2. 36 - 1 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show THE ECONOMICS OF HEALTH CARE 36 C H A P T E R

3. 36 - 2 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show THE HEALTH CARE INDUSTRY Twin Problems: Costs and Access High & Rising Health Care Costs Total Spending on Health Care Deductibles - Copayments Medicare - Medicaid Percentage of GDP International Comparisons

4. 36 - 3 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show Economic Implications of Rising Costs Reduced Access to Care Labor Market Effects Slower Wage Growth Use of Part-time & Temporary Workers Impact on Government Budgets The basic problem... QUALITY OF CARE Are We Healthier?

5. 36 - 4 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show LIMITED ACCESS Why the Rapid Cost Increases? Peculiarities of the Health Care Market Ethical and Equity Considerations Asymmetric Information Spillover Benefits Third-Party Payments: Insurance The Uninsured: 16% of Population

6. 36 - 5 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show INCREASING DEMAND FOR HEALTH CARE Rising Incomes: Role of Elasticities An Aging Population Unhealthy Lifestyles The Role of Doctors Supplier-Induced Demand Fee-for-Service Defensive Medicine Medical Ethics

7. 36 - 6 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show ROLE OF HEALTH INSURANCE Insurance and Governments Pay 79% of all Payments Moral Hazard Problem Less Prevention Overconsumption Government Tax Subsidy Graphically...

8. 36 - 7 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show INSURANCE AND THE OVERALLOCATION OF RESOURCES TO HEALTH CARE D S PuPu QuQu Overallocation with health insurance 0 P Q PiPi QiQi

9. 36 - 8 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show SUPPLY FACTORS IN RISING HEALTH CARE PRICES Supply of Physicians Slow Productivity Growth Changes in Medical Technology Relative Importance Reform of the Health Care System Universal Access Play-or-Pay Tax Credits and Vouchers

10. 36 - 9 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show SUPPLY FACTORS IN RISING HEALTH CARE PRICES National Health Insurance (NHI) Arguments for NHI: Choice of Physicians Reduce Administrative Costs Separate Employment from Insurance Single-Insurer Market Power for Cost Containment

11. 36 - 10 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show Against NHI: Won’t Control Costs Long Waits for Care Doctor “Strikes” Government’s Poor Record Undesirable Redistributive Effects SUPPLY FACTORS IN RISING HEALTH CARE PRICES National Health Insurance (NHI) Arguments

12. 36 - 11 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show COST CONTAINMENT: ALTERING INCENTIVES Deductibles - Copayments Managed Care Preferred Provider Organizations (PPOs) Health Maintenance Organizations (HMOs) Medicare and DRG Diagnosis-Related-Group (DRG)

13. 36 - 12 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show RECENT LAWS & PROPOSALS Portability and Accountability Medical Savings Accounts Prescription Drug Coverage Chapter Conclusions

14. deductibles copayments fee for service defensive medicine tax subsidy “play or pay” national health insurance (NHI) preferred provider organizations (PPOs) health maintenance organizations (HMOs) diagnosis-related-group (DRG) system ENDBACK Copyright McGraw-Hill/Irwin 2002

15. 36 - 14 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previous Slide Next Slide End Show International Trade Chapter 36 Coming next...