Slides for Class 10: Traditional Economic Model That Depicts a Firm’s Output Problems With the Traditional Model The Implications These Problems Raise for Health Policy

Critique of 5 Assumptions Rice Associates With Traditional Supply Theory Supply and demand are independently determined Firms do not have monopoly power Firms maximize profits There are no increasing returns to scale Productivity is independent of the distribution of wealth

Are physicians perfect agents for their patients? Can hospitals and physician practices raise their prices without loosing all of their patients? Do health providers maximize their profits? Do hospitals experience increasing returns to scale? If the distribution of household incomes in a society becomes more equal, will that society’s productivity increase?

What Health Policy Implications are linked to your answers from the previous slide? Capitation and incentive reimbursement : –Payment methods designed to reduce induced demand for medical care –Incentive payments to health plans –Incentive payments to health providers Issues surrounding Patient Cost-Sharing (PCS) –The impact of PCS on utilization and costs –Is PCS equitable in the same as a progressive income tax? Regulating Growth in the Health Sector Alternative strategies for regulating growth in the health sector Improving Productivity by Providing Health Insurance