Healthcare

Front 1

What is the percentage formula for “Natural Rate of Population Increase”?

Back 1

Birth Rate % - Death Rate % = Increase

Front 2

The world’s population is approaching 7.5 billion today? Chart 16.1 showed the world’s population at the end of World War II. How much has the world’s population increased since the end of that war.

Back 2

Tripled, 2.5B to 7.5B

Front 3

Did the productivity of medical technology start to increase before or after improvements in the productivity of industrial technology? Why?

Back 3

After – rate of technological change in medicine is largely determined by economic resources devoted to making new discoveries.

Front 4

What source provides the largest amount of funds to the health care system

Back 4

Government

Front 5

Define opportunity cost

Back 5

What must be given up in order to do or obtain something; the highest-valued alternative which must be foregone. For example, the opportunity cost of taking the final exam may be missing out on a trip to Bermuda.

Front 6

When dealing with medical decisions, who makes the most choices today?

Back 6

Doctors; Chapter 2, Summary 5
Physician assistants and prescribing nurses contributing more now

Front 7

Demand for urgent medical care is considered inelastic while demand for discretionary care is more elastic. Why?

Back 7

Not life threatening, painful, etc.
Not covered by insurance

Front 8

Efficiency of the health care system depends three general categories. Briefly describe each of them.

Back 8

Effectively producing medical services (reducing costs as one measure)
Dynamically generating new medical technology
Meeting expectations regarding broader social welfare goals

Front 9

Describe the “Cost-Benefit Analysis” process and how it can be used.

Back 9

CBA is a set of techniques for assisting in the making of decisions by providing a framework and organization when gathering facts, presenting findings, and most importantly for evaluating alternatives on a rational, consistent basis.

Front 10

initiatives of the PPACA regarding effectively producing medical services

Back 10

ACO- continuous care
Wellness- exams and programs
Services could be controlled or limited

Front 11

initiatives of the PPACA regarding dynamically improving medical technology

Back 11

ectronically shared medical records
cost controls could decrease research and development
increased taxes on medical devices

Front 12

initiatives of the PPACA regarding meeting social welfare goal expectations

Back 12

more people with coverage
less discrimination for conditions
more control and less freedom

Front 13

Adverse Selection

Back 13

A disproportionate share of bad risks. When given a choice, the people who choose to purchase insurance are likely to be a group with higher than average losses.

Front 14

Moral Hazard

Back 14

Any change in behavior due to insurance which increases expected losses, such as higher utilization of covered medical services by employees

Front 15

Welfare Losses Due to Moral Hazard

Back 15

Services consumed due to moral hazard that were worth less to the consumer than the price paid by the insurance company

Front 16

Preferred Provider Organization

Back 16

A health insurance plan which offers enrollees a discount for using hospitals and physicians within an approved network of contracted providers.

Front 17

Health Maintenance Organization

Back 17

An organization that contracts to provide comprehensive medical services (not reimbursement) for a specified fee each month.

Front 18

Point of Service

Back 18

An HMO plan which offers partial reimbursement for services which a patient chooses to obtain outside of the HMO network.

Front 19

Employee Retirement And Income Security Act of 1974

Back 19

A federal act and its amendments which govern most health insurance contracts.

Front 20

Health Savings Account

Back 20

A tax-favored savings account coupled with a high-deductible health plan, usually funded by an individual.

Front 21

Health Reimbursement Account

Back 21

A tax-favored savings account coupled with a high-deductible health plan funded solely by an employer

Front 22

Federal Employees Health Benefits Plan

Back 22

A system through which all federal employees can obtain health insurance that offers several plans that meet or exceed the specified qualifications. Government pays for only lowest cost.

Front 23

Medicare

Back 23

A federal government insurance program that provides hospital benefits (part A), medical benefits (part B) and drug benefits (part D) to persons over age 65 and some other qualified individuals.

Front 24

Medicaid

Back 24

Combined state/federal program to insure people whose incomes are insufficient to pay for health care: primarily those on welfare or older people in nursing homes.

Front 25

Employer-based group health insurance

Back 25

Plans that are open only to employees and related parties. As part of a compensation package, an employer enters into contracts with health insurers and/or care providers on behalf of its employees.

Front 26

Capitation

Back 26

Paying a fixed amount per enrolled person per month for a defined set of services which does not vary with utilization.

Front 27

Accountable Care Organization

Back 27

Patient-centered team that delivers comprehensive medical care (hospital, physician, diagnostic, etc.) to assigned beneficiaries and agrees to be accountable for overall quality and cost. Under PPACA there must be more than 5,000 participants to qualify for certain things.

Front 28

Differentiate between Fee For Services (FFS) and Capitation

Back 28

FFS – A specified payment for each unit of service provided

Capitation – A set payment per person per month regardless of services used

Front 29

Prepare a common size income statement (i.e. using percentages) for a typical Physician’s
Practice. Show Revenues as 100%, then list typical expenses their total, and finally show
the Pretax Income percentage left for the doctor.

Back 29

Revenues 100%

Expenses:
Wages 17
Doctors 3
Rent, etc 12
Supplies 4
Malpractice 5
Equipment 2
Other 6
Total 49

Pretax income 51%

That the GP only keeps about half of his gross revenue is key point to remember

Front 30

Briefly describe the effect Licensure seems to have on supply and demand relating to doctors
and doctor’s services

Back 30

The supply is limited by the number of doctors that are prepared to meet the licensing criteria, i.e. a limit is placed on how many are trained and licensed. This drives up the price to be paid because there is a planned/controlled shortage that makes seeing a doctor more valuable than it would be if the supply of doctors increased.

Front 31

PPACA Bronze plan

Back 31

represents minimum creditable coverage and provides the essential health benefits, cover 60% of the benefit costs of the plan, with an out-of-pocket limit equal to the Health Savings Account (HSA) current law limit ($5,950 for individuals and $11,900 for families in 2010);

Front 32

PPACA Silver plan

Back 32

provides the essential health benefits, covers 70% of the benefit costs of the plan, with the HSA out-of-pocket limits;

Front 33

PPACA Gold plan

Back 33

provides the essential health benefits, covers 80% of the benefit costs of the plan, with the HSA out-of-pocket limits;

Front 34

PPACA Platinum plan

Back 34

provides the essential health benefits, covers 90% of the benefit costs of the plan, with the HSA out-of-pocket limits;

Front 35

PPACA Catastrophic plan

Back 35

available to those up to age 30 or to those who are exempt from the mandate to purchase coverage and provides catastrophic coverage only with the coverage level set at the HSA current law levels except that prevention benefits and coverage for three primary care visits would be exempt from the deductible. This plan is only available in the individual market.

Front 36

Price Elasticity

Back 36

% Change in Quantity / % Change in Price

Front 37

Give an example that shows how the health care system is willing to give up some current efficiency in the production of medical services to (a) increase dynamic efficiency by providing money for research

Back 37

Dynamic efficiency is the ability to change over time. Research takes away from current production (and current efficiency), but makes the process more efficient in the future. For example, millions of dollars are spent monitoring HIV transmission rates. While this takes away from dollars that could be used to treat current patients, it helps researchers understand the disease better, leading to lower treatment costs in the future.

Front 38

Give an example that shows how the health care system is willing to give up some current efficiency in the production of medical services to increase social welfare.

Back 38

Social welfare is a system’s ability to address ‘the common good’. The Hospital of the University of Pennsylvania receives a large number of patients injured by gunshots. The surgeons who treat such patients are generally quite competent at other surgical procedures, so efficiency would dictate that they spend non-emergency time performing routine surgery. However, they spend quite a bit of time educating physicians from other areas where gunshot wounds are less common. Though this use of time may not be economically efficient from the hospital’s point of view, it does result in more lives saved in other areas, effectively increasing social welfare.

Front 39

Life Principle

Back 39

Only buy insurance to protect what you have, whatever the insurable asset, including your health. Don’t buy insurance for more than the value of the asset you are trying to protect. Don’t use insurance as an investment vehicle.

Front 40

Catastrophic Coverage

Back 40

Only buy protection for what you cannot afford to lose. The more things covered, the higher the premium. The higher the premium, the more you pay for sure. Most insured risks never happen to you personally. So lean towards taking risks regarding minor losses and insuring for major (catastrophic ) losses.

Front 41

Managed Competition

Back 41

Pitting various insurance providers against one another in an ongoing situation where the low bidder will probably get most of the business but not all of the business.

Front 42

ECONOMIC GROWTH HAS DETERMINED THE SHAPE OF HEALTH CARE Four Conditions

Back 42

Life expectancy, long enough, to justify
Sufficient income, ample wealth, to pay
Organization, insurance, government
Effective medical technology

Front 43

THE STONE AGE

Back 43

Time span: 5 million to 10,000 b.c.
Economy: Subsistence hunter-gatherer
Total population: Beginning to 4 million
Distribution of income: Roughly equal
Growth rate (doubles): .0007% (100,000 years)
Medical care: Shaman/witch doctor
Life expectancy: 28 years
Medical $: Not applicable

Front 44

THE AGRICULTURAL AGE

Back 44

Time span: 10,000 b.c. to 1800 a.d.
Economy: Farming and harvesting
Total population: 4 million to 400 million
Distribution of income: Top-heavy, unequal
Growth rate (doubles): .046% (1,500 years)
Medical care: Empirical
Life expectancy: 24 years
Medical $: Perhaps 1%
Investment and Trade
Civilization, War, and Government
The Decline of Civilizations Leads to Population Declines
The Plague
Food Supply Determines Population
The Rise of Economics
The Malthusian Hypothesis

Front 45

THE INDUSTRIAL AGE

Back 45

Time span: 1800 to 1950 a.d.
Economy: Manufacturing
Total population: 0.4 billion to 1.6 billion
Distribution of income: Mixed
Growth rate (doubles): .65% (108 years)
Medical care: Empirical
Life expectancy: 35–65 years
Medical $: 2% to 4%
Why Malthus Was Wrong
Demographic Transition
Demographic Change, Income Distribution, and the Rise of the Middle Classes

Front 46

THE INFORMATION AGE

Back 46

Time span: 1950 to future
Economy: Services
Total population: 1.6 billion to 20 billion?
Distribution of income: Not yet clear
Growth rate (doubles): 1.88% (40 years)
Medical care: Scientific but slowing
Life expectancy: 70+ years
Medical $: 6% to 16%+

Front 47

} Why are the markets for health insurance so much more price competitive than the markets for medical care?

Back 47

- The asymmetry in information means that consumers/patients are likely to want an agent to assist them in making health care decisions, and leads to a demand for licensure as a protection against selecting an inappropriate agent. Part of the information deficit is an inability to judge quality, so the principal wants to be assured that any agent chosen will be competent. In effect, the public has dual agents; in addition to the physician’s role as the technical agent in selecting care, the government acts as an agent to assure that the quality of the physician is adequate. The more extreme the asymmetry, the more market power the agent will have and thus the larger the likely rent to the agent. When asymmetry is less, as in eyeglasses (because the principal can make relatively easy judgments concerning whether or not the service has been satisfactory), there is likely to be greater willingness to shop and consider substitutes, and thus a more elastic demand.

Plain English – It’s easier to compare and evaluate health insurance policies than it is to determine what surgeon will do the best heart by-pass surgery.

Front 48

THE ORIGINS OF LICENSURE AND LINKAGE TO MEDICAL EDUCATION

Back 48

AMA Controls over Physician Supply, 1930–1965
Breaking the Contract: The Great Medical Student Expansion of 1970–1980 Figure 7.1
Building Pressure: Fixed Domestic Graduation Rates 1980–2008, supplemented with foreign, Figure 7.2 shows the foreign spike

Front 49

What controls the supply of physicians in the United States? Distinguish between short- and long-term and between proximate and fundamental factors (i.e., the actual decision-making individuals and organizations versus the underlying economic and political forces).

Back 49

The two primary mechanisms for controlling the supply of physicians in the U.S. in the relatively short run are medical education and residency training. Although the licenses are actually granted by the states, only a very small number of persons who complete the educational and specialty certification requirements are denied or lose their licenses. Thus the real control is in the hands of those who oversee and accredit medical schools and residency training programs. In the specific case of foreign citizens seeking to immigrate, there is also a role for federal immigration law and quotas, though the historical emphasis has been more on limiting access to residency training opportunities and thus the pathway to licensure. In the longer run, the decisions are influenced by less direct variables such as the perceived need and demand for physicians, changes in the technology of care and the relative attractiveness of different specialties (and medicine versus other careers), the difficulty of finding adequate employment opportunities without threatening the income potential of physicians already in place, and the size of historical cohorts of physicians and thus the rate at which they will leave practice.

Front 50

Why do physicians choose to practice together in groups? Is assembling physicians into groups any different from assembling employees into a manufacturing firm, or lawyers into a legal firm, or baseball players into a team?

Back 50

Group practice would be expected to yield a variety of scale economies in production as well as pecuniary economies (e.g., purchasing supplies and insurance in larger volume). As the text notes, these can include traditional production economies, such as shared equipment and management; economies in marketing and distribution, especially in relating to managed care companies; and economies resulting from risk spreading or reducing the variance of work and revenue fluctuations. Group practice in medicine has some in common with any firm’s decisions to bring activities inside the firm rather than handling them by external contract. It probably has most in common with law firms, because of the professional nature of the work and the similar economies realizable in a larger practice even though independent practice is possible. Employees in a manufacturing firm will be determined more by the technology of production, though that technology itself is a decision. A medical group practice is probably least like a baseball team, simply because the team is rule-defined in a way that does not apply to medicine (i.e., a group practice is not required to field a pitcher surgeon, a catcher dermatologist, etc.). Remember – A group practice is a business with business and social problems to be dealt with as well as medical problems.

Front 51

KICKBACKS, SELF-DEALING, AND SIDE PAYMENTS

Back 51

Referral Fees, Kickbacks, Bribes, Etc. – All are essentially illegal at this time and those that aren’t are well regulated.

Scams included: Using an owned a lab; Using an owned a hospital; Being paid to attend “seminars”; Being paid to prescribe certain drugs; Paid to refer to specialists, even when services not needed.

Being illegal does not stop some from perpetrating fraud, especially against government programs with poor audit functions.

Front 52

Main financial reason for modern hospitals

Back 52

It was necessary to bring all patients of many physicians together under one roof to obtain funding, make effective use of new technology and hire a manager who could coordinate efforts of medical and ancillary staff.

Front 53

HOSPITAL FINANCING: EXPENSES

Back 53

When payroll, professional fees, and local services are added together, about 75 percent of a hospital’s costs are labor