1. Chapter 2: Health Care Economics

2. Differences Among Health Care Institutions
Services Offered by Health Care Facilities
Emergency room treatment
Community health education classes and materials
Health screening services
Clinical services
Medical education for physicians, nurses, & others
Financial contributions to community organizations
Coordination of events & donations for community organizations

3. Differences Among Health Care Institutions (cont’d)
Voluntary Nonprofit Institutions
Exempt from federal, state, & local taxes
Must be operated for charitable purposes

4. Differences Among Health Care Institutions (cont’d)
Proprietary Institutions
For-profit health care facilities
Owned by a corporation
Often consist of a chain of:
Hospitals
Nursing homes
Outpatient facilities
Pay local, state, & federal taxes

5. Differences Among Health Care Institutions (cont’d)
Government Institutions
Funded primarily by local, state, or federal sources
Examples:
Military treatment facilities
Veterans Affairs (VA) hospitals
Public or government-funded hospitals
State mental hospitals
State rehabilitation facilities

6. Health Care Payment Methods
Private Insurance
Employment-based, group plans
Offered by insurance companies
Employer pays part of premium; employee pays rest
Trend: employers shifting costs to employee

7. Health Care Payment Methods (cont’d)
Private Insurance (cont’d)
Premium: monthly amount the insured pays for policy
Deductible: amount the insured must pay before benefits start
Co-insurance: insured shares a portion (10-30%) of costs
Co-pay: flat fee paid by the insured per service

8. Health Care Payment Methods (cont’d)
Direct Payment
Patients pay for health care with their own money
“Shopping around”:
Creates competition
Drives down prices

9. Health Care Payment Methods (cont’d)
Government Plans: Medicare
Health care program for older Americans
Established in 1965 by amendments to Social Security Act
Expanded in 1972 to include disabled & their dependents
Converted in 1983 to prospective payment system

10. Health Care Payment Methods (cont’d)
Government Plans: Medicare (cont’d)
Part A: inpatient care costs (no monthly premium)
Part B: outpatient costs (monthly premium)
Part C: extra benefits
Part D: prescription drug coverage

11. Health Care Payment Methods (cont’d)
Government Plans: Medicaid
Health insurance for low-income & disabled people
Established in 1965 as part of Social Security Act

12. Health Care Payment Methods (cont’d)
Government Plans for Military Personnel
TRICARE

13. Health Care Payment Methods (cont’d)
New Government Programs
SCHIP
State Children’s Health Insurance Program
Established in 1997
Expired in 2007
CHIRPA
Children’s Health Insurance Program Reauthorization Act
Passed in 2009

14. Managed Care Health care providers (gatekeepers) manage access to care
Goal: contain costs
In-network vs. out-of-network providers
Utilization review

15. Managed Care (cont’d) Types of Plans
Health Maintenance Organization (HMO) plan
Preferred Provider Organization (PPO) plan
Point of Service (POS) plan

16. Cost Containment Measures
Diagnostic related group (DRG) classification system
Patients assigned to DRG based on:
Diagnosis
Other demographic info
Health care paid in standard fees, regardless of actual costs
Offers incentive to hospitals for operating more efficiently

17. Utilizing Resources Efficiently
Responsibility of all health care professionals
Conscientious time management
Electronic documentation