1 / 16

MEDICAL CARE: COSTS OUT OF CONTROL?

MEDICAL CARE: COSTS OUT OF CONTROL?. Chapter 7 Presented By Mary Young. National Health Expenditures, Selected Years, 1980-2011. Expenditure Per capita ($). National Health Expenditure. GDP. Expenditures as % of GDP. year. 1980 1990 1995 2000 2001 2005 2011. 245.8 696.0 990.3

tory
Télécharger la présentation

MEDICAL CARE: COSTS OUT OF CONTROL?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. MEDICAL CARE: COSTS OUT OF CONTROL? Chapter 7 Presented By Mary Young

  2. National Health Expenditures, Selected Years, 1980-2011 Expenditure Per capita ($) National Health Expenditure GDP Expenditures as % of GDP year 1980 1990 1995 2000 2001 2005 2011 245.8 696.0 990.3 1299.5 1423.8 1902.2 2815.8 2795.6 5803.3 7400.4 9872.9 10201.5 12227.5 16589.8 8.8 12.0 13.4 13.2 14.0 15.6 17.0 1067 2738 3698 4637 5039 6519 9216 SOURCE: Centers for Medicare and Medicaid, Office of the Actuary, January 2002

  3. Rising Cost of Medical Care 7.3 % As GDP 4.8% • NHE Predictions is by 2011 NHE will be 17 % of GDP Why?

  4. Cost Disease of the Service Sector • Technologically – progressive, capital – intensive • Labor – intensive sector • Wage competition between two sectors lead to cost that grow faster in labor – intensive sectors. • Both sectors wages increase at near same rate but labor productivity in capital – intensive sector faster. • Labor cost will rise more slowly in capital – intensive sectors.

  5. Cost Disease of the Service Sector • Labor hours per unit * wage per hour • Labor productivity * wage per hour • Increase in hourly wage then, • Increases labor cost per unit output • Inversely labor productivity reduces labor cost per unit output.

  6. Cost Disease Theory • Cost disease theory suggest reasons QHC will increase overtime maybe: • Aging population 2% • Relatively high income elasticity of demand for health care 5% • Increase in insurance coverage 13% • Technological change 49%

  7. Cost Theory • Income elasticity = IEDHC is a measured change in the quantity demanded (or amount purchased) of a specific good or service as a result of a change in income expressed in percentages • IEDHC = % change QHC / % change I

  8. Income elasticity • Disposable income (household) after taxes = $5 trillion 100% of DI • NHE = $5 billion 10% of DI • IEDHC = 1.4 • Remainder is spent on AOGS • An increase of 140% of $500 b is $700 B. • Increase QHC from $500 b to $1200 b, or 10% to 12% of DI.

  9. Health Insurance coverage • Increases in health insurance coverage explains 10% growth in QHC. • Health insurance is the passkey to accessing the health care system. • People with health insurance receive more care, more frequently, than people without health insurance.

  10. Technological Change • Together demand and supply determine aggregate expenditures. • A change in demand Is fueled by advertisement of drugs and tech development promises to improve life, demand for insurance provides increased earnings to manufacturer of new drugs and technologies and aggregate health expenditures increases. • Increases in earnings stimulate research, development and production of next generations of products.

  11. Technological Change

  12. Technological Change Is it worth it? • Benefits • Reduced mortality • Reduced morbidity • Increased life expectancy. • Value of life – in terms of additional years of life. • Additional years of life = the average American can expect to live 4.5 additional years because of medical advances or behavior changes reducing cardiovascular disease mortality. • Present value of life to the individual at age 45. PVLY45 = FVLY t / (1+i) t-45

  13. Determination of PVLY frommedical advances in cardiovascular disease FVLY Years Value Discount Factor PVLY Delayed $100,000 31 (1.02)76-45 = (1.02)31 = 1.848 $100,000/1.848 = $54,112 $100,000 32 (1.02)77-45 = (1.02)32 = 1.885 $100,000/1.885 = $53,050 $100,000 33 (1.02)78-45 = (1.02)33 = 1.922 $100,000/1.922 = $52,029 $300,000 $159,186

  14. The Effect of Third – Party Payments on Hospital Care D S $1,228 Price per Day ($) 39 249 303 Hospital Days (Millions)

  15. Physician – Induced Demand • Asymmetric information • Physicians’ desire to increase wealth • Physicians practice fee-for-service medicine

  16. Approaches to Reducing Wasteful Expenditures • Managed care • Eliminating the federal tax exemption for health insurance • Health care vouchers

More Related