TAILIEUCHUNG - Lecture Issues in economics today - Chapter 22

When you finish this chapter, you should: Define the key terms of economics and opportunity cost and understand how a production possibilities frontier exemplifies the trade-offs that exist in life, distinguish between increasing and constant opportunity cost and understand why each might happen in the real world, analyze an argument by thinking economically, while recognizing and avoiding logical traps. | Lecture Issues in economics today - Chapter 22 Chapter 22 Medicare McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Chapter Outline PUBLIC INSURANCE AND THE ELDERLY MEDICARE S NUTS AND BOLTS COST CONTROL PROVISIONS MEDICARE TRUST FUND McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Background Medicare covers health care for those over 65 was established in 1964 was fully in force in 1967 part of President Johnson s Great Society Programs paired with Medicaid which covers health care for the poor is a federally-administered program McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Public Insurance and the Elderly Why It Is Needed A private insurance market for the elderly is likely to fail because of Adverse Selection the problem in insurance in which those who need it the most will be the only ones willing to pay for it driving the price up and driving out those who need it somewhat less Lack of a group Most private health insurance is obtained through employers and a group is formed to overcome the problem of adverse selection. Because most Medicare recipients are retired there is no group. McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Public Insurance and the Elderly Who Should Pay Those over 65 have a poverty rate that is typically 2-3 percentage points lower than the rest of the nation. The cost-split was intended to be 50-50 with the taxpayer and recipient paying roughly equal shares. Today that split is 75-25 with taxpayers carrying the larger share. McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Why Medicare s Costs Are High The elderly are susceptible to much more costly illnesses and treatments for these illnesses are expensive. Costs to patients are relatively low so there is the problem of the Third Party Payer when someone other than the producer or consumer pays the costs of a good or service and as a result neither .

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