1. Earl Goldberg Ed.D. & Joan P Frizzell Ph.D. La Salle University
Health Care Economics
Earl Goldberg Ed.D. & Joan P Frizzell Ph.D.
La Salle University

2. Health Care Economics
Studies issues related to efficiency, effectiveness, value and behavior related to the costs of Health Care.
It includes the study of the functioning of health care systems and health-affecting behaviors in the general population.

3. Historical Perspective
At the start of the United States, there was no need for insurance.
There was nothing to buy.
Health care as it is known today was not available.
Civil War ( )
More than 620,000 died – however, more than 2/3 died from disease
Poor Hygiene, Improper & inadequate diet, lack of sanitation, impure water
Clara Barton
Worked with Ladies' Aid societies to obtain bandages, food, and clothing that would later be distributed during the Civil War.
Founded the American Red Cross in 1881

4. Historical Perspective
Crimean War ( )
Florence Nighingale demonstrated that Nursing Care makes a difference in survival
Infections contributed to the high death rates of Wars
No Antibiotics until the 1900s
Treatment for pain consisted of Alcohol and Opiates
Formal Nursing Education in the Philadelphia
Pennsylvania Hospital
Philadelphia General Hospital
Hospital of the University of Pennsylvania

5. Antibiotics
Alfred Bertheim & Paul Erhlich synthesized Arsphenamine as the first medication to treat and infection (syphilis) in 1907
Sulfa Powder was sprinkled onto wounds during WWI
Sulfa Antibiotics developed in 1930s in Bayer Laboratories
Penicillin developed by Alexander Fleming in 1928
It is the ability to develop large quantities of PCN than made the difference in treatment of infection
 Now there was something to purchase for treatment of illness

6. Workers Compensation Initiated in 1914
Originally concerned with cash payments for wages loss due to job related injury
Compulsory insurance for medical expenses and death benefits as a result of job related injury

7. Private Insurance Initially voluntary
In 1850s some private insurance companies provided limited coverage for bodily injury but not illness
Early 1900s – coverage for surgical fees
1911 Policies becam available for accidental injury, sickness and nursing services.
The Railroad and Unions developed their own policies.

8. Blue Cross /Blue Shield
American Hospital Association lent support for the development of this health insurance to cover hospital admission costs
Blue Shield was later developed to cover the cost of physician bills
Not for Profit
No shareholders would receive profit distributions
Fee for Service
Payment was based on the cost of care

9. Employer Based Health Insurance
In the post WWII period, inflation rates were high. A wage freeze was mandated to control inflation
Health Insurance and Retirement Benefits were offered as a way to compensate employees without giving raises.
These benefits were determined to be a legitimate part of Union/Management bargaining agreements
These employee benefits were considered to be non-taxable.
Essentially free money

10. Medicaid/Medicare
Developed to assist the elderly, unemployed, and the poor people of the US.
1966 – Medicare – Administered by US Government
Initially for 65 and older
In 2010, Medicare provided health insurance to 48 million Americans—40 million people age 65 and older and eight million younger people with disabilities.
It provided coverage for an estimated 15.3 million inpatient stays in 2011, representing 47.2 percent ($182.7 billion) of total a inpatient hospital costs in the United States

11. Medicare Part A – Hospital Insurance Part B – Medical Insurance
Funded by a 2.9% payroll tax levied on employers and workers (each pay 1.45%)
Part B – Medical Insurance
Outpatient services and care
Part C – Health Plans – Medicare Advantage
Part D – Perscription Drugs
Parts B and D are partially funded by premiums paid by Medicare enrollee
There are deductibles and Co-Insurance costs
In the Patient Protection & Affordable Care Act legislation of 2010, a surtax was added to the Part B & D premium for higher income seniors to partially fund the PPACA.