36 - 1 Copyright McGraw-Hill/Irwin, 2002 The Health Care Industry Quality of Care Limited Access Increasing Demand for Health Care Role of Health Insurance Insurance and the Overallocation of Resources to Health Care Supply Factors in Rising Health Care Prices Cost Containment: Altering Incentives Recent Laws & Proposals Key Terms Previo us Slide Next Slid e End Show THE ECONOMICS OF HEALTH CARE 36 C H A P T E R
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36 - 1Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
THE ECONOMICS OFHEALTH CARE
36C H A P T E R
36 - 2Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
THE HEALTH CARE INDUSTRY
Twin Problems: Costs and Access
High & Rising Health Care Costs
Total Spending on Health Care
Deductibles - Copayments
Medicare - Medicaid
Percentage of GDP
International Comparisons
36 - 3Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
Economic Implications of Rising Costs
Reduced Access to CareLabor Market Effects
Slower Wage GrowthUse of Part-time & Temporary
WorkersImpact on Government BudgetsThe basic problem...
QUALITY OF CAREAre We Healthier?
36 - 4Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
LIMITED ACCESS
Why the Rapid Cost Increases?Peculiarities of the Health Care
MarketEthical and Equity ConsiderationsAsymmetric InformationSpillover BenefitsThird-Party Payments:
Insurance
The Uninsured:16% of Population
36 - 5Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
INCREASING DEMANDFOR HEALTH CARE
Rising Incomes: Role of Elasticities
An Aging PopulationUnhealthy LifestylesThe Role of Doctors
•Supplier-Induced Demand•Fee-for-Service
•Defensive Medicine•Medical Ethics
36 - 6Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
ROLE OF HEALTH INSURANCE
Insurance and Governments Pay 79% of all Payments
Moral Hazard ProblemLess PreventionOverconsumption
Government Tax Subsidy
Graphically...
36 - 7Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
INSURANCE AND THE OVERALLOCATIONOF RESOURCES TO HEALTH CARE
D
S
Pu
Qu
Overallocationwith healthinsurance
0
P
Q
Pi
Qi
36 - 8Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
SUPPLY FACTORS IN RISINGHEALTH CARE PRICES
Supply of PhysiciansSlow Productivity GrowthChanges in Medical TechnologyRelative ImportanceReform of the Health Care
SystemUniversal AccessPlay-or-PayTax Credits and Vouchers
36 - 9Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
SUPPLY FACTORS IN RISINGHEALTH CARE PRICES
National Health Insurance (NHI)Arguments for NHI:
• Choice of Physicians• Reduce Administrative Costs• Separate Employment from
Insurance• Single-Insurer Market
Power for Cost Containment
36 - 10Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
Against NHI:• Won’t Control Costs• Long Waits for Care• Doctor “Strikes”• Government’s Poor Record• Undesirable Redistributive
Effects
SUPPLY FACTORS IN RISINGHEALTH CARE PRICES
National Health Insurance (NHI)Arguments
36 - 11Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
COST CONTAINMENT:ALTERING INCENTIVESDeductibles - CopaymentsManaged CarePreferred Provider
Organizations (PPOs)Health Maintenance
Organizations (HMOs)Medicare and DRGDiagnosis-Related-Group
(DRG)
36 - 12Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
RECENT LAWS & PROPOSALS
Portability and Accountability
Medical Savings Accounts
Prescription Drug Coverage
ChapterConclusions
deductiblescopaymentsfee for servicedefensive medicinetax subsidy“play or pay”national health insurance (NHI)preferred provider organizations (PPOs)health maintenance organizations
(HMOs) diagnosis-related-group (DRG) system
ENDBACKCopyright McGraw-Hill/Irwin 2002
36 - 14Copyright McGraw-Hill/Irwin, 2002
The Health Care Industry
Quality of Care
Limited Access
Increasing Demand for Health Care
Role of Health Insurance
Insurance and the Overallocation of Resources to Health Care
Supply Factors in Rising Health Care Prices
Cost Containment: Altering Incentives
Recent Laws & Proposals
Key Terms
PreviousSlide
NextSlide
EndShow
InternationalTrade
Chapter 36
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