Classen_HealthEcon_Class2

Classen_HealthEcon_Class2 - Trends in Health Care Trends in...

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Unformatted text preview: Trends in Health Care Trends in Health Care Class 2 Loyola University Chicago Prof. Tim Classen January 21, 2011 Class Outline Wrap up Course Introduction Trends in Health Care Spending & Financing Model of Utility from Health Supply and Competition Supply and Competition The supply of medical care. Competition in health markets. The supply of physician services. Location and organization of providers. Returns to medical education Hospitals ­ the importance of ownership form (for profit vs. not for profit vs. government). How doctors and hospitals interact in the market. The role of consumer search and the role of information (e.g., “report cards”) "Demand creation“ “Creative destruction” in pharmaceutical products Market Failures & Govt. Market Failures & Govt. Externalities in the health care system Missing Markets (For risk sharing) Government Interventions Vaccines, epidemics Non­medical care events (e.g., drunk driving) Obesity? Medicare & Medicaid Licensing, certification & FDA approval Employer­provided health insurance Subsidies for training & research Benefits, Costs and Benefits, Costs and Allocations Like most economic choices, decisions regarding health care involve weighing the potential benefits against associated costs. What is an “optimal” allocation of health care? People choose health care options that they feel will make them better (benefits > costs), but not necessarily in financial terms. The benefits of medical treatment may be measured in intangibles (such as quality of life), while the costs of medical treatment are usually measured in dollars. Think of Marginal Benefits vs. Marginal Costs From whose perspective? Patient, insurer, society? Trends in Health Care Spending, Financing and Insurance U.S. Health Care Spending as % of GDP 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 19 60 19 63 19 66 19 69 19 72 19 75 19 78 19 81 19 84 19 87 19 90 19 93 19 96 19 99 20 02 20 05 20 08 16.5% in 2009 12% in 1990 8% in 1975 HC’s share of the US economy has tripled over last 50 years. We now spend $2.5 trillion each year on health care. Shares of NHE by Recipient 45% 40% 35% 30% Share of NHE 25% 20% 15% 10% Nursing Homes 5% 0% 65 68 71 74 77 80 83 19 86 19 89 19 92 19 95 19 98 20 01 20 04 20 07 20 10 20 13 20 16 19 19 19 19 19 19 19 Hospitals Physicians Prescription Drugs Year Price Indices for Medical Care 600 Avg. Annual Price Growth CPI Index (1982-84 = 100) 500 400 All Goods CPI Medical Care Physician Services Prescription Drugs Hospital Services 4.2% 6.3% 5.6% 6.5% 8.1% Hospital Services Prescription Drugs 300 Physician Services 200 All Goods Prescription Drugs Physician Services Medical Care Hospital Services 100 0 19 78 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 Year Sources of Payment for Health Care 50% 45% 40% Private Insurance Out of Pocket Medicare Medicaid Share of Total NHE 35% 30% 25% 20% 15% 10% 5% 0% Projections Medicare Part D 19 65 19 68 19 71 19 74 19 77 19 80 19 83 19 86 19 89 19 92 19 95 19 98 20 01 20 04 20 07 20 10 20 13 20 16 20 19 Year 19 62 Private vs. Public Payments for NHE 80% 70% 60% NHE Share 50% 40% 30% 20% 10% 0% Public Private 19 63 19 67 19 71 19 75 19 79 19 83 19 87 19 91 19 95 19 99 20 03 20 07 20 11 20 15 20 19 Year Concentration of Health Care Spending in the U.S. Population, 2007 Percent of Total Health Care Spending 100% 80% 65.2% 60% 40% 20% 0% 2 2.9% 3.0% Top 1% (≥$44,482) Top 5% (≥$15,806) Top 10% (≥$8,716) Top 15% (≥$5,798) Top 20% (≥$4,064) Top 50% (≥$786) Bot t om 50% (<$786) 49.5% 81.2% 97.0% 74.6% Percent of Population, Ranked by Health Care Spending Note: Dollar amounts in parentheses are the annual expenses per person in each percentile. Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey (MEPS), 2007. Per­capita Health Expenditures by Age Group, 2004 $30,000 $25,000 Per-capita Spending $20,000 $15,000 $10,000 $5,000 $0 0-18 19-44 45-54 55-64 Age Group 65-74 75-84 85+ Percent Who Didn’t Receive Needed Care Due to Cost, 2008 Profile of U.S. Health Profile of U.S. Health Insurance, 2008 Age profile of uninsured, 2009 Age profile of uninsured, 2009 Economic Model of Demand for Health Care Model of Health Demand Model of Health Demand Economists model health as the output from multiple inputs (i.e., health care, food consumption, behaviors) Utility = U(X,H) measures utility from given level of consumption (X) and health H=f(medical care, disease, Xbad . . . ) Diminishing marginal returns to Medical Care Health depreciates over time Diminishing Marginal Utility Diminishing Marginal Utility Implications Implications Utility is derived from health which is produced by Medical Care (M) and X. Thus, demand for M depends on the prices of M and X. The marginal utility of medical care can be divided as: Demand for Medical Care is thus derived demand But how to measure improvement in health from medical care? A) Change in utility from an improvement in health and B) Improvement in health from an increase in medical care Measures of pain, numerical measures of health (BP, cholesterol, blood sugar), survival rates Marginal and Average Marginal and Average Productivities of Medical Care Clearly there are large improvements to health from medical care on average Relevant issue is how does health change on the margin ∆H Avg. productivity = H/M Marginal productivity = ∆M Obviously will vary depending on how health is measured Effect is often smaller than expected Life expectancy, (infant) mortality rates Daily activities, well­being harder to measure (QALYs) ...
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