Presentation on theme: "Problems of the American Health Care System"— Presentation transcript:
1 Problems of the American Health Care System 1. Lack of Health Insurance Coverage for47 Million People2. High Cost of Health Care3. Growth in the Costs of Health Care4. Quality of the Health of Americans
3 Total Health Care Expenditures as a Share of GDP, 2003
4 Infant Mortality and Life Expectancy, 2007 Infant Deaths Per 1,000 Births Life Expectancy at BirthAustraliaAustriaCanadaChileDenmarkFinlandFranceGermanyIrelandItalyJapanNew ZealandNorwaySpainSwedenSwitzerlandUnited KingdomUnited States
6 World Health Organization Ranking of Health Care Systems 1. France Norway2. Italy Portugal3. San Marino Monaco4. Andorra Greece5. Malta Iceland6. Singapore Luxembourg7. Spain Netherlands8. Oman United Kingdom9. Austria Ireland10. Japan Switzerland41 USA
7 Why Have Health Care Costs Increased So Greatly? Demand for Health Care Has Been Rising1. Rising Incomes2. Aging of the Population3. Unhealthy Lifestyles4. More Health Care Services Are Provideda. Fee-for Serviceb. Medical Malpractice5. Increased Insurance CoverageCosts of Providing Health Care Have Been Rising1. Some Restrictions on the Number of Physicians2. Slow Growth in Worker Productivity3. Tremendous Technological AdvancesBetween 1/3 and ½ of the increase in health care costs can be explained by rising incomes, the aging population, the increased insurance coverage. And the slow worker productivity growth. The rest is explained by the high cost of medical advances.
8 Why Do People Have Health Insurance? 1. Health Problems Can Be Random Events That Can Cause Great Financial Hardship2. People are Risk Averse3. The Tax Law – A $126 Billion TaxBreak
9 Why Must All Employees Be Covered by Health Insurance? 1. Adverse Selection2. Asymmetric Information3. The Lemon’s Principle
10 Inefficiencies Caused by Health Insurance 1. Moral Hazard2. Increased Demand for Health CareServices3. May Prevent People From Changing Jobs and Prevent Employers FromHiring Older Workers
11 Why is Health Care Different From Food? 1. Supplier-induced demand2. Health Insurance3. Insufficient CompetitionA. PhysiciansB. HospitalsC. Pharmaceutical Companies4. Externalities
12 The British National Health Service 1. Treatment is decided by doctors2. Health care is mostly tax financed and mostly free.3. Little use of fee-for service4. Health care is explicitly rationed because an overall budget limits the amount of service that can be provided5. One of the cheapest systems – spending about 7% of GDP (c.f. 16% for the USA)6. Yet the British population is as healthy as the American population.
13 British General Practitioners 1. Each person registers with a GP. One is free to choose his or her GP and to change GPs.2. GPs are self-employed.3. Most of their money comes from a Family Health Authority. It gets its money from the NHS budget.4. The doctor is paid a capitation fee + an allowance to run the practice.5. An average GP earned about $200,000 per year in Half earned more than this.6. The patient pays nothing for doctor visits or home visits.7. For a major problem, the GP refers the patient to a specialist.
14 British Hospitals1. Hospital doctors are all specialists. They are government employees and receive a salary. They earn more than GPs. There is no fee-for-service.2. All hospital treatment is free to the patient.3. Hospitals are self-governing bodies run by their own board.4. The NHS gets most of its funding from general taxes. This is allocated to District Health Authorities. These can buy health care from any hospital in any area. This is designed to create greater competition and therefore increase efficiency.
15 Advantages of the British Health Care System 1. Incentives to economize and not over-supply health care.2. NHS is inexpensive by international standards. Because there is no billing of patients, only 3% of health care spending goes for administration, compared to about 25% in the USA.3. Avoids the problems of private health insurance such as adverse selection and moral hazard.4. Because health care is free, earlier diagnosis is more likely.5. Variation in the quality and quantity of treatment received by people at different income levels is smaller than in the USA.6. No one in Britain fears that and illness will cause financial ruin!
16 Problems of the British Health Care System 1. Too few resources are devoted to NHS. Much equipment is old and out-of date.2. There are long waiting times.3. The “Brain Drain” – leads to reliance on foreign trained doctors.4. Inefficiency and inflexibility of a government bureaucracy.
17 Recent British Government Responses 1. Funding for the NHS approximately doubled between 1997 and 2005.2. Pay for physicians has increased.3. Introduction of market elements and competition.4. No one of any political party has proposed eliminating the NHS!
18 Similarities of Canadian and British Health Care 1. Universal Coverage2. Public Funding through Taxes3. People do not pay for “essential” health services. There are no deductibles or co-payments. Therefore, there is much less paperwork.
19 Similarities of Canadian and American Health Care Systems 1. Most doctors are in private practice.a. Doctors are paid on a fee-for-service basisb. Fees are negotiated with the province.c. Doctors cannot bill the patient above the negotiated fees.2. Hospitals are non-profit organizations run by their own boards.3. There is significant use of private insurance, mostly received through employment. This covers “non-essential” services. About 30% of health care costs are paid privately.
20 Advantages and Disadvantages of the Canadian System 1. Lower cost than in the U.S.a. Advantages of being a monopsonybuyer2. Better health outcomes than the U.S.Disadvantages1. Long waiting times2. Low number of doctors and nurses3. Decrease in spending by the nationalgovernment4. Equipment is in need of replacement. Technologycan be out-of-date. Innovation is lacking.
21 Proposals to Lower Health Care Costs 1.Increase Deductibles and Co-Payments2.Preferred Provider Organizations (PPO)3.Health Maintenance Organization (HMO)a. Fixed Fee Per Employeeb. Doctors Are Salariedc. Restricted Choiced. Must Be Referred to a Specialist
22 Proposals to Provide Access 1. Tax Credits2. Pay or Play (Mandates)3. Single Payer
23 Hillary Clinton Proposals 1. Individual Mandate – Requires Everyone to Have Health InsuranceA. Large Businesses Are Expected toProvide CoverageB. Small Businesses Get Tax Creditsto Help Them Pay for CoverageC. Individuals Also Get Tax CreditsD. Insurance Pools2. If Happy, People Can Keep the Plan TheyNow Have3. Insurance Companies Would Have to Accept All4. Emphasis on Prevention to Hold Down Costs5. Use of Computer Technology to Reduce Costs6. Best Practices Institute7. Medicare to Negotiate Pharmaceutical Drug Prices