McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. CHAPTER 10 GOVERNMENT AND THE MARKET FOR HEALTH CARE

10-2 SOURCE: Centers for Medicare and Medicaid Services [2005a].

10-3 SOURCE: Centers for Medicare and Medicaid Services [2005a].

10-4 Private Health Insurance  The Implicit Subsidy for Employer-Provided Insurance World War II era price controls Federal tax subsidy

10-5 The Advantages of Employer-Provided Health Insurance  Increase the risk pool  Reduce adverse selection  Lower administrative costs

10-6 Employer-Provided Health Insurance and Job Lock  Job lock  Health Insurance Policy Portability and Accountability Act of 1996 (Kennedy- Kassenbaum Act)

10-7 Cost Control and Private Insurance  Cost-based reimbursement (fee-for-service)  Managed care Capitation-based reimbursement Health Maintenance Organizations (HMOs) Preferred Provider Organizations (PPOs) Point-of-service (POS)

10-8 Medicare: Overview SOURCE: Centers for Medicare and Medicaid Services [2005a]. Real expenditures on Medicare Expenditures on Medicare as a Share of GDP

10-9 How Medicare Works  Benefits Part A – Hospital insurance (HI) Part B – Supplementary medical insurance (SMI)  Financing Payroll tax funds HI General revenues fund SMI

10-10 Prescription Drug Benefit  Part C – Medicare Advantage  Part D – Prescription Drug Benefit Monthly premium Low deductible Donut hole Generous coverage for high costs

10-11 Cost Control Under Medicare  Medicare’s retrospective payment system  Medicare’s prospective payment system Diagnosis related groups Resource-based relative value scale system  Medicare Managed Care

10-12 Medicare: Impacts on Spending and Health  Expenditures on health care for the elderly  Health outcomes

10-13 Medicaid: Overview  Medicaid  State Children’s Health Insurance Program

10-14 SOURCE: Centers for Medicare and Medicaid Services [2005a].

10-15 Financing and Administration  Joint Federal-State financing  State administration

10-16 Benefits  States obligated to offer minimum package of benefits  States may offer more generous benefits  State administrative flexibility

10-17 Medicaid: Impacts on Health  Take-up rate  Crowding out Crowding out  Empirical evidence: Are Medicaid expansions effective? Crowding out and taking up

10-18 Health Care Reform  Individual mandates  Health savings accounts Catastrophic insurance policy  Single payer

10-19 Final Thoughts  Security v efficiency  No free lunch  Connection between health care expenditures and health

10-20 Does Public Insurance Crowd Out Private Insurance? Health insurance Quantity of all other goods AA A F F F B BB M M M 000 Amount of publicly provided insurance CCC