Health Policy Final Review - Part 1

Who might remain uninsured after the Affordable Care Act is implemented?

-Anyone who chooses to pay the penalty tax -Illegal immigrants -Legal immigrants within 5 years depending upon the state

Give two examples of goods with an inelastic price elasticity of demand. Give examples of goods with an elastic price elasticity of demand.

-Inelastic goods: Water (utility bill even when price goes up people pay for it because they need to shower, do dishes, ext. ), Gas (New Jersey example with storm Sandy, gas shortage increased prices, people waited in two hour lines to get gas.) An inelastic priced good is where the supply and the demand for the good are not affected by any price changes. -Elastic Goods: T.V. (Price goes up people realize they can live without it), air conditioning (People use fans as substitutes instead of turning on their AC) An elastic priced good is where the supply and demand for a good can vary due to price changes.

The individual mandate in health reform is quite controversial. Discuss one policy argument supporting the mandate and one policy argument opposing the mandate

-argument to justify the individual mandate both on policy and legal grounds is that without it, uninsured individuals will continue to receive lots of uncompensated care as "free riders" and private premium payers will pay for it. Avoid adverse selection. -an argument opposing individual mandate is that it is unprecedented and not bound by any limiting principle. It threatens the concept that enumerated powers under the Constitution set some limits on the scope of permissible federal authority.

Identify three common demand shifters and explain how each factor shifts demand

1. Income: As income increases, demand for products can increase because people can afford to buy more 2. Quality: If quality decreases, demand may decrease because people might not buy the product. If quality increases, demand may increase because people might choose to buy the product. 3. Price: If price goes up, demand may decrease because people can't afford to buy the product. 4. Substitutes: If there is cheaper alternative, demand may decrease.

Identify three common supply shifters and explain how each factor shifts supply

1. Costs: a key factor in determining the level of supply. They determine what inputs are needed to produce a good or service. For example, the price of cotton may impact the cost of producing medical scrubs or bed linens made out of cotton, or the price of steel may affect the cost of producing an autoclave or X-ray machine made with steel. So, if the price for a good or service does not increase as the cost of inputs increases, the quantity supplied is likely to decrease. For example, if it costs a manufacturer $100 more to build an X-ray machine because the cost of steel has risen therefore, the manufacturer will pass that production cost increase on the consumer by raising the purchase price of the X-ray machine. 2. Number of Sellers: as the number of sellers of a good increases, the supply of the good will increase as well because there are more companies producing the good. When the market is profitable, more sellers will want to enter the market. This will occur until the market reaches equilibrium, which is when the quantity demanded equals the quantity supplied. 3. Change in technology: New technology may mean a new way to produce a desired outcome, which may alter the supply of a good or service. New technology can also make a product more accessible than before. Technological improvements can increase demand for some services and reduce it for others, leading to a change in the production of these goods and services.

Define and give an example of an externality and a policy that addresses externalities

Definition: When a decision causes costs or benefits to individuals or groups other than the person making the decision. In other words when a transaction affects parties other than the buyers and sellers. -By-product of production or consumption that affects others. The adverse or beneficial affect is not built into the price of the good. •Negative Externality: Private Cost<Social Cost •Positive Externality: Private Benefit<Social Benefit Example of positive externality: -A positive externality is something that benefits society, but in such a way that the producer cannot fully profit from the gains made. An example would be environmental cleanup and research. A cleaner environment benefits society, but does not increase profits for the company responsible for it. A policy to encourage its consumption is pollution limits or tax companies for polluting. -Vaccination for rabies Example of negative externality: -A negative externality is cost that a third party has to bear when a good is consumed or produced. An example would be smoking. Smoking may benefit the person doing it but it imposes a negative externality on people who do not like the smell of smoke. Health consequences of second smoke; health care cost due to smoking borne by society/Medicare. Policy to discourage its consumption is smoking tax or smoking ban.

Moral Hazard

Do not have to pay the full cost of acquiring the good or service. In relation to health insurance, moral hazard results when an insured consumer uses more services than she would other-wise because part of the cost is covered by insurance. For example, if a consumer has a $500 health insurance deductible, the consumer pays 100% of the first $500 of healthcare received. If there is only 20% coinsurance charge after that, the consumer only pays $.20 per dollar for every $ spent after $500.

What is elasticity?

Elasticity refers to the flexibility of variables in relation to the adjustment or change of other variables. It is a measure of how a certain variable, such as price, affects another variable, such as demand. A product is said to be elastic if it responds to such fluctuations.

How does the Affordable care act affect employer-based health insurance coverage? What types of firms are affected and why?

Employers are basically required to provide affordable coverage or face a penalty if they have greater than 50 employees. The employers under ACA must offer vouchers to employees who earn upto 400% of poverty, would have to pay premiums between 8% and 9.8% of their income, and choose to enroll in a state exchange. The voucher is equal to the amount the employer would have paid for the employee and is used to offset premium costs. Small business will be impacted the greatest.

What is the difference between an entitlement program and a block grant? Give two examples of entitlement programs in health care

Entitlement: Everyone who is eligible for and enrolled in the program is legally entitled to receive benefits from the program. Beneficiaries may not be refused service for lack of funds or other reasons. Two examples of entitlement programs in health care would be Medicaid and Medicare. Block Grants: A defined sum of money (often from the federal government to the states) that is allocated for a particular program over a certain amount of time. Beneficiaries may be refused service for lack of funds or other reasons. There is no legal entitlement to the benefits.

What is a "health insurance exchange"?

Federal subsidies made available on an income-related basis to exchange-eligible individuals for the purchase of health insurance coverage through health insurance coverages.

What is the general rule regarding immigrant eligibility under Medicaid?

Immigranta have 5 year bar but states have option to cover legal immigrant pregnant women and children who have been in the country less than 5 years.

What is a market failure?

Market failure occurs when markets do not achieve the best outcome; inefficient allocation of resources, inequitable distribution of income. Common reasons for market failures are imperfect information, concentration of market power, consumption of public goods, and presence of externalities. In the event of market failure the government restores efficiency & promotes equity by encouraging competition, providing consumer information, reducing harmful externalities, and redistributing income in society.

Currently, who is covered by Medicaid? Who would be covered by the expansion under the Affordable Care Act? How does the Supreme Court Ruling affect the ACA-related Medicaid expansion?

Medicaid : a jointly designed and operated federal-state public health insurance program for the indigent (poor) [text- pg 185] Current Coverage - low-income pregnant women, children, adults in families with dependent children, people with disabilities, and the elderly Note: not all low-income people are covered by Medicaid. Over 28 million low-income Americans remain uninsured (pg 187). Coverage under the Affordable Care Act (ACA): this program is expected to add 16 million people to the program by 2019. (pg 187) 2014: All non-Medicare eligible individuals under age 65 (with incomes up to 133% of the FPL) will be eligible for Medicaid in every state. Children (ages 6-19) must be covered up to 133% FPL (instead of current 100% FPL). (pg 189) Slides (week 9, part 1): ACA will expand to: everyone with incomes below 138% FPL.* Largest among those without children. People age 55-64. Supreme Court Ruling: The Decision stated that Congress is not free to penalize states that chose not to participate in that new program by taking away their existing Medicaid funding. The result: -No increase until 2017 (Federal government share 100%) -Responsible for 10% in 2020 (Fed government share 90%) -"Blue States" go forward -"Red States" decline -"Purple States" (includes Colorado) in limbo/undecided

Name and describe two changes to Medicare made in the Affordable Care Act

Medicare Part B services, also known as Supplemental Medical Insurance (SMI), covers physician, outpatient, and preventive services. The ACA added coverage for certain preventive services without cost-sharing, including an annual comprehensive risk assessment, provided without cost-sharing when delivered in an outpatient setting. Coverage for Pharmacuetical was increased by decreasing the size of the donut hole. (Part D)

How does the concept of adverse selection differ from moral hazard?

Moral Hazard can occur in various situations when consumers buy more goods or services then necessary because they do not have to pay full price. Adverse selection differs in that it occurs when unhealthy individuals over-select a particular plan due to its coverage. Someone who is at risk for having high health care cost will choose a plan that is suitable for their medical coverage. Adverse selection mainly occurs when buyers and sellers or insurers and the insured have access to different info. One party has more info then the other (asymmetric information). Moral hazard does not require that people behave "immorally" rather they are responding to incentives. Adverse selection people will choose the best option given their information.

What is the difference between a positive statement and a normative statement?

Positive: What is (or was) Evaluative statement Normative: What should be

What is adverse selection?

Refers to the idea that individuals with a higher-than-average risk of needing health care are more likely to seek health insurance coverage. Unhealthy people over-select (beyond a random distribution) a particular plan because people at risk for having high healthcare costs choose a particular plan because of that plan's attractive coverage rules.

Normative statement

discusses what public policy should be implemented based on the decision maker's values. It answers the questions: What should be? Example: All people living in the US should have health insurance

Positive statement

identifies, predicts, and evaluates who receives a benefit and who pas for a public policy choice. Answers the questions: What is the current situation? & What already happened? Example: In 2010, approx. 50 million people in US did not have health insurance.