RH - week 2 Flashcards
1
Q
supply - side rationing
A
- Through introducing closed end budgets, and other restrictions, supply of care effectively restricted
- Common in public systems (especially public integrated and public contract) where government involvement in health care is strong
- Through restriction of the quantity of supply (financial, doctors, beds, …) in combination with common restrictions on price, total costs are controlled
- Principles to guide allocating scarce capacity often not explicated (at national level): “implicit rationing” (although this sometimes becomes explicit at lower level)
- Result is a system that is “naturally restricted” in its capacity to treat people, often leading to waiting…
2
Q
Waiting times: positive aspects
A
- Reduces need to use other rationing mechanisms
- Waiting time functions as a price - longer waiting induces lower demand
- In principle, this mechanism should work similar for the rich and the poor (a price that could be ‘equally limiting’ for the rich and the poor)
- Therefore, no socio-economic differences need to occur due to this rationing mechanism, within the public system
- Especially unnecessary care should be restricted (given the professional judgement of necessity)
- Existing waiting times and waiting lists can reduce the flow of referrals (more restrictive referrals; e.g. Stoddard & Tavakoli)
- Waiting lists can help to use available capacity optimally (planning device)
- Prioritisation on waiting lists possible based on medical need, so that negative medical side-effects of waiting may be minimised
3
Q
Waiting times: negative aspects
A
- Loss of quality of life during waiting
- Health state may worsen during waiting time (even causing unnecessary deaths)
- Recovery time may increase with waiting time
- Treatment may sometime be less successful after waiting times (e.g. psychotherapy, cancer treatment)
- Higher medical costs due to “worse cases” and lower success rates
- Uncertainty in patients about when they will be treated
- Dissatisfaction in society with health care systems when waiting times are perceived as too high
- Costs in other economic sectors due to absence of waiting employees (next week)
- Higher risk of becoming permanently disabled when waiting keeps you away from work for longer period
- Differences in waiting times between countries (or regions) may induce cross-border care, which has specific problems
4
Q
Consumer moral hazard
A
- Consumer moral hazard has two behavioral dimensions:
o ex ante: less prevention and more risk - a risky behavior, because you are already insured
- beforehand
o ex post: demand more and more expensive care - after you become ill, you want the best care no matter the costs
- Through for instance cost-sharing (certain percentage of costs is borne by patient) the experienced price is raised and the incentive for consumption and moral hazard decreased.
o Transfering the bill to the patient, so they have to pay a part of their own bill
o Reduce the amount of unnecessary care (reduce the walfare loss) - Aim may be to control costs by reducing less necessary care (and shifting collective costs to private costs) – but effect may differ
- Problems with equity: poor react stronger to incentive than rich do
- Increasing efficiency at expense of equity?
5
Q
conclusion welfare loss
A
- Leaving demand free leads to inefficiencies (more on that in Lecture 4)
- Even if the price directly paid by the patient is zero, care is not without costs
- Here, people who do not value the care consumed > MC may still consume
- Total costs would exceed total benefit => welfare loss
- Restricting use can then be done through limiting supply
6
Q
An aside - demand curve
A
- People low on demand curve can have high objective ‘need’ and people high on demand curve can have low objective need
- Having a person low on the curve use care for which WTP<MC may still be socially desirable
- Social value of treatment ≠ private value of treatment
- It does require solidarity, subsidies, etc.
- By taking out price from the equation, a new way of allocating comes into play – the rules of which need to be set (in line with system goals!)
7
Q
Demand is left free
A
- Often, in systems which use supply side rationing, demand is (relatively) unrestricted
- Individuals can freely enter the “market” for health care and demand without financial restrictions
- No differences within the system between the rich and the poor (i.p.)
- Unrestricted demand will normally exceed restricted supply
- Health care system / professionals need to allocate available resources over individuals, e.g. on basis of medical need
8
Q
What works to reduce waiting times?
A
What works to reduce waiting times?
* Many countries struggle to reduce waiting times
* Supply-side expansion (if capacity considered too low): reducing budgetary/capacity constraints, rewarding productivity
* Demand side reduction (if capacity is deemed adequate): less referrals, less demand (e.g. co-payments)
* Process / regulations: improving utilization facilities, maximum waiting time guarantees, choice (given variation in waiting times)
* All have pros and cons and devil often in the details
9
Q
Important lesson from experiences
A
Important lesson from experiences
* Waiting lists and times are often persistent
* This has much to do with the fact that reducing waiting times increases demand (supply and demand interact)
* “Hidden demand” becomes visible when waiting time reduces (or the ‘price’ of care is lowering!)
* It is like digging in the sand on the beach: the hole will fill itself with sand while you are digging (Smethurst & Williams, Nature, 2001)
* Can we dig faster than the sand can fall?
10
Q
Waiting list fund: the solution?
A
- Pressure led to the implementation of a waiting list fund in 1997
- Specific subsidy to reduce waiting lists
- Evaluation showed however that it had almost no effect on waiting lists (Laeven et al., 2000) and very little on waiting times
- Hospital production increased, but demand as well…
- Perverse incentives: if you pay hospitals with waiting lists it is profitable to have long waiting lists
- No uniform registration existed, making ‘working the system’ easy
- Structural solutions better than temporary ones
11
Q
Inequity?
A
- Benefit of waiting lists is allocation health care without depending on ATP. Ability to pay
- Evidence shows socio-economic inequity nonetheless
- Possible explanations include (OECD, 2013):
o People with higher SES engage more actively with the system and exercise pressure when they experience long delays.
o May have better social networks (“know someone”) and use them to gain priority
o May have a lower probability of missing scheduled appointments
o May articulate their wishes and needs better and more forcefully - This negative gradient between waiting time and socioeconomic status may be interpreted as evidence of inequity within publicly funded systems and suggests that waiting lists may be less equitable than they appear.
(OECD, 2013)
12
Q
Overconsumption
A
- In a common market, consumers trade off costs (prices) against utility and opportunity costs
- Under full insurance, individual consumers do not experience costs of care
- Price for the consumer is zero (abstracting from time costs, travel, etc.)
- Insurance premiums often not directly related to health care consumption
- Thus an incentive for ‘overconsumption’ occurs: consuming beyond the point where benefits exceed costs: welfare losses.
13
Q
Consumer moral hazard
A
- Consumer moral hazard has two behavioral dimensions:
o ex ante: less prevention and more risk - a risky behavior, because you are already insured
- beforehand
o ex post: demand more and more expensive care - after you become ill, you want the best care no matter the costs
- Through for instance cost-sharing (certain percentage of costs is borne by patient) the experienced price is raised and the incentive for consumption and moral hazard decreased.
o Transfering the bill to the patient, so they have to pay a part of their own bill
o Reduce the amount of unnecessary care (reduce the walfare loss) - Aim may be to control costs by reducing less necessary care (and shifting collective costs to private costs) – but effect may differ
- Problems with equity: poor react stronger to incentive than rich do
- Increasing efficiency at expense of equity?
14
Q
Asymmetric information
A
- Besides problems of equity (taking income distribution as given and thus willingness and ability to pay as reasonable ways of distributing health) another fundamental problem is knowledge
- Normally economic theory requires a consumer to know what she wants and how a product will fulfil her needs and wants
- In health care, consumers are often not that knowledgeable
- Patient cannot determine own demand (‘self diagnose’)
- Also problem for cost sharing: people may choose not to consume necessary care and continue to consume unnecessary care
- Questions about efficiency and equity therefore!
15
Q
This means - use care
A
- Copayments reduce care for which individual does not believe B>C
- Assessment may be based on income
- Assessment may be based on wrong information
- Whether society thinks that foregone care is indeed of low value is unsure
- WTP does not perfectly reflect need for and effectiveness of treatment
