1. Delmar Learning Copyright © 2003 Delmar Learning, a Thomson Learning company Chapter 6 Health Care Economics

2. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Health Care Economics Fee for Service system Provider control over health care services rendered Provider control over where health care services provided Pay as you go Quality at any cost

3. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Managed Care Payer control over health care services rendered Payer control over where health care services provided Shared risk Balance cost with quality

4. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Implications for Nursing Practice Understand health care economics Must provide cost-effective, quality care Reduce or eliminate wasteful practices Coordination of care

5. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 U.S. Health Dollar Source (HCFA, 2000) Medicaid 15% Medicare 19% Private Insurance 32% Out of Pocket 17% Other Private 5% Other Public 12%

6. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 U.S. Health Dollar Spending (HCFA, 2000) Hospital Care 33% Other Spending 26% Physician Services 20% Nursing Home Care 8% Prescription Drugs 8% Program administration and net cost 5%

7. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Economics Macroeconomics Microeconomics Economic policy Financing Reimbursement

8. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Economic terms Market system Gross Domestic product (GDP)  In 1999, 13% of GDP spent on healthcare Inflation

9. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Health Care Economic Terms Capitation Case Management Co-payment Diagnosis Related Groups (DRGs) Fee for Service

10. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Health Care Economic Terms (cont.) Managed Care Managed Care Organization Managed Competition Out-of-Pocket Expenses Preferred Provider Organization (PPO) Third Party Payer

11. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Medicare Part A Automatic coverage at age 65 May obtain coverage earlier if disabled 40 quarter rule to determine eligibility Helps pay hospital, home health, skilled nursing facility and hospice care Funded by payroll taxes paid by employer and employee

12. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Medicare (cont.) Part B Supplemental medical insurance Helps pay for physician, outpatient hospital care, and durable medical equipment Does not cover medications Funded by Federal government and individual (via insurance premiums)

13. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Medicaid Funded by Federal and State taxes Program is administered by the states Pays for the health care of low-income persons Does not cover all people below the Federal poverty line

14. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Factors Causing Increased Health Care Costs Increased Cost per Volume of Service (CPVS) Per Capita Increases in Volume of Service (PCIVS) Increased elder population Advanced technology

15. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Factors Causing Increased Health Care Costs Rising Administration Costs Client Complexity Uncompensated Care Health Care Fraud

16. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Government's Role in Health Care Historical role  Intervene only when private sector has failed to provide a service Governmental involvement  Ensure availability of care  Ensure standards  Provide funding to upgrade systems and educate health care providers

17. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Changing Climate in Health Care 1961 – 1969Great Society Legislation 1970sNew Federalism and implementation of block grants 1980sDecrease federal funding for social welfare Decentralize programs to states using block grants Market forces to shape health care Implement DRG prospective payment system

18. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Changing Climate in Health Care 1990s Clinton era Kennedy-Kasselbaum bill “Health portability plan” Increased State jurisdiction over health care 2000s Bush era Prescription benefit coverage for senior citizens Health care safety net

19. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Cost Controls Finance controls Regulatory finance controls Reimbursement controls Usual and customary reimbursements Client cost sharing Utilization controls

20. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Actions to Control Costs Diagnostic related groups (DRGs) Increased utilization of general practitioners instead of specialists Increased utilization of nurse practitioners

21. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Access to Health Care Insurance Health insurance provided through employers Increased numbers of uninsuredor underinsured Out of pocket costs Pre-existing conditions

22. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Access to Health Care Insurance Medicare  Part A  Part B Medicaid

23. Copyright © 2003 Delmar Learning, a Thomson Learning companyChapter 6 Emerging Trends Managed Care Managed Care in Medicare and Medicaid Managed Competition Rationing