TAILIEUCHUNG - 15. Principles of Economics (Brief Edition)_2e (10)

Chapter 10: Using Economics to. Make Better Policy . Describe how the Scarcity Principle applies to. choices involving . Use the Incentive Principle to explain why health. care costs have been rising so . Discuss pollution taxes and effluent permits as a. means to reduce the cost of improved air . Illustrate why free trade is often politically. controversial even though it promises to increase. total . Assess the economic pros and cons of various. components of the social safety net. McGraw­Hill/Irwin Copyright © 2011 by The McGraw­Hill Companies, Inc. All rights reserved. Health Care Delivery.• Health care spending has grown faster than income. – Up from 4% of national income in 1940 to 16% in 2010. – Part of the increase is due to improved quality of tests,. procedures, drugs, etc – Part is due to the third-party payment system. • Growth in use of insurance for payments (Employer-provided. and government-provided).• Cost-benefit test assures efficient allocation of health care. – Perform a service only if the benefit exceeds the cost.• Costs are easy to measure.• Benefits are complicated. – Usual measure is willingness to pay marginal cost. • Some patients are unable to pay for basic services. (government-provided insurance). – Confused by third-party payment system. 10­2 Health Care for Employed.• Employer pays insurance. on behalf of employee Medical. Employer. Provider. – Employees pay part of. the insurance premiums.• Medical provider cares for Insurance Patient /. patient / employee Company Employee. – Patient co-pay.• Medical provider bills insurance. – Insurance company pays provider.• Insurance company periodically reviews employers. policy and adjusts rates. 10­3Insurance, Demand, and Waste.• Amount of waste from full insurance depends on. the price elasticity of demand for medical. services.• Research compared patients with first dollar. coverage to those with $1,000 deductibles. – First-dollar coverage pays all expenses for the. insureds health care. – $1,000 deductible pays all expenses after the. patient has paid $1,000. – Deductible patients spent 40 – 50% less on health. care and had the same health outcomes. 10­4 Policy Implications.• Research shows that when individuals pay for. their health care, they consume less.• A more efficient system can be designed. – Adopt a system of high deductible health insurance. – Use stipend payments for the poor.• An efficient policy will increase the size of the. health care pie. 10­5 Health Maintenance. Organization (HMO).• A Health Maintenance Organization is a group. of physicians that provides health services for a. fixed annual fee. – Reduced incentives to prescribe expensive tests. • The doctor receives no additional fee for prescribing. and interpreting tests.• In most cases, diagnoses and treatment will be. the same with conventional health insurance and. with an HMO. – HMO costs less than conventional health insurance 10­6 US Health Insurance.• In 2007, 47 million Americans had no health insurance. – Cost of a policy for a family of 4 generally exceeds annual. health spending for the family. – Stigma of being irresponsible is fading. – Adverse selection problem. • If the healthy opt for no insurance, the insured are those with. known health problems or risks (Raises costs for remaining. insured)

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