1. WHY HEALTH ECONOMICS?

3. What makes health care different from other goods? Health is a major source of uncertainty and risk. Governments around the world are deeply involved in financing health systems.

4. The U.S. health care economy is massive and expensive. The fact that other people’s health decisions affect you creates externalities –Examples: Vaccinations and other preventative measures create positive externalities Going out in public with Ebola virus creates negative externalities Externalities undermine the efficient function of markets and often require government intervention. What makes health care different from other goods?

5. National Health Expenditures

7. National Health Expenditures per Capita, 1960-2010 Notes: According to CMS, population is the U.S. Bureau of the Census resident-based population, less armed forces overseas. Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; NHE summary including share of GDP, CY 1960-2010; file nhegdp10.zip). http://www.cms.hhs.gov/NationalHealthExpendData/ 5.2% 7.2% 9.2% 12.5% 13.8% 14.5% 15.4% 15.9% 16.0% 16.1% 16.2% 16.4% 16.8% 17.9% 17.9% NHE as a Share of GDP

8. National Health Expenditures as a % of GDP

9. Average Annual Growth Rates for NHE and GDP, Per Capita, for Selected Time Periods Source: Historical data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, January 2012, at http://www.cms.hhs.gov/NationalHealthExpendData/ (see Historical; NHE summary including share of GDP, CY 1960-2010; file nhegdp10.zip). Projections from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, July 2011, “National Health Expenditures 2010-2020,” Table 1, https://www.cms.gov/NationalHealthExpendData/downloads/proj2010.pdf. http://www.cms.hhs.gov/NationalHealthExpendData/https://www.cms.gov/NationalHealthExpendData/downloads/proj2010.pdf Projected

11. International Comparisons

12. Year = 2006 Total expenditure on health, % GDP Total expenditure on health, Per capita US$ PPP Australia 8.73141 Austria 10.13606 Belgium 10.33462 Canada 103678 Czech Republic 6.81509 Denmark 9.53362 Finland 8.22668 France 113449 Germany 10.63371 Greece 9.12483 Hungary 8.31504 Iceland 9.13340 Ireland 7.53082 Italy 92614 Japan 8.12578 Korea 6.41464 Mexico 6.6794 Norway 8.74520 Poland 6.2910 Portugal 10.22120 Slovak Republic 7.41308 Spain 8.42458 Sweden 9.23202 Switzerland 11.34311 United Kingdom 8.42760 United States 15.36714 Public expenditure on health, % total expenditure on health 67.7 76.2.. 70.4 88 84.1 76 79.7 76.9 61.6 70.9 82 78.3 77.2 81.3 55.7 44.2 83.6 69.9 70.6 68.3 71.2 81.7 60.3 87.3 45.8

13. Per Capita Total Current Health Care Expenditures, U.S. and Selected Countries, 2009 ^OECD estimate. *Break in series. Notes: Amounts in U.S.$ Purchasing Power Parity, see http://www.oecd.org/std/ppp; includes only countries over $2,500. OECD defines Total Current Expenditures on Health as the sum of expenditures on personal health care, preventive and public health services, and health administration and health insurance; it excludes investment.http://www.oecd.org/std/ppp Source: Organisation for Economic Co-operation and Development. “OECD Health Data: Health Expenditures and Financing”, OECD Health Statistics Data from internet subscription database. http://www.oecd-ilibrary.org, data accessed on 01/10/12.http://www.oecd-ilibrary.org

19. Year = 2004 Doctor consultations per capita Hospital discharge rates, all causes, per 100 000 population Average length of stay for acute care, all conditions, days Australia 6157866.1 Austria 6.7278526 Belgium 7.6174107.4 Canada 687477.3 Czech Republic 13.1..8.1 Denmark 7.5170313.4 Finland 4.2204844.7 France 6.6271025.5 Germany 7201498.7 Greece..184065.7 Hungary 12.6232726.5 Iceland 6.3169775.3 Ireland..138896.5 Italy..144716.7 Japan 13.8..20.2 Mexico 2.551884 Norway..173455.2 Poland 6.2177776.6 Portugal 3.890356.9 Slovak Republic 11.9188937.4 Spain..108386.7 Sweden 2.8160024.7 Switzerland..157228.8 Turkey 3.18451.. United Kingdom 5.3127788 United States 3.8120905.6

20. CountryFemales % Daily Smokers Males % Daily Smokers Population % Daily Smokers Alcohol Litres per capita Females % with BMI>30 Males - % with BMI > 30 Population - % with BMI > 30

21. Why are Health Care Expenditures Increasing Rapidly in the United States?

22. 1. An Aging Population Aging U.S. population % 65 years+ 1950 8.1 1970 9.8 2008 12.8

23. The Coming Surge in the Population of Age 65 Years and Older Source: IFTF; U.S. Census Bureau

24. Table 2a. Projections of the Population by Selected Age Groups for the United States: 2010 to 2050 Age (Resident population as of July 1. Numbers in thousands) 201020152020202520302035204020452050 BOTH SEXES 310,233325,540341,387357,452373,504389,531405,655422,059439,010.Under 18 years75,21778,10681,68584,86687,81590,72293,98697,669101,574.Under 5 years21,10022,07622,84623,48424,16125,05626,11727,17128,148.5 to 13 years37,12339,01140,79242,49043,85845,17046,74348,66450,697.14 to 17 years16,99417,01918,04818,89219,79620,49621,12621,83422,728.18 to 64 years194,787200,597204,897208,678213,597221,266230,431239,933248,890.18 to 24 years30,71330,88530,81732,55534,05935,69537,03838,23439,538.25 to 44 years83,09585,80189,72492,61295,24297,962101,392106,366110,862.45 to 64 years80,98083,91184,35683,51084,29687,60892,00095,33398,490.65 years and over40,22946,83754,80463,90772,09277,54381,23884,45688,547.85 years and over5,7516,2926,5977,2398,74511,45014,19816,98519,041.100 years and over79105135175208239298409601 Source: Population Division, U.S. Census Bureau

25.  Current Dollars  Constant Dollars 2. Increasing Incomes

26. 3. Technology: The Health Care Industry is Rapidly Evolving Advances in medical technology and drugs are dramatically improving patient care –But, these improvements are costly

28. Annual Percent Change in Medical Care and All Goods Price Indices

29. 4. Growth of Third Party Insurance Percent Distribution of National Health Expenditures, by Source of Funds, 1960-2010

30. 4. Growth of Third Party Insurance There have been increased cost containment efforts –Changes in government reimbursement of health care providers –Private insurers are exercising more control over patient care

31. Two False Reasons for growth in National Health care Expenditures…

33. Facts don’s support…

34. Summary: Health care is only getting bigger and more expensive for governments and taxpayers Increasing life expectancies and graying populations throughout the developed world will place stress on public health insurance systems. Governments will have to cope with ongoing questions about whether to pay for expensive new medical technologies. Given these trends we can confidently expect health care to be an ever-growing line item on government balance sheets.

35. Where are the Dollars$ Coming From and Where are They Going$?

36. Total Health Care Expenditures in 2010: $2,593,600,000,000

38. Note: Dollar amounts in parentheses are the annual expenses per person in each percentile. Population is the civilian noninstitutionalized population, including those without any health care spending. Health care spending is total payments from all sources (including direct payments from individuals and families, private insurance, Medicare, Medicaid, and miscellaneous other sources) to hospitals, physicians, other providers (including dental care), and pharmacies; health insurance premiums are not included. Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey (MEPS), Household Component, 2009. Concentration of Health Care Spending in the U.S. Population, 2009 (≥$51,951)(≥$17,402)(≥$9,570)(≥$6,343)(≥$4,586)(≥$851)(<$851) Percent of Total Health Care Spending

39. Distribution of Average Spending Per Person, 2009 Average Spending Per Person Age (in years) <5$ 2,468 5-171,695 18-241,834 25-442,739 45-645,511 65 or Older9,744 Sex Male$3,559 Female4,635 Note: Population is the civilian noninstitutionalized population, including those without any health care spending. Health care spending is total payments from all sources (including direct payments from individuals and families, private insurance, Medicare, Medicaid, and miscellaneous other sources) to hospitals, physicians, other providers (including dental care), and pharmacies; health insurance premiums are not included. Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey (MEPS), 2009.

40. Total Health Care Expenditures in 2010: $2,593,600,000,000

43. Percent Distribution of National Health Expenditures, by Type of Sponsor, 1987, 2000, 2010 Notes: Starting with the 2009 NHE data, CMS expanded their focus on spending by Type of Sponsor, which provides estimates of the individual, business, or tax source that is behind each Source of Funds category and is responsible for financing or sponsoring the payments. “Federal” and “State & Local” includes government contributions to private health insurance premiums and to the Medicare Hospital Insurance Trust Fund through payroll taxes, Medicaid program expenditures including buy-in premiums for Medicare, and other state & local government programs. “Private Business” includes employer contributions to private health insurance, the Medicare Hospital Insurance Trust Fund through payroll taxes, workers’ compensation insurance, temporary disability insurance, worksite health care. “Household” includes contributions to health insurance premiums for private health insurance, Medicare Part A or Part B, out-of-pocket costs. “Other Private Revenues” includes philanthropy, structure & equipment, non-patient revenues. Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group at https://www.cms.gov/NationalHealthExpendData/https://www.cms.gov/NationalHealthExpendData/ (see Historical; NHE Web tables, Table 5). Government Private 1987 (Total = $519.1 billion) Government Private 2000 (Total = $1,377.2 billion) 31.8% 68.2% 35.5% 64.5% 44.9% 55.1% Federal Private Business State & Local Household Other Private Revenues 2011 (Total = $2,700.7 billion)

44. Percent Distribution of Source of Funds for Selected Personal Health Care Services, 1970 and 2010 Notes: Medicare and Medicaid were enacted in 1965; by January 1970, all states but two were participating in Medicaid. “Out-of-Pocket” includes direct spending by consumers for all health care goods and services not covered by insurance, except for health care premiums. “Priv. Health Ins.” includes premiums paid to health insurance plans and the net cost of private health insurance (administrative costs, reserves, taxes, and profits or losses). “Other” includes Other Public Health Insurance Programs (CHIP, Depts. of Defense and of Veterans Affairs) and Other Third Party Payers (e.g., worksite health care, other private revenues, workers’ compensation, maternal/child health, other state and local programs, etc.). Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group at https://www.cms.gov/NationalHealthExpendData/ (see Historical; NHE Web tables, Tables 7, 8, 11, 12). https://www.cms.gov/NationalHealthExpendData/ 1970 2010 Hospital Care Physician & Clinical Services Retail Prescription Drugs Nursing Care Facilities & Continuing Care Retirement Communities