Health Economics- Lecture 10
What are the drug prices in U.S. compared to other OECD countries?
They are much higher in the U.S.
What is the annual growth rate of GDP per capita and total national health spending per capita from 1970 to 2017?
•Health spending growth has slowed, and is now more on pace with economic growth -GDP has been growing over time but health expenses is growing over time much more. -GDP is growing because health care is growing at a faster rate. They are growing at the same rate
What is the billing and insurance-related (BIR) inefficiency?
•How big is $400 billion in annual billing-related waste? •>$1 billion per day •~$1400 per individual per year •All the health spending in California. -Large chunk is through private insurers and it comes to 400 billion that we are wasting -Argument for health reform: could reduce the inefficiencies if you have just 1 payer with set rates that there will be less scope for these inefficiencies
What are the trends for per-capita out of pocket spending from 1970 to 2017?
•Per capita OOP costs have grown since 1970 ~30% of private insurance has a high deductible -In dollar terms, out-of-pocket expenditures have grown steadily since 1970, -Out-of-pocket medical costs are in addition to the amount individuals contribute towards health insurance premiums. -Although OOP costs per capita have also been rising, compared to previous decades, now makes up a smaller share of total health expenditures.
What is the average annual worker and employer premium contributions for family coverage?
-Both increasing over time -Premiums are going up which includes the employee portions -Plans are less generous because care itself is getting more expensive
Health Care reform
-Health care reform is for the most part governmental policy that affects health care delivery in a given place. -Attempts to: Broaden the population that receives health care coverage through either public sector insurance programs or private sector insurance companies -Improve the access to health care specialists -Improve the quality of health care -Decrease the cost of health care
What does it mean to be underinsured?
-If you are insured but still paying a ton of out of pocket expenses or if your deductible is a certain amount you are considered under-insured, NOT uninsured
Single payer
-In a single payer healthcare system, rather than multiple competing health insurance companies, a single public takes responsibility for financing healthcare for all residents. -That is, everyone has health insurance under a one health insurance plan, and has access to necessary services — including doctors, hospitals, long-term care, prescription drugs, dentists and vision care. -However, individuals may still choose where they receive care. -Universal health coverage would be a major step towards equality, especially for uninsured and underinsured American Critiques -Lengthy wait times and restricted availability of certain healthcare services (such as elective surgery or cosmetic procedures) are important criticisms.
What is the rate of enrollment in medicare advantage plans in 2004?
-It has increased -Medicare people have medicare advantage which they are opting to sign up for which may be more expensive than traditional medicare.
What are some trends in the uninsured in U.S. health insurance?
-Low-income Americans are at far greater risk of being uninsured than other groups -A lot of people are not insured -Why? Some states have not expanded their medicaid, some cant afford it, some don't know how to naviagate system -This is primarily low income people and people of color who are unlikely to be insured
Medicaid
-Medicaid is a health care program that assists low-income families or individuals in paying for doctor visits, hospital stays, long-term medical, custodial care costs and more. -Medicaid is a joint program, funded primarily by the federal government and run at the state level, where coverage may vary. -Medicaid is available only to individuals and families who meet specified criteria
Medicare
-Medicare is the federal government program that provides health care insurance if you are 65+ -The program is funded in part by Social Security and Medicare taxes you pay on your income, in part through premiums that people with Medicare pay, and in part by the federal budget
Define Private Insurance
-Private health insurance is paid for in part or entirely by the individuals being covered. -Private health insurance can be offered through an employer or can be purchased by individuals.
U.S. Health Care financing by source
-Public -State/local (medicaid, safety net)=16% -Public- Federal (medicare, medicaid, VA, military, IHS) =27% -Private-employers (copremiums)=21% -Private- families (co-premiums)=13% -Families (cost-sharing)=16%
What is the U.S. standing on health care outcomes?
-We are last -We have the worst birth weight and infant mortality for a developed country. -Better care in older ages but not in younger ages
What are the Major US Health reform efforts and events?
1940: Medican Benefits to increase compensation during WWII salary freeze --> offered employer based health insurance because of the salary freeze 1944: Franklin Roosevelt endorsed Wagner-Murray which provided for a national medical care and hospitalization fund. After FDRs death, Harry S Truman continued support of a national health care program but defeated by lobbying by the American Medical Association and outbreak of the Korean War 1965: Medicare and Medicaid established by LBJ 1974: Nixon introduced Comprehesive Health Insurance Act which would have mandated insurance through employers and federal Medicare for all. Ted Kennedy rejected it but later regretted doing so 1985: COBRA act enacted under Ronald Reagan amended the Employment Retirement Security Act of '74 to enable some employees to keep health insurance after leaving jobs 1993: Clinton Health Care plan was not enacted into law 1996: HIPAA enacted --> made it easier for workers to keep health insurance when they lost or changed jobs. Made use of national data for protecting, reporting, and tracking personal health info 2003: Medicare prescription drug improvement and modernization act established by George W Bush which included a prescription drug plan for elderly and disabled Americans 2009: re-authroization of state childrens health insurance program by Obama extended coverage to millions of children. American Recovery and Reinvestment Act included funding for computerized medical records and preventive services 2010: Health Carw Reform Act enacted by Obama extending affordable insurance to 32 million more Americans by extending Medicaid, insurance through employers etc.. 2017: ACA Dilution - failed ACA repeal, partial dismantling, no individual mandate, "noncompliant" plans, subsidy cuts, But more medicaid expansion
What are the key provisions of the Patient Protection and Affordable Care Act?
Expand access •Employer mandate to cover workers, or pay penalty •Individual mandate to have coverage or pay penalty •Medicaid expansion to cover people with incomes < 133% federal poverty •State-based insurance exchanges with subsidies for poor / near-poor •Coverage for young adults up to age 26 on parents' policies Consumer protections •Prohibit exclusion based on preexisting conditions •Require insurers to spend >80% of premiums on medical care -ACA passed in 2010 as a health insurance reform. It did very little in delivery of care. It was effecting who gets insured and what that insurance is -It passed the employer mandate//pay a penalty -We pay premiums to our insurer and a percentage of that has to go towards providing care so its regulating the insurance companieis to make them more sufficient
Medicaid and CHIP have also moved enrollees to managed care plans
Medicaid is state so if states are contracting with private insurance companies to cover medicaid beneficiaries, this may dilute the ability of the traditional medicare to manage care plans
What is the organization of the Health System in the US?
Medicare: Federal program for adults 65 and older and some people with disabilities--> public financing, but still private care providers that are giving these --> not socialized insurance. It's a private system with public financing Medicaid: (public financing) joint federal-state program for certain low-income populations; called Medi-Cal in CA Employers: (private financing) traditional way private health insurance purchased, regulated mostly by states Marketplaces: (private financing) a.k.a. health insurance exchanges, administered by states or feds, established under 2010 ACA, with income-based premium subsidies for low- and middle-income people
What is the U.S. performance on quality?
Money does NOT equal quality -We spend the most but our overall ranking is #11 and we are last on efficiency, equity, and access to care -We are not buying much for the amount of money we are spending
What are the factors accounting for growth in personal health care expenditures?
Personal health care expenditures (PHC) measures the total amount spent to treat people with specific medical conditions. It represents about 85 percent of total national health expenditures over the projection period. Average annual personal health care spending growth is decomposed to demonstrate the relative contributions of underlying price growth (economywide and relative personal health care price inflation), use and intensity of medical services, population growth, and age-sex mix. -During 2018-27 personal health care spending growth is expected to average 5.5 percent, with growth in personal health care prices expected to account for nearly half of that growth, on average. Growth in use and intensity is expected to account for just under one-third of the average annual personal health care spending growth, with population growth and the changing age-sex mix of the population accounting for the remainder.
What are the strengths and weakness of Fee for Service?
Strengths •Encourages productivity: do more to get paid more •Encourages technology adoption •Encourages treatment of severely ill •If more care is needed, more revenues are earned •Administrative simplicity? Weaknesses •Does not support coordination across caregivers •Does not support coordination across episodes •Favors surgical over medical intervention? •Supports "over-treatment" in instances of uncertainty (e.g., at end of life)? •Some third party (insurer or gov't) must counter incentives for over-treatment -Traditional fee-for-service reimbursement creates financial incentives for performing more tests, procedures, etc., regardless of whether additional care benefits patients. -Fee-for-service reimbursement also contributes to poor coordination of care because providers do not have an incentive to work with one another to maximize patients' health and functional status, and there is no funding dedicated to support others who might align and coordinate care.
What are the strengths and weakness of capitation?
Strengths •Supports coordination of services and caregivers •Supports efficient use of resources •Reduces need for third party oversight •Physicians rather than insurers decide what is appropriate care Weaknesses •Encourages "under-treatment" in cases of uncertainty (e.g., unproven technologies) •Encourages risk-avoidance ("cherry picking") •Requires sophisticated physician capabilities for financial management •Requires large scale of physician organization to spread risk of unexpected high-cost patients -Under capitation, physicians are paid a fixed amount, usually on a per patient per month basis, for a defined set of health care services. -This set of services may include specialty care and screening and diagnostic tests in addition to primary care services. -This payment method encourages physicians to provide care as efficiently as possible because they are paid the same amount regardless of the cost of providing care to patients. -Capitation also encourages physicians to focus on prevention of illness and management of chronic disease. However, there is concern than primary care physicians subject to capitation may withhold access to expensive services that their patients need, such as imaging and specialist consults, to maximize their incomes. -In addition, patients' needs for primary care vary substantially. Unless capitation rates are adjusted to reflect differences in age, gender, and disease burden, capitation payments may not be sufficient for primary care physicians to effectively manage patients with complex needs.
What is the ACA?
The Affordable Care Act (ACA) is the healthcare reform signed into law by President Barack Obama in March 2010. -The law includes a list of health-related provisions intended to extend health-insurance coverage to millions of uninsured Americans. The Act expanded Medicaid eligibility, created health insurance exchanges, and prevents insurance companies from denying coverage (or charging more) due to pre-existing conditions. -It also allows children to remain on their parents' insurance plan until age 26. KEY TAKEAWAYS -ACA aka Obamacare—was designed to extend health insurance coverage to millions of uninsured Americans. -The Act expanded Medicaid eligibility -It prevents insurance companies from denying coverage due to pre-existing conditions and requires plans to cover a list of essential health benefits. -Lower-income families can qualify for extra savings on health insurance plans through premium tax credits and cost-sharing reductions Critiques -The largest criticism is the fact that prices will have to eventually rise based on this model--> many questions whether it will remain affordable and accessible. -The second largest criticism was the fact that people just don't understand the marketplace or health care reforms-->The options available to people are varied and people may not understand how to choose between different programs.
What are the trends in national health spending as a share of GDP in the US?
Total health spending represents the amount spent on health care and health-related activities (such as administration of insurance, health research, and public health), including expenditures from both public and private funds. Health spending refers to national health expenditures. Projections are shown as P and are based on current law. The 2017 figure reflects a 4.2% increase in gross domestic product (GDP) and a 3.9% increase in national health spending over the prior year. As a wealthy country can we afford to continue to keep spending money on health care -some people say it's a good use of resources but others say we are sacrificing other things
Life expectancy vs. health spending per capita
US is an outlier vs. OECD countries •Much higher spending per capita •Much worse life expectancy Healthcare is one of the most important inputs to produce health; and life expectancy is one of the key measures of a population's health. -The visualization shows the relationship between life expectancy at birth and healthcare expenditure per capita. -As it can be seen, countries with higher expenditure on healthcare per person tend to have a higher life expectancy. -And looking at the change over time, we see that as countries spend more money on health, life expectancy of the population increases.... -The US is an outlier that achieves only a comparatively short life expectancy considering the fact that the country has by far the highest health expenditure of any country in the world." Note: the association b/w health spending and life expectancy also holds for LMICs:
What is the republican push to repeal/dismantle ACA?
•2017 Repeal vote failed in Senate passage by 1 vote •Individual mandate repealed as part of 2017 tax reform •Encouragement of "non-compliant" health plans lacking pre-existing illness and other protections. •Restricted subsidies for near poor (workarounds mitigated) •Constitutional challenges in federal courts to the ACA •Supreme Court upheld individual mandate as a tax but struck down requirement that states expand Medicaid •Pending cases
What are the administrative costs as a share of total health expenditures?
•Administrative costs of administering public and private insurance have risen over time. •So have providers' administrative costs (e.g., billing departments) -Administrative expenses include the cost of administering private insurance plans and public coverage programs but not the administrative costs of health providers
What is the episode of care (bundled) payment and what are it's strengths and weaknesses?
•FFS isolates each component of the process of care, undermining incentives for coordination, while capitation places epidemiological risk on physicians •Episode-of-care payment sets one fee for a bundle of services related to a single course of care •Must define beginning and end of episode •Must decide which services during that period belong to this episode and which are unrelated •Must adjust for severity of illness (need for services) •Must not adjust for complications (not same as severity) Under bundled payment, a single payment is made for all services associated with a discrete episode of illness, such as a knee replacement or perinatal care. Pros Like capitation, bundled payment creates incentives for physicians to provide care as efficiently as possible, including improving coordination of care among physicians, hospitals, and other entities involved in a patient's care, such as home health agencies. Cons -Physicians, hospitals, and other organizations paid via bundled payment are only at financial risk for medical services included in the bundle. -Implementation of bundled payment can be difficult because the medical services included in the bundle need to be defined and the payments need to be divided up among participating physicians (and potentially hospitals). -Surgeons are often paid on an episode basis for care pre, post, and during procedure
What are forms of physician payments?
•Fee for service: one fee for each service provided •Capitation: fixed payment per patient (typically per month) •Salary:No matter what you are providing (Kaiser) you get this salary) •Episode-of-care: one fee for a bundle of services related to a single course of care ("bundled payments")-->For one surgical procedure, after care, bed care is all 1 episode--> they will be responsible for everything that happens in that bundle of services •Pay for performance: bonus or penalty based on quality measures--> based on health status of patient Organization and payment •Payment to the physician group •Payment to the individual physician -Physician payments are one key category of supply-side incentives, hospital payments being the other. -One of the biggest challenges in health care is designing payment systems that create financial incentives for physicians and other health professionals to deliver high value care. -Diagnostic Related Grouping (DRG) payments are bundled payments to hospitals (e.g., paid by Medicare). These are fixed payments determined by a patient's diagnosis.
What is the average annual growth rate for select service types from 1970 to 2017?
•In recent years, spending on hospitals, physicians, and prescriptions has slowed to a similar pace -The rate of growth for medical services (e.g. physicians/clinic, hospitals) varied by service type until recent years. During the 1970s, growth in hospital expenditures outpaced other services, while prescriptions and physicians/clinics saw faster spending growth during the 1980s. Prescriptions continued their elevated growth during the 1990s as well. Between 2010 and 2017, average spending growth on prescription drugs grew and physicians/clinics was 4 and 4.4%, respectively. Spending grew at a similar pace for hospitals and clinics
What is the federal spending as % GDP from 2004 to 2049?
•Includes Medicare, Medicaid, CHIP, marketplace premium subsidies •Driven primarily by Medicare due to population aging -Medicare is net of premiums and other offsetting receipts -Within our federal budget which is from taxes, health care consumes a massive proportion -People don't like paying higher taxes especially if they don't think its leading to better health outcomes -It is expected to grow because of medicare --> aging population is growing, therefore you are paying into your medicare in your life -Medicare is financed through payroll taxes but it's not your personal medicare, just medicare as a whole -This shows what we are spending in the federal gov't (where is the money going out) -This focuses on where the money is going out
What are the potential drivers of U.S. health spending?
•Medical price inflation •Increased cost of "input factors" such as provider salaries and medical supplies -Prices have been increasing over time. Prices are what is driving health care. We pay higher prices in drugs, doctors, nurses than in anywhere else in the world. •Hospital market structure and hospital charging practices •Increasing # of hospital mergers (less competition) •Hospital systems gaining market power to charge higher prices -Could be market structure: fewer and fewer hospitals have been having independent provider groups which means there is less competition (drives prices higher) --> must come to a deal about how much providers will be paid •Provider reimbursement •Including fee-for-service payment for physicians leading to "overuse" of services -Pay providers with fee-for-service = overuse of health services because there arnt enough controls in place in lab tests and drugs provided --> since it is subsidies, employers plans that they are offer are very generous because there is a built in subsidy--> creates a moral hazard which drives this spending •Employer sponsored health insurance •Tax deductible status of health insurance promoting overuse -Pre-tax dollars which means you are getting more for your money which leads to voeruse and is a distrotion about amt of healthcare that gets provided •Population growth, aging, chronic disease prevalence In general, the market has consolidated and experienced a decrease in competition. - The breadth of provider payment (mainly bundling) affects the degree of competition of providers. If payments are very narrow, the degree of competition can increase. - The generosity of payments changes the market structure through the effect that it has on entry decisions and the # of providers - hospitals or physicians - than can exist side by side on the market. -With larger payments, there can be more providers because, for the same cost structure, revenues are larger. The US population has aged - due in part to medical advancement. Older persons are expected to have more health problems and consume more health care than younger persons. Changes in disease prevalence such as increases in the level of obesity and diabetes may contribute to health spending.
What is the annual change in price and quantity indexes of health services?
•Prices have historically driven health services spending growth •But use (utilization)is now the primary driver -Health services spending is generally a function of prices (e.g., the dollar amount charged for a hospital stay) and utilization (e.g., the number of hospital stays). -In recent years, utilization - likely driven by coverage gains under the Affordable Care Act - has been the dominant driver of health services spending.
What are the concrete health reform options in 2019?
•Retain the (weakened) ACA. Refine functioning: Republicans (more insurer freedom), or Democrats (protect the protections). •Add a public option (Medicare buy-in) to the ACA - revive the early ideas for a non-profit, strong public option to compete with private plans in the exchanges. •Single payer / Medicare-for-All - Abandon the ACA entirely. National or state-level. Harder to achieve, so need to argue for benefits beyond a public option.
What is the U.S. health system performance compared to other OECD nations?
•Spending per capita ~60% higher •Generally fewer doctor visits and hospital days •Difference in spending due to: •Price (costs of doctor, procedure, drugs) •Use of high technology (Dartmouth Atlas: no benefit) •Administrative costs (later) •Weak cost controls •Drugs, outpatient (RBRVS), inpatient (DRG) •Fee for service, for expensive items supplants primary care--> Fee for service encourages more speciality and less primary care •Health care outcomes same or worse -Under FFS, it is imperative to have a method for setting the price (payment level) for each detailed visit, test, procedure. The RBRVS (Resource Based Relative Value Scale) is based on surveys of time and input costs. It does not seek to reflect the value (outcomes, convenience) of the services to the patients. -Medicare faces political pressures to increase the relative value of services where input costs rise but no pressure to reduce RVS where costs decline. -Primary care payments have declined as payments have increased for selected specialty services, esp. related to tests -Diagnostic Related Grouping (DRG) payments are fixed payments (administered prices) determined by a patient's diagnosis, paid to hospitals (e.g., by Medicare). DRG system codes all admissions into categories that ideally are homogenous with respect to costs.
What are the relative contributors to total national health expenditures in 2017?
•Total health spending was ~$3.5 trillion in 2017 •Hospital & physician services are ½ of total health spending -Most of our money goes towards hospital care! -Hospital spending represented 33% of overall health spending in 2017, and physicians/clinics represent 20% of total spending. -Prescriptions accounted for 10% of total health spending in 2017, which is up from 7% of total spending in 1970. SPENDING CATEGORY DEFINITIONS Government administration includes the administrative costs of government health care programs such as Medicare and Medicaid. Investment includes noncommercial research, structures, and equipment. Net cost of health insurance reflects the difference between benefits and premiums for private insurance. Other health care refers to other health, residential, and personal care, including care delivered by providers in non-traditional settings such as schools, community centers, and the workplace; as well as by ambulance providers and residential mental health and substance abuse facilities. Other medical products refers to durable medical equipment and nondurable medical products.