Understanding healthcare economics : managing your career in an evolving healthcare system PDF
Preview Understanding healthcare economics : managing your career in an evolving healthcare system
Understanding Healthcare Economics Managing Your Career in an Evolving Healthcare System, Second Edition Understanding Healthcare Economics Managing Your Career in an Evolving Healthcare System, Second Edition By Jeanne Wendel, PhD, Teresa Serratt, PhD, RN, and William O’Donohue, PhD CRC Press Taylor & Francis Group 6000 Broken Sound Parkway NW, Suite 300 Boca Raton, FL 33487-2742 © 2018 by Taylor & Francis Group, LLC CRC Press is an imprint of Taylor & Francis Group, an Informa business No claim to original U.S. Government works Printed on acid-free paper International Standard Book Number-13: 978-1-138-72301-6 (Hardback) International Standard Book Number-13: 978-1-315-19328-1 (eBook) This book contains information obtained from authentic and highly regarded sources. Reasonable efforts have been made to publish reliable data and information, but the author and publisher cannot assume responsibility for the valid- ity of all materials or the consequences of their use. 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CCC is a not-for-profit organization that provides licenses and registration for a variety of users. For organizations that have been granted a photocopy license by the CCC, a separate system of payment has been arranged. Trademark Notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data Names: Wendel, Jeanne, author. | Serratt, Teresa D., author. | O’Donohue, William T., author. Title: Understanding healthcare economics : managing your career in an evolving healthcare system / Jeanne Wendel, Teresa Serratt, William O’Donohue. Description: Second edition. | Boca Raton : Taylor & Francis, 2018. | “A CRC title, part of the Taylor & Francis imprint, a member of the Taylor & Francis Group, the academic division of T&F Informa plc.” | Includes bibliographical references and index. Identifiers: LCCN 2017030798| ISBN 9781138723016 (hardback : alk. paper) | ISBN 9781315193281 (ebook) Subjects: LCSH: Medical economics--United States. Classification: LCC RA410.5 .W46 2018 | DDC 338.4/73621--dc23 LC record available at https://lccn.loc.gov/2017030798 Visit the Taylor & Francis Web site at http://www.taylorandfrancis.com and the CRC Press Web site at http://www.crcpress.com We dedicate this book to our families: Tom, Nathan, Jane, Katie, Anna, Jim, and Madi, for their support and encouragement. Contents Foreword ...................................................................................................xv Preface ......................................................................................................xxi Acknowledgments ................................................................................xxix Authors ...................................................................................................xxxi Introduction ........................................................................................xxxiii SeCtion i PReSSUReS FoR CHAnGe 1 Access ..........................................................................................5 Introduction .................................................................................................5 Sources of Insurance and Characteristics of People Who Are Uninsured .....6 Insurance Sources and Trends ................................................................6 Who Is Uninsured and Why? ......................................................................8 Who Is Uninsured? ..................................................................................8 Why Are Some People Uninsured? .......................................................12 Private Insurance Markets .........................................................................12 Insurance Principles: Insurance Is a Mechanism for Managing Risk .....13 How Will the Insurance Company Compute the Premium for a Specific Type of Insurance? ..............................................................13 When Will an Individual Decide to Purchase Insurance? ...............14 Application of Insurance Principles in Markets for Health Insurance ....16 Health Insurance for Preexisting Conditions: Risk versus Subsidy ....17 Insuring Risk versus Subsidizing an Expenditure ............................17 Summary of Explanation of Insurance Premiums and When to Buy Insurance .......................................................................................19 Why Do Some Employers Offer Health Insurance While Others Do Not? ...........................................................................................................22 Employers Don’t Actually Pay for Employer-Sponsored Healthcare ...23 vii viii ◾ Contents What Forces Shift the Cost of Employer-Sponsored Health Insurance onto Workers? .....................................................................24 Basic Economic Tools: Supply and Demand ....................................24 Basic Economic Tools: At the Equilibrium Wage, Quantity Supplied Is Equal to Quantity Demanded .......................................25 What Happens When the Actual Wage Is above (or below) the Equilibrium Wage? .............................................................................26 Why Is the Equilibrium Concept Useful? .........................................27 How Does Employer-Sponsored Health Insurance Affect the Equilibrium Wage? .............................................................................29 Scenario 1 ..........................................................................................31 Scenario 2 ..........................................................................................34 Implications of Scenarios 1 and 2 ....................................................36 An Inefficient Healthcare System Means Lower Wages for Workers....36 Healthcare Coverage Mandates Lead to Higher Costs for Health Insurance and Lower Wages for Workers .........................................37 Why Do Some Individuals Remain Uninsured, Even Though They Are Eligible for Public Insurance or ESI? .................................................39 Why Do Insurance Companies Utilize Restrictive Practices That Make It Impossible for Some Individuals to Purchase Insurance ...........42 Industry Reasons for Using Restrictive Practices..................................43 The “Lemons Problem” .........................................................................43 Lemons Problem in Health Insurance Markets ................................44 Employer-Sponsored Health Insurance Mitigates the Lemons Problem ..............................................................................................45 Solution Strategies .....................................................................................47 Pre-PPACA Legislation to Restrict the Use of Preexisting Condition Exclusions .............................................................................47 Title I of HIPAA: Prohibit Restrictive Practices in the Markets for Small Group and Large Group Health Insurance .......................47 State Reforms That Preceded PPACA Reforms .................................49 Pre-PPACA Estimates of the Impacts of Alternate Strategies for Increasing Access ..................................................................................50 Employer Mandate with or without Individual Mandate .................50 Expand Public Programs, Chiefly Medicaid .....................................51 Tax Credit ..........................................................................................51 ACA Solution Strategy for Increasing the Proportion of Individuals Covered by Health Insurance ...................................................................51 ACA Strategy for Increasing Health Insurance Coverage ....................52 Contents ◾ ix Mandates That Employers Must Offer Group Insurance, Mandates That Individuals Must Obtain Insurance Coverage, and Ban on Provisions in Health Insurance Policies That Exclude Preexisting Conditions from Coverage ...............................52 Creation of State-Level Health Insurance Exchanges .......................52 Expansion of Medicaid Eligibility for Adults with Incomes up to 100% of the FPL ............................................................................54 Impacts ..................................................................................................55 Conclusion .................................................................................................56 2 Cost ............................................................................................59 Introduction ...............................................................................................59 Background Information ...........................................................................61 Definitions: Cost, Price, and Expenditures ...........................................61 Healthcare Expenditures by Type ............................................................62 Sources of Funding for Healthcare Expenditures ....................................63 Sustainability of the Public Expenditures ............................................65 Diagnosing the Problem: What Is Fueling the Cost Increases? .......69 Technology Is a Key Driver of Healthcare Expenditure Increases .....70 Value Produced by the New Technologies Compared with the Costs of the Treatments ........................................................................72 Do the New Treatments Improve Health? ............................................72 Are the New Treatments a Good Investment as Measured by Cost per Life Saved (or Cost per Life-Year Saved)? ..............................74 Solution Options .......................................................................................77 Option 1: Continue to Spend More on Healthcare Every Year, and Accommodate This by Spending Less on Other Goods ..............77 Option 2: Restrain the Quantities of Healthcare Services That Are Utilized Annually in the United States .................................................78 Ration by Price ......................................................................................78 Ration by Wait Time .............................................................................79 Ration by Setting Priorities ....................................................................79 Option 3: Reduce the Rate of Technological Innovation by Reducing the Incentive for Firms to Invest in R&D .............................80 Option 4: Reduce the Cost of Delivering Care by Regulating Prices and/or Profits of Healthcare Providers and Pharmaceutical Companies .............................................................................................80 Regulate Prices and/or Profits of Healthcare Providers and Pharmaceutical Companies ...............................................................80
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