final- markets of healthcare Flashcards
define the Cost Crisis and how we got here
- 1929 Baylor forms a hospital-wide medical coverage plan for employees- the first American medical insurance
- this later expanded as a solution to the hospital crisis (not enough hospitals especially in rural areas)
- because more people could afford care, doctors worried about impacts on profession. AMA wanted to protect being a physician from effects of monetary incentives and drafted guidelines
- new insurance companies wanting to compete began to use Experience Rating of patients (assessing patient health and selecting only the healthiest people to insure- Blue Care Blue Cross tried to fight this)
- this leaves out high-risk people and upends the logic of health insurance in the first place
0 experience rating reintroduced the same problems insurance was supposed to solve. it created a new problem of overconsumption/overuse. patients separated from payment lose the sense that healthcare costs something.
What is managed care and MCOs?
healthcare delivery system that aims to provide cost-effective, high-quality care by managing and coordinating healthcare services for patients.
Managed care organizations (MCOs) are entities that oversee and administer healthcare services for a set monthly fee.
Golden Age of Medicine/Doctoring
- late 1930s-early 1960s: medicine was largely self-regulated. payment was fee for service arrangement (people pay doctors out of pocket directly like any other transaction)
- era with highest degree of professional autonomy for physicians
problems:
- people didn’t save for needed medical expenses
- people didn’t seek out preventative care
- medical expenses wiped out family savings
- poor and rural areas disproportionately lacked medical services (hospital crisis)
Hill Burton Act
Using markets to solve healthcare problems (lack of hospitals in rural areas- hospital crisis, growing cost of medical care)
- Hill Burton Act:
- fed money built hospitals nationwide
- partially subsidized medical education to increase supply of doctors
- increasing supply of medical providers and hospitals -> create competition -> lower cost
- provide free care to people in rural areas
problems:
- too many doctors competing
- supply-driven demand
- increase in medical care costs
- no free care ever provided to people in poorest areas
Non-Treatment Incentives
In this model, the Mayo Clinic eliminated financial barriers by pooling all revenue and paying everyone a salary, ensuring that doctors’ goals in patient care are not driven by increasing income. The institution promotes leaders who focus on what is best for patients first and then work on making it financially feasible.
Insurance as Socializing Risk
- in a free-for service risk pool, only the sick people actually seek care, and their care is more expensive. no incentive for preventative care
- insurance socializes risk by putting together health people and sick people in the same pool. since there are always more health than sick people, its cheaper overall. it induces people to “save” for future care (organized reciprocity)
Markets of healthcare- how do they differ from regular markets?
supply driven demand: doctors could prescribe more medical care to patients. patients are not in a position to know better (supply-side was able to drive the demand-side)
overall effects of co-pays: symbolic means to remind people that healthcare costs something
Defense medicine
- the practice of healthcare providers ordering unnecessary tests, procedures, or treatments primarily to protect themselves from potential malpractice lawsuits rather than solely for the benefit of the patient. This defensive approach is often driven by fear of litigation and aims to minimize the risk of legal action by demonstrating thoroughness in patient care.
overutilization
- the excessive or unnecessary use of medical services, treatments, or procedures that may not be beneficial to patients but are driven by financial incentives or defensive medicine practices.
physician decisions when the symptoms and treatment are well-established and when they’re not
well established: the excessive or unnecessary use of medical services, treatments, or procedures that may not be beneficial to patients but are driven by financial incentives or defensive medicine practices.
not well established: physicians may need to exercise more clinical judgment and consider a broader range of possibilities.
how competition (and the entrepreneurial spirit) can drive prices up)
When healthcare providers compete with one another, there is a tendency to invest in new technologies, facilities, and marketing strategies to attract patients and gain a competitive edge. These investments can lead to higher operating costs, which are then passed on to patients in the form of higher prices for medical services.
This profit-driven mindset can result in the overutilization of medical services, unnecessary procedures, and inflated pricing strategies to maximize financial returns.
Powell’s anchor-tenant theory
certain key entities, such as prominent companies or universities in a particular industry like biotechnology, can significantly influence the economic development and culture of a region.
Regions with anchor tenants that promote collaboration tend to be more successful in the long term compared to those where anchor tenants focus on dominance rather than cooperation. This theory suggests that the presence and behavior of these anchor tenants play a crucial role in shaping the economic landscape of a community.
Mayo Clinic model as an “accountable care” institution
In this model, the Mayo Clinic eliminated financial barriers by pooling all revenue and paying everyone a salary, ensuring that doctors’ goals in patient care are not driven by increasing income. The institution promotes leaders who focus on what is best for patients first and then work on making it financially feasible.
