1 / 20

CHAPTER 9

CHAPTER 9. The Health Care Market. Social Insurance. Social insurance - government programs that provide insurance to protect against adverse events Examples Medicaid Medicare Social Security Unemployment Compensation. How Health Insurance Works. Insurance premium Expected Value

jonny
Download Presentation

CHAPTER 9

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. CHAPTER 9 The Health Care Market

  2. Social Insurance • Social insurance - government programs that provide insurance to protect against adverse events • Examples • Medicaid • Medicare • Social Security • Unemployment Compensation

  3. How Health Insurance Works • Insurance premium • Expected Value • Expected value (EV) = probability of outcome 1) * (Payout in outcome 1) + probability of outcome 2)*(Payout in outcome 2) + … + (probability of outcome n)*(Payout in outcome n)

  4. Expected Value Computation Draw cards from deck of cards Draw heart and receive $12 Draw spade, diamond or club and lose $4 Probability of drawing heart = 13/52 = ¼ Probability of drawing spade, diamond or club = 39/52 = ¾ EV = (1/4)($12) + (3/4)(-$4) = $0

  5. Why Buy Insurance? Actuarially Fair Insurance Policy

  6. Why People Buy Insurance B UB Utility D UD UC C • Expected Utility • Risk Smoothing A UA Income 20,000 47,000 50,000

  7. Do People Buy Insurance with Loading Fees? • Risk Aversion • Risk Premium • Loading Fee

  8. The Role of Risk Pooling • Insurance in a small population • Insurance in a large population • Law of large numbers

  9. Adverse Selection in the Health Insurance Market • Asymmetric information

  10. Asymmetric Information and Adverse Selection

  11. Does Adverse Selection Justify Government Intervention? • Experience rating • Experience rating and equity • Community rating

  12. Insurance and Moral Hazard • Moral hazard • Deductible • Co-payment • Co-insurance

  13. Moral Hazard Flat-of-the-curve medicine Price per unit deadweight loss b a Sm P0 h .2P0 Dm 0 M0 M1 Medical services per year

  14. Health Care Expenditures and Health Outcomes

  15. Additional Considerations • The Elasticity of Demand for Medical Services • Does Moral Hazard Justify Government Intervention? • Third Party Payment

  16. Other Market Failures in the Health Care Market • Information Problems • Externalities

  17. Do We Want Efficient Provision of Health Care? • Paternalism • The Problem of the Uninsured • Who are the uninsured? • Does health insurance improve health

  18. High Health Care Costs

  19. Causes of Health Care Cost Inflation • The Graying of America • Income Growth • Improvements in Quality • Commodity Egalitarianism

More Related