Aging & Health Care

1. Chapter 32 Aging & Health Care

2. Older Society • The population of the U.S. is getting older. • In 1970, the median age in the U.S was 27.9 years. In 2014, it is 37.6 years. • For Men: 36.3 years • For Women: 39.0 years http://www.census.gov/prod/cen2010/briefs/c2010br-03.pdf and www.cia.gov/library/publications/the-world-factbook/fields/2177.html Chapter 32 2

3. U.S. Age Distribution 2010 Source: factfinder.census.gov Chapter 32 3

4. Gender Distribution by Age2008 Population over 18 Population over 65 Source: factfinder.census.gov Chapter 32 4

5. Race as % of Population est. 2010 (for fun) Source: factfinder.census.gov Chapter 32 5

6. Workers to Social Security Recipients * Estimated Source: www.cbo.gov/doc.cfm?index=4011&type=0 Chapter 32 6

7. Age & Health Care Spending Source: Boyes & Melvin, Economics Chapter 32 7

8. Age & Health Care • As the population ages: • More people are receiving Social Security benefits • more money is spent on Health Care. Chapter 32 8

9. Health Care Spending as % of GDP Chapter 32 9

10. U.S. Health Care Expenditures 2008 Source: www.chcf.org Chapter 32 10

11. Sources Of Health Care Payments Source: www.chcf.org Chapter 32 11

12. Supply & Demand of Health Care • Higher costs (new technology, malpractice insurance) is decreasing the supply of health care • Shifting left, raising prices • Aging population is increasing the demand for health care • Shifting right, increasing prices Chapter 32 12

13. Medicare, Medicaid, & Insurance • The availability of payment assistance makes it “easier” for people to see a doctor – increasing demand • Shifts right, increases prices • This costs the government, insurance companies, and you (higher premiums, taxes & co-pays) Chapter 32 13

14. Insurance Companies • They are for-profit organizations. • They want to have more money come in & less money go out. • Incentives: • Try not to pay your claims • Try to get people to reduce their number of claims Chapter 32 14

15. Reducing Claims • Health & wellness programs • Reward programs for healthy behavior • Set limits to coverage • Investigate fraud • Increase Premiums after each claim • Moral Hazard Chapter 32 15

16. Moral Hazard • The purpose of co-payments is to make a person “make sure” they really need to see the doctor. • They do this by making people pay some of the expense out-of-pocket at the time of the visit. Chapter 32 16

17. Definitions • Co-Payment – money you must pay out-of-pocket at each visit. • Premium – monthly payment to insurance company for coverage Chapter 32 17

18. Calculating Premiums • What is the likelihood they must pay a claim on your behalf this year? • How much would they have to pay? Chapter 32 18

19. Premiums Example • Life insurance is easiest: • 10% chance Bob will die this year. • Bob has $1,000,000 policy • There is a 10% chance they will pay $1,000,000 this year, so they will charge him a minimum of $100,000. • Of course, they would charge more than that for “processing” & “administration” fees Chapter 32 19

20. Premium Example • They figure he will die sometime in the next 10 years. • They hope he will beat the odds & live 11 years. • If he died in 10 years, he’d pay them $1,000,000 & they’d pay him $1,000,000 • If he lived 11 years, he would pay more than $1,000,000. Chapter 32 20

21. Premiums & Behavior • The more likely the insurance will have to pay for you, the higher your premiums. • This should encourage you to try to improve your behavior (quit smoking, etc.) Chapter 32 21

22. “In-Network” Providers • Groups of doctors contract bulk-pricing to insurance companies • Customer will pay larger co-pay if they do not go to preferred provider Chapter 32 22

23. Socialized Medicine • Why not let the federal government take over the entire health care system? • With Doctors now government employees, the pay will be lower, which reduces the incentives for people to become doctors, & quality of health care goes down. Chapter 32 23