Test 2 Flashcards
Define social justice
Idea of collectivism and restraining of markets applied to health care. Role of distributing social (collective) goods assigned to govt. national healthcare programs
National - supply side rationing. Planned rationing
Define market justice
Capitalism and free markets applied to health care. Role of distributing economic goods is assigned to the market
US - demand and price rationing
Limits of market justice
Social justice becomes unavoidable when dealing with human populations
(Housing transportation education healthcare)
People in ill health place economic burden on society.
Critical care provide to the uninsured
Human problems have broader implications for society
Define health economics
Study of supply and demand of health care resources and impacts on population
Efficient allocation of scarce resources
Forces shaping medication use policy
Govt Private Accredited and QI Science Patients Specialty organizations
Supply and demand
Market equilibrium
Buyer determines demand
Seller determines supply
Types of markets
Perfectly competitive Oligopoly Monopoly Monopolistic competition Monopsony Oligopsony
Oligopoly
Small number of competitors
Not always aggressive competition
Monopoly
One seller which controls price
Sole supplier
Cost dictated by supplier
Monopolistic competition
Many competitors with slightly differentiated products
Each seller may set price for own product
Monopsony
One buyer which controls price. Like electric boat and subs
Buyer has market power
Law of demand
Other things equal then quantity demanded of a good falls when the price rises
Movement along the curve when change price
Demand curve - substitutes
When fall in the price of one good reduces the demand for another good
Demand curve - complements
When the fall in price of one good increases the demand for another good.
Supply
Quantity of goods that a seller is willing and able to sell
As quantity supplied increases price increases
Elasticity
Measure of the sensitivity of change in one variable to another
% change in one variable given a 1% change in another.
E= %change in quantity/ % change in price
Sign positive or negative tells the directionality
Elasticity of demand
E > 1 elastic demand
E < 1 relative inelastic
E = 1 unit elastic
E = 0 perfectly inelastic
Inelastic demand
Change in price have little impact on quantity demanded
Highly elastic demand
Small changes in price impact quantity demanded
Ex automobiles. Groceries
Types of production costs
Fixed Variable Average Marginal/incremental Opportunity
Define fixed costs
Costs to keep doors open
Overhead
Not affected by changes in production
Variable costs
Change with level of output
Ex supplies and staffing
Average costs
Total costs/quantity produced
Total costs = fixed + variable
Marginal costs
Cost per additional unit produced increases
Cost to make one more unit of output
Diminishing marginal returns
Opportunity costs
Costs of what you sacrifice to get it
Cost of other alternative forgone
Perfect competition
Many firms selling same product
Many buyers
No restrictions on entry to industry
Firms in industry have no advantage over new entrants
All firms must accept market price
Price takers
Firms and buyers have complete info about the market
Economics of health
Inelastic demand Universal demand Unpredictability of illness Health care as a right Supplier-induced demand Third party insurance and patient-induced demand
Functional components of health care delivery
Financing-employer Medicaid
Insurance- self insurance companies blue cross to protect against catastrophic risk
Delivery - providers like doctors hospitals any entity that delivers health care and receives insurance payments directly
Payment - insurance companies or third party claims processors
Before managed care
Direct access to any provider Itemized billing to insurer Few controls over the amt of payment Sickness coverage only (no wellness) Insurers just passive payers of claims
Define managed care
Body of clinical financial and organizational activities designed to ensure the provision of appropriate health care services in a cost efficient manner
Make health care more efficient and less wasteful.
Features of managed care
Negotiated fees (prefer prospective payment)
Gatekeeping - need referral to see specialist
Patient cost sharing or shifting (premiums increased. Deductibles increased)
Coordination of benefits
Preventative care and wellness programs
plan designs and coverage options
HMO
Health maintenance organization
Assumes or shares both financial risks and delivery risks associated with providing medical services
Usually for a fixed prepaid price
Gate keeping. Need prior authorization.
HMO act of 1973. Nixon. Allow to go out of network. Response to people saying plans too restrictive.
Managed care continuum
Indemnity Indemnity plus cost containment Ppo Pos (point of service plans) HMO
Manage quality cost and access
PBM
Pharmacy benefit manager
Provide external management of health plan or pharmacy benefits by applying managed care principles and procedures to contain cost and enhance quality
Arranges for rebates
AWP
Average wholesale price.
Roughly reflected actual acquisition costs
20% mark up on what retailers paid to wholesale r&d
AWP= 1.2xWAC
Sticker price. Price reported by mfg to publishing firms
Used for the last 20 years
WAC
Wholesale acquisition price
Manufacturers reported list price for Rx drug for sale to wholesale r&d
Does not include MFG discounts
Approximates costs for brands but not generics
Wholesalers sell to pharmacy about 2-3% above WAC
List price
Price sold to wholesalers
ASP
Average sale price
Under Medicare in 2003 Break from AWP Based on MFG selling price including discounts and rebates Substantially Less than AWP Pay 104-106% above ASP (Medicare)
AMP
Average manufacture price
Medicaid 1990. Important to state.
Avg price paid to manufacturers for drugs through retail pharmacies
Reflects rebates paid to wholesale r&d and retail pharmacies BUT not PBMs Medicaid and 3 parties
MAC
Maximum allowable costs
Upper limit for reimbursement
Typically used for generics
Federal upper limit 150% of published price of least costly equivalent
Updated quarterly
U/C
Usual and customary
What the cash customer pays
Never less than contracted price
Public Health Service pricing 340B
Equal to price state Medicaid would pay (does not include discount or rebate)
Highest price a 340B could be charged
US health care expenditures - public vs private - 1960 vs today
1960 about 25% public
Today about 50% public
Public is federal state and local govt
National health care expenditure per capita. 1990 to 2019
1990 was $3000
Now about $10000
2019 expected to be $13000
How much of health care spent on Hospital care Physicians services Other health care Other personal health care Prescription drugs
Hospital = $850B 30% Physicians = $540B 20% Other = $420B 15% Other = $400B 15% Prescription drugs = $260B 10%
Percent change in national spending on health services
Peaked during 2001-2006 (5-15%)
While still increasing not increases as much (3-5%)
Prescription drug spending. 1980-2010
- About 15B
2010 $100-260B
Growth in prescription drug spending as total of health
1999 peaked around 20%
Now around 4%
Prescription drug expenditures bt payer type 1990 to 2008
Consumer out if pocket decreased from 56% to about 21%
This 30% difference split between private insurers and public fimunds with about 20% picked up by public funds (from 18% to 37%)
Pharmaceutical sales 1997 - 2008
80B in 1997 to over $200B in 2007
But not growing as rapidly as in late 90s
Number if blockbuster drugs with sales $1B
1996 about 7
Peak in 2006 with over 50
Biggest increase 1996 to 2002
Biggest blockbuster drug
Lipitor in 2006 with over $13B
2011 top product by total dollars
Lipitor
2011 top product by total prescriptions
Hydrocodone (over 58M scripts)
Brand name vs generics tend
Generics being prescribed more frequently
About 50% of scripts in 1998
In 2008 about 75%
In 2011 about 80%
Info on generics
Now 80% of all prescriptions
If generic available dispensed 94% of the time
Generics represent 27% of total spending
Specialty medicines
Increase by 15% from 2010-2011
Cost more than traditional meds
Some cost more than $10K per month
Not as frequently used by Medicare
