IDSB04 Lec 9: Health Crisis (Nov. 2)
Neoclassical approach: if supply is free then the demand goes down
Its not as alluring, and has moral hazard (overuses it)
health care approach: demand goes up if supply is free
health care creates its own demand (by physicians recommendation, etc)
p. 542-3: why is the difference?
1.Patients dont control health spending (unless all have Munchausens syndrome)
2.Physician often spending 3rd party $$
3.Some health spending has no medical benefit (unnecessary services, profits,
corruption, malpractice premiums….
4.
Table 11-2: How the health care sector differs from markets
P. 544: key questions
P. 545: means of financing health care (3 points)
P. 546: financing health care:
Ultimately households pay but fairness differs:
General taxation is most progressive (fair)its in Canada (premiums
tailored to income)
Mandatory health insurance less fair, especially if one premium for all
Private insurance even less fair: sickest (poorest) pay higher premiums
(everyone rated to risk of becoming ill so usually older, poorer, sicker pay most
Out-of pocket least fair (most regressive)- no risk sharing at all
Inadequate health financing is an important cause of poverty and
P. 546-7: health insurance model:
Guilds and workers- mutual protection/friendly societies social
insurance (national or community-based)
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Risk pooling (to reduce costs of expected illness, burial, etc.) ((both of
these 2 = beneficial))
Versus
Risk selection (private companies select young and healthy): community
vs. experience rating (individual occupation, genetic risk, etc)
Health care costs concentrated in sick few- sickest 10% account for 64% of
expenses
P. 547: cost-sharing
Co-payments (every time you go to a health care provider, you pay a set
amount) no co-payments at point of service in Ontario
Co-insurance (set percentage, not set payment. In US was 20%.)
Deductibles (amount you have to spend and pay for out of pocket before
insurance kicks in at all. Assumes most societies are made up of
hypochondriacs that will use up health care at any opportunity)
Limits to care (ceilings, lifetime maximum, pre-existing conditions,
uncovered services)
US spends 15% of GDP on healthcare, whereas the next highest is
Switzerland at 11% (higher could mean more burden on population)
P. 547: US and Canada compared
Single payer in Canada = one source; US = multi-payer (insurance
companies, people, etc)
Health care financing in Canada: $172B in 2008 = 10.7% GDP = $5170/capita
70% funded publicly; remainder private insurance, employer benefits out-
of pocket
Provincial and federal taxes (personal and corporate)
Alta, ON, BC use premiums (one rate; no bar to access) no minimum
payment out-of pocket
Some others use sin taxes (lotteries, sales)
As of 2004 federal portion comes in block grant: Canada Health Transfer
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$2/3 funded by province
Hospitals negotiate annual budgets with province
Doctors fees negotiated between province and provincial medical
association (with ceilings) (no patient mills allowed where docs take as
many patients as they can to increase money)
Nurses salaries negotiated via collective bargaining (not applicable to
part-time nurses)
NO EXTRA BILLING and NO user fees allowed but
Chaoulli decision in Quebec: will private insurance be allowed to cover
publicly available services?
Health care un-system in the US
~6000 hospitas
~1200 insurance companies; power concentrated ina handful of corps
~700 000 docs
300M people
46M uninsured
42M > 65 covered by medicare
41M indigent covered by 51 medicaid rograms (states plus DC)
171 million covered by thousands of employer-based plans (Obamas
planoffers public subsidies to those who cant afford any insurance,
but everyone required to have insurance)
Managed care = profits over patients
This is too chaotic so there will probably more health reform in the US
Ch. 12: Dont need to know specific numbers
Why are for-profit hospitals costlier?
Admin costs; costs lower in Canada, but outcomes slightly better in
Canada
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Document Summary

Idsb04 lec 9: health crisis (nov. 2: neoclassical approach: if supply is free then the demand goes down. i t"s not as alluring, and has moral hazard (overuses it) health care approach: demand goes up if supply is free. general taxation is most progressive (fair) it"s in canada (premiums tailored to income) mandatory health insurance less fair, especially if one premium for all. private insurance even less fair: sickest (poorest) pay higher premiums (everyone rated to risk of becoming ill so usually older, poorer, sicker pay most. out-of pocket least fair (most regressive)- no risk sharing at all. Inadequate health financing is an important cause of poverty and: p. 546-7: health insurance model: guilds and workers- mu tual protection/friendly societies social insurance (national or com munity-based) www. notesolution. com. risk pooling (to reduce costs of expected illness, burial, etc. ) ((both of these 2 = beneficial))

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