XIII.

THE ECONOMICS OF HEALTHCARE

ECONOMICS OF HEALTHCARE

Private health insurance

 periodically collect money (premiums)

 paid by individuals or employers

Public health insurance

 collect money from taxpayers

Canada

Public Insurance System

 healthcare system through taxation

Doctor's Offices

 private businesses paid directly by govt

Single Payer System

 govt does most of paying

 Canadians pay for prescription drugs, eyeglasses and dental care

France

 not single payer system

Healthcare Providers

 paid by several non- profit insurance funds

 most providers are private businesses

Citizens

 required to get health insurance

 free to choose doctor

UK

 socialized healthcare system

 funded and controlled by government thru taxes

US

 funded by private firms

 under 65

 covered by insurance through employer or individual policies

Single Payer System

 for people over 65 and below poverty line

Medicare

 tax-payer funded public insurer -> pays providers to care for seniors

Medicaid

 for low-income households

Criteria of Economists for evaluating effectiveness of healthcare systems

1. Access

2. Cost

3. Quality

People without insurance

- younger

-earn less

- racially diverse
Unpaid medical expenses

 drive costs for everybody

•Cost of Healthcare

US - $ 8745

Switzerland (Captain Ri) and Norway - $ 6000

Germany, France - $3000- $5000

Why US spends so much per person?

 High Quantity of Care per person

 insurance companies pay for individuals (not govt) ➡ patients may want more than
necessary

RAND Health insurance experiment

Requiring patients to pay

deters them from overconsuming of healthcare ➡ why there are deductibles

Deductibles

 form of cost-sharing

 patient is required to pay specific amount before insurance kicks in

Prices

 also a problem

 1500 in US (too high)

Reasons why US has high med expenses

1. Providers are paid 3x or more

  US - ✖️unified system >> can aggresively negotiate providers

Medicare and Medicaid

 get significant discount compared to small insurers

2. Blizzard of paperwork

 generated by interaction of insurers and providers

 people work on reimbursement-related papers >> add to [administrative costs] of

healthcare

US -- quantity (10-20%)

US costs ⬆

 other countries reduce billing paperwork through universal insurer

 providers are paid ⬆

Quality

US - has higher rates on

1. Hospital admissions for preventions

2. Medical medication and lab errors

Iron Triangle

 makes reforming of healthcare system difficult

 mutually beneficial relationships between members of Congress, govt bureaucrats and

lobbyists ➡ all end up working towards policies that maintain status quo (not best
interest of people)

2010

•Affordable Care Act (ObamaCare)

- increase health coverage by requiring private health insurers to insure everyone (all age)