Health Economics- Lecture Ch23

8/3/2019 Health Economics- Lecture Ch23

http://slidepdf.com/reader/full/health-economics-lecture-ch23 1/21

Healthcare Reform

Dr. Katherine Sauer

Metropolitan State College of Denver

Health Economics



I. Goals of Reform

II. InsuranceIII. Competitive Strategies

IV. Consumer-Driven Health Care

V. Other Market-Based Reforms



I. Goals of Reform

Healthcare reform usually focuses on 2 main factors:

coverage

cost containment

Other important considerations:

choice for patients and providers

ease in administration



A. Basic Questions about Healthcare Reform

1. extent of service coverage

2. extent of cost-sharing for covered services

3. cost of reform itself and how it will be funded

4. whether to base on existing framework (government

programs and private employment-based insurance) or new framework



B. The Cost of Universal Coverage

From society¶s point of view, the incremental cost of

national health insurance (NHI) in the United States is

the extra total expenditure on health care that would beincurred if we switched to NHI.



The incremental costs stem from several sources:

1. extend coverage to the (approx. 46 million) uninsured

2. if NHI

plan provides greater typical coverage than people already choose to buy, then insured people face

higher costs

3. any tax-supported system of financing care potentiallyentails a deadweight loss to society



II. Insurance

A. Employer vs Individual Mandates

Under the employer mandate, the employer must procure

health insurance for its employees and their dependents.

Under the individual mandate, all residents are obligated

to purchase health insurance for themselves and their

families.



Economists would argue that in either case, the individualwill pay the majority of the cost of a mandate.

Employer mandates will ultimately be shifted

backwards to individual workers.

Individual mandates are clearly seen as falling

to individuals and their families.



In redesigning a health system, a good argument can be

made for revising or replacing the prevailing system of

employer-provided insurance.

Health insurance would no longer be dependent on

employment status and coverage would be portable.



B. Single Payer vs Multiple Insurers

In principle, a single payer system could reduce costs by

- economies of scale in administration

- greater pooling of insured

However, the same administrative options are already

available to the private sector.

- if further economies were possible, it is likely that

surviving private firms would be those who havealready merged



A single-payer system may also reduce costs by

eliminating the multiple forms and policy rules of

multiple insurance providers.

ex: a nursing home must use a different set of

forms and follow different policy rules for eachinsurance provider

A single-payer system (run by the government) may fail

to reduce costs because it lacks- profit incentive

- market competition



A potential benefit of the single-payer system lies withthe possibility of common coverage.

- simplified

The tradeoff is the current variety of policies.- tailor policies to individual¶s preferences for

cost and coverage



III. Competitive Strategies

The battle is over the superiority of :

increased government involvement through both

expanded regulation and additional government programs to provide or finance health care

Or

an increased emphasis on market mechanisms and

market forces with corresponding decreases in theuse of regulatory instruments.



Proponents of further regulation tend to argue that

- information imperfections

- flawed agency relationships

- other distortionscannot be readily corrected by attempts to promote partial

forms of competition.



A competitive health care policy is one that relies

primarily on financial incentives rather than controls toachieve goals.

Those supporting this approach believe that market

participants respond to changes in prices in a predictableand substantial way.

Supporters of competitive approaches also argue that

imperfections in their strategies are still preferable to thedistortions caused by imperfect regulation.



IV. Consumer Driven Health Plans

The dominant competitive strategy has been the

promotion of delivery systems that can provide an

alternative to traditional fee-for-service.

The cornerstone of this strategy has been the promotion

of managed care organizations.



A. Consumer-Driven Health Plans

In most cases, a CDHP features:

1. a high-deductible health plan

2. Health SavingAccount (HSA) or Health Reimbursement

A

rrangement (HR A

)

The motive for the CDHP:

- create highly informed consumers

- give consumers incentives and tools to takecharge of health care decisions



B. Evidence

Feldman and colleagues (2007)

do not find significant savings for those enrolled in

CDHPs

Dixon et al. (2008)

found that enrollees in the high-deductible CDHP were

more likely to cut back on utilization



C. Drawbacks

Healthier individuals are more likely to be attracted to

high deductible health plans, leaving sicker higher cost

populations to be insured by other plans.

Patients may have incentive to scrimp on preventive

care.

HSAs are more difficult to administer.



A small proportion of individuals with serious chronic and

acute conditions account for a large share of annual health

care spending.

These patients will have exceeded their maximum out-of-

pocket requirements and may not have a strong incentive to

economize on their use of health care.



V. Other Market-Based Reforms

Two other reforms are important to proponents of market-

based solutions:

1. deal with the tax subsidy of employer-provided

insurance

2. elimination of many mandated benefits

- increase the availability of lower-priced insurance

policies

Health Economics- Lecture Ch23

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