The Economics of Healthcare
Questions and Problems
Questions:
- Identify the major players in the US healthcare system.
- How do Americans pay for health care?
- Identify the major challenges facing the US healthcare system.
- How does the US healthcare system compare with those of other advanced economies (e.g. Canada, UK).
- Why does the traditional demand analysis not fit neatly to the US healthcare market?
- Why does the traditional supply analysis not fit neatly to the US healthcare market?
- What are the major causes of annual growth in US healthcare costs?
- Why does the US government intervene in the US healthcare market?
Answers:
- Households, employers, private insurance, state government, federal government, providers (hospitals, nurses, care facilities), pharmaceuticals.
- Private insurance, out-of-pocket, Medicaid, Medicare, other third-party payers.
- Increasing healthcare costs per capita; how uninsured Americans will obtain healthcare; increasing healthcare spending to GDP; access to health services particularly in small/rural communities; commitment of private insurers to pay for certain care including pre-existing conditions; commitment of medical providers to provide services given increasing costs.
- Growing gap in health expenditures as a percentage of GDP between the US and other advanced economies; per capita health expenditures higher in the US than in comparable advanced economies; decreasing growth rate in per capita health expenditures in the U.S. and other advanced economies; the outcomes on access and quality relative to other advanced economies are mixed in spite of higher per capita US health spending.
- Price that consumers pay is dependent on private Insurance agreement, negotiated fees by Medicare and Medicaid; health services are fairly heterogeneous; healthcare can be viewed simultaneously as current service and human capital investment.
- Providers (hospitals) tend to be not-for-profit entities; dominance by a few large providers in each area; significant professional barriers to entry; government providers of healthcare services.
- Technological advances; profit motive of private insurers; drug prices; inelasticity of demand.
- Presence of externalities; improve/ensure healthcare access; provide information on quality of care, drugs, and prices; improve commitment by providers and private insurers