Chapter 0 Introduction to Health and Care Flashcards
Describe the main types of health and care insurance contracts: -private medical insurance -health cash plans -main example variations of contracts issued.
Broadly speaking:
What is “health” ? (2)
What is the purpose of insurance? (2)
How do we marry the above two concepts to understand the purpose of ‘health insurance’? (3)
- Health refers to
- a state of being where one is free from illness…
- …in relation to one’s mental and physical wellbeing
- The purpose of insurance is, broadly speaking,
- prepaying and pooling of funds…
- …to mitigate losses arising from a contigent even
- Health insurance is purposeful because
- no-one plans to get sick or hurt (mentally or physically), but in the event that this happens, medical care is needed
- health insurance covers the costs associated with this, and offers many other important benefits
- health insurance protects against unexpectd, high medical costs
What are some consumer needs which are met by the use of health insurance?
(8)
- Medical expenses
- Loss of income
- Directly
- Ability to earn income
- Other members of household
- Household expenses
- Cost of lifestyle changes
- Debt
List 4 important pillars/activities involved in a well-functioning health system
(4)
- Collection of funds
- Pooling of resources
- Purchasing of goods
- Deliver of services
Health systems, collecting of funds:
Give examples of who might ‘pay’ (10)
- Households
- Employers
- Donors
- The fiscus
- The poor
- The elderly
- The unemployed
- Payment may determined by
- one’s ability to pay
- one’s willingness to pay
Health systems, collecting of funds:
How might funds be collected? (6)
- General taxes imposed by the State
- VAT
- Income taxes
- Corporate taxes
- Earmaked taxes, taxes earmarked specifically for provision of healthcare
- Premiums
Health systems, collecting of funds:
What kind of cross subsidies might exist in terms of collecting funds for provision of healthcare? (7)
- Social solidarity
- Subsidies varying in their extent
- min payment/funding requirement,
- max payment/funding which may be imposed,
- sliding scale for funding depending on other factors
- Income cross subsidies
- Cross subsidies between generations (younger subsiding the older)
Health systems, resources pooling:
What different aspects/characteristics should be considered regarding pooling of funds for health systems?
(4)
- Types of pools/who pools funds together
- Influence of pool size
- Issues related to having multiple pools
- Mutliple tiers created due to pooling
Health systems, resources pooling:
What types of ‘resource pooling’ might be found in health systems…i.e. who might pool resources/funds? (6)
- State pooled resources
- Mutuals
- Insurers
- Individuals
- Donors
- Employers
Health systems, resources pooling:
Give examples of factors to be considered due to having multiple pools within a health system (3)
- Multiple pools (vs single pools) leads to factors such as
- competition between insurers (may be both good and/or bad)
- pool fragmentation (usually bad)
- the need for risk equalisation (additional administration/cost)
Health systems, resources pooling:
When resources are pooled within a health system, what kind of tiers may be introduced in so far as provision of benefits is concerned? (3)
- Different populations may have access to different benefits
- Benefits provided may be means tested
- Social security pillars may be used/enforced
Health systems, resources pooling:
What influence does pool size play in a health systems’ ability to provide health services? (8)
- Large pools are better than small pools because
- …the larger the pool..
- …the bigger the share of contributions which can be allocated exclusively to health services
- this is manifested through, for example,
- economies of scale
- greater ability to carry risk
- reduced need for solvency margins
- But beyond a critical size, economies of scale show diminishing returns
- In addition, the argument for large pools, is not the argument for single pools
Health systems, purchasing:
Regarding purchasing/provision of services within a health system, what key factors arise? (1)
What does this lead to? (3)
- Limited budgets/supply and competing demands
- This leads to the need to ration healthcare benefits by considering:
- what benefits are/need to be offered?
- who gets what benefits?
- who decides and how?
Health systems, delivery:
In what various ways may healthcare services/benefits be delivered via a health system? (6)
- Hospitals
- Doctors - GPs and specialists
- Pharmaceuticals
- Equipment
- Traditional medicine
- Allied professionals
What key aspects usually characterise or can be found prevalent within a healthcare system? (7)
- Its perception as a basic human right
- Information assymetry
- Rapidly rising demand and costs of healthcare
- Mutuality vs solidarity
- Principle agent issues
- The “3rd party payer problem”
- Issues arising due to the existence of insurance
What do we mean by “information assymetry” in a healthare context?
What causes information assymetry in the healthcare environment?
- Information assymetry arises where there is a significant difference in material, relevant information possesed by parties/stakeholders involved in the provision/consumption of healthcare services.
- Causes
- the health industry has quite irregular consumption so lack of experience,
- different experiences not comparable,
- results often related to biology and not service quality
What factors lead to the rising demand for healthcare over time?
(8)
- Technological developments
- Demographic changes e.g. ageing populations in many countries
- The burden of disease e.g. lifestyle diseases
- Increased exposure, access and expectations
- Information asymmetry
- Supplier induced demand
- Existence of a third party payer
- Existence of insurance
- Cultural trends e.g. C-Section rate in SA
What do we mean by mutuality in a health insurance context?
Mutuality:
- similar to a pooled fund
- premiums based on risk profile ie all known risk factors
- disadvantage is that
- some policyholders will be excluded due to high risk or high premiums
- benefits also limited by contract, thus some treatment may not be covered
- denies universal access
What do we mean by solidarity in a health insurance context?
Solidarity:
- premiums not based on risk, but according to ability to pay
- benefits paid according to need
- underpins national/social health insurance
- can lead to anti-selection…
- …so often insurance is compulsory to avoid free rider problem. Can have subsidies
- can lead to cross-subsidies (income, age, health status)
- in SA there is open enrolment for unrestricted funds:
- funds must accept anyone at standard premium rates and minimum benefit package
What do we mean by the “Principle-Agent” issue? (1)
Give examples of things that may add to the principle-agent issues
- Person advising care is also the person profiting from the delivery of the service
- Principle-agent issues may be caused by
- Insurance: its interference in the relationship between doctor and patient
- Existence of a third party payer which may alter dynamics
- Existence of treatment protocols
What kind of issues arise due to the presence of insurance on the provision of health services within a health system?
(1; 2 points)
(2; 4 points)
(3; 3 points)
Dual moral hazard
- Increased probability of ‘falling ill’
- Choice of service provider and treatment => wanting better service/treatment, which costs more
“3rd party payer” problem
- Use-it or lose-it => fact that someone else is paying for your costs
- Connection between benefit usage and contribution increases
- Economics terms: marginal utility is not equal to marginal cost
- Choice between elective/discretionary care…what is really necessary
Cost-sharing
- e.g. co-payments, deductibles…
- …is cost-sharing considered to be equitable/fair?
- What about low-income members?
What are the key pillars of the actuarial control cycel?
(6)
Specify the problem
- Specifying problem: targeted outcome, risks faced, options available
Develop the solution
- Develop the solution: actuarial models, assumptions, results, implications, stakeholders, solution, alternative solutions
Monitor experience
- Monitoring experience: departures from target outcome, modify assumptions, surplus/deficits
While also considering
- Influence of commercial/economic environment and professionalism
