Health care system

Question 1

Economically, how is health seen?

Answer 1

It is seen as a uncertain good that has economic consequences for individuals

Question 2

What are the economic consequences that health bring to individuals?

Answer 2

Lose the ability to work + health care expenditure

Question 3

What is the unitary premium?

Answer 3

The amount I have to pay for each euro of reimbursement 0 < p < 1

Question 4

What is the main cause of the market failure in insurance markets?

Answer 4

Asymmetric information

Question 5

What does asymmetric information cause?

Answer 5

• Adverse selection –> the company isn’t able to distinguish between H and L individuals ex-ante
• Moral hazard –> company isn’t able to observe individuals’ behavior after the contract signing. They might engage in reckless behavior or increase their consume of health care goods (third payer)

Question 6

What happens when the insurance company offers different contracts?

Answer 6

Individuals will want to purchase the cheapest plan to L people and the company will incur in a loss.

Question 7

What happens when the company offers only one contract?

Answer 7

Only H individuals will buy it because the P is too expensive for L people

Question 8

What happens when the company offers two contracts with an average P for all?

Answer 8

Only H individuals will buy it because the P is too expensive for L people, the company will raise P, only H will buy…. until only one type of individuals will be on the market facing very high prices, which not everyone can afford = market failure

Question 9

What is the best solution for insurance companies?

Answer 9

To offer two contracts that induce customers to choose the best one, that is, full coverage for H people and partial coverage for L people.

Question 10

What are the limits for co-participation in health expenditure?

Answer 10

• When health care demand is rigid (dialysis), recurrent

- A high coverage level must be guaranteed.

Question 11

What are the main issues that arise as a consequence of the private health system?

Answer 11

• Over-expansion of the health-care (MH)
• No equity and partial coverage (AS)
• Typically, the health insurance market is only partially competitive (oligopoly)

Question 12

How is Asymmetric information different in public and private health systems?

Answer 12

• Public –> it is on the demand side, individuals may not know how to correctly evaluate the quality of the service
• Private –> it is on the supply side, companies cannot differentiate among H and L individuals

Question 13

What are the pros of public health care system?

Answer 13

• Equity on health care access
• No cream skimming –> private companies may not provide insurance for very H individuals. In the public system everyone is covered
• Compulsory coverage –> no adverse selection problem, everyone is covered and everyone contributes
• Easier to keep health expenditure under control –> there is a fixed budget

Question 14

What are the limitations of the public health system?

Answer 14

• Inefficiency in production –> no competition, waste of resources and corruption
• Long waiting list
• Centralized decisional system –> less flexibility
• Inefficient incentives to efficient choices

Question 15

What is a solution to the limitations of the public health system and why?

Answer 15

Introduction of a quasi-market system:

• Since institutions will receive a reimbursement per patient, they have an incentive to attract patients
• Competition among hospitals because authorities will purchase services from hospitals that guarantee the highest efficiency

Question 16

What is the difference between medicare and medicaid?

Answer 16

Medicare –> no income requirement 65 + yrs

Medicaid –> low income and disabled people

Question 17

In the US, who are the uninsured people?

Answer 17

Medium-low income individuals, young, self-employed or working at small-medium companies that don’t offer coverage

Question 18

How is the insurance market in the US?

Answer 18

Not competitive at all, most states have a 65% market share for the biggest company

Question 19

What are the 5 phases of uninsured individuals graph in the US?

Answer 19

1-17 –> low uninsurance rate, parents’ coverage also covers them
18-28 –> young adults either studying or working a job that doesn’t allow economically to purchase an insurance
29-37 –> individuals working for smaller companies that don’t offer coverage and cannot afford on their own
28-65 –> working people at jobs that pay them coverage
65 + –> medicare adopters

Question 20

What was the obligations opposed by the Obama Reform on individuals?

Answer 20

• Compulsory insurance
• Subsidies to who cannot afford paying insurance premium
• Fiscal incentives –> tax deductions if you pay for the contract
• Less instrigent requirements for medicaid

Question 21

What was the obligations opposed by the Obama Reform on employers?

Answer 21

• Obligation to provide insurance if N >= 50

- Subsidies for companies with N< 50

Question 22

What was the obligations opposed by the Obama Reform on insurance companies?

Answer 22

• Not possible to refuse H individuals –> avoid cream-skimming
• Insurance premia cannot overcome threshold of 9.5% of the subscriber’s income
• Affordable insurance exchanges (inform citizens) –> decrease AS

Question 23

What happened in 1992 with the italian health system?

Answer 23

Reform, introducing quasi-market features

Question 24

What are the 4 levels on the Italian health system?

Answer 24

• Central government
• Regions
• ASL
• Health care providers

Question 25

What are the duties of the central italian government on the health provision?

Answer 25

• Controls the distribution of revenue
• Define the national statutory benefits package
• General guidelines for prevention, diagnosis and therapies
• Coordinates and monitors regions

Question 26

What are the duties of the italian regions on health provision?

Answer 26

• Autonomy with macro structure of their health systems
• Organizes and delivers services
• Ensure benefit package

Question 27

What are the duties of the ASL on health provision?

Answer 27

• Are managed by a general manager appointed by the governor
• Responsible for territorial planning
• Purchase and deliver primary care
• Funded through a fixed per-patient reimbursement

Question 28

What are the duties of the italian health providers on health provision?

Answer 28

• Public hospitals are either managed by ASL or operate as semi-independent public enterprises
• Hospitals funded through perspective payments
• General practitioners are paid a fixed amount/patient (max 1500)
• Salary is determined by the State, it varies with age and specialization

Question 29

What is perspective payments?

Answer 29

Patient goes to the family doctor who provides them with a diagnosis and are directed to a diagnosis related group (DRG) that have an allocated resource. This way it is possible to have an estimate of the expenditures ex-ante.
If there is a wrong diagnosis, then there will be an expenditure problem