1. CHAPTER 10 Government and the Market for Health Care Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

2. 10-2 Uses of Health Care Funds in the U.S. (2007) Source: Centers for Medicare and Medicaid Services [2008c].

3. 10-3 Sources of Health Care Funds in the U.S. (2007) Source: Centers for Medicare and Medicaid Services [2008c].

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

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

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

7. 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)

8. 10-8 Medicare Expenditures (1966-2007) Real expenditures on Medicare Expenditures on Medicare as a Share of GDP Real expenditures on Medicare Source: Centers for Medicare and Medicaid Services [2008c].

9. 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. 10-10 Prescription Drug Benefit Part C – Medicare Advantage Part D – Prescription Drug Benefit –Monthly premium –Low deductible –Donut hole –Generous coverage for high costs

11. 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

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

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

14. 10-14 Medicaid Expenditures (1966-2007) Source: Centers for Medicare and Medicaid Services [2008c].

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

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

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

18. 10-18 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

19. 10-19 Health Care Reform Individual mandates –The Massachusetts Plan Health savings accounts –Catastrophic insurance policy Single payer –International experiences Canada United Kingdom

20. 10-20 Health Care Costs and Health Outcomes: U.S., Canada, United Kingdom

21. 10-21 Final Thoughts Security vs. efficiency No free lunch Connection between health care expenditures and health