The Uninsured

(Causes)

• Increase of insurance premium > increase in wages
• Too proud for Midcaid (negative label)
• Not covered/declined cover through employer

The uninsured

(Characteristics)

• Not just the poor: only 1/3 below poverty level
• Not just the unemployed: 2/3 work full-time

The Uninsured

(Health implications)

• Delay care, no preventative/screening care = sicker when diagnosed = more expensive when treated
• Poor Health
• Poor Income

Medicaid

(Background)

• Enacted in 1965; supplement/section of Social Security Bill
• Health insurance for the poor
• Partnership between federal government and the states

Medicaid

(Eligibilty)

• Children, pregnant women, parents, eniors and individuals with disabilities
• Calculated based on income in relation to Federal Poverty Level (FPL)

Medicaid

(Coverage: Mandatory Services)

• Physician services
• Laboratory and X-ray services
• Medical and Surgical dental services
• Nursing facility services for individuals 21 and older
• Home health care for nursing facility services

Medicaid

(Coverage: Optional Services)

• Prescription drugs
• Physical therapy and rehab services
• Dental and vision services and supplies

Medicare

(Eligibility)

• 65+, contributed to or bought into program, widowed or married to someone who contributed
• Long-term disabled
• End-stage renal disease

Medicare

(Coverage: Part A)

Medicare

(Coverage: Part B)

• Physician care = Medical Insurance
• Outpatient care, medical equipment, labwork, x-rays, etc.
• Have to pay a montly premium

Medicare

(Coverage: Part C)

• Medicare advantage plans
• A Manage Care Organization of choice replaces A+B
• Can have health care providers outside of Medicare

Medicare

(Coverage: Part D)

• Drugs
• Participation voluntary -> instability
• 4 different plans
• Pay a penalty if choose not to participate at first, but joins later

Medicare

(Coverage: 4 different plans for Part D)

• Deductible: Patient pays 100%
• Initial Coverage: Co-payments/Co-insurance
• Donut hole: Patient pays 100%
• Cheap care is covered -> so that people will buy in
• Expensive care is covered -> so taht high risks are covered
• Mid-level care is not -> so that Medicare saves money
• Catastrophic insurance: Covered Completely

Medicare

(Funding: Part A)

• Not voluntary
• 2.9%% of Current Payroll tax
• Current employees and employers pay in for the current retirees

Medicare

(Funding: Part B & D)

• Part premiums and part general tax revenues

Medicare

(Policy Implication)

• Older population
• Funding structure

• Due to proposed increase in coverage of uninsure population, policy implication on demand for health care professionals
• Requires lengthy education to train and educate doctors and health care providers
• How to deal with influx of uninsured individuals?
• Change immigration law: have foreign doctos practice on a short term basis
• Increase substitution of nurses
• Nurses do some services (physicals)

Affordable Care Act

(Objectives)

• Expand coverage, Establish rights, Control costs

ACA

(Individual mandate)

• Every citizen will be required to purchase health insurance
• Subsidies in law - those who cannot afford will have to pay on a sliding scale
• Some can get health insurance for free through Medicaid
• Larges contested point: forcing the US population to buy a service

ACA

(Employer Mandate)

• By 2014, large employers will be required to offer health insurance
• Requirement that each employer provide a certain minimum of what is considered  standardized health insurance benefits for its employers

ACA

(Health Exchanges)

• Helath insurance marketplace
• Where providers can create packages for individuals to purchase health insurance
• Desinged to help individuals access/understand different health insurance packages
• ACA minimum requirement for the exchange

Types of MCOs and the incentives that they employ to contain costs

(Health Maintenence Organizaiton)

• Function of insurance and provision of care is completely integrated
• Insurer owns the clinics/hospitals, and health care auxiliary

Types of MCOs and the incentives that they employ to contain costs

(Independent Practice Association)

• Contract between a large group of physicians and an insurer
• Insurer sends all their patients to these physicians
• Also engage in FFS type care

Types of MCOs and the incentives that they employ to contain costs

(Preferred Provider Organization)

• Cousin to IPA - with focus on selecting suvset of MD's
• Contract based on price in return for patients

Types of MCOs and the incentives that they employ to contain costs

(Point of Service)

• Hybrid between HMO, IPA, and PPO
• Fee per Patient
• Smaller co-payment to stay in network
• Higher co-payment but can see any physician in the country

• Historically, insurance companies covered physician costs and were not involved in health care decisions
• That was known as the Fee for Service model
• 1980's as cost of MC escalated faster than inflation, we started to see MCOs
• Insurance company was no longer passive but got involved in decisions about medical care, "managing" the care with the intention of controlling costs
• Reasons:
• Reaction to increased costs
• Inclusion of insurance into care decisions
• Offset incentives of overuse

Instability of the insurance market

(Experience Rating)

• Uses an individual's or group's health history as a proxy for future risk and insurers adjust and set insurance premiums and plans accordingly
• Often applies to employer-provided insurance
• People are employed based on skill and not based on their health; but insurers like to charge based on health history and risk
• Works well with large groups or small (if healthy) group
• Doesn't work well if a small group has an employee with high health expenditures 

Instability of insurance market

(Community Rating)

• Price of the insurance product is based on the whole community rather than the employee group
• Everyone in that community pays the same rate
• Get a normal distribution of helath risk that way, avoid market collapse and benefits small employers
• Rate is calculated based on the costs of claims for the whole community population. 

• Calculated based on the statistically expected costs of taking care of the population of insured people
• Example:
• If there is 1000 people in an insurance pool, they will take the total costs of MC of all the 1000 people last year and divide it by 1000. 
• The average cost will be the cost of the upcoming year with a little extra added for inflation

•  Costs of administering insurance and profit ofr the insurance company
• This pays for the retail space of the company, sending out notices, processing claims sent in by physicians, etc.

• Insurance changes behavior
• People who are insured, don't take full precautions that those without insurance takes, because they will be compensated in the event of illness
• Becuase of the diminished cost due to health insurance
• Not limited to health insurance
• People that are insured will be compensated for their financial loss and they are not taking full precautions as a person that is NOT insured
• If your home is on fire; you wouldn't install a fire sprinkler system; too expensive
• If you have insurance, your behavior changes because you know that you will be covered

1. Change in behavior towards one's health
2. Changes use of MC services because it lowers the price at the time we are using the services

• Uncertainty, insures cost, risk averse
• Does NOT insure health risk; only finincial risk
• People are risk averse (they don't like risk)
• Doesn't prevent us from getting sick
• Ex:
• 10% of women get breast cancer which is $10,000 to treat
• Risk population: 100,000 women
• 10% of these women with high degreee of certainty will develop brease cancer -> 1,000 women
• Each woman pays a little and the money will be tehre when she is diagnosed
• You are insuring your financial loss that comes with disease
• You DO NOT get compensated UNLESS you seek care
• Tied to utilization of services

Mechanisms of Health Care

• Quality report cards -> overall quality of institutions
• Pay for Performance (P4P) -> Knowing which MC is the best. "mimicking the market"
• Quality Improvement Organizations (QIOs): Work with providers to improve quality within each department. Subsidies.
• Regulators: # of Nurse Practitioners on shift, the amount of hours, monetary compliance 

Quality Report Cards

• Provide patients with explicit information about quality
• Allows us to distinguish between low and high quality hospitals
• Separates between high and low providers
• Primarily done by government
• But also by non-government sources; for-profit companies and non-profits
• National Center for Quality Assurance
• CAPS survey
• Sent to patients in managed care organizations and asking about their experience with physicians
• When patients don't know quality, they assume all physicians are the same and that they're all average.
• Demand curve for physicians assumes they're all of average quality, thus ther's only one demand curve
• [image]

• Voluntary
• Incentives for reaching goal and maintaining standard
• Uses quality measures similar to report cards. But are used by insurance sompanies or other payers to make decisions about reimbursement

• Illness severity, age, gender, etc. Price, Income, Insurance - increases demand, but decreases elasticity.
• Fixed copay: Patient pays a fixed amount
• Fixed coverage: Insurer pays a fixed amount
• % copay: Paitient pays % of full amount
• Deductibles and max payment
• Time/Travel costs and Quality
• Elasticity: show the responsiveness of demand in response to price
• The demand response to price is larger: 1% increase in price generate more than 1% decrease in demand
• the damnd for MC type is relate to how discretionary that type of medical care is

• Quality of care: Overuse, underuse, misuse
• Cost of care: Too much, too little
• What level is just right? (outcomes research)
• Efficacy studies: ideal circumstances (can it work?)
• Effectiveness studies: ordinary conditions (does it work?)
• Factors:
• Clinical aspects: disease prevalence, severity of illness; other medical issues
• Patient characteristics: health beliefs, culture; ethnicity; gender, age; education, costs, insurance, income
• Non-patient factors: Practice variation, practice styles (personlaity factors of the provider: risk aversion, level of comfort with uncertainty), substitution, health system resources, financial incentives for physician

What causes variation in practice?

• Differing beliefs about effectiveness of an intervention
• Patient clinical factors
• Disease prevalence
• Severity or stage of illness
• Presence of other medical problems

The RAND HIS 

(Health Insurance Study)

• Performed by RAND corporation and does studise for health policy research
• 6000 people involved in 4 cities/ 2 rural areas -> randomized into two groups: no helath insurance and health insurance that covered EVERYTHING
• Used different amounts of medical care -> measurd their health through physicals, surveys, etc.
• Productivity = health/1 unit of MC
• Split into two group with multiple characteristics: age, religion, health, etc.
• Health insurance (randomized)
• Results:
• Those with MC covered used more MC than the other group

• Usually used for drugs
• People are split randomly between intervention and control groups
• Intervention group: Gets new care/drug
• Control group: Gets the usual care
• Then compare how well both groups did

Natural Experiments

• Compare/contrast two phenomena - like an experiment, but differences between the two groups are naturally occuring
• Ex:
• Comparing the mortality rates in Utah and Nevada to find out the effects of "bad" goods

• Ratio of the cost of treatment to the number of years of life saved ($/years of life saved)
• Used to evaluate and compare the effectiveness of drugs and treatments
• Extensive margins (case of low-dose cholesterol drug):
• Men->Women
• Young females that don't smoke won't benefit from the drug becuase they are not ogin got save many years of life by taking the drug
• Cost is not worth it and they should not take the drug
• Intensive margin (Papsmear for cervical cancer starting at age 20):
• older women -> younger women
• Provide more consistent check ups at a younger age is not necessary since cervical cancers don't develop as fast; not financially a smart move

• How often or what dosage/intensity
• Factors to consider:
• Nature of the disease (mortality, morbidity and onset)
• Direct cost of the screening
• Indirect cost (time off work, gas, other personal costs)
• Risk of the procedure (side effects, emotional effects of false positive both emotionally and in need for follow-up procedures)
• Ex:
• Decision to change the age at which women should be screened for breast cancer, considering the prevalence was low in 40 year old women & screening them was not worth the risks.

• The range of people who are screened or for whom a precedure is recommended
• Factors to consider:
• Sensitivity (true positives) of test among the various subgroups, or the false positives
• Ideally want highest number of true positives and lowest number of false positives
• Probability of the disease

• More MC produces more health care
• Marginal productivity of medical care is positive.
• Presume, in common with other economic phenomena, that the incemental effect of MC on health care diminishes as more MC is used; after ahwile they may become negative
• Includes our lifestyle

• It's increasing at a faster rate than GDP
• Growth expected to peak in 2014
• Largest portions in personal health care (85%) -> Hospital, professional services, physician and clinical services, new technology, increase in population, aginig of population, inflation

• An increase in the level of prices over time
• Actural current price vs. Real price
• Adjusted for inflation using consumer price index
• Based on the cost of the goods that an average family consumes each month

• The total amount spent on healthcare -> consumption, investment, government spending, export/import. 
• As a proportion of GDP.
• US = Most

Production of health and the factors that influence it

• Input -> Production -> Output (Health)
• [image]
• Health Production: People make decisions based on a "cost=benefit" analysis
• Ex:
• Smoking benefit: lead to diseases and death
• Health is important because it contributes to utility
• There are many ways to influence health; including medical care, "good" & "bad" goods
• The effectiveness of medical care in producing health depends on hte disease (and the technology - things change all the time)

1. Desire to be healthy -> belief in the effectiveness of Medical Care
2. Want to maxamize utility by increasing well being (health) -> cannot directly seek health
3. Interaction between patients and providers and whether patients take physician's advice.

• Non-compliant patients
• Age group, race/ethnicity, region of the country, education, income (Relates to cultural references and beliefs)
• Could be a generational issue and cost of drugs
• All these factors apply in improving health
• Better health literacy

1. Uncertainty
2. Asymmetric Information
3. Externalities

• Onset of disease: individuals are "risk averse" -> this is why we buy insurance that helps us to deal with health issues
• Insurance is the biggest factorthat plays into the amount of healthcare that is consumed by individuals
• Planning depends on the onset of disease
• Progression of disease: Making decisions in an uncertain environment
• Quality Assessment: Determining the quality of care that patients receive
• Diagnostic Testing: Every test taht takes place has false positives and false negatives. Both of these has a cost associated to them 
• There are no perfect tests. Rates depend on quality of the test.
• Uncertainty in efficacy & effectiveness of treatment
• "What works?"
• Do more researc, spend more money in order to do so
• Technology changes -> information is greater over the years. This produces answers to questions that soon become no long relevant

• Patients & Physicians
• In this case, Physicians have more information than patients
• This is a problem because patients basivally have to hand over the decision making to the physicians
• "A true agent" results when both ends have the same information and would be able to come up with the same decisions
• Ex:
• Surgeons only get paid for the operatinos they perform. They don't get paid to "see" patients. As a result, there may be a bias in the decisions they offer for patients to make. They may be more inclined to recommend surgery -> since they'll get paid for it.
• Patients & Insurers
• Insurers do not have as much information as patients do
• During questioning, patients can withold out of information to their insurers so that they don't have to pay as much

• An action, such that the cost and benefit do not accrue to the same person or entitiy, or decision maker
• Negative Externality:
• A factory that produces a lot of toxic pollution and vapor -> all the residents that live downwind from the factory are suffering from this negative externality
• Factory takes into account the cost of how much it is to run their factory - but they don't consider the risk factors for those living around them
• Cost Does NOT equal benefit
• Total benefit = Private benefit + Public Benefit =Cost
• Ex: Vaccinating your child
• Private benefit = Your child won't get sick
• Public Benefit = Child won't get others sick
• Total benefit > Private benefit = COST