An Economic Perspective

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Presentation transcript:

An Economic Perspective Health Policy Issues An Economic Perspective Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Can Price Controls Limit Medical Expenditure Increases? Chapter 18 Can Price Controls Limit Medical Expenditure Increases? Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

LEARNING OUTCOME Examine the potential consequences of price controls and global budgets as approaches for limiting rising medical expenditures Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Lecture Effect of Price Controls in Theory Imbalances Between Supply and Demand Service Shortages Shift of Capital Away from Price-Controlled Services Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Lecture (continued) Effect of Price Controls in Practice Medicare Medicaid Rationing Waiting Lists Deterioration of Quality Gaming the System Global Budgets Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Discussion What is the impact of price controls on capital investment by hospitals? Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Summary Price controls and global budgets provide the appearance of limiting rising prices and expenditures, but in reality, they lead to cheating and a reduction in quality, impose large costs on patients and providers, and do little to improve efficiency. Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Summary (continued) Consumers and producers respond to prices, so when government sets prices below costs, hospital and physician economic incentives are to reduce the supply of their services. If the purpose of regulation is to improve efficiency, eliminate inappropriate services, and decrease the costly duplication of medical technology, government policies should provide incentives to achieve these goals. Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.

Summary (continued) Competitive systems provide both purchasers and providers with incentives to weigh benefits and costs of new technology. When patients are willing to pay, medical expenditures will increase faster, but the rate of increase will be more appropriate. Copyright © 2015 Foundation of the American College of Healthcare Executives. Not for sale.