Health Economics and Policy
The Economic Perspective - Answer: Unique among the social sciences in that it establishes a
context of scarcity and uncertainty
Health economics - Answer: studies issues related to efficiency, effectiveness, value and
behavior in the production and consumption of health and healthcare. Broadly, it deals with
how healthcare systems function.
Arrow's "Uncertainty" - Answer: Arrow argues that healthcare doesn't fit the free market
model. To Arrow, unless a patient knows much about medicine as his/her doctor, the patient
cannot evaluate the quality of advice the doctor gives him/her. This, arrow calls "uncertainty."
Grossman's "Production on Health" Model - Answer: Grossman developed an economic
framework for the study of medical care demand in which medical care counts only as one of
the many factors used to produce good health.
Grossman's Determinants of Health - Answer: Grossman considers the determinants of health
to include, income, wealth, education, genetics, and public health.
Are Healthcare systems static or dynamic? - Answer: Health care systems are not static. Rather,
they are dynamic in that policy makers and planners are always looking for better ways to
produce, deliver, and pay for a growing menu of medical care services demanded by an
insatiable public.
Healthcare facilities in the United States - Answer: predominantly owned and operated by the
private sector. Government facilities are relatively small in number.
Health insurance in the United States - Answer: now primarily provided by the government in
the public sector. 60-65% of healthcare provision and spending comes from such programs as
Medicare, Medicaid, TRICARE, and the Veteran's Health Administration.
, Health Economics and Policy
Medicare - Answer: emerged in 1965 as a national social insurance program administered by
the US federal government. It guarantees access to health insurance for US citizens and resident
aliens, 65 and older, younger people with disabilities, and people with end stage renal disease.
Medicaid - Answer: was created by the Social Security Amendments of 1965. As a health
program, it serves people and families with low incomes and resources. Jointly funded by the
state and federal governments, Medicaid is a means-tested program that is managed by the
states.
TRICARE - Answer: serves the military population by providing civilian health benefits for
military personnel, military retirees and their dependents, including some members of the
Reserve Component. It is managed by Tricare Management Activity (TMA) under the authority
of the Assistant Secretary of Defense (Health Affairs).
The Veterans Health Administration (VHA) - Answer: implements the medical assistance
program of the VA through the administration and operation of numerous VA outpatient clinics,
hospitals, medical centers and long-term health care facilities (i.e. nursing homes). The VHA is
the component of the United States Department of Veteran Affairs (VA) led by the Under
Secretary of Veterans Affairs for Health.
Uninsured people in 2009, 2010. 2011 - Answer: 49.9 million people were without insurance in
2010. This accounted for 16.3% of the US population.
In 2009, this figure was 16.1%.
In 2011,46.3 million Americans were uninsured.
The three broad and important issues regarding the current state of US Health Care - Answer:
quality, access and affordability
, Health Economics and Policy
Reasons for the need to reform US Health Care - Answer: - In the last decade, private health
insurance coverage has gradually declined with the number of uninsured rising at an alarming
rate.
- Gaps in health insurance coverage combined with the astronomical rise in spending on
medical care.
- Concern over access to care for the uninsured and whether those who are currently insured
would continue to be insured.
- Whether the quality of medical care would suffer as managed care gradually becomes the
norm for the provision of medical care.
Americans without insurance coverage - Answer: find themselves relying on public assistance
and private charity for their care. Many people get insurance coverage through their place of
employment so there is a genuine concern that that coverage would be lost upon losing the job.
Health Care Crisis Causes - Answer: Experts on health care see the healthcare crisis as one that
is borne out of the astronomical rise in aggregate spending coupled with the problems the
government is experiencing in sustaining Medicare and Medicaid.
But there appears to be divergence of views from experts as far as the cause of the crisis is
concerned.
While some argue that the problem lies in the unrestrained use of medical technology, others
believe that the increased use of health insurance and tax subsidies that encourage individuals
to overinsure is driving the crisis.
The Unique Nature of Medical Care as a Commodity - Answer: 1. The demand for medical care
is irregular
2. There are information problems associated with medical care transactions.
3. There is widespread uncertainty in medical transactions.
, Health Economics and Policy
4. There is widespread reliance on not-for-profit providers especially in the provision of hospital
services.
The demand for medical care is irregular - Answer: With the exception of a small percentage of
care that fall under the classification of preventive, the demand for medical care follows an
accidental injury or the onset of illness. This is not the case for other commodities
There are information problems associated with medical care transactions. - Answer: These
problems disproportionately affect patients. Although all consumers are frequently confronted
with difficulties in collecting information about a product, in the case of medical care, this
problem becomes more acute for consumers given that medical knowledge is very complex.
Medical care consumers are poorly informed and find it very difficult to be well informed.
Patients find themselves relying on physician for both their diagnosis and the prescription of
treatments.
There is widespread uncertainty in medical transactions. - Answer: Since it is rare to predict an
illness, an individual cannot usually predict his or her demand for medical care.
There is widespread reliance on not-for-profit
providers especially in the provision of hospital services. - Answer: It is argued that restraining
the profit motive would solidify the basis for trust between patient and provider.
Government Intervention in Medical Care - Answer: Medical costs have escalated over the last
decade as have the number of uninsured, causing government intervention.
Arguments for Government Intervention - Answer: - medical care is too complicated to be left to
the free market.
- patients always have to rely on the recommendations of physicians because medicine is
inherently difficult to understand.
The Economic Perspective - Answer: Unique among the social sciences in that it establishes a
context of scarcity and uncertainty
Health economics - Answer: studies issues related to efficiency, effectiveness, value and
behavior in the production and consumption of health and healthcare. Broadly, it deals with
how healthcare systems function.
Arrow's "Uncertainty" - Answer: Arrow argues that healthcare doesn't fit the free market
model. To Arrow, unless a patient knows much about medicine as his/her doctor, the patient
cannot evaluate the quality of advice the doctor gives him/her. This, arrow calls "uncertainty."
Grossman's "Production on Health" Model - Answer: Grossman developed an economic
framework for the study of medical care demand in which medical care counts only as one of
the many factors used to produce good health.
Grossman's Determinants of Health - Answer: Grossman considers the determinants of health
to include, income, wealth, education, genetics, and public health.
Are Healthcare systems static or dynamic? - Answer: Health care systems are not static. Rather,
they are dynamic in that policy makers and planners are always looking for better ways to
produce, deliver, and pay for a growing menu of medical care services demanded by an
insatiable public.
Healthcare facilities in the United States - Answer: predominantly owned and operated by the
private sector. Government facilities are relatively small in number.
Health insurance in the United States - Answer: now primarily provided by the government in
the public sector. 60-65% of healthcare provision and spending comes from such programs as
Medicare, Medicaid, TRICARE, and the Veteran's Health Administration.
, Health Economics and Policy
Medicare - Answer: emerged in 1965 as a national social insurance program administered by
the US federal government. It guarantees access to health insurance for US citizens and resident
aliens, 65 and older, younger people with disabilities, and people with end stage renal disease.
Medicaid - Answer: was created by the Social Security Amendments of 1965. As a health
program, it serves people and families with low incomes and resources. Jointly funded by the
state and federal governments, Medicaid is a means-tested program that is managed by the
states.
TRICARE - Answer: serves the military population by providing civilian health benefits for
military personnel, military retirees and their dependents, including some members of the
Reserve Component. It is managed by Tricare Management Activity (TMA) under the authority
of the Assistant Secretary of Defense (Health Affairs).
The Veterans Health Administration (VHA) - Answer: implements the medical assistance
program of the VA through the administration and operation of numerous VA outpatient clinics,
hospitals, medical centers and long-term health care facilities (i.e. nursing homes). The VHA is
the component of the United States Department of Veteran Affairs (VA) led by the Under
Secretary of Veterans Affairs for Health.
Uninsured people in 2009, 2010. 2011 - Answer: 49.9 million people were without insurance in
2010. This accounted for 16.3% of the US population.
In 2009, this figure was 16.1%.
In 2011,46.3 million Americans were uninsured.
The three broad and important issues regarding the current state of US Health Care - Answer:
quality, access and affordability
, Health Economics and Policy
Reasons for the need to reform US Health Care - Answer: - In the last decade, private health
insurance coverage has gradually declined with the number of uninsured rising at an alarming
rate.
- Gaps in health insurance coverage combined with the astronomical rise in spending on
medical care.
- Concern over access to care for the uninsured and whether those who are currently insured
would continue to be insured.
- Whether the quality of medical care would suffer as managed care gradually becomes the
norm for the provision of medical care.
Americans without insurance coverage - Answer: find themselves relying on public assistance
and private charity for their care. Many people get insurance coverage through their place of
employment so there is a genuine concern that that coverage would be lost upon losing the job.
Health Care Crisis Causes - Answer: Experts on health care see the healthcare crisis as one that
is borne out of the astronomical rise in aggregate spending coupled with the problems the
government is experiencing in sustaining Medicare and Medicaid.
But there appears to be divergence of views from experts as far as the cause of the crisis is
concerned.
While some argue that the problem lies in the unrestrained use of medical technology, others
believe that the increased use of health insurance and tax subsidies that encourage individuals
to overinsure is driving the crisis.
The Unique Nature of Medical Care as a Commodity - Answer: 1. The demand for medical care
is irregular
2. There are information problems associated with medical care transactions.
3. There is widespread uncertainty in medical transactions.
, Health Economics and Policy
4. There is widespread reliance on not-for-profit providers especially in the provision of hospital
services.
The demand for medical care is irregular - Answer: With the exception of a small percentage of
care that fall under the classification of preventive, the demand for medical care follows an
accidental injury or the onset of illness. This is not the case for other commodities
There are information problems associated with medical care transactions. - Answer: These
problems disproportionately affect patients. Although all consumers are frequently confronted
with difficulties in collecting information about a product, in the case of medical care, this
problem becomes more acute for consumers given that medical knowledge is very complex.
Medical care consumers are poorly informed and find it very difficult to be well informed.
Patients find themselves relying on physician for both their diagnosis and the prescription of
treatments.
There is widespread uncertainty in medical transactions. - Answer: Since it is rare to predict an
illness, an individual cannot usually predict his or her demand for medical care.
There is widespread reliance on not-for-profit
providers especially in the provision of hospital services. - Answer: It is argued that restraining
the profit motive would solidify the basis for trust between patient and provider.
Government Intervention in Medical Care - Answer: Medical costs have escalated over the last
decade as have the number of uninsured, causing government intervention.
Arguments for Government Intervention - Answer: - medical care is too complicated to be left to
the free market.
- patients always have to rely on the recommendations of physicians because medicine is
inherently difficult to understand.
