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Text III. Health Economics

Spending for health care in the United States is nearly $1 trillion. In 1990 health-care expenditures were only 5,9 percent of GDP but were 13 percent in 2005. Per capita spending in 2005 was $3,621. Why have health-care expenditures risen so dramatically?

Expenditures for hospital services constitute 39 cents of every dollar, or 39 percent of the nation's health-care bill, nursing-home expenditures, 8 percent; spending for physicians' services, 20 percent, and spending for other personal health-care services (dental care, other professional services, drugs and other nondurables, durable medical products, and miscellaneous personal-care services), 21 percent. The remaining 12 percent of national health expenditures goes for medical research, construction of medical facilities, government public health services, and the administration of private health insurance.

Of the $1 trillion spent on health care, 54 percent comes from private sources: private insurance and direct payments. Private health insurance, the single largest payer for health care, accounts for 33 cents of every dollar of national health expenditures, or 33 percent. Private direct payments account for 21 percent. Direct payments consist of out-of-pocket payments made by individuals, including copayments and deductibles required by many third-party payers (third-party payers are insurance companies and government). Government spending on health care constitutes 45 percent of the total; the federal government pays about 70 percent of this. Medicare, the largest publicly sponsored health-care program, funds health-care services for about 35 million aged and disabled enrollees. The Medicare program pays for 20 percent of all national health expenditures. Medicaid, a jointly funded federal and state program, finances 16 percent of all health care covering the costs of medical care for poor families, the neediest elderly, and disabled persons who are eligible for social security disability benefits. Other government programs pay for 9 percent. Health-care spending varies tremendously among various groups in the U.S. population. If each person spent the same amount on health care, the line of perfect equality would describe the distribution of spending. In fact, the distribution of health expenditures is heavily skewed. In 2000, the top 1 percent of persons ranked by health-care expenditures accounted for almost 30 percent of total health expenditures, and the top 5 percent incurred 55 percent of all health expenditures.

The bottom 50 percent of the population accounted for only 4 percent of all expenditures, and the bottom 70 percent accounted for only 10 percent of costs. The aging of the population stimulates the demand for health care. The elderly consume four times as much health care per capita as the rest of the population. About 90 percent of the expenditures for nursing home care are for persons 65 or over, a group that constitutes only 12 percent of the population. The aged (65 or older) currently account for 35 percent of hospital expenditures, In contrast, the young, although they constitute 29 percent of the population^ consume only 11 percent of hospital care. Per capita spending on personal health care for those 85 years of age or over is 2.5 times that for people age 65 to 69 years. For hospital care, per capita consumption is twice as great for those age 85 or over as for those age 65 to 69, for nursing home care, it is 23 times as great. For demand to increase, the aged must be both willing to buy medical care and able to pay for it. The emergence of Medicare and Medicaid in 1990 gave many elderly the ability. Medicare covers the cost of the first 100 days of hospital or nursing-home care for the elderly and disabled, providing benefits to 32 million people. Like social security, Medicare is funded by payroll taxes and is available on the basis of age (or disability) not need. By contrast, Medicaid helps only the neediest people, including many elderly people whose Medicare benefits have run out. As a result, Medicaid is considered the program most associated with long-term health care (such as for people living in nursing homes).



The effect of the Medicare and Medicaid programs has been to increase the demand for services and to decrease the price elasticity of demand because individuals do not pay for much of their health care. Private sources pay for about 59 percent of personal health care for the general population, and Medicare and Medicaid pick up most of the remainder. Private sources, however, pay for 74 percent of care for people under age 65. For the elderly, the private share of spending is only 15 percent for hospital care, 36 percent for. physicians' services, and 58 percent for nursing home care. Medicaid spending for those 85 or over is seven times the spending for people age 65 to 69 and three times greater than the spending for people age 75 to 79. This difference is attributable to the heavy concentration of Medicaid money in nursing home care, which those 85 or over use much more than others. Medicare spending for the oldest group is double that for the 65 to 69 group. New medical technologies provide the very sick with increased opportunities for survival, Everyone wants the latest technology to be used when their life or the lives of their loved ones are at stake, But because these technologies are cost-increasing innovations and because costs are not paid by the users, the increased technology increases demand.

The original function of hospitals was to provide the poor with a place to die. Not until the twentieth century could wealthy individuals who were sick find more comfort, cleanliness, and service in a hospital than in their own homes. As technological changes in medicine occurred, the function of the hospital changed: the hospital became the doctor's workshop,

The cost of hospital care is attributable in large part to the way current operations and capital purchases are financed. Only a small fraction of the cost of hospital care is paid for directly by patients; the bulk comes from third parties, of which the government is the most important. The term third-party payers refers to insurance companies and government programs: neither the user (the patient) nor the supplier (the physician or hospital) pays. Until recently, the public-sector, third-party payers made very little effort to question the size of hospital bills. The rate of reimbursement for each hospital was determined primarily by the hospital's costs. Thus, high-cost hospitals were rewarded with higher reimbursement. In 1993. Medicare instituted the prospective payment system, which changed this reimbursement scheme. The prospective payment system (PPS) assigns specific reimbursement rates for certain procedures so that high-cost hospitals are reimbursed at the same rate for the same procedure as low-cost hospitals, The result has been to slightly slow the rate of growth of hospital costs and to increase the use of outpatient facilities and at-home care.

Physicians affect the cost of medical care not only through their impact on the operation of the hospital but aiso through their fees. Expenditures on physicians' services rose more rapidly than any other medical-care expenditure category in the 1990s and early 2000s. Is the increased cost of physicians due to a shortage of doctors? The answer is not necessarily yes. From 1990 to 2005, the supply of physicians increased 100 percent while the U. S. population increased about 25 percent. As a result, the ratio of active physicians per 100,000 people increased substantially, from 169 in 1990 to 240 in 2005.

The factors that have led to rising physicians' fees include an increase in demand relative to the supply of certain types of physicians, the ability of physicians to restrict price competition, and the payment system. The number of physicians per population has risen in many areas of the country. Yet, because the American Medical Association restricts advertising by physicians, consumers are unable to obtain complete information about prices or professional quality, and physicians are less likely to compete through advertising or lower prices. Moreover, the restrictions on advertising enable established physicians to keep new, entering physicians from competing for their customers, by charging lower prices. The increased costs of medical care and the increased supply of physicians have led to new medical-care delivery systems, the health maintenance organization and the preferred provider organization. A health maintenance organization (HMO) provides comprehensive medical care, including preventive, diagnostic, outpatient, and hospital services in return for a fixed, prepaid amount of money from the enrol lees.

There are four basic types of HMOs: staff, medical group, independent practice associations (IPAs), and networks. A preferred provider organization (PPO) is a group of physicians who contract with a firm to provide services at a price discount in hopes of increasing their volume of business or a firm that contracts with a group of physicians. A general practitioner serves as a member's'primary-care provider and refers patients to specialists as needed. Instead of contacting a specialist directly, a patient must be referred to a specialist by the primary-care provider.

Per capita expenditures for health range from $142 in Turkey to $3,621 in the United States, as shown in Figure II. U.S. per capita spending exceeded spending in Canada by 43 percent, France by 86 percent, Germany by 99 percent, and Japan by 124 percent.

Increases in health-care expenditures and the widening gap between the United States and other countries have led to a consideration of how medical care is provided in various countries. The comparison considered most often is between the United States and Canada because the two are neighbors with not too dissimilar economic and political systems and yet very different medical systems. U.S. and Canadian payment systems differ considerably. In the United States, physicians are paid more for doing more, and the return on their time is higher if they perform a procedure than if they use their cognitive skills. Because procedures often require hospital care, this approach translates into higher expenditures for hospital care. Jn Canada, by contrast, physicians operate under a system of fee schedules and overall provincial limits on health spending, and they have no incentive to increase the number of procedures.

The biggest difference between the U.S. and Canadian systems is that in Canada most of the funds for health care come from a single source. Because hospital budgets are set in advance by the Canadian government, it is very difficult for hospital administrators, physicians, or patients to spend more than has been budgeted. In addition, Canada has a significantly lower ratio of specialists to general practitioners than the United States has. In the United States, the large number of surgeons and other specialists order a large number of procedures and experience a low average workload.

Exercises

I. Learn the vocabulary; find In the text and translate the sentences that contain these words and expressions:

Disabled enrollees, nursing home care, per capita consumption, price elasticity of demand, to be at stake, to be attributable, third-party payers, the rate of

reimbursement, outpatient facilities, a health maintenance organization, a low

average workload.

II. Explain the meaning of the following words and phrases in English:Medicare,

Medicaid, prospective payment system (PPS), health maintenance organization

(HMO), preferred provider organization (PPO).

III. Use prepositions where necessary:

spending ... health care, to vary ... various groups. ... the basis of age, ... contrast,

to be associated ..., to be attributable ..., to be ... stake, to be rewarded ... smth.,

to institute ... smth., ... the same rate, to affect smth. ... smth. restrictions ...

advertising, to keep smb. ...smth, to be reimbursed fees, the gap ... the USA

and other countries, to be set... advance IV. Answer the following questions:

Why is health care leading the list of U.S. citizens' concerns?

What do the costs of medical care result from?

Describe the alternative methods of providing health care in the USA. Why

are they affective?

How much does the United States spend per capita for health care? What

about other nations?

V. Agree or disagree. Discuss the following problems with your partner:

Health care is the fastest-growing portion of total national expenditures. It is

rising primarily because of the rising cost of physician services and hospital

services.

The demand for medical care has risen at a very rapid rate, One reason for

the increase is the aging of the population.

In some nations nearly all medical care is provided by the government; in

others, most medical care is purchased by patients. In all, health care must

be rationed either by price or by some other mechanism.

VI. Read and render the text.



Date: 2016-01-03; view: 648


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