ECON 440 Lecture Notes - Lecture 14: Essential Health Benefits, Health Insurance Marketplace, Moral Hazard
13 Jun 2018
School
Department
Course
Professor
Criteria
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Essential Health Benefits
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Canadian Pharmacare
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Value-Based Insurance Design
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Policy decisions regarding coverage of services
•
Tiered Cost Sharing
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High-Deductible Plans
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Policy innovations in demand-side cost sharing
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Outline
In the context of Zeckhauser's dilemma, policymakers - public and private - have important choices
to make
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Health care services: categories and specific
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Providers: who is included "in-network"
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Patients: based on characteristics (age, diagnosis, etc.)
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To cover or not:
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How much (% or $)
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Variation based on characteristics of patient or product/service
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If covered, individual cost-sharing?
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Coverage as a function of health status --> provinces restricted coverage to sicker
patients (i.e. those with more advanced liver disease)
▪
Hepatitis C treatment across Canadian provinces
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Secondary vs. tertiary care
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Disease-specific
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$ amount
▪
State and Federal insurance schemes in India - varied coverage
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Essential Health Benefits in the US
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Pharmaceuticals in Canada
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E.g.:
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What Decisions Need to be Made?
Relatively expensive services
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Services that individuals are at risk of using, but won't be used for certain
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Services for which demand is less price-elastic
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The tradeoff between the benefits from financial risk protection and the losses from moral hazard
consumption points towards covering:
•
Might also affect the probability of a loss
▪
Inclusion of more covered services will increase the average costs
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The less comprehensive, the cheaper it is, and the less it's actual insurance
▪
So, the more comprehensive coverage is, the more expensive it is for the insurer to cover the
costs of care, and therefore also the premium
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Affordability of health insurance vs. comprehensiveness of coverage
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i.e., publicly provided insurance has a big impact on the public budget
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Are we going to be able to pay for this in 10 years?
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Public entities are concerned about the "sustainability" of the health care system
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If the goals is for everyone to have some insurance, we want to keep some "affordable
options" in the market
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The goal is universal coverage (multi-payer systems with no insurance as an option)
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Affordability of coverage is important if:
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What Benefits Should Be Covered?
Lecture 14 - Health Insurance Design and Policy Choices
Sunday, March 25, 2018
3:36 PM
ECON 440 Page 1
options" in the market
There's a need to balance the cost of insurance with setting a minimum quality standard and
avoiding underinsurance
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ACA's individual mandate:
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Who decides?
▪
Health care providers are not neutral in this decision - we rely on medical perspectives,
but they're also no an uninterested party
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Medically necessary services
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Cost-effective services
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e.g. immunizations
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Services whose use has positive externalities
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Services represented by powerful lobby groups (patient advocacy organizations, providers) for
which political pressure is a factor
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Others?
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Other criteria:
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Ambulatory patient services
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Emergency services
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Hospitalization
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Maternity and newborn care
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Mental health and substance use disorder services, including behavioral health treatment
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Prescription drugs
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Rehabilitative and habilitative services and devices
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Laboratory services
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Preventive and wellness services and chronic disease management
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Pediatric services, including oral and vision care
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Every plan offered on the health insurance marketplace must include items and services within 10
categories:
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Designed to set a minimum quality level
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ACA's Essential Health Benefits
ACA plans must be as or more generous than this
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Some flexibility - States were allowed to define the scope of benefits by choosing a state-specific
"benchmark" plan
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But the scope and quantity of services in each category can vary across plans
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Variation in costs and quality of plans -> gives consumers choice
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Conditional on covering comparable benefits, plans vary in their actuarial value, the share of costs
for medical care paid by patients
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Essential Health Benefits
The CHA defines medically necessary services
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Maybe also dental and vision services
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See "Needling toward essential health benefits" CMAJ, Nov 6, 2012
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Complementary medical services (acupuncture, chiropractic, etc.) are also part of the
discussion
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Major gaps acknowledged for prescription drugs and mental health care
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Canadian Debates Regarding Coverage of Benefits
Maybe insurance wasn't necessary, from the perspective of financial risk
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When Canada's public insurance plans were created, drugs were less prominent in the practice of
medicine; less expensive
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Today they're much more clinically and financially important
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Provincial programs usually target vulnerable populations
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Increasing interest in a national Pharmacare program
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Prescription Drug Coverage in Canada
Approximately $1 billion is spent on cancer drugs each year
Some quick facts…
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Cost and Coverage of Cancer Treatments
ECON 440 Page 2
Document Summary
Lecture 14 - health insurance design and policy choices. In the context of zeckhauser"s dilemma, policymakers - public and private - have important choices to make. Variation based on characteristics of patient or product/service. Coverage as a function of health status --> provinces restricted coverage to sicker patients (i. e. those with more advanced liver disease) State and federal insurance schemes in india - varied coverage. The tradeoff between the benefits from financial risk protection and the losses from moral hazard consumption points towards covering: Services that individuals are at risk of using, but won"t be used for certain. Affordability of health insurance vs. comprehensiveness of coverage. Inclusion of more covered services will increase the average costs. Might also affect the probability of a loss. So, the more comprehensive coverage is, the more expensive it is for the insurer to cover the costs of care, and therefore also the premium.
