1. Health Economics & Policy 3rd Edition James W. Henderson
Chapter 1
U.S. Medical Care: Crisis or Conundrum

2. Growth in Spending

3. U.S. Spending: Summary Measures

4. Why do Americans spend so much on medical care?
Aaron (1991)
Expansion of 3rd party payment system
Aging of the population
Expanded medical malpractice
Increased use of medical technology
Other factors
Physician-induced demand
Entry restrictions
Predominance of not-for-profit providers

5. Changes in Medical Care Delivery
Shift from private to public financing
Shift to 3rd party financing
Changes in hospital usage and pricing
Deregulation and growth in managed care

6. Shifts in Financing

7. Third Party Insurance Spread the risk Spend other people’s money
Prescription for overspending

8. Payment Structure Traditional fee structure Managed care
Fee for service
Retrospective payment
Incentive to overspend
Managed care
Capitation and risk sharing
Prospective payment
Incentive to limit care

9. Changes in Hospital Usage and Pricing

10. Growth in Managed Care

11. Nature of Health Care As a Commodity
Demand is irregular
Transactions characterized by information problems
Widespread uncertainty prevalent
Reliance on not-for-profit providers
Insurance has emerged as the primary means of payment

12. Health System Goals Access to care Quality of care Cost of care
Who’s covered?
What’s covered?
Quality of care
Medical efficacy
Medical outcomes
Cost of care
Who pays?
How much?

13. The Structure of Health Economics

14. Key Economic Concepts Scarcity and choice Opportunity cost
Marginal analysis
Self-interest
Markets and pricing

15. Key Economic Concepts Supply and demand Competition Efficiency
Market failure
Comparative advantage

16. Where the Money Comes From…

17. Where the Money’s Spent…

18. The Medical Care Cost Problem