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PE Exam 2 > Health Insurance > Flashcards

Health Insurance Flashcards

1
Q

potential motivations for studying health insurance

A
  1. Healthcare is a large and growing part of the economy
  2. People care about their health
  3. The U.S. healthcare system is different from other advanced countries
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2
Q

Comparing healthcare in the U.S. and other countries

A

Healthcare in the U.S. differs from healthcare in peer countries
U.S. health system generates bad outcomes relative to other countries

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3
Q

The fact that Americans have bad health despite the U.S. spending a lot doesn’t necessarily mean

A

the U.S. has a bad health system
- the across-country relationship may be confounded by third factors

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4
Q

Low baseline health in U.S. means

A

health system forced to spend a lot, but the spending won’t nec. result in good health outcomes

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5
Q

trends in US life expectancy

A

has been decreasing

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6
Q

Potential explanations as to why the US spends more on healthcare but seems to obtain worse outcomes

A
  1. Low baseline levels of health ⇒ health syst. has to combat health deficits
  2. There is a lot of waste in American healthcare
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7
Q

Waste in U.S. Healthcare

A

1/4th of us health spending ($872 billion is waste)
US has high administrative costs due to private insurance
US pays high prices for medical goods and services
US has many unnecessary or inefficiently delivered medical services

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8
Q

Health Insurance Structure

A

– A purchaser (patient) pays a monthly premium to an insurer
– The insurer pays for medical care for the purchaser (Insurers generally pay for only a portion of a patient’s medical care and patients are responsible for the rest)

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9
Q

Deductible

A

the amount that is paid before insurance kicks in

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10
Q

Copayment

A

a fixed amount that is paid when a patient uses care

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11
Q

Coinsurance

A

patient pays 20%; insurer pays 80%

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12
Q

Cost Sharing

A

when a patient is responsible for some of the cost of care

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13
Q

In the US, most insurance plans have

A

cost sharing

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14
Q

Private Employment-Based Health Insurance

A

Employer buys private insurance on behalf of its employees

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15
Q

reasons why employer-based insurance is common

A
  1. adverse selection
    – If the employer enrolls all employees, can create a small-scale pooling eq. which is easy for insurers to predict their payouts
  2. tax incentives
    – employee compensation in the form of wages is taxed so its cheaper for employers to provide health insurance than to increase wages
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16
Q

Private non-group health insurance

A

Individuals buy insurance directly from insurance companies
– This group is small due to adverse selection

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17
Q

to deal with adverse selection, non-group insurers

A
  1. Offered limited forms of insurance → separating eq.
  2. Charged very high prices to high-risk people → perfect info. eq.
  3. Banned people with pre-exist. conditions (if can’t charge a high price)
    ⇒ Many people bought restrictive insurance or no insurance
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18
Q

ACA (Obamacare)

A

created a more functional non-group market, contributing to a decrease in the share of Americans who are uninsured

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19
Q

Public Health Insurance funding

A

Funded by taxes, not premiums, but generally does include cost-sharing (deductibles, copayments, etc)

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20
Q

Medicare

A

Insurance for Americans who are 65 or older

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21
Q

Medicaid

A

Insurance for poor Americans

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22
Q

Tricare/CHAMPVA

A

Insurance for members of military & their families

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23
Q

The share of people who are uninsured has

A

declined in recent years

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24
Q

Why are people uninsured?

A
  1. Some people may not be able to afford insurance
    — poor people in states that rejected the Medicaid expansion
  2. Some people don’t want to pay for insurance (rationally or irrationally)
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25
Q

Being uninsured doesn’t mean that a person completely lacks healthcare

A

– By law, the uninsured can get emergency care at hospitals
– But they don’t get long-term care or preventative medicine

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26
Q

Concerns related to people being uninsured

A

Equity: May not get adequate care
Efficiency:
– May not get treated for infectious disease (an externality)
– Tend to over-use the emergency room (highly expensive)

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27
Q

benefits of health insurance

A

Means that people can afford treatment
Makes people more likely to get preventative medicine
Offers peace of mind and mental health benefits

28
Q

Patient-related moral hazard

A

Having health insurance may induce patients to over-use healthcare
– In healthcare, a patient faces only some of the cost of care
– Patient may use excessive care

29
Q

Evidence for patient-related moral hazard

A
  1. A few studies have quantified the elasticity of demand for healthcare and found that demand for healthcare is elastic:
  2. But moral hazard is about using excessive care (not just more)
30
Q

The drawback of patient cost sharing

A

Cost-sharing may cause patients to cut back on necessary care

31
Q

High Cost Sharing

A
  1. lower usage of preventative medicine
  2. patients worse at following prescription drug regiments
    which can worsen health outcomes & sometimes higher long-run costs
32
Q

High-deductible health plans (HDHPs)

A

offer low premiums but high deductibles
– Since 2000, there has been a large ↑ in HDHPs

33
Q

HDHPs Rationale

A

These plans result in lower usage of healthcare. This saves money for: the insurer, a person’s employer, & potentially for the health system overall

34
Q

HDHPs Drawbacks

A

If they cause people to excessively cut back on care, they could lead to worse health outcomes and, possibly, higher long-run health spending

35
Q

HDHPs with subsidies for preventative medicine

A

– decreases patient-related moral hazard while mitigating against bad health outcomes
– But plans are still in their infancy, so not yet clear how well they work

36
Q

Issue with HDHPs

A

Put a lot of decision-making burden on patients
– The plans cover preventative medicine but for other care, kick in only after a person’s costs reach a threshold
– If a person has costs below the threshold, the person basically doesn’t have health insurance (for most types of care)

37
Q

Provider-Related Moral Hazard

A

providers may have incentives to prescribe unneccessary or overly expensive care

38
Q

Retrospective Reimbursement

A

A payment scheme where providers charge insurers after treating patients

39
Q

Retrospective Reimbursement Incentive

A

Incentive for excessive care bc a provider’s income is proportional to the amount of care he provides

40
Q

Managed care

A

Health insurance that imposes supply-side controls on the delivery of care

41
Q

Preferred Provider Organization

A

A type of health insurance that tries to reduce prices via negotiation
– tries to price shop on behalf of patients

42
Q

PPO Strategy

A

(1) Gets patients to agree to only use providers within a network
(2) Then uses its patients as a bargaining chip:
– Providers can only treat PPO’s patients if they join the network
– Can only join the network if they charge low enough prices

43
Q

PPO Advantages

A

1) gain lower prices for patients
2) give providers an incentive to be economical

44
Q

Staff Model HMO

A

A type of health insurance that directly hires healthcare providers
– Pays a fixed salary that is not related to the amount of care provided
⇒ No income-based incentive to deliver excessive care

45
Q

Independent Practice Association

A

A twist on traditional health insurance
– Contracts with independent providers . . .
– but pays providers using prospective reimbursement

46
Q

Prospective Reimbursement

A

The insurer pays the provider a fixed amount based on the expected cost of care for a patient

47
Q

Prospective Reimbursement Incentive

A

Incentive to under-prescribe
– Profit is the difference between the fixed payment and the amount spent on treatment
⇒ can maximize profit by spending as little on treatment as possible

48
Q

Structure of Medicaid

A

A federal program that is run by the states
– States must provide a minimum set of benefits
- funding comes from both state & federal governments
- primary beneficiaries are poor children and poor pregnant women

49
Q

Medicaid Coverage

A
  • technically very generous coverage
  • limited cost sharing
  • pays providers a fixed amount per service
  • low reimbursements rates
50
Q

Medicaid Size

A
  • very large
  • low costs per patient due to low reimbursement rates and many Medicaid beneficiaries are children who use limited care
51
Q

Financial Benefits of Medicaid

A

increased consumption of non-medical goods
reduced medical debt
fewer bills sent to collection agencies
lower rate of bankruptcy

52
Q

Finkelstein

A

Studied the Oregon Health Insurance Experiment
- found that Medicaid boosts mental health (lower stress over medical costs)
- suggestive evidence of improvements in physical health but the results weren’t statistically significant (sample size was too small)

53
Q

Mortality Benefits of the Medicaid Expansion

A

Found that expansion caused 19200 fewer deaths in its first 4 years
- predicted that would have been 34,800 if all states had expanded
- the number of avoided deaths is expected to grow over time

54
Q

Structure of Medicare

A

funded by (significant) patient cost-sharing and payroll tax
three parts
1) Part A: inpatient hospital costs and long-term care
2) Part B: physician expenditures, outpatient hospital expenses
3) Part D: spending on prescription drugs

55
Q

Efforts to Control the Cost of Medicare

A

the Prospective Payment System (PPS): classified medical diagnoses into 467 Diagnosis Related Groups (DRGs)

56
Q

PPS Loopholes

A

1) Providers gamed the system by giving patients overly severe diagnoses
2) Also, PPS reimbursed hospitals for each admission

but over time, most loopholes have closed

57
Q

Single-Payer Health System Advantages

A

1) universal nature -> no one is uninsured
2) low administrative costs
3) sometimes better at controlling other healthcare costs
4) means health insurance is no longer tied to employment

58
Q

Single-Payer Health System Diadvantages

A

1) may generate less medical innovation (but the government could fund research)
2) might mean people have less interest in working
3) switching systems would be highly disruptive

59
Q

Goals of ACA

A

1) insure more people
2) reduce health spending
3) impose the least-possible disruption on the current system

60
Q

ACA Three-Legged Stool

A

1) Community Rating
2) The Individual Mandate
3) Subsidies for buying insurance

61
Q

Community Rating

A

A rule that applies to the non-group insurance market
– says insurers can’t charge different prices based on a person’s health
– adverse selection -> non-group market may unravel

62
Q

Individual Mandate

A

A rule that says that all people are required to have insurance
– eliminates adverse selection in the non-group market
– but many poor or non-risk-adverse may not want to buy insurance

63
Q

Subsidies for Buying Insurance

A

Make insurance cheap so that people are fine with having it
1) expand Medicaid
2) keep children on parents’ plans until they turn 26
3) give tax credits for insurance to people with income 133%-400% of FPL

64
Q

ACA Strategies

A
  1. closed loopholes in Medicare’s system for reimbursing providers
  2. Promoted cost-effective treatment strategies
    3.Created health insurance marketplaces
65
Q

Effects of the ACA

A
  1. The number of uninsured have uninsured has fallen by 20 million, from 15% of the population to 9%
  2. healthcare costs have grown more slowly
66
Q

Reasons why the is ACA Unpopular

A
  1. Complex policy design is poorly understood
  2. Non-group insurance plans are somewhat expensive
  3. Some people just want the single-payer system
67
Q

Possible Reforms

A
  1. single-payer system but many political constraints
  2. improve the ACA - expand tax credits
  3. public offer - offer public insurance on the non-group market
  4. expand Medicaid
  5. lower the age requirement

PE Exam 2 (4 decks)

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