IDSB04H3 Study Guide - Moral Hazard, Community Rating, Market Failure


Department
International Development Studies
Course Code
IDSB04H3
Professor
Anne- Emanuelle Birn

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Why health economics? p. 537
Spending is soaring-why?
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Need to maximize value for spending (efficiency): better outcome at same or lower cost
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Health economics is driving health are policy and health system planning
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Remember that factors that lie outside of health care service and systems, including income, education,
housing, water and sanitation, social security systems, nutrition and transports
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Low cost interventions for developing countries (neoclasical approaches)
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Comprehensive, primary care-oriented redistributive systems (social justice approach)
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Ideally health economics assesses fairness and equity in context of local culture, history and politics
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Key questions: p. 540
What is the relationship btw health and the economy?
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What are the underlying assumptions of markets?
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How does health differ from other goods/services?
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Why are markets incapable of equitably providing health services?
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Health Economic 101
Expenditures= price X quality
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Neo-classical economics says:
Price links supply with demand
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If supply fixed and demand high, price goes up
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If price is free: demand should go down (moral hazard: ppl over use services)
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Supply of what? Doctor? Services? Drugs?
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Health care create its own demand
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The health care curve: supply goes up, demand goes up, price goes up over time
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Why the difference? p. 542-3
Patients don't control health spending (unless all have Munchausen's syndrome)1.Physician often spending 3rd party $$2.Some health spending has no medical benefit (unnecessary services, profits, corruption, malpactice
premiums etc)
3.
Health is special (beyond $): may be better not to need health care: vulnerability4.Health care spending shaped by values, not by "rational" consumers5.Most societies deem health care to be a human right6.
Key questions 544
How are decisions made regarding health financing?
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What is the role of international institutions in shaping health system financing policies?
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Means of financing health care p. 545
Revenues gathered by national or local governments through taxations1.Tax based or salary deducted contributions to public insurance system2.Private payment to private insurance schemes or out of pocket expenditure at the point of the health
care provision
3.
General taxation is most progressive (fair)
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Mandatory health insurance less fair, especially if one premium for all
Ultimately household pays but fairness differs:
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Lecture 8
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Ch 11
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Health Economics and the Economics of Health
November-02-10
1:15 PM
Lecture Page 1
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Mandatory health insurance less fair, especially if one premium for all
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Private insurance even less fair: sickest (poorest) pay higher premiums
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Out of pocket less fair (most regressive)-no risk sharing at all
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Inadequate health financing is an important cause of poverty and insecurity
Health insurance model p. 546-7
Guilds and workers-- mutual protection/ friendly societies -- social insurance (national or community-
based)
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Many pay premiums into a common pool, from which any one individual may withdraw funds
when needed
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Risk pooling
(to reduce costs of expected illness, burial etc )
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Private insurers select who they will provide coverage for or may decide to delay or reduce
benefits paid
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Risk selection
(private companies select young and healthy): community vs. Experience rating
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Community rating-
Uniform premiums and benefits for a pool of associated people
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Private insurance, charge higher premiums to people with an increased "risk" of illness or death, they
calculate to include profits for the insurer
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Community base insurance
: offers financial protection against health care cost in countries without
other forms of social health insurance, does not distribute health financing equitably across the
population.
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Cost-sharing p. 547
Every time you go to a provider, you pay a set amount (we don't have it in Ontario)
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Co-payments
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Set percentage of your income
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Co-insurance
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Pay for out of pocket before insurance gives money back to you
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Deductibles
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Single payer public system-distribute resources according to need
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Multi payer private public insurance system-distribute resources according to ability to pay
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Two types of health insurance models
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Health care financing in Canada
70% funded publicly; remainder private insurance, employer benefits, out of pocket
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Provincial and federal taxes (personal and corporate)
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Alberta, ON, BC use premiums (one rate; no bar to access
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Some other use sin taxes (lotteries, sales)
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As of 2004 federal portion comes in block grant: Canada Health transfer
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$2/3 funded by province
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Hospitals negotiate annual budgets with province
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Doctors' fees negotiated btw province and provincial medical association (with ceilings)
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Nurses' salaries negotiated via collective bargaining
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No extra billings and no user fees allowed
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Health care un-system in the US
"managed" care = profits over patients
Why health care expenditures are rising
Aging of population, population growth
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Increase in health personnel/ infrastructure
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Longer period of illness, complex diseases
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Explosion in health care technology
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Doctor run more tests than necessary, to protect themselves
Malpractice, defensive medicine-unnecessary care
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Lecture Page 2
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