GOVERNMENT AND THE MARKET FOR HEALTH CARE

1. GOVERNMENT AND THE MARKET FOR HEALTH CARE Chapter 10

2. Uses of Health Care Funds in the U.S. (2010) Source: Centers for Medicare and Medicaid Services [2012c].

3. Sources of Health Care Funds in the U.S. (2010) Source: Centers for Medicare and Medicaid Services [2012c].

4. Private Health Insurance • The Implicit Subsidy for Employer-Provided Insurance • World War II era price controls • Federal tax subsidy

5. The Advantages of Employer-Provided Health Insurance Increase the risk pool Reduce adverse selection Lower administrative costs

6. Employer-Provided Health Insurance and Job Lock Job lock Health Insurance Policy Portability and Accountability Act of 1996 (Kennedy-Kassenbaum Act)

7. Cost Control and Private Insurance • Cost-based reimbursement (fee-for-service) • Managed care • Capitation-based reimbursement • Health Maintenance Organizations (HMOs) • Preferred Provider Organizations (PPOs) • Point-of-service (POS)

8. Medicare Expenditures(1966-2010) Expenditures on Medicare as a Share of GDP Real expenditures on Medicare Source: Centers for Medicare and Medicaid Services [2012c].

9. How Medicare Works • Benefits • Part A – Hospital insurance (HI) • Part B – Supplementary Medical Insurance (SMI) • Financing • Payroll tax funds HI • General revenues fund SMI

10. Prescription Drug Benefit • Part C – Medicare Advantage • Part D – Prescription Drug Benefit • Monthly premium • Low deductible • Donut hole • Generous coverage for high costs

11. Cost Control Under Medicare • Medicare’s retrospective payment system • Medicare’s prospective payment system • Diagnosis related groups • Resource-based relative value scale system • Medicare Managed Care

12. Medicare: Impacts on Spending and Health Expenditures on health care for the elderly Health outcomes

13. Medicaid: Overview Medicaid State Children’s Health Insurance Program

14. Medicaid Expenditures(1966-2010) Source: Centers for Medicare and Medicaid Services [2012c].

15. Financing and Administration Joint Federal-State financing State administration

16. Benefits States obligated to offer minimum package of benefits States may offer more generous benefits State administrative flexibility

17. Medicaid: Impacts on Health Take-up rate Crowding out Empirical evidence: Are Medicaid expansions effective? Crowding out and taking up

18. Does Public Insurance Crowd Out Private Insurance? A. Person who places relatively high value on private insurance B. Person who places relatively low value on private insurance C. Person who is uninsured before public insurance Quantity of all other goods Quantity of all other goods Quantity of all other goods F F A F A A B B B E C C C 0 0 0 M M Health insurance Health insurance Health insurance M Amount of publiclyprovided insurance Amount of publiclyprovided insurance Amount of publiclyprovided insurance

19. Health Care Reform • Individual mandates • The Massachusetts Plan • Health savings accounts • Catastrophic insurance policy • Single payer • International experiences • Canada • United Kingdom

20. Health Care Costs and Health Outcomes:U.S., Canada, United Kingdom

21. Final Thoughts Security vs. efficiency No free lunch Connection between health care expenditures and health