1. 21 Health Care McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

2. U.S. Emphasis on Private Health Insurance Patient Protection & Affordable Care Act (2009) During WWII employers offered insurance Continued as an employee benefit Led to overuse & higher prices Tendency to regulate industry LO1 21-2

3. Costs and Access Costs increased rapidly Higher prices Increased quantity of services Projected to grow at 6.1% annually over next 10 years Access 46 million uninsured LO1 21-3

4. Health Care Spending LO1 21-4

5. Health Care Spending LO1 Costs as a percentage of U.S. GDP 21-5

6. Health Care Spending Is the U.S. healthier? Longer life expectancies Most advanced medical equipment and technologies Half of medical research funding is in U.S. Increase in breast cancer mortality TB has reappeared AIDS epidemic LO1 21-6

7. Economic Implications of Rising Costs Reduced access to care Labor market effects Slower wage growth Part-time and temporary workers Outsourcing and offshoring Personal bankruptcies Impact on government budgets LO2 21-7

8. Limited Access The poor are likely to be uninsured Make too much to qualify for Medicaid Waiting for treatment increases costs LO3 21-8

9. Why the Rapid Rise in Costs? Peculiarities of the health care market Ethical and equity considerations Asymmetric information Positive externalities Third-party payments: insurance LO4 21-9

10. Increasing demand for health care Rising income Role of elasticity Aging population Unhealthy lifestyles Role of doctors Supplier induced demand Defensive medicine Medical ethics LO4 Why the Rapid Rise in Costs? 21-10

11. Role of health insurance The moral hazard problem Less prevention Overconsumption Government tax subsidy Rationing to control costs LO4 Why the Rapid Rise in Costs? 21-11

12. Supply Factors in Rising Health Costs Supply of physicians Slow productivity growth Changes in medical technology Relative importance of supply and demand factors LO4 21-12

13. Cost Containment: Altering Incentives Deductibles and copayments Health Savings Accounts (HSA) Managed care Preferred Provider Organizations (PPO) Health Maintenance Organizations (HMO) Medicare and DRG Limits on malpractice awards LO4 21-13

14. Patient Protection & Affordable Care Preexisting conditions, caps, and drops Employer mandate Personal mandate Covering the poor Insurance exchanges Other provisions Taxes LO5 21-14

15. Patient Protection & Affordable Care Objections and alternatives Greater inefficiencies in health care First step to national health insurance Lack of revenue sources Increased consumption Need to force consumers to weigh marginal benefits and costs LO5 21-15