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Econ 5194 Health Economics Final Study Guide Lecture 14:-Gruber 2008: Covering the uninsured in the US - Although most industrialized nations guarantee universal healthcare in the US, 47 million people are uninsured (18% of the nonelderly population)- One common argument is that healthcare is a merit good, and the government should bemore involved in ensuring healthcare - On the other hand, the US government is already heavily involved in healthcare markets. The government currently accounts for half of all medical spending. 200+ billion per year on tax subsidies for employer-sponsored insurance, which may not be an optimal policy -This paper summarizes research on the nature of the uninsured, the arguments for and against policy intervention, and the equity and efficiency consideration of such policies Main sources of insurance coverage in the US-80% of insurance is private insurance and of that 90% comes from firms -Individual insurance (market is pretty small)-Public insurance: Medicare, Medicaid, tri-care The uninsured -Insurance is not actuarially fair -High administrative costs -Insurance products are very coarse- individual or family of any size (small families cross- subsidize large families)-Adverse selection costs -Evidence suggests that 2/3 of increase in uninsurance in the past decade is due to rising insurance costs, so price matter -umcompensated care is implicit insurance -the ability to get free care at any emergency room decreases the need for insurance in theory-Overinsurance : full insurance is not optimal because of moral hazard Why should society care about the uninsured -Externalities:-Communicable diseases-Financial externalities from uncompensated care and cross-subsidization, though small fraction of total costs -Labor market inefficiencies-Reduces ability to search for jobs, mismatch between workers and firms -Job-lock from health insurance reduces job mobility by about 25%-Welfare implications are probably fairly small, about 0.1-0.2% of GDP although this estimate is very imprecise -Income redistribution: uninsured are generally poor- Paternalism-Uninsured are 25% more likely to die-Marginal health benefit from basic insurance is probably quite highBehavioral Responses to Policy Change - Take up and crowd out: Estimated take up expansion of new Medicaid benefits are around 10%. Evidence on magnitude of crowd out varied a lot, but Gruber and Simonestimate that more than half of new Medicaid enrollees dropped some private coverage.- Firm Reactions: Firms respond to changes in tax rates, which affect the value of the ESI tax benefit. Also that a 10% increase in price decreases the probability that a firmpays for the total cost of insurance premium by about 1.7-3.8%- Individual reactions: Central question is: What happens to take-up when employers pass more of the cost along to workers? Consensus answer is: There’s almost no effectLecture 15Supply side mechanisms to reducing excess medical spending-Managed care controls focuses more on mechanisms that control supply -Selective contracting: insurance company negotiates best prices available with only some of the providers in the areas. Often results in different negotiated prices with different providers in the same market -Steering: MCOs encourage enrollees to get care from selected providers in the MCO network. If patient choose to go outside the network they have much less generous coverage, or no coverage at all. This also mean that MCOs can assure providers that they will receive a certain volume of patients, especially valuable if it’s a large insurance company with lots of customers -Quality Assurance: Monitor providers to assure that they follow clinical guidelines, best practices, manage chronic illnesses efficiently-Utilization review: Review how providers decide what amount/ type of medical care is necessary Types of managed care organizations and their features -Managed care organizations are healthcare delivery systems that focus on trying to limit overuse of healthcare by focusing on clinical and fiscal accountability -There's many differed kinds of MCO : HMO, PPO, POS, are all types of MCO -Different types of plans are defined by the features that they use to control costs and or/ improve qualityHealth Maintenance Organizations (HMO): Several different types of HMO's mainly differ on how physicians are incentivized and organized as part of the HMO1. Uses selective contracting to restrict provider networks, usually narrow geographic networks with large penalties for receiving care outside the provider network 2. Uses primary care physicians as gatekeepers to determine when/where medical care is necessary3. Imposes financial incentives on physicians to contain costs while managing the quality of care -Different types of HMO's: mainly differentiated by the degree of control over physicians and patient referral options1. Staff model HMO: Physicians are generally employees of the HMO, they usually receive a salary rather than earning compensation based on the number of tests/ procedures performed. Staff HMO has high degree of control over MD practice patterns2. Group model HMO: HMO exclusively contracts with multi-specialty group. Often capitated (per patient) payment to group practice. Group practice may then compensate MDs on salaried basis. There is little patient choice of provider 3. Network / IPA Model HMO: HMO contracts with several single or multi specialty group practices or independent practice associations (IPAs). Closed panel or open panel. Open panel allows for non-group MDs to provide care. Compensation via capitation or discounted FFS. HMO retains less control over physicians, but generally contract with numerousMD practices Preferred Provider Organization (PPO): A plan which offers coverage to participants through a network of selected health care providers (such as hospitals and physicians). Enrollees may go outside the network, but they pay a greater percentage of the cost of coverage than within the network. Unlink HMOs in which network is closed, greater consumer choice. Populat choice: reflects consumer sentiment from the “managed care backlash”Point of Service (POS) plan: Hybrid between HMO and PPO: Health plan that allows members to choose to receive services from a participating or non-participating network provider. Usually a financial disincentive for going outside the network. More of an insurance product than an organization----POS plans can be offered by

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OSU ECON 5194 - Final Study Guide

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