

The Advantages of Employer-Provided Health Insurance

• Increase the risk pool• Reduce adverse selection• Lower administrative costs

10-5

Page 6: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Employer-Provided Health Insurance and Job Lock

• Job lock• Health Insurance Policy Portability and

Accountability Act of 1996 (Kennedy-Kassenbaum Act)

10-6

Page 7: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Cost Control and Private Insurance

• Cost-based reimbursement (fee-for-service)• Managed care

– Capitation-based reimbursement– Health Maintenance Organizations (HMOs)– Preferred Provider Organizations (PPOs)– Point-of-service (POS)

10-7

Page 8: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Medicare Expenditures(1966-2010)

Expenditures on Medicare as a Share of GDP

Real expenditures on Medicare

Source: Centers for Medicare and Medicaid Services [2012c].10-8

Page 9: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

How Medicare Works

• Benefits– Part A – Hospital insurance (HI)– Part B – Supplementary Medical Insurance (SMI)

• Financing– Payroll tax funds HI– General revenues fund SMI

10-9

Page 10: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Prescription Drug Benefit

• Part C – Medicare Advantage • Part D – Prescription Drug Benefit

– Monthly premium– Low deductible– Donut hole– Generous coverage for high costs

10-10

Page 11: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Cost Control Under Medicare

• Medicare’s retrospective payment system• Medicare’s prospective payment system

– Diagnosis related groups– Resource-based relative value scale system

• Medicare Managed Care

10-11

Page 12: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Medicare: Impacts on Spending and Health

• Expenditures on health care for the elderly• Health outcomes

10-12

Page 13: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Medicaid: Overview

• Medicaid• State Children’s Health Insurance Program

10-13

Page 14: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Medicaid Expenditures (1966-2010)

Source: Centers for Medicare and Medicaid Services [2012c].

10-14

Page 15: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Financing and Administration

• Joint Federal-State financing• State administration

10-15

Page 16: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Benefits

• States obligated to offer minimum package of benefits

• States may offer more generous benefits• State administrative flexibility

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Page 17: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Medicaid: Impacts on Health

• Take-up rate• Crowding out• Empirical evidence: Are Medicaid expansions

effective? Crowding out and taking up

10-17

Page 18: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Does Public Insurance Crowd Out Private Insurance?

Health insurance Health insurance Health insurance

Qua

ntity

of a

ll ot

her g

oods

Qua

ntity

of a

ll ot

her g

oods

Qua

ntity

of a

ll ot

her g

oods

A A AF F

F

B B B

M M M0 0 0

Amount of publiclyprovided insurance

Amount of publiclyprovided insurance

Amount of publiclyprovided insurance

C C C

10-18

E

A. Person who places relatively high value on private insurance

B. Person who places relatively low value on private insurance

C. Person who is uninsured before public insurance

Page 19: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Health Care Reform

• Individual mandates– The Massachusetts Plan

• Health savings accounts– Catastrophic insurance policy

• Single payer– International experiences

• Canada • United Kingdom

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Page 20: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Health Care Costs and Health Outcomes:U.S., Canada, United Kingdom

10-20

Page 21: GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

Final Thoughts

• Security vs. efficiency• No free lunch• Connection between health care expenditures

and health

10-21