This document discusses the economics of healthcare and how the healthcare market differs from the standard market model. It makes three key points:
1) The healthcare market has many externalities like positive externalities from vaccination and medical research, which leads to underprovision without government intervention.
2) Patients have difficulty monitoring healthcare quality, so there is more potential for issues like moral hazard and adverse selection in health insurance markets.
3) Due to these problems and the unpredictability of healthcare costs, health insurance plays a large role but also has challenges like moral hazard and adverse selection that the government tries to address through policies.
We don’t have a functional competitive market in health care in the U.S. Consequently, many of the attributes of competitive markets that are beneficial in our lives are not present in health care. One significant negative externality of a dysfunctional market is an inability to discern quality. Consumerism is critical. Includes data and analysis from the 5TH ANNUAL HEALTHGRADES PATIENT SAFETY IN AMERICAN HOSPITALS STUDY – APRIL 2008
We don’t have a functional competitive market in health care in the U.S. Consequently, many of the attributes of competitive markets that are beneficial in our lives are not present in health care. One significant negative externality of a dysfunctional market is an inability to discern quality. Consumerism is critical. Includes data and analysis from the 5TH ANNUAL HEALTHGRADES PATIENT SAFETY IN AMERICAN HOSPITALS STUDY – APRIL 2008
Introduction
What is definition and law of supply
Factors determine supply for health care services
Factors determine price & quantity of health care
What is the production function for health
Market equilibrium
Investing in the healthcare sector
Cost production in healthcare
Different healthcare system
Models of non-profit agencies
References
Consumer health: time for a regulatory re-think? is a report by RB in association with PAGB, written by the Economist Intelligence Unit. It looks at the changing healthcare environment and the role self-care plays and efforts at regulatory harmonisation, the barriers they have encountered, and prospects for the future.
A strategic management presentation on a tertiary level hospital in an urban setting (Metro Manila, Philippines),based on a paper written in partial fulfillment of the requirements of a MD-MBA degree. Topics covered include: industry and competitor analysis, internal and company analysis, strategy formulation, strategic plans and objectives, monitoring and control, and contingency plans.
The Subversion of Medicine Through Treatment Guidelinesjerryleonard999
A detailed examination of how treatment guidelines ghost-written by "big pharma" are destroying medicine. Part II: Application of the basic model to show how manufactured pharma "thought leaders" created the Lyme disease epidemic to treat symptoms in perpetuity rather than address the underlying cause.
Disaster Contact a disaster preparedness person at either a loca.docxlynettearnold46882
Disaster
Contact a disaster preparedness person at either a local hospital, or local city or county emergency services agency. NORTHEAST OHIO
1. Blackout 2003
2. Chardon Highschool shooting 2012
3. Great blizzard 1978
Interview your contact, asking the following questions:
1) "What do you consider to be the top three disasters for which you prepare?"
2) "What would you say are your top three lessons learned about managing a disaster?"
What Would the Best Future for Health Care Look Like?
Introduction
The one thing the debate over reforming health care taught us all is that there are as many opinions as there are interested groups, and all of them differ in meaningful ways. To look at the views on improving the systems of care delivery, it is important to note where they have points of agreement and where they differ. They are all driven by the values and principles of the constituencies and what they hope to achieve from changes in the delivery system. This module will explore points of agreement and differences between important groups that will influence the direction health care will go in the next decade.
Patients
It is an interesting point that all constituencies, in their public statements, emphasize that a strong health care system should focus on getting the best outcomes for patients. What would that be, from the perspective of patients? Typically, patients relate that they want top quality in their care and the latest technology, along with immediate and unrestricted access to care, at the lowest possible cost. This triad has become the stumbling block of change initiatives, since to date, no one has figured out how to deliver all three. However, when patients' views are explored and probed, some interesting facts emerge. When patients say they want top quality care, in general, they tend to define that as achieving a cure or return to health. They certainly do not want to leave the system feeling worse than when they came in. Patients have been heavily lobbied in the media by pharmaceutical and medical technology companies to convince them that the latest (and most expensive) technology will deliver the desired outcomes. However, very little real research on the true effectiveness of treatments and technology makes its way to most patients, and patients in general do not shop for their medical care as carefully as they would if they were purchasing new cars, for example. The language of research and medicine is difficult for patients to understand and is frequently not well-explained by providers.
So, the nuances of top quality care in terms of being able to deliver a cure or return to health are not well understood by the constituency with the most at risk. What patients do understand is whether they feel better or see improvement in their health and whether care was rendered without errors and in a compassionate way. The best health care system, from a patient's point of view, is one that can consistently deliver the good.
Read Logica’s paper on the need for convergence of healthcare and pharmaCGI
As the biggest industry sector in most European economies, healthcare is already given a big chunk of the gross domestic product (GDP). This portion is expected to become even bigger and have a huge impact on employment, the opportunities to grow businesses and economies in general.
Introduction
What is definition and law of supply
Factors determine supply for health care services
Factors determine price & quantity of health care
What is the production function for health
Market equilibrium
Investing in the healthcare sector
Cost production in healthcare
Different healthcare system
Models of non-profit agencies
References
Consumer health: time for a regulatory re-think? is a report by RB in association with PAGB, written by the Economist Intelligence Unit. It looks at the changing healthcare environment and the role self-care plays and efforts at regulatory harmonisation, the barriers they have encountered, and prospects for the future.
A strategic management presentation on a tertiary level hospital in an urban setting (Metro Manila, Philippines),based on a paper written in partial fulfillment of the requirements of a MD-MBA degree. Topics covered include: industry and competitor analysis, internal and company analysis, strategy formulation, strategic plans and objectives, monitoring and control, and contingency plans.
The Subversion of Medicine Through Treatment Guidelinesjerryleonard999
A detailed examination of how treatment guidelines ghost-written by "big pharma" are destroying medicine. Part II: Application of the basic model to show how manufactured pharma "thought leaders" created the Lyme disease epidemic to treat symptoms in perpetuity rather than address the underlying cause.
Disaster Contact a disaster preparedness person at either a loca.docxlynettearnold46882
Disaster
Contact a disaster preparedness person at either a local hospital, or local city or county emergency services agency. NORTHEAST OHIO
1. Blackout 2003
2. Chardon Highschool shooting 2012
3. Great blizzard 1978
Interview your contact, asking the following questions:
1) "What do you consider to be the top three disasters for which you prepare?"
2) "What would you say are your top three lessons learned about managing a disaster?"
What Would the Best Future for Health Care Look Like?
Introduction
The one thing the debate over reforming health care taught us all is that there are as many opinions as there are interested groups, and all of them differ in meaningful ways. To look at the views on improving the systems of care delivery, it is important to note where they have points of agreement and where they differ. They are all driven by the values and principles of the constituencies and what they hope to achieve from changes in the delivery system. This module will explore points of agreement and differences between important groups that will influence the direction health care will go in the next decade.
Patients
It is an interesting point that all constituencies, in their public statements, emphasize that a strong health care system should focus on getting the best outcomes for patients. What would that be, from the perspective of patients? Typically, patients relate that they want top quality in their care and the latest technology, along with immediate and unrestricted access to care, at the lowest possible cost. This triad has become the stumbling block of change initiatives, since to date, no one has figured out how to deliver all three. However, when patients' views are explored and probed, some interesting facts emerge. When patients say they want top quality care, in general, they tend to define that as achieving a cure or return to health. They certainly do not want to leave the system feeling worse than when they came in. Patients have been heavily lobbied in the media by pharmaceutical and medical technology companies to convince them that the latest (and most expensive) technology will deliver the desired outcomes. However, very little real research on the true effectiveness of treatments and technology makes its way to most patients, and patients in general do not shop for their medical care as carefully as they would if they were purchasing new cars, for example. The language of research and medicine is difficult for patients to understand and is frequently not well-explained by providers.
So, the nuances of top quality care in terms of being able to deliver a cure or return to health are not well understood by the constituency with the most at risk. What patients do understand is whether they feel better or see improvement in their health and whether care was rendered without errors and in a compassionate way. The best health care system, from a patient's point of view, is one that can consistently deliver the good.
Read Logica’s paper on the need for convergence of healthcare and pharmaCGI
As the biggest industry sector in most European economies, healthcare is already given a big chunk of the gross domestic product (GDP). This portion is expected to become even bigger and have a huge impact on employment, the opportunities to grow businesses and economies in general.
Chapter 16Conclusion All Those Levers and No FulcrumThe pragmEstelaJeffery653
Chapter 16
Conclusion: All Those Levers and No Fulcrum
The pragmatic method is primarily a method of settling metaphysical disputes that otherwise might be interminable. … What difference would it practically make to any one if this notion rather than that notion were true? If no practical difference whatever can be traced, then the alternatives mean practically the same thing, and all dispute is idle. Whenever a dispute is serious, we (need to) be able to show some practical difference that must follow from one side or the other’s being right.
Source: Reproduced from: What is Pragmatism (1904), from series of eight lectures dedicated to the memory of John Stuart Mill, A New Name for Some Old Ways of Thinking, in December 1904, from William James, Writings 1902–1920, The Library of America; Lecture II
16.1 WHERE TO STAND
A variety of levers can be used to try to move health care delivery in one direction or the other. All levers, however, require a strong fulcrum, a solid base against which the lever can operate when sufficient force is applied. In the United States, there is a clear absence of a reliable fulcrum. The passage of the Affordable Care Act (ACA) provides a fulcrum, albeit a sometimes shaky one, but its future is uncertain and there has been little stomach for movement since then.
Federal government bureaucrats know that the efforts of lobbyists, senior White House staffers, or chairs of congressional committees can undermine in a few days what has taken months of study and consensus building to achieve. At worst, one’s program, or even one’s agency, can disappear from the budget overnight. State offices are subject to the same risks, although governors sometimes stand more firmly because a state must meet its financial obligations, rather than print money or borrow more heavily.
Other potential fulcrums are likewise unreliable. Insurers continue to take their cut and pass on any added costs. Providers continue to maximize revenue. Employers continue to opt out of defined benefit programs. More and more of the costs of providing coverage and care accrue to state and federal governments through Medicare, Medicaid, and other programs. A 2013 survey of more than 200 key health care industry executives showed deep pessimism about our ability to improve both quality and inflation-adjusted costs, thus improving value. Only 1% were strongly positive, and 22% were strongly negative. To a parallel question about the current quality of U.S. health care, 16% were strongly positive, and 22% were strongly negative (Chin et al., 2013).
Fitting into Our Culture of Individualism
There are practical reasons for the on-the-one-hand and on-the-other-hand approach Harry Truman objected to when he called for a “one-handed” economist. Each of us brings a value system to any policy analysis, and those values inevitably get mixed up with the objective information that a scholarly approach offers decision makers. We are therefore understandably relu ...
HSA405 Healthcare Policy and LawCHAPTER 9Health Economic.docxpooleavelina
HSA405 Healthcare Policy and Law
CHAPTER 9
Health Economics in a Health Policy Context
Starting at page 156 Health Economics Defined
Entire books and courses are devoted to the concept of health economics, and this chapter is not an attempt to distill all the theories and lessons of those texts and courses. Instead, our goal is to introduce you to the basic concepts of health economics, because understanding how economists view health-related problems is one essential component of being a good health policy analyst and decision maker. This chapter begins with an overview of what health economics is, how economists view health care, and how individuals determine whether obtaining health insurance is a priority in their lives. It then moves to a review of the basic economic principles of supply, demand, and market structure. As part of this discussion, you will learn what factors make supply and demand increase or decrease, how the presence of health insurance affects supply and demand, how different market structures function, and what interventions are available when the market fails to achieve desired policy goals.
HEALTH ECONOMICS DEFINED
Economics is concerned with the allocation of scarce resources, as well as the production, distribution, and consumption of goods and services. Macroeconomics studies these areas on a broad level, such as how they relate to national production or national unemployment levels, while microeconomics studies the distribution and production of resources on a smaller level, including individual decisions to purchase a good or a firm’s decision to hire an employee. Microeconomics also considers how smaller economic units, such as firms, combine to form larger units, such as industries or markets.1(p3) Health economics, then, is the study of economics as it relates to the health field.How Economists View Decision Making
Economists assume that people, given adequate information, are rational decision makers. Rational decision making requires that people have the ability to rank their preferences (whichever preferences are relevant when any sort of decision is being made) and assumes that people will never purposely choose to make themselves worse off. Instead, individuals will make the decision that gives them the most satisfaction, by whatever criteria the individual uses to rate his level of satisfaction. This satisfaction, referred to as utility by economists, may be achieved in many ways, including volunteering time or giving money to charities. Utility in a health context takes into account that individuals have different needs for and find different value in obtaining healthcare goods and services, and that whether and which health resources are purchased will depend on the individual’s preferences and resources.Utility Analysis
What does utility mean in terms of health care? Most people do not enjoy going to the doctor or taking medicine. It seems strange to think that individuals are happy as a result ...
Lexington Health Practice 'The future of Market Access' Interactive PamphletEmily Stevenson
Lexington Health Practice recently held a breakfast event to discuss the future for market access in England. The breakfast, the first in a series, examined the Health Technology Appraisal (HTA) environment and facilitated a discussion amongst individuals who work closely with and amongst the pharmaceutical industry, examining how the mechanisms in place can be improved to ensure equitable access to medicines.
In July 2018, NITI Aayog published a Strategy and Approach document on the National Health Stack. The document underscored the need for Universal Health Coverage (UHC) and laid down the technology framework for implementing the Ayushman Bharat programme which is meant to provide UHC to the bottom 500 million of the country. While the Health Stack provides a technological backbone for delivering affordable healthcare to all Indians, we, at iSPIRT, believe that it has the potential to go beyond that and to completely transform the healthcare ecosystem in the country. We are indeed headed for a health leapfrog in India! Over the last few months, we have worked extensively to understand the current challenges in the industry as well as the role and design of individual components of the Health Stack. In this post, we elaborate on the leapfrog that will be enabled by blending this technology with care delivery.
hapter 5What Are the Governmental AlternativesThe United StatJeanmarieColbert3
hapter 5
What Are the Governmental Alternatives?
The United States has tried an alphabet soup of health policy options: HSAs, HMOs, IPAs, PPOs, POS plans, ACOs, and so on. Health care analysts often must look beyond specific organizational and financial alternatives and address issues at a higher level and deal with the threads of economic and political thought behind different proposals while considering the overall criteria of access, cost, and quality of care.
Politicians and businesspeople from outside the health care sector advocate many alternatives. To offset their tendency to ignore professional issues, in this chapter we discuss alternatives affecting professional status and roles and institutional responses to them. Table 5-1 presents an array of federal alternatives organized by their primary criteria—access, quality, or cost—and then by the economic philosophies behind them. The items in this array are not intended to be either mutually exclusive or collectively exhaustive; rather, the table provides a framework for looking at both the broad policy picture and specific health care actions taken at various times and places. Later in the chapter, another table (Table 5-3) summarizes policy alternatives added by state and local governments. Many of these alternatives were included as provisions of the Affordable Care Act (ACA). They are still included here, partly because they may be subject to reconsideration in the future.
Table 5-1 Illustrative Federal Government Health Policy Options
Access to Care
• Administered systems
• Universal coverage
• Expand or reduce eligibility or benefits
• Mandate coverage and services
• Captive providers
• Control insurance industry practices
• Mandate employer-based insurance coverage
• Consumer-driven competition
• Implement insurance exchanges
• Encourage basic plans with very low premiums for low-income workers and “young invincibles”
• Mandate individual coverage
• Allow states flexibility to reallocate federal funds for vouchers
• Oligopolistic competition
• Expand or contract coverages in entitlement and categorical programs
• Allow states to reallocate federal uncompensated care funds
• Eliminate ERISA constraints on the states
• Expand the capacity of the system
Quality of Care
• Administered system
• Mandate participation in quality improvement efforts in federal plans and programs
• Add more pay-for-performance incentives
• Select providers and programs on the basis of quality excellence
• Consumer-driven competition
• Encourage or mandate transparency of quality reporting in federal plans and programs
• Oversee licensure and credentialing of foreign-trained providers
• Oligopolistic competition
• Work reporting of quality care and adverse events into purchasing specifications for federal programs and disseminate to the public
• Encourage wider use of health information technology
Cost of Care
• Administered system
• Use full bargaining power in negotiation of ...
How to Start, Run and Manage a Hospital Successfully by Dr.Mahboob ali khan Phd Healthcare consultant
The purpose of this paper is to give a brief outline of the pre-planning and strategic thinking in which an entrepreneur might consider before investing in or starting up a new hospital in the developing world.
There are numerous examples of hospital startups that were ill-conceived or poorly planned and have resulted in either a hospital that was partially constructed and abandoned or were completed and within two years failed in profitability and now sit idle. Other examples exist of underperforming assets. What went wrong? What could the investors have done to decrease their investment risk and increase the chances of the hospital being successful?Globalization of Healthcare.
Week #5-To Do List-CCHWeek 5 IntroductionIntroduction To Co.docxcelenarouzie
Week #5-To Do List-CCH
Week 5: Introduction
Introduction To Compliance Documentation & Reporting
Proper documentation is an inherent component of delivery of care, not an add-on. One of the oldest battles in healthcare is that between the hospital Medical Records department and the admitting Physician to complete necessary documentation for the Patient’s Chart. The most common cause of loss of admitting privileges has been from this source. This process has only become more important and necessary with the increasing recognition of the importance of proper documentation for legal and ethical defense purposes.
Documentation also serves a number of financial aspects of patient care delivery, including billing, grant writing for research projects, medical research to discover future tests, procedures, and cures, and funding for government supported agencies and programs.
Objectives
To successfully complete this learning unit, you will be expected to:
Identify the uses for health care documentation.
Learn the essential components of quality documentation.
Categorize the document guidelines under the federal False Claims Act.
Identify the documentation required for compliance under the Federal Stark Law.
List the aspects of documentation compliance with regard to electronic health records.
Identify the important issues regarding ethical coding practices.
Learn the most common illegal practices for HIM reporting.
Identify the key concerns under the federal False Claims Act that relate to reporting.
Determine the impact of the Physician Quality Reporting Initiative (PQRI) on HIM processes in physicians’ offices.
Identify the circumstances in which a health care professional is mandated to report a patient’s diagnosis.
Week 5: Discussion
Answer the following questions:
Review the various uses for health care documentation and discuss how each has an impact on the health care delivery system
Discuss procedures you might enact in your facility to avoid violating the False Claims Act
Discuss why physician offices should participate in PQRI
Week 5: Case Study Assignment
Please read and choose one of the following case studies:
Case study on page 111 of your textbook. (This Case Study is in the section for Securing EHR and starts with "NOTE: In each CMP (Civil Monetary Penalties) case resolved through a settlement agreement, . . . ")
Case study on page 127 of your textbook. (This Case Study is in the section for Phantom Patients and starts with "Two Charged in False Claims to Medicaid."
Case study on page 128 of your textbook. (This Case Study is in the section for Services not Performed and starts with "WASHINGTON—April 14, 2008—A board-certified radiologist, Fred Steinberg, M.D., his imaging centers . . ."
Case study on page 131 of your textbook. (This Case Study is in the section for Upcoding and starts with "July 2007: In Florida, a doctor was sentenced to 78 months in prison .
Ethanol (CH3CH2OH), or beverage alcohol, is a two-carbon alcohol
that is rapidly distributed in the body and brain. Ethanol alters many
neurochemical systems and has rewarding and addictive properties. It
is the oldest recreational drug and likely contributes to more morbidity,
mortality, and public health costs than all illicit drugs combined. The
5th edition of the Diagnostic and Statistical Manual of Mental Disorders
(DSM-5) integrates alcohol abuse and alcohol dependence into a single
disorder called alcohol use disorder (AUD), with mild, moderate,
and severe subclassifications (American Psychiatric Association, 2013).
In the DSM-5, all types of substance abuse and dependence have been
combined into a single substance use disorder (SUD) on a continuum
from mild to severe. A diagnosis of AUD requires that at least two of
the 11 DSM-5 behaviors be present within a 12-month period (mild
AUD: 2–3 criteria; moderate AUD: 4–5 criteria; severe AUD: 6–11 criteria).
The four main behavioral effects of AUD are impaired control over
drinking, negative social consequences, risky use, and altered physiological
effects (tolerance, withdrawal). This chapter presents an overview
of the prevalence and harmful consequences of AUD in the U.S.,
the systemic nature of the disease, neurocircuitry and stages of AUD,
comorbidities, fetal alcohol spectrum disorders, genetic risk factors, and
pharmacotherapies for AUD.
Pulmonary Thromboembolism - etilogy, types, medical- Surgical and nursing man...VarunMahajani
Disruption of blood supply to lung alveoli due to blockage of one or more pulmonary blood vessels is called as Pulmonary thromboembolism. In this presentation we will discuss its causes, types and its management in depth.
Knee anatomy and clinical tests 2024.pdfvimalpl1234
This includes all relevant anatomy and clinical tests compiled from standard textbooks, Campbell,netter etc..It is comprehensive and best suited for orthopaedicians and orthopaedic residents.
The prostate is an exocrine gland of the male mammalian reproductive system
It is a walnut-sized gland that forms part of the male reproductive system and is located in front of the rectum and just below the urinary bladder
Function is to store and secrete a clear, slightly alkaline fluid that constitutes 10-30% of the volume of the seminal fluid that along with the spermatozoa, constitutes semen
A healthy human prostate measures (4cm-vertical, by 3cm-horizontal, 2cm ant-post ).
It surrounds the urethra just below the urinary bladder. It has anterior, median, posterior and two lateral lobes
It’s work is regulated by androgens which are responsible for male sex characteristics
Generalised disease of the prostate due to hormonal derangement which leads to non malignant enlargement of the gland (increase in the number of epithelial cells and stromal tissue)to cause compression of the urethra leading to symptoms (LUTS
New Directions in Targeted Therapeutic Approaches for Older Adults With Mantl...i3 Health
i3 Health is pleased to make the speaker slides from this activity available for use as a non-accredited self-study or teaching resource.
This slide deck presented by Dr. Kami Maddocks, Professor-Clinical in the Division of Hematology and
Associate Division Director for Ambulatory Operations
The Ohio State University Comprehensive Cancer Center, will provide insight into new directions in targeted therapeutic approaches for older adults with mantle cell lymphoma.
STATEMENT OF NEED
Mantle cell lymphoma (MCL) is a rare, aggressive B-cell non-Hodgkin lymphoma (NHL) accounting for 5% to 7% of all lymphomas. Its prognosis ranges from indolent disease that does not require treatment for years to very aggressive disease, which is associated with poor survival (Silkenstedt et al, 2021). Typically, MCL is diagnosed at advanced stage and in older patients who cannot tolerate intensive therapy (NCCN, 2022). Although recent advances have slightly increased remission rates, recurrence and relapse remain very common, leading to a median overall survival between 3 and 6 years (LLS, 2021). Though there are several effective options, progress is still needed towards establishing an accepted frontline approach for MCL (Castellino et al, 2022). Treatment selection and management of MCL are complicated by the heterogeneity of prognosis, advanced age and comorbidities of patients, and lack of an established standard approach for treatment, making it vital that clinicians be familiar with the latest research and advances in this area. In this activity chaired by Michael Wang, MD, Professor in the Department of Lymphoma & Myeloma at MD Anderson Cancer Center, expert faculty will discuss prognostic factors informing treatment, the promising results of recent trials in new therapeutic approaches, and the implications of treatment resistance in therapeutic selection for MCL.
Target Audience
Hematology/oncology fellows, attending faculty, and other health care professionals involved in the treatment of patients with mantle cell lymphoma (MCL).
Learning Objectives
1.) Identify clinical and biological prognostic factors that can guide treatment decision making for older adults with MCL
2.) Evaluate emerging data on targeted therapeutic approaches for treatment-naive and relapsed/refractory MCL and their applicability to older adults
3.) Assess mechanisms of resistance to targeted therapies for MCL and their implications for treatment selection
263778731218 Abortion Clinic /Pills In Harare ,sisternakatoto
263778731218 Abortion Clinic /Pills In Harare ,ABORTION WOMEN’S CLINIC +27730423979 IN women clinic we believe that every woman should be able to make choices in her pregnancy. Our job is to provide compassionate care, safety,affordable and confidential services. That’s why we have won the trust from all generations of women all over the world. we use non surgical method(Abortion pills) to terminate…Dr.LISA +27730423979women Clinic is committed to providing the highest quality of obstetrical and gynecological care to women of all ages. Our dedicated staff aim to treat each patient and her health concerns with compassion and respect.Our dedicated group ABORTION WOMEN’S CLINIC +27730423979 IN women clinic we believe that every woman should be able to make choices in her pregnancy. Our job is to provide compassionate care, safety,affordable and confidential services. That’s why we have won the trust from all generations of women all over the world. we use non surgical method(Abortion pills) to terminate…Dr.LISA +27730423979women Clinic is committed to providing the highest quality of obstetrical and gynecological care to women of all ages. Our dedicated staff aim to treat each patient and her health concerns with compassion and respect.Our dedicated group of receptionists, nurses, and physicians have worked together as a teamof receptionists, nurses, and physicians have worked together as a team wwww.lisywomensclinic.co.za/
Couples presenting to the infertility clinic- Do they really have infertility...Sujoy Dasgupta
Dr Sujoy Dasgupta presented the study on "Couples presenting to the infertility clinic- Do they really have infertility? – The unexplored stories of non-consummation" in the 13th Congress of the Asia Pacific Initiative on Reproduction (ASPIRE 2024) at Manila on 24 May, 2024.
micro teaching on communication m.sc nursing.pdfAnurag Sharma
Microteaching is a unique model of practice teaching. It is a viable instrument for the. desired change in the teaching behavior or the behavior potential which, in specified types of real. classroom situations, tends to facilitate the achievement of specified types of objectives.
These lecture slides, by Dr Sidra Arshad, offer a quick overview of physiological basis of a normal electrocardiogram.
Learning objectives:
1. Define an electrocardiogram (ECG) and electrocardiography
2. Describe how dipoles generated by the heart produce the waveforms of the ECG
3. Describe the components of a normal electrocardiogram of a typical bipolar leads (limb II)
4. Differentiate between intervals and segments
5. Enlist some common indications for obtaining an ECG
Study Resources:
1. Chapter 11, Guyton and Hall Textbook of Medical Physiology, 14th edition
2. Chapter 9, Human Physiology - From Cells to Systems, Lauralee Sherwood, 9th edition
3. Chapter 29, Ganong’s Review of Medical Physiology, 26th edition
4. Electrocardiogram, StatPearls - https://www.ncbi.nlm.nih.gov/books/NBK549803/
5. ECG in Medical Practice by ABM Abdullah, 4th edition
6. ECG Basics, http://www.nataliescasebook.com/tag/e-c-g-basics
ARTIFICIAL INTELLIGENCE IN HEALTHCARE.pdfAnujkumaranit
Artificial intelligence (AI) refers to the simulation of human intelligence processes by machines, especially computer systems. It encompasses tasks such as learning, reasoning, problem-solving, perception, and language understanding. AI technologies are revolutionizing various fields, from healthcare to finance, by enabling machines to perform tasks that typically require human intelligence.
Ozempic: Preoperative Management of Patients on GLP-1 Receptor Agonists Saeid Safari
Preoperative Management of Patients on GLP-1 Receptor Agonists like Ozempic and Semiglutide
ASA GUIDELINE
NYSORA Guideline
2 Case Reports of Gastric Ultrasound
TEST BANK for Operations Management, 14th Edition by William J. Stevenson, Ve...kevinkariuki227
TEST BANK for Operations Management, 14th Edition by William J. Stevenson, Verified Chapters 1 - 19, Complete Newest Version.pdf
TEST BANK for Operations Management, 14th Edition by William J. Stevenson, Verified Chapters 1 - 19, Complete Newest Version.pdf
1. 1
The Economics of Healthcare
A
ll of us would like to lead long, healthy lives. And given the choice, we would
prefer to do so without ever having to endure the surgeon’s scalpel, the
nurse’s needle, or the dentist’s drill. Yet good health rarely comes so easily.
Achieving a long, healthy life often requires the input of scarce resources, and that
makes it, at least in part, an economic problem. About one out of every six
dollars
spent in the U.S. economy goes to some form of healthcare, including spending
on physicians, nurses, dentists, hospitals, pharmaceutical drugs, and medical
research scientists. Understanding the modern economy, therefore, requires an
appreciation of the special economics of healthcare.
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 1 8/30/17 3:17 PM
2. 2 The Economics of Healthcare
We begin this module by examining some of the economic forces that shape the
healthcare system. The standard theory of how markets work is the model of sup-
ply and demand, in which buyers and sellers are guided by prices to an efficient
allocation of resources. Yet, as we will see, the market for healthcare deviates from
this model in many ways. These deviations often call for government policies
to ensure that healthcare resources are allocated efficiently and equitably. And,
indeed, in most nations, governments are deeply involved in healthcare markets.
After discussing the forces at work in healthcare markets, we look at some
key facts that describe the healthcare system in the United States. The health-
care
system today is very different from what it was fifty years ago, and it is also
different from the healthcare systems in other nations. Recognizing these differ-
ences is important for understanding the healthcare system we have as well as for
imagining systems we could have.
The proper scope of government intervention in the healthcare system is a
topic of continuing political debate. We won’t go into the details of that debate
here. But this basic introduction to the economics of healthcare should help you
become a more informed participant in what will surely be an ongoing national
discussion for many years to come.
1 The Special Characteristics of the Market for Healthcare
The standard theory of how markets work is the model of supply and demand,
which we studied in Chapters 4 through 7. That model has several notable features:
1. The main interested parties are the buyers and sellers in the market.
2. Buyers are good judges of what they get from sellers.
3. Buyers pay sellers directly for the goods and services being exchanged.
4. Market prices are the primary mechanism for coordinating the decisions of
market participants.
5. The invisible hand, left to its own devices, leads to an efficient allocation
of resources.
For many goods and services in the economy, this model offers a reasonably good
description.
Yet none of these five features of the standard model reflects what goes on in
the market for healthcare. Like other markets, the healthcare market has consum-
ers (patients) and producers (doctors, nurses, etc.). But various features of this
market complicate the analysis of their interactions. In particular:
1. Third parties—insurers, governments, and unwitting bystanders—often have
an interest in healthcare outcomes.
2. Patients often don’t know what they need and cannot evaluate the treatment
they are getting.
3. Healthcare providers are often paid not by the patients but by private or
government health insurance.
4. The rules established by these insurers, more than market prices, determine
the allocation of resources.
5. In light of the foregoing four points, the invisible hand can’t work its magic,
and so the allocation of resources in the healthcare market can end up highly
inefficient.
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 2 8/30/17 3:17 PM
3. 3
The Economics of Healthcare
Healthcare is not the only good or service in the economy that departs from
the standard model of supply, demand, and the invisible hand. (Recall our dis-
cussions of externalities and monopoly.) But healthcare may be the most import-
ant good or service that departs so radically from this benchmark. Examining the
special features of this market is a good starting point for understanding why the
government plays a large role in the provision of healthcare and why health pol-
icy is often complex and vexing.
1a The Prevalence of Externalities
As you may recall from Chapter 10, market outcomes may be inefficient when
there are externalities. To recap: An externality arises when a person engages in
an activity that influences the well-being of a bystander but neither pays nor
receives compensation for that effect. If the impact on the bystander is adverse,
it is called a negative externality. If it is beneficial, it is called a positive externality.
In the presence of externalities, society’s interest in a market outcome extends
beyond the well-being of buyers and sellers who participate in the market to
include the well-being of bystanders who are affected indirectly. Because buy-
ers and sellers neglect the external effects of their actions when deciding how
much to demand or supply, the externality can render the unregulated market
outcome inefficient.
This general conclusion is crucial for understanding healthcare, because exter-
nalities in the market are so prevalent. These externalities can call for government
action to remedy the market failure.
Take vaccines, for example. If one person vaccinates herself against a disease,
she is less likely to catch it. But because she is less likely to catch it, she is less
likely to become a carrier and infect other people. Thus, getting vaccinated con-
veys a positive externality. If getting vaccinated has some cost, either in money,
time, or risk of adverse side effects, too few people will choose to get themselves
vaccinated because they will likely ignore the positive externalities when weigh-
ing the costs and benefits. The government may remedy this problem by subsidiz-
ing the development, manufacture, and distribution of vaccines or by requiring
vaccination.
Another example of an externality in the healthcare system concerns medi-
cal research. When a physician figures out a new way to treat an ailment, that
information enters society’s pool of medical knowledge. The benefit to other phy-
sicians and patients is a positive externality. Without government intervention,
there will be too little research.
Governments respond to this externality in many ways. Sometimes, the gov-
ernment grants the researcher a patent on the new product, as is the case with
new pharmaceutical drugs. The patent gives an incentive for research because the
patent holder can profit from a temporary monopoly. The patent is said to inter-
nalize the externality. Yet this approach is not perfect because the monopoly price
is higher than the marginal cost of production. As we discussed in Chapter 15, the
high monopoly price reduces consumption of the patented treatment, leading to
inefficiency as measured by the deadweight loss. Moreover, the high price may be
particularly hard on lower-income patients.
Another approach to dealing with the positive externality from medical
research is for the government to subsidize the research—and indeed it does.
The annual budget of the National Institutes of Health, which funds medi-
cal
research, is over $30 billion, or about $100 per person. This policy requires
taxation to raise the necessary funds, and taxation entails deadweight losses of
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 3 8/30/17 3:17 PM
4. 4 The Economics of Healthcare
its own. But if the externalities from the funded research exceed the cost of the
research, including the deadweight losses, overall welfare can increase.
1b The Difficulty of Monitoring Quality
In most markets, consumers know what they want, and after a transaction is com-
pleted, they can judge whether they are happy with what they got. Healthcare
is different. When you get sick, you may not know what the best treatment is.
You rely on the advice of a physician, who has years of specialized training. And
even with hindsight, you cannot reliably judge for yourself whether the treatment
the physician offered you was the right one. Sometimes state-of-the-art medicine
fails to improve a patient’s health. And given the natural restorative power of the
human body, the wrong treatment can sometimes appear to work.
The inability of healthcare consumers to monitor the quality of the product they
are buying leads to various regulations. Most important, the government requires
physicians, dentists, nurses, and other health professionals to have licenses to
practice. These licenses are granted only after an individual attends an approved
school and passes rigorous tests. Those caught practicing without a license can
be imprisoned. Similarly, the Food and Drug Administration (FDA) oversees the
testing and release of new pharmaceutical drugs to make sure they are safe and
effective.
In addition to government regulation, the medical profession monitors itself
by accrediting medical schools, promoting best practices, and establishing profes-
sional norms of behavior. A physician’s advice is supposed to be based entirely
on the patient’s best interest, not on the physician’s personal gain. When patients
accept the advice, they rely on a degree of trust, which is often fostered by long-
term relationships between doctor and patient.
Suspicions about the standard economic motive of self-interest and the role of
trust in healthcare relationships may explain the prevalence of nonprofit hospi-
tals. In some ways, hospitals are like hotels, but while most hotels are for-profit
businesses, most hospitals are run by the government or established as nonprofit
entities. When consumers are not able to judge the quality of the product they are
buying, they may be more willing to trust an institution that is not set up primar-
ily to enrich its owners.
To be sure, these public and private regulations of healthcare have their crit-
ics. For example, some economists have argued that there are too many hurdles
to opening new medical schools. They suggest that the medical profession acts
like a monopoly: By restricting the number of doctors, it drives up doctors’ sala-
ries and consumers’ healthcare costs. Other economists have argued that the FDA
is too slow in approving new drugs. Some patients who might have benefited
from
experimental treatments are forced to go without them. The proper balance
between protecting public safety and giving people the freedom to make their
own healthcare decisions is a subject of ongoing debate.
1c The Insurance Market and Its Imperfections
Because people don’t know when they are going to get sick or what kind of med-
ical treatments they will need, spending on healthcare is unpredictable. This
uncertainty, and how people respond to it, is a key reason why we have the health
institutions that we do.
The Value of Insurance Most people are risk averse. That is, they dislike uncer-
tainty. Imagine that you face a choice between a certain income of $100,000 and
risk aversion
a dislike of uncertainty
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 4 8/30/17 3:17 PM
5. 5
The Economics of Healthcare
a 50-50 chance of income of $50,000 or $150,000. The two options offer the same
average income, but the second is riskier. If you prefer the certain $100,000, you
are risk averse.
The same behavior arises from the randomness of health spending. Suppose
that some disease affects 2 percent of the population and that everyone is equally
likely to be stricken. Treatment costs $30,000. In this case, the expected cost of
healthcare is 2 percent of $30,000, which is $600. If people are risk averse, they
prefer to pay $600 with certainty over a 2 percent chance of having to pay $30,000.
Giving people this option is the purpose of insurance. The general feature of
insurance contracts is that a person facing a risk pays a fee (called a premium) to an
insurance company, which in return agrees to accept all or part of the risk. There
are many types of insurance. Car insurance covers the risk that you will be in an
auto accident, fire insurance covers the risk that your house will burn down, and
health insurance covers the risk that you will need an expensive medical treat-
ment. In our example, a health insurance company can charge a premium of $600
(or slightly more to make a profit) in exchange for promising to cover the cost of
the $30,000 treatment for the 2 percent of its customers who get the disease.
Markets for insurance are useful in reducing risk, but two problems hamper
their ability to do so fully and efficiently.
Moral Hazard The first problem that impedes the operation of insurance markets
is moral hazard: When people have insurance to cover their spending on health-
care, they have less incentive to engage in behavior that will keep that spending
to a reasonable level. For example, if patients don’t have to pay for each visit to a
doctor, they may go too quickly when they experience minor symptoms (a runny
nose, an achy finger). Similarly, physicians may be more likely to order tests of
dubious value when they know an insurance company is picking up the tab.
Health insurance companies try to reduce the problem of moral hazard by
finding ways to encourage people to act more responsibly. For instance, rather
than picking up the entire cost of a visit to a physician, they may charge patients
co-pays of, say, $20 per visit to deter patients from making unnecessary visits. Sim-
ilarly, insurance companies may have strict rules about the circumstances under
which they will cover the cost of certain tests that physicians order.
Adverse Selection The second problem that impedes the operation of insur-
ance markets is adverse selection: If customers differ in their relevant attributes
(such as whether they have a chronic disease) and those differences are known to
customers but not observable by insurers, the mix of people who choose to buy
insurance may be especially expensive to insure. In particular, people with greater
hidden health problems are more likely to buy health insurance than are healthy
people. As a result, for an insurance company to cover its costs, the price of health
insurance must reflect the cost of a sicker-than-average person. Even people with
average health may see the high price and decide to go without insurance. As peo-
ple drop coverage, the insurance market fails to achieve its purpose of
eliminating
the financial risk from illness.
Adverse selection can lead to a phenomenon called the death spiral. Suppose
that, because a person’s health profile is private information, insurance companies
must charge everyone the same price. At first, it might seem to make sense for a
company to base the price of insurance on the health characteristics of the
average
person in the population. But after it does so, the healthiest people may decide
that insurance is not worth the cost and drop out of the insured pool. With a sicker
moral hazard
the tendency of a
person
who is imperfectly
monitored to engage in
dishonest or otherwise
undesirable behavior
adverse selection
the tendency for the mix
of unobserved attributes
to become undesirable
from the standpoint of an
uninformed party
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 5 8/30/17 3:17 PM
6. 6 The Economics of Healthcare
group of customers than expected, the company has higher costs and therefore
has to raise the price of insurance. The higher price now induces the next health-
iest group of people to drop insurance coverage, which drives up the cost and
price again. As this process continues, more people drop coverage, the insured
pool gets less healthy, and the price keeps rising. In the end, the
insurance market
may disappear.
The problem of adverse selection has been central in the debate over health pol-
icy. For example, the Affordable Care Act (signed by President Obama in 2010 and
often called “Obamacare”) prevented health insurance companies from charging
more to cover people with pre-existing medical conditions. This rule was
enacted
to help people with ongoing medical problems, but it was also a recipe for
adverse
selection: People with pre-existing conditions would view insurance as a better
deal than those without them and, therefore, would be more likely to buy health
insurance. Healthy people would have an incentive to wait until they got sick
before buying insurance.
Lawmakers were aware of this problem. To combat it, the Affordable Care Act
required all Americans to buy health insurance and imposed a financial penalty
on those who did not. (It also gave subsides to help low-income households afford
insurance.) The goal of the mandate was to increase the number of healthy people
buying insurance, thereby reducing the problem of adverse selection and lower-
ing the cost of insurance. As more healthy people entered the insurance market,
those without pre-existing conditions would, in effect, subsidize those with them.
Analysts differ in their views about how successful the Affordable Care Act
has been in improving the healthcare market. Many people (presumably healthy
ones) chose to remain uninsured and pay the penalty. One interpretation of this
fact is that the penalties for not purchasing insurance were too small to prevent a
significant amount of adverse selection. Yet the law has increased the number of
people with health insurance, which was one of its main goals. The share of the
population without insurance fell from 16 percent in 2010 to 9 percent in 2015.
1d Healthcare as a Right
Normally, when some people don’t buy a good or service, perhaps because they
think it costs too much given their income, that outcome is not a major problem
for society. For example, suppose that a ticket to a hit Broadway show becomes
expensive and lower-income consumers choose other forms of entertainment.
We may lament that good theater is not enjoyed more widely, but few would
argue this rises to the level of a great injustice.
Healthcare is different. When a person gets sick, it seems wrong that a low
income would be a reason to deny treatment. Healthcare, unlike a ticket to a
Broadway show, is arguably a human right. This judgment goes beyond the scope
of economics and is best left to political philosophers, but we should acknowl-
edge this belief as we study the economics of healthcare.
In some ways, healthcare is like food. Food is necessary to survive, and as a
society we try to ensure that everyone has the resources to get the food they need.
That is the purpose of the Supplemental Nutrition Assistance Program (SNAP),
formerly known as Food Stamps. There is, however, an important distinction
between food and healthcare. Over time, the price of food has risen more slowly
than incomes, and so affording an adequate diet has taken up a declining share
of the typical household’s budget. By contrast, because the cost of state-of-the-art
healthcare has risen rapidly, affording it has required an increasing share of the
typical household’s budget.
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 6 8/30/17 3:17 PM
7. 7
The Economics of Healthcare
Healthcare being viewed as a right, along with its rising cost, has led to a large
role for the government. In many nations, such as Canada and England, the
government runs the healthcare system, financed mostly by taxes. This system
is sometimes called single payer because one entity—the government’s health
service—pays all the bills.
By contrast, in the United States, most people have private health insurance,
often through their employers, but the government still has a sizable presence.
Medicare provides health insurance for those 65 and older; Medicaid provides
health insurance for the poor; the Veterans Health Administration offers health-
care to former members of the military; and the Affordable Care Act regulates
the market for private health insurance and gives insurance subsidies to many
lower-income households. Whether these programs can be improved, and if so
how, remain topics of debate. But there is little doubt that, with healthcare often
viewed as a human right, the government will continue to play a large role in the
healthcare system.
1e The Rules Governing the Healthcare Marketplace
The importance of health insurance, whether provided by private companies or
the government, requires that the market for healthcare work differently than
most other markets in the economy. The typical market—say, the market for
ice cream—looks like panel (a) of Figure 1. The market has buyers and sellers.
A seller offers a good or service at a price. A buyer who wants the item simply has
to offer up the right amount of money. An exchange is made, and soon the seller is
counting her profit and the buyer is enjoying his ice-cream cone.
The market for healthcare looks more like panel (b). The provider (the seller of
medical services) is not paid directly by the patient (the buyer). Instead, the patient
pays money to an insurer in the form of either a premium (if the insurer is a private
company) or taxes (if the insurer is the government). The insurer uses this money
to compensate the provider, who in turn provides medical services to the patient.
This process requires three sets of rules to guide behavior. The first set determines
the financing—that is, who pays for the insurance and how much they pay. If the
Figure 1
How an Insurer Changes a Market
In a typical market, shown in panel (a),
a seller delivers a good or service to a buyer,
who in exchange pays the seller a market-
determined price. In a healthcare market,
shown in panel (b), the provider delivers
healthcare to the patient, but the provider is
paid by an insurer (either the government or a
private company). This arrangement requires
rules for financing, access, and payment.
Buyer
Good or service
Access rules
Financing rules
(a) Model of the typical market
(b) Model of a healthcare market with an insurer
Payment rules
Provider
Patient
Insurer
Money
Seller
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 7 8/30/17 3:17 PM
8. 8 The Economics of Healthcare
insurer is the government, paying for healthcare becomes part of designing the tax
system. If the insurer is a private company, healthcare is financed by the price that
health insurance purchasers pay for their coverage. The price is set in the insurance
market, which (like other markets) bases price on costs. In many cases, however,
state and federal governments regulate the market for private
insurance. For exam-
ple, they may limit the extent to which companies can charge different prices based
on age, sex, and pre-existing conditions. Thus, even when the financing of health-
care occurs between a patient and a private insurer, it is still shaped by public policy.
The second set of rules determines a patient’s access to healthcare. As we have
discussed, because insured patients do not pay the marginal cost of each medical
service they consume, there is the possibility of overuse. To mitigate this problem
of moral hazard, the insurer (whether the government or a private firm) has rules
to limit access to when it makes sense. In other words, these rules ration the use of
medical services based on estimated costs and benefits. For example, a patient may
be able to get a routine check-up no more than once a year, may have access to only
a limited number of doctors, or may need a referral from a general practitioner be-
fore making an appointment with a more expensive specialist. Such
access rules are
necessary because, once people have insurance to pick up the cost, market prices
are no longer giving them the right signals about how to allocate scarce resources.
The third set of rules determines the payments from insurers to providers.
These rules establish both what an insurer will pay for and how much they
will pay. Treatment prices influence which treatments providers guide patients
toward. Insurers may deem some treatments too expensive, too experimental, or
insufficiently valuable to pay for them at all. In such cases, providers will often
not offer patients the services. Sometimes, however, providers will offer the ser-
vices only if the patient pays the full cost of the treatment (as is often true with
cosmetic procedures). In this case, the market for healthcare reverts from panel
(b) in
Figure 1 to the more typical market in panel (a).
The rules regarding financing, access, and payment are related, and
together
they shape the kind of healthcare system a nation has. For nations with a
government-run system, these rules are set by public policy. For nations with more
private insurance, such as the United States, these rules are set by insurance com-
panies as they compete for customers, subject to various government regulations.
2 Key Facts about the Healthcare System
Now that we understand the main economic forces at work, let’s look at some
data that describe the U.S. healthcare system. We first examine what we get from
it, as measured by how long people live. We then see how much healthcare costs
us, how much other nations pay, and how we pay the bill.
2a People Are Living Longer
We start with some good news: People are living longer than ever before. Figure 2
shows life expectancy over time in the United States. Life expectancy measures how
long people born today would live, on average, if they faced current mortality rates
at every age. You can see that it has increased substantially over time. Life expectancy
in 1900 was just 47.3 years. It increased to 68.2 years in 1950 and to 78.8 years in 2015.
A large part of the increase in life expectancy is due to a decline in infant mor-
tality. At the beginning of the twentieth century, about 10 percent of children died
before the age of one. Today, the infant mortality rate is less than 0.6 percent.
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 8 8/30/17 3:17 PM
9. 9
The Economics of Healthcare
Much of the credit for the increase in life expectancy goes to advances in med-
ical technology. Physicians now know more about how to prevent disease and
how to treat medical problems when they arise. But other developments play a
role as well. For example, improvements in sanitation—specifically, the availabil-
ity of clean water and the adequate disposal of sewage—has reduced the spread
of disease. In addition, the rate of fatalities from car accidents is now half what it
was in 1950. Credit for this change goes to advances in automotive safety, such as
seat belts and air bags.
2b Healthcare Spending Is a Growing Share of the Economy
Figure 3 shows healthcare spending in the United States as a percentage of GDP
(a measure of the economy’s total income). Health spending has risen from
5
percent of GDP in 1960 to 18 percent in 2015, and there is no sign that this
increase is about to stop.
What explains this trend? Several forces are at work.
First, some medical care, such as a doctor’s visit, is a personal service, much
like a barber’s haircut or a teacher’s lesson. Economist William Baumol pointed
out long ago that for many providers of personal services, productivity does not
change much over time. But as the rest of the economy experiences technolog-
ical progress, labor productivity and overall wages increase. Those supplying
personal services will come to expect rising wages along with the rest of the la-
bor force. Yet without much productivity growth in those sectors, the only way
to give these service providers higher wages is for the prices of their services (ad-
justed for overall inflation) to increase. In other words, when overall productivity
Figure 2
U.S. Life Expectancy
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2010
2000
0
40
45
50
55
60
65
70
75
80
Year
Life expectancy
at birth, years
1918 Flu Pandemic
The number of years a person can expect to live has increased substantially over time.
Source: Centers for Disease Control and Prevention.
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 9 8/30/17 3:17 PM
10. 10 The Economics of Healthcare
is rising, a symptom of being a sector with low productivity growth is increas-
ing costs and prices. This phenomenon is called Baumol’s cost disease. And if the
demand for the services of these sectors is price inelastic, as it is for healthcare,
spending on those services will increase as well.
Second, while there have been significant advances in medical technology,
many of these advances, rather than being cost-saving, have increased spend-
ing. In the past, physicians had little treatment for many diseases. Bed rest and
wait-and-see (and leeches!) were sometimes the best they could offer. Today, we
have more options for treatment. These new treatments extend and enhance the
quality of life, but they are often expensive.
Third, changes in the population may have increased the demand for health-
care. In particular, as social norms for women have evolved, birth rates have
fallen. Fifty years ago, the average woman had about three children over her life-
time, compared with about two children today. This fall in birth rates, along with
rising life expectancy, has altered the relative sizes of various age groups. The
share of the U.S. population 65 years or older increased from 9 percent in 1960 to
15 percent in 2015. Because the elderly consume more healthcare than the young,
an older population leads to greater healthcare spending.
Fourth, over time, society has become richer, and that change may have
increased the share of spending on healthcare. Average income per person, ad-
justed for inflation, is today more than three times what it was in 1960. As incomes
rise, we spend more on many things, but we don’t increase spending on all items
proportionately. How we choose to spend the extra income depends on prefer-
ences. For
example, as incomes increase, the share of spending on food declines
Figure 3
Health Spending as a Share of
GDP: Changes over Time
The percentage of the U.S. national income devoted to healthcare has increased over time.
Source: Center for Medicare & Medicaid Services.
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2015
2010
0
2
4
6
8
10
12
14
16
18%
Year
Health spending,
percent of GDP
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 10 8/30/17 3:17 PM
11. 11
The Economics of Healthcare
because the marginal value of consuming more calories declines
rapidly. By contrast, the marginal value of years of life declines
slowly and so, as we get richer, we may spend a higher fraction
of our budget on healthcare. In other words, healthcare may be a
good with an income elasticity greater than one. Estimates based
on international comparisons put this elasticity at about 1.3.
In light of these four forces, the increasing share of health
spending in the economy may be inevitable. In and of itself, higher
healthcare spending is not necessarily a problem. But it does mean
that the policy challenges of this sector will loom larger over time.
2c Healthcare Spending Is Especially High
in the United States
Figure 4 shows healthcare spending as a percentage of GDP for
seven major developed nations. One striking fact is that the United
States spends an especially high fraction of its GDP on healthcare.
Most developed nations spend 9 to 12
percent of GDP on health-
care, while the United States spends more than 17 percent.
Critics of the U.S. healthcare system use this comparison to
argue that the United States is uniquely inefficient. They point
out that life expectancy is higher in some nations that pay less
for healthcare, such as Canada, France, and Japan. They some-
times suggest that greater reliance on government rather than
private health insurance, as is the case in most other nations,
could lower costs without adversely affecting health outcomes.
Figure 4
Health Spending as a Share of
GDP: International Comparison
The United States spends a
much larger share of its income
on healthcare than do other
nations.
Source: The World Bank. Data are for 2014.
0
2
4
6
8
10
12
14
16
18 %
United
Kingdom
Italy Japan Canada Germany France United
States
Health spending,
percent of GDP
9.1% 9.2%
10.2% 10.4%
11.3% 11.5%
17.1%
Baumol’s Cost Disease
ask the experts
“Because labor markets across different sectors are con-
nected, rising productivity in manufacturing leads the cost
of labor-intensive services—such as education and health
care—to rise.”
What do economists say?
Source: IGM Economic Experts Panel, May 16, 2017.
8% uncertain
4% disagree
88% agree
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 11 8/30/17 3:17 PM
12. 12 The Economics of Healthcare
Defenders of the U.S. healthcare system accept that some reforms might
reduce
costs, but they believe that reliable conclusions are hard to draw from the inter-
national comparisons. For example, the rate of obesity is higher in the United
States than it is in the other six nations in Figure 4. Higher rates of obesity reduce
life expectancy and increase health care costs. Thus, some of the international
differences observed in health data do not shed light on healthcare systems but,
instead, reflect differing lifestyle choices regarding diet and exercise.
One notable and widely debated difference between the United States and
other nations concerns pharmaceutical pricing. Canadians on average spend
about 30 percent less on drugs than Americans do (and residents of most Euro-
pean
nations spend even less). Often, the same drug is much cheaper on the Cana-
dian side of the border than on the American side. The reason is that Canada, with
its centralized government-run health system, maintains strict controls over drug
prices. Critics of the U.S. healthcare system believe that pharmaceutical companies
are taking advantage of America’s less centralized system by charging exorbitant
prices for patented drugs. They argue that the U.S. government should follow Can-
ada’s lead and undertake more aggressive regulatory policies to reduce drug prices.
Defenders of the U.S. system believe that expanding price controls into the United
States would substantially reduce the incentives for pharmaceutical companies to
engage in research into new drugs. Consumers would benefit from lower prices
today, but they would bear the cost of a smaller range of treatments in the future.
2d Out-of-Pocket Spending Is a Declining Share
of Health Expenditure
When you consume the services of a healthcare provider, such as a physician
or dentist, the provider is compensated in one of two ways. Either you pay the
provider directly out of your own pocket or a third party, such as a government
insurance program or a private insurance company, pays the provider for you.
Figure 5 shows the percentage of spending on personal healthcare that is paid
out of pocket in the United States. The percentage has declined from 56 percent
in 1960 to 12 percent in 2015. Conversely, third-party payment has risen from
44 to 88 percent of health spending. Of the large amount that is not paid out of
pocket, just over half is paid by government insurance programs, such as Medi-
care (the program for the elderly) and Medicaid (the program for the poor); just
under half is paid by private insurance companies.
The increasing importance of health insurance is understandable. Because the
need for healthcare is unpredictable, as it gets more expensive, people will seek to
protect themselves from the uncertainty by obtaining insurance.
Yet many economists believe that the United States health system has become
too reliant on health insurance, especially for small or routine expenditures. They
believe that excessive insurance exacerbates the moral hazard problem discussed
earlier and thereby drives up healthcare costs. To explain excessive insurance,
they note that the U.S. income tax gives preferential treatment to employer-
provided health insurance. Compensation in the form of health insurance is
tax-exempt, unlike cash compensation. As a result, employees have an incentive
to bargain for more generous (and thus more expensive) health insurance than
they otherwise would, reducing the amount of healthcare they pay out of pocket.
The Affordable Care Act tried to remedy this problem by levying a so-called
“Cadillac tax” on especially expensive employer-provided health plans. This pol-
icy would level the playing field between paying workers in the form of cash com-
pensation and paying them in the form of generous health insurance. That is, the
tax code would no longer give an incentive for excessive insurance. The Cadillac
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 12 8/30/17 3:17 PM
13. 13
The Economics of Healthcare
tax was originally scheduled to go into effect in 2018 but has
been delayed until 2020.
3
Conclusion: The Policy Debate
over Healthcare
This module has introduced some of the facts and economic
insights useful in understanding the market for healthcare.
Most of these ideas are widely accepted by the economists
who study healthcare. Despite this consensus, there is ongoing
debate among U.S. policymakers about what role the govern-
ment should play in the healthcare system.
Those on the political left would like to see an expanded gov-
ernment role. They often believe that private insurance compa-
nies are particularly inefficient and too often put profit ahead
of people. Some on the left would like the government to offer
people a public option in the healthcare system—that is, a govern-
ment-run insurance program that any person can buy into in-
stead of purchasing private
insurance. Others would like to move
toward a single payer system in which the government pays for
Figure 5
Out-of-Pocket Spending as a
Share of Total Personal Health
Spending
The share of U.S. personal healthcare that households pay for themselves has declined
over time. The share paid by third parties—government programs and private health
insurers—has increased.
Source: Center for Medicare Medicaid Services.
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2015
2010
0
10
20
30
40
50
60%
Year
Out-of-pocket spending,
percent of total personal
health spending
Cadillac Tax
ask the experts
“The ‘Cadillac tax’ on expensive employer-provided health
insurance plans will reduce costly distortions in U.S. health
care if it is allowed to take effect as scheduled in 2018.”
What do economists say?
Source: IGM Economic Experts Panel, May 17, 2016.
16% uncertain
84% agree
0% disagree
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 13 8/30/17 3:17 PM
14. 14 The Economics of Healthcare
healthcare for everyone out of tax revenue, as Medicare now does for the
elderly.
They point to Canada as a successful model. A centralized system run by intelli-
gent administrators, they argue, is best able to reduce administrative inefficiency,
eliminate wasteful treatment, bargain with providers for lower costs, and allocate
healthcare resources most equitably to where they are most needed.
Those on the political right would like to reduce government’s role in the
healthcare system. They acknowledge that the market for health insurance needs
to be regulated, but they would like the regulation to be less heavy-handed
than it is now. They believe that the best healthcare is likely to arise as private
insurers and providers compete for consumers. They worry that a centralized
government-run system would limit individual freedom, excessively ration care,
and stifle innovation. They view Canada not as a role model but as an example
of what could go wrong. Waiting times for medical procedures can be long in
Canada, and those who can afford it sometimes choose not to wait and instead
come to the United States for medical procedures.
The debate over health policy also needs to be understood as part of the larger
debate over income inequality and the role of government. As we first discussed
in Chapter 1, society faces a trade-off between equality and efficiency, and that fact
looms large when discussing the provision of healthcare. Those on the
political
left want to provide universal health coverage to all citizens, regardless of income,
either through government insurance programs or by subsidizing private insur-
ance for low-income households. But paying for these policies requires higher
taxes on higher-income households, and those taxes distort incentives and shrink
the size of the economic pie. Those on the political right are more concerned about
the distortionary effects of taxes and income redistribution. They advocate more
limited government and lower taxes to expand the economic pie. But smaller gov-
ernment revenue means fewer public resources to help those who struggle to get
the healthcare they need.
This debate raises hard and important questions, and this module does not try
to offer up easy answers. But this introduction to healthcare economics should
give you a starting point for thinking through the many issues.
1. Give two examples of externalities in the healthcare
system.
2. Explain moral hazard and adverse selection in the
market for health insurance.
3. Describe the three sets of rules that are necessary in a
healthcare market with an insurer.
4. Give three reasons why life expectancy has been
increasing over time.
5. How does spending on healthcare in the United
States compare with spending 50 years ago?
Give four
economic forces that might help explain
the trend.
6. How does healthcare spending in the United States
compare with spending in other developed nations?
7. Explain the rationale for the “Cadillac tax” on expen-
sive health insurance plans.
Questions for Review
Key Concepts
risk aversion, p. 4 moral hazard, p. 5 adverse selection, p. 5
85126_EconomicsofHealthcare Mod_rev01_001_014 cf_PP2.indd 14 8/30/17 3:17 PM