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Public Economics > Healthcare > Flashcards

Healthcare Flashcards

1
Q

Example of healthcare system w/public funding but private provision?

A

Canada

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2
Q

Evidence of adverse selection in healthcare market?

A

Oster et al (2010) – individuals w/Huntington disease genetic mutation 5X more likely to buy health insurance

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3
Q

Evidence about progressivity of different healthcare systems?

A

Propper (2001) - cross-country study:

(i) Tax-financed and social insurance health systems progressive, on average
(ii) Private health insurance systems highly regressive, on average

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4
Q

Evidence that marginal utility of income is higher when healthy

A

Finkelstein et al (2013)

  1. Marginal utility of consumption declines w/sickness (more so for higher level of consumption/income)
  2. Data - based on happiness surveys, though questions over reliability of such evidence
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5
Q
  1. If the only costs of illness are financial, then what insurance do you take out?
  2. If costs to being ill (so marginal utility of income higher when healthy), then what insurance do you take out?
A
  1. Full insurance (yh=ys=y and B=L)

2. Partial insurance (so yh>ys)

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6
Q

How can 1st best outcome can be achieved in the Blomqvist (1991) model?

A

HMO (to avoid 3rd party payment problem) + regulation in form of performance guarantee (to avoid under-treatment incentive)

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7
Q

Zweifel and Breger (1997)

Outcome of paying doctors w/fee-for-service?

A

input use efficient but mix of services unlikely to be cost minimising

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8
Q

Zweifel and Breger (1997)

Outcome of paying doctors w/fixed salary?

A

efficiency can be achieved but only if intrinsic incentive sufficiently strong

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9
Q

Zweifel and Breger (1997)

Outcome of paying doctors w/capitation (payment according to no. registered patients) fees?

A

can achieve efficiency, if patients’ choice of doctor depends on H

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10
Q

Features of healthcare systems associated with lower spending

A

Propper (2001) - cross-country empirical evidence:

  1. Primary care gatekeepers (e.g. GPs)
  2. Direct payment plus reimbursement
  3. Public production
    N.B. Little effect of age distribution
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11
Q

Explanations for rising healthcare spending

A
  1. Technological change (increased possibilities for treatment)
  2. Demand (income increased; is health care spending income-elastic?)
  3. Supply – Baumol effect? (labour-intensive services tend to have relatively slow labour productivity growth)
  4. Demography (ageing population)
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12
Q

Asymmetric information about nature and quality of healthcare:

A
  1. Consumers don’t know treatment needed (not medical experts)
  2. Sick people may be less able to make decisions
  3. Can’t assess quality of care
  4. Mistakes (low quality) v. costly
  5. Technical complexity
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13
Q

Why does private health system require insurance?

A
  1. Individual demand = uncertain

2. Treatment = v. expensive

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14
Q

Finkelstein et al (2013)

A
  1. Data - based on happiness surveys, though questions over reliability of such evidence
  2. Marginal utility of consumption declines w/sickness (more so for higher level of consumption/income)
  3. Self-reported happiness declines in poor health
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15
Q

Rothschild and Stiglitz (1976) - why are the indifference curves of low-risk types steeper?

A

Low-risk types infrequently sick and so require greater increase in income in sick state to compensate for given income decrease in income in healthy state

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16
Q

Canadian healthcare system

A
  1. Everyone insured by government
  2. Tax-funded
  3. Mostly privately supplied
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17
Q

German healthcare system

A
  1. Non-profit sickness funds provide insurance at same rate for all
  2. Compulsory membership for low-income earners
  3. High-income earners can buy complementary or substitute private insurance
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18
Q

Definition of social insurance

A
  1. (social) pooling arrangements to protect against risk

2. Not actuarially fair and so requires compulsory membership

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19
Q

Examples of health externalities

A
  1. Infectious diseases
  2. Immunisation
  3. Antibiotic resistance
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20
Q

Problem of ordinary moral hazard in healthcare

A
  1. Individual can affect probability of being ill (e.g. abstaining from smoking)
  2. InsureCo can’t observe this care/preventative action
  3. Problem – w/full insurance, no incentive to take such care (financially at least) and so full insurance contracts not offered
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21
Q

Problem, of ex-post moral hazard in healthcare?

A

3rd party payment problem

  1. InsureCo doesn’t know exactly how ill patient really is when claim made
  2. W/full insurance, patient and doctor face zero costs of extra healthcare, resulting in incentive to over-provide/consume healthcare
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22
Q

Propper (2001)

A

FEATURES OF HEALTHCARE SYSTEMS ASSOCIATED W/LOWER SPENDING

Cross-country empirical evidence:

  1. Primary care gatekeepers (e.g. GPs)
  2. Direct payment plus reimbursement
  3. Public production
    N.B. Little effect of age distribution

PROGRESSIVITY:

  1. Tax-financed and social insurance health systems progressive, on average
  2. Private health insurance systems highly regressive, on average
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23
Q

Oster et al (2010)

A

EVIDENCE OF ADVERSE SELECTION IN HEALTHCARE MARKET

Individuals w/Huntington disease genetic mutation 5X more likely to buy health insurance

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24
Q

….. (…..)

EVIDENCE OF ADVERSE SELECTION IN HEALTHCARE MARKET

Individuals w/….. are ….. more likely to buy health insurance

A

Oster et al (2010)

EVIDENCE OF ADVERSE SELECTION IN HEALTHCARE MARKET

Individuals w/Huntington disease genetic mutation are 5X more likely to buy health insurance

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25
Q

Problem if HMO can choose their patients

A

Cream-skimming

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26
Q

What type of information problem is the Blomqvist (1991) model?

A

Principal-agent problem (because patient can’t observe diagnosis)

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27
Q
  1. Why might there be a role for a ‘complementary agent’ to help choose contract on patient’s behalf?
  2. What form could this ‘complementary agent’ take?
A
  1. Patient may:
    (i) Not be sufficiently well-informed to determine optimal 2nd best contract
    (i) Be in weak negotiating position
  2. Complementary agents:
    (i) Private InsureCo
    (ii) Social insurance (either in form of government regulation or direct employment of doctors)
28
Q

Zweifel and Breger (1997)

  1. Key problem with paying doctors?
  2. Alternative payment criteria?
A
  1. Would like to pay based on health outcomes, but H not observable in contractible way

2a. Efficient use of inputs
2b. Efficient mix of services

29
Q

Zweifel and Breger (1997)

Results of model?

A
  1. D paid fee proportional to input use
    (i) mix of inputs = ratio of net factor costs
  2. Fee-for service
    (i) input use efficient
    (ii) but mix of services unlikely to be cost minimising
  3. Fixed salary
    (i) efficiency can be achieved, but only if intrinsic incentive (utility derived from patients’ health) sufficiently strong
  4. Capitation (payment according to no. registered patients)
    (i) can achieve efficiency, if patients’ choice of doctor depends on H (so patients move to doctors producing best health outcomes)
30
Q

How are GPs paid?

A
  1. Mostly capitation

2. Some fee-for-service

31
Q

Why is healthcare often provided by the state as a benefit-in-kind?

A
  1. Market failures
  2. Positive consumption externalities
  3. Paternalism and merit goods (left to themselves, individuals wouldn’t purchase enough healthcare for their own good)
32
Q

Tobin (1970)

A
  1. Specific egalitarianism = social preference for equality wrt certain goods/rights that can’t be captured in aggregation of individual utility functions
  2. Objections – we object to patients swapping places on waiting list, poor people selling organs etc
33
Q
  1. Specific egalitarianism = social preference for equality wrt certain goods/rights that can’t be captured in aggregation of individual utility functions
  2. Objections – we object to patients swapping places on waiting list, poor people selling organs etc
A

Tobin (1970)

34
Q

Is increasing healthcare spending necessarily a problem? Example of another good whose spending is also rapidly increasing?

A
  1. iPhone spending also rapidly increasing

2. Similarly, rising health expenditure might reflect changing preferences for healthcare as societies advance/develop

35
Q

Why doesn’t lower healthcare spending necessarily imply higher efficiency?

A

Propper (2001)

Quality might be lower

36
Q

Evidence for relationship between healthcare spending and mortality

A

Propper (2001)

Little relationship between healthcare spending and mortality

37
Q

What is the progressivity of healthcare financing measured by?

A

Kakwany index

38
Q

Examples of countries with progressively financed healthcare systems?

A

UK, France

39
Q

Examples of countries with regressively financed healthcare systems?

A

Germany, USA

40
Q

Evidence of rising UK public healthcare spending as a % of GDP?

A

IFS

Late 80s = ~4%
Late 90S = ~5%
Late 00s = ~7%
2050 (OBR projection) = ~12%

41
Q

IFS - evidence of rising UK public healthcare spending as a % of GDP

Late 80s = …..%
Late 90S = …..%
Late 00s = …..%
2050 (OBR projection) = …..%

A

IFS - evidence of rising UK public healthcare spending as a % of GDP

Late 80s = ~4%
Late 90S = ~5%
Late 00s = ~7%
2050 (OBR projection) = ~12%

42
Q

What is the problem of adverse selection in the healthcare market?

A
  1. Problem – individuals know more about own risk level than insurers
  2. Consequence – individuals w/higher health risks more likely to buy health insurance
  3. Outcome – insurers would make losses, leading to increased price of insurance, which prices more low-risks out (leaving only high §risks) etc
43
Q
  1. What information problem can publicly funded healthcare address?
  2. What problem remains?
A
  1. Publicly funded healthcare can address adverse selection problem

2a. Moral hazard exists within private + social insurance, if insurer can’t perfectly monitor insured person
2b. Might want to only partially insure individuals against health risks

44
Q

Advantages and disadvantages of co-payments?

A
  1. Advantages:
    (i) Raise revenue
    (ii) Tackle moral hazard problem
  2. Disadvantages:
    (i) Might delay treatment, which means individuals enter health system in worse state of health (increasing overall costs)
    (ii) Delaying/avoiding treatment may lead to increased negative externalities
    (iii) Equity issue when linking healthcare access to ability to pay
45
Q

Dayan et al (2018)

A

% who have skipped a health consultation due to cost:

UK = <5%
US = >20%
Average= ~8%
46
Q

….. (…..)

% who have skipped a health consultation due to cost:

UK = .....%
US = .....%
Average= .....%
A

Dayan et al (2018)

% who have skipped a health consultation due to cost:

UK = <5%
US = >20%
Average= ~8%
47
Q

Why is the private insurance market for long-term social care so limited?

A
  1. Adverse selection
  2. Moral hazard
    (i) Incentive to over-consume when fully insured
  3. Individual behavioural and informational problems
    (i) Myopia
    (ii) Misinformed – people often wrongly expect social care to function like NHS
    (iii) Survival pessimism
  4. Correlated risks
    (i) Main sources of long-term care risk common to all (e.g. medical advances which increase life expectancy), so can’t diversify risks within cohort
48
Q

Evidence that ex-post moral hazard/3rd party payment problem exists within healthcare markets

A
  1. Einav and Finkelstein (2017)
    (i) literature review
    (ii) health insurance unambiguously increases health care utilization and spending…moral hazard “irrefutably exists”
  2. Oregon health insurance experiment (2008)
    (i) Oregon randomly assigned health insurance to set of low-income adults
    (ii) quasi-experimental design provided strong evidence that moral hazard in healthcare exists
49
Q

Einav and Finkelstein (2017)

A

EVIDENCE - 3rd PARTY PAYMENT PROBLEM

(i) literature review
(ii) health insurance unambiguously increases health care utilization and spending…moral hazard “irrefutably exists”

50
Q

Oregon health insurance experiment (2008)

A

EVIDENCE - 3rd PARTY PAYMENT PROBLEM

(i) Oregon randomly assigned tohealth insurance to set of low-income adults
(ii) quasi-experimental design provided strong evidence that moral hazard (3rd PPP) in healthcare exists

51
Q

Evidence that ordinary moral hazard exists within healthcare market

A

Dave and Kaestner (2009)

  1. Research design – exploit plausibly exogenous variation in health insurance that results from obtaining Medicare coverage at age 65
  2. Evidence that obtaining health insurance decreases prevention and increases unhealthy behaviours among elderly men
52
Q

Dave and Kaestner (2009)

A

EVIDENCE - ORDINARY MORAL HAZARD

  1. Research design – exploit plausibly exogenous variation in health insurance that results from obtaining Medicare coverage at age 65
  2. Evidence that obtaining health insurance decreases prevention and increases unhealthy behaviours among elderly men
53
Q

Key characteristics which make organisation of healthcare provision difficult?

A
  1. Specific equality concerns
  2. Asymmetric information
  3. Externalities
54
Q

The Health Foundation (2015)

A

STRONG NORMS OF UNIVERSAL HEALTHCARE ACCESS

UK - 89% agreed that the government should support a national health system that’s tax-funded, free-at-point-of-use and provides universal care for all

55
Q

Evidence of strong norms of universal universal healthcare access in the UK?

A

The Health Foundation (2015)

89% agreed that the government should support a national health system that’s tax-funded, free-at-point-of-use and provides universal care for all

56
Q

….. (…..)

…..% agreed that the government should support a national health system that’s tax-funded, free-at-point-of-use and provides universal care for all

A

The Health Foundation (2015)

89% agreed that the government should support a national health system that’s tax-funded, free-at-point-of-use and provides universal care for all

57
Q
  1. How could a privately financed healthcare system achieve universal coverage?
  2. Problem?
A
  1. Private finance + state regulation (e.g. mandate that everyone must have health insurance)

2a. Problem - doesn’t stop sorting and screening by risk, so adverse selection a problem
2b. Could introduce minimum standards, but only way to completely eliminate screening/sorting by risk = mandate that everyone belong to the same plan

58
Q

What is the only way to completely the problem of adverse selection and screening/sorting by risk in healthcare markets?

A

Mandate that everyone belong to the same plan

59
Q

Why is a lack of choice NOT an important disadvantage of a publicly funded healthcare system?

A
  1. Greater choice in privately financed system entails adverse selection and resultant inefficiency
  2. Value of choice unclear in healthcare because asymmetric information means choice/competition likely to result in market failure (rather than lower prices and higher quality, as in most markets)
  3. Choice can be realised within publicly funded system using quasi-markets (NHS), or private providers that are publicly financed (Canada)
60
Q

World Health Organisation (2004)

A

PRIVATE INSURERS INCENTIVISED TO AVOID HIGH-RISKS

  1. Evidence that insurers engage in covert risk selection
  2. Example – advertising via internet alongside gym memberships to attract young and healthy
61
Q

Evidence that private insurers incentivised to avoid costly high-risks?

A

World Health Organisation (2004)

  1. Evidence that insurers engage in covert risk selection
  2. Example – advertising via internet alongside gym memberships to attract young and healthy
62
Q

IFS - evidence of rising UK public healthcare spending as a % of GDP

...... = ~4%
..... = ~5%
..... = ~7%
..... = ~12%
A

IFS - evidence of rising UK public healthcare spending as a % of GDP

Late 80s = ~4%
Late 90S = ~5%
Late 00s = ~7%
2050 (OBR projection) = ~12%

63
Q

Cross-country empirical evidence on features of healthcare systems associated with lower spending:

  1. Primary care gatekeepers (e.g. GPs)
  2. Direct payment plus reimbursement
  3. Public production
    N.B. Little effect of age distribution
A

Propper (2001)

64
Q

Cross-country study:

(i) Tax-financed and social insurance health systems progressive, on average
(ii) Private health insurance systems highly regressive, on average

A

Propper (2001)

65
Q

Little relationship between healthcare spending and mortality

A

Propper (2001)

66
Q

EVIDENCE - 3rd PARTY PAYMENT PROBLEM

(i) literature review
(ii) health insurance unambiguously increases health care utilization and spending…moral hazard “irrefutably exists”

A

Einav and Finkelstein (2017)

67
Q

EVIDENCE - ORDINARY MORAL HAZARD

  1. Research design – exploit plausibly exogenous variation in health insurance that results from obtaining Medicare coverage at age 65
  2. Evidence that obtaining health insurance decreases prevention and increases unhealthy behaviours among elderly men
A

Dave and Kaestner (2009)

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