Health Economics & Policy 2 nd Edition James W. Henderson Chapter 16 Medical Care Reform in the United States Copyright 2002, South-Western, a division of Thomson Learning, James W. Henderson, Health Economics and Policy, 2e

The Push for Reform l Polls show satisfaction and unease l Forces behind reform movement –Advocates for elderly, poor, uninsured l Middle class –Rising out-of-pocket cost –Health insurance link with employment l Business –Rising cost creates wedge between cost of employment and salary paid –Potential liability risk

The Moral Issues l Is medical care a right? l What is a right? l Difference between a right and an entitlement

Goals of Reform l Who’s covered l What’s covered l Who pays and how much

Health Insurance in the United States l Employer-based group plans l Individual insurance l Government entitlements

Market Access Problem l Uninsured find it difficult to find willing providers l Insured find themselves underinsured

Health Insurance Regulations l Federal responsibility –ERISA –Federal mandates l States’ responsibilities –Health insurance mandates

Economics of Mandates l Correct perceived deficiencies in health insurance market –Tendency to undervalue certain types of benefits l Mental health l Long-term care –Adverse selection l Tendency for high-risk users to enroll in high benefit plans and low-risk users to enroll in low benefit plans l Viewed by state policy makers as a low cost way of improving access l Empirical evidence

Types of Mandates l Benefits l Providers l Persons l Processes

Benefit Mandates l Alcoholism treatment l Drug abuse treatment l Oral contraceptives l Mammography screening l Prostate cancer screening l Well-child care

Provider Mandates l Chiropractors l Dentists l Nurse practitioners l Psychologists

Covered Persons Mandates l Adopted children l Newborns l Handicapped children l Dependent students

Process Mandates l Guaranteed issue l Exclusions of preexisting conditions l Premium caps l Guaranteed renewable

U.S. Policy Alternatives l State-level experiments l Federal involvement l Market alternatives

State-level Experiments l Hawaii l Oregon l Minnesota l Other states

Federal Involvement l Universal coverage –Single-payer –Employer mandate –Individual mandate l Universal access

America’s Market Orientation l Distrust of government l Heterogeneous population l Individualistic tradition l Equal opportunity l Philanthropic tradition

Conditions for Market Response l Prerequisites –Rank preferences –Goods to buy –Money to spend l Cost-conscious behavior –When purchasing insurance plan –When purchasing medical services

Market Alternatives l Managed competition l Medical savings accounts

Immediate Prospects l Medicare reform l Patients’ bill of rights l Health care for the uninsured l Pharmaceutical drug pricing