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CHAPTER 10

CHAPTER 10. GOVERNMENT AND THE MARKET FOR HEALTH CARE. Private Health Insurance. The Implicit Subsidy for Employer-Provided Insurance World War II era price controls Federal tax subsidy. The Advantages of Employer-Provided Health Insurance. Increase the risk pool Reduce adverse selection

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CHAPTER 10

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  1. CHAPTER 10 GOVERNMENT AND THE MARKET FOR HEALTH CARE

  2. Private Health Insurance • The Implicit Subsidy for Employer-Provided Insurance • World War II era price controls • Federal tax subsidy

  3. The Advantages of Employer-Provided Health Insurance • Increase the risk pool • Reduce adverse selection • Lower administrative costs

  4. Employer-Provided Health Insurance and Job Lock • Job lock • Health Insurance Policy Portability and Accountability Act of 1996 (Kennedy-Kassenbaum Act)

  5. Cost Control and Private Insurance • Cost-based reimbursement (fee-for-service) • Managed care • Capitation-based reimbursement • Health Maintenance Organizations (HMOs) • Preferred Provider Organizations (PPOs) • Point-of-service (POS)

  6. Medicare: Overview Expenditures on Medicare as a Share of GDP Real expenditures on Medicare

  7. How Medicare Works • Benefits • Part A – Hospital insurance (HI) • Part B – Supplementary medical insurance (SMI) • Financing • Payroll tax funds HI • General revenues fund SMI

  8. Prescription Drug Benefit • Part C – Medicare Advantage • Part D – Prescription Drug Benefit • Monthly premium • Low deductible • Donut hole • Generous coverage for high costs

  9. Cost Control Under Medicare • Medicare’s retrospective payment system • Medicare’s prospective payment system • Diagnosis related groups • Resource-based relative value scale system • Medicare Managed Care

  10. Medicare: Impacts on Spending and Health • Expenditures on health care for the elderly • Health outcomes

  11. Medicaid: Overview • Medicaid • State Children’s Health Insurance Program

  12. Financing and Administration • Joint Federal-State financing • State administration

  13. Benefits • States obligated to offer minimum package of benefits • States may offer more generous benefits • State administrative flexibility

  14. Medicaid: Impacts on Health • Take-up rate • Crowding out • Empirical evidence: Are Medicaid expansions effective? Crowding out and taking up

  15. Health Care Reform • Individual mandates • Health savings accounts • Catastrophic insurance policy • Single payer

  16. Final Thoughts • Security v efficiency • No free lunch • Connection between health care expenditures and health

  17. Does Public Insurance Crowd Out Private Insurance? Quantity of all other goods Quantity of all other goods Quantity of all other goods F F A F A A B B B C C C 0 0 0 M M M Health insurance Health insurance Health insurance Amount of publiclyprovided insurance Amount of publiclyprovided insurance Amount of publiclyprovided insurance

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