Chapter 8 Economics of Health Care

Economic Approach to Health Care Competition in the market Healthcare market Demand Supply Competition

Competition Versus Regulation Standards of participation Cost containment and value

Market Failure in Health Care Free market competition Market failure Supplier-influenced demand Third-party payer Imperfect market

Rising Costs and Today’s Healthcare System Social Security Act of 1935 1959 Federal Employees Health Benefit Act and Blue Cross 1960’s Medicaid (Title XIX) and Medicare (Title XVIII) Increased costs Gross domestic product (GDP)

Rising Costs and Today’s Healthcare System (cont.) Decreased access Rising costs/inability to pay Increased number of people covered by Medicare and Medicaid; decreased number covered by private insurance More employers offering insurance; fewer employees are purchasing it Private insurance does not guarantee financial access to care Public programs offer inadequate prenatal and mental health care programs Negative outcomes for the uninsured/underinsured

Rising Costs and Today’s Healthcare System (cont.) Influences on costs and access Increased sources of funds from governments Inflation Drug cost increase Advanced technology is expensive Higher personnel wages and benefits costs Change in population demographics Excess Medical excess Administrative excess Emphasis on cure instead of prevention

Paying for Health Care Out-of-pocket payments and charity Cost sharing Health insurance Private insurance Employment-based insurance Experience rating Community rating Health insurance purchasing cooperatives Self-insurance

Paying for Health Care (cont.) Publicly funded insurance and direct care programs Medicare Part A Inpatient hospital care Benefit period Skilled nursing facility Home health agency Hospice Part B and Part D Medicare Advantage “Medigap” insurance

Paying for Health Care (cont.) Medicaid Entitlement/welfare program Based on income and assets Categorically needy Medically needy Personal Responsibility and Work Opportunity Act Temporary Assistance for Needy Families (TANF)

Paying for Health Care (cont.) Children’s Health Insurance Program (CHIP) Federally funded CHAMPUS Other public direct care programs: Public Health Service Act of 1994 Affordable Care Act (ACA) of 2010

Cost Containment, Cost Analysis, and Quality Cost-containment strategies Controlling quantity of supply Controlling price Controlling quantity of demand Competition Prioritizing through cost analysis

Cost Containment, Cost Analysis, and Quality (cont.) Cost-of-illness analysis Cost–benefit analysis Cost-effectiveness analysis Technology assessment

Public Health, Managed Care, and the Economics of Prevention Opportunities for collaboration Cost-containment efforts Shift from acute services to preventive Counterforces to collaboration Safety net Dumping of services Coordination of state reporting Nature of for-profit firms Economics of alternative therapies

Significance of Economics for Community Health Nursing Practice Disease prevention/health promotion Consumer-driven health care Nurses can help consumers understand price and quality issues Gaining third-party reimbursement—an important labor market change for nurses Coalition building, research, lobbying, negotiating with insurers, influencing policymaking

Economics and Nightingale’s Legacy Market justice Social justice