Unit 4 Flashcards
what are Hurley’s WFM characteristics of health care
demand for health care, externalities, information asymmetry, uncertainty, vulnerability to the integrity of a person
what are the fundamental misconceptions about economics and economists
their motivation; view of life; and understanding of others
what societal goals do many economists express preference for
low unemployment, reduced inequalities, and improved health
what’s the relation between economy and societal problems
economy = society, therefore societal problems = economic problems
how do economists see health
as an opportunity cost with zero intrinsic value
what is Pareto efficiency
an efficient allocation of resources is one from which no person can be made to feel better off without making another person feel worse off
how is an allocation defined as Pareto superior
if and only if it makes at least one person feel better off and no one feel worse off
what is financing
the activity of raising funds to pay for the operation of the healthcare system
what are the different forms of financing
direct out of pocket payments, private insurance premiums, social insurance contributions and taxes
what is Pareto efficiency
an efficient allocation of resources is one from which no person can be made to feel better off without making another person feel worse off
what causes an allocation to be defined as Pareto superior
if and only if it makes at least one person feel better off and no one feel worse off
what is the kaldorian criterion
a reallocation of resources as is a social improvement if those who gain from that value their gain sufficiently as that they could, bribe those who lose from the move into accepting that move, even if the bribe is actually not paid
describe a case in which information is symmetric
both the insurance company and the person buying insurance knew the information, and knew the other person knew it too
what is asymmetric information
a situation when a party knows more information than the other
what is adverse selection
when only the high risk people buy insurance because it is completely unobservable who is high risk and low risk to an outside party
what is required to eliminate adverse selection
the reduction of asymmetric information
what is moral hazard
when you compensate people when something bad happens, they might be inclined to do bad things
why does moral hazard occur
insurance lowers the cost of a bad outcome, making people act more reckless
how is moral hazard avoided
copayments are used
how does copayment affect moral hazard
It introduces a price differential
what does the demand curve represent
the buyers
what does the supply curve represent
the producers
how does a shift in demand curve affect the equilibrium
the equilibrium cost and quantity goes up
what is elasticity
a way to measure how responsive people are to changes in price
describe a case in which the demand curve is elastic
if a small change in price leads to a big change in quantity
describe a case in which the demand curve is inelastic
if a big change in price leads to a small change in quantity
what determines elasticity
availability of substitute and the price of substitute
what is a substitute
any two or more goods that can be used interchangeably
how does time affect elasticity
elasticity increases over time
what is funding and remuneration
the activity of allocating those funds to alternative activities within the health care sector
what are the three types of funding
fee-for-service, capitation, budgetary allocations
what are the two sources of finance
public and private
what are the three types of public finance
tax revenue, tax expenditure, and social insurance contributions
what is tax revenue
revenue collected from taxpayers by a government tax agency to support the provision of publicly financed goods and services
what is tax expenditure
forgone tax revenue not collected due to preferential treatment of a good, service, or activity within the tax code
what are social insurance contributions
contributions made to a social insurance fund that insures healthcare for members of the fund
what are the three types of private financing
private insurance premiums, out of pocket spending, private donations/non-patient revenue
what are private insurance premiums
premiums paid to a private insurer for coverage of defined health care events
what is out of pocket spending
money directly by the recipient of a service at the time the service is received
what are private donations/non-patient revenue
monies collected by health organizations not related to the delivery of a health good or service
how does a method of financing affect allocative efficiency in the market for services
through the influence on consumption
what are the two ways for efficiency of utilization
welfarist and non-welfarist
how does welfarist efficiency of utilization work
private market with cost sharing
how is a one payer in a multi-payer system affected
they have a disincentive to innovate because others will free-ride
what is the problem with the single payer public system
there is a lack of competition
what are the affects of efficiency in the labor market
coupling coverage with employment creates a disincentive to be fluid in the labor market
what comes with welfare loss
any price distortion
what does welfare loss depend on
the use of the tax revenue
what is altered from the tax on wages
the relative price of work and leisure
what is the issue with distributional equity
potential conflict between the benefit principle and the ability to pay principle
what is horizontal equity
two individuals with equal ability to pay contribute the same amounts
what is vertical equity
two individuals with differing abilities to pay contribute appropriately different amounts
what systems involved distributional equity
regressive, proportional, and progressive systems
what type of system is personal income tax
progressive
what type of system is consumption tax
regressive
what type of system is social insurance
depends
what type of system is private finance
generally regressive
what type of system is OOP payments
regressive
what is progressivity determined by
the progressivity of each source of finance; and the extent to which the country relies on each source
why is full public coverage more equitable
greater breadth and depth of coverage
what reveals that full public coverage is more equitable
patterns if utilization for services with different coverage
what is it that we want to distribute fairly
utilization, access, treatment, and health outcomes
what is incidence
the ultimate distribution of the burden of a tax or the benefits of a good
what is net incidence
the distribution of the difference between tax benefits and burdens
how is pure private finance affected by adverse selection
missing or incomplete markets due to adverse selection
how is pure public finance affected by adverse selection
it avoids all selection problems
what is forced by pure public finance
consumption of the same amount of insurance
what causes higher administrative costs in pure private finance
rate setting, advertising, provider offices, beneficiary time/effort
what causes lower administrative costs in pure public finance
piggyback on tax collection, streamlined administrative processes for providers, avoids need to calculate premiums
what do pure private judgments depend on
on normative framework employed, and that willingness to pay is an appropriate measure of value
how does pure private health care markets affects those with low levels of coverage
it reduces access to health care
how does pure public health care markets affect moral hazard
it poses a greater concern for insurance induced moral hazard associated with full coverage
what do pure public health care market judgements depend on
extra-welfarist frameworks that focus on health gain as the measure of value
what are problems associated with pure private economy
job lock
what are problems associated with pure public economy
welfare costs of taxation
what type of system is pure private finance
regressive
what are the affects of pure private finances being regressive
it violates the ability to pay principle
what system is pure public finances
proportional or progressive
describe a pure private health care market under public finance
it has less equitable patterns of utilization
describe a pure public health care market under private finance
it has more equitable patterns of utilization than under private finance
why are there three configurations of mixed systems of finance
because of different incentives for providers and patents, and different distributional effects
what are the three configurations of finance
joint public and private financing; public and private financing as alternatives and; complementary public and private financing
what is joint public and private financing
a given service is partly paid for through public sources, partly through private sources
what is the public and private financing as alternatives configuration
either public or private financing is chosen
what is complementary public and private financing
private sector pays for expenses not covered by the public plan
what are the effects of joint public and private financing
no competition, but also no alternatives
what is the key issue of complementary public and private financing
whether private covered expenses are complements to the public services
how is the dominance of public financing explained
through equity concerns and market failure
what is needed for efficiency
broad consideration
what is equity
the burden of payment and utilization
in health care, what is a principal
the third party insurer
in health care, what is an agent
the provider
what are the challenges faced by principal
difficulty in determining quality of providers, uncertainties, and informational asymmetries
what are funders’ strategies for principal-agent framework
reduce informational deficit and uncertainty; norms to encourage better agents; and finical rewards to align incentives
what is finical intermediary
an organization that raises or receive monies used to fund the provision of health care services
what are the most common payment mechanisms
fee-for-service, case based funding, capitation, global budget, and bonus/incentive payments
what is the ability to pay principal
principal which holds that the amount a person contributes should depend on their ability to pay, not their need or their ability to benefit
what is the benefit principle
the principle that the amount a person contributes should be proportional to the benefit they receive
what is complementary private finance
finance that complements public finance; often the form of private voluntary insurance for expenses
what is free riding
someone who wants others to pay for a public good but plans to use the good themselves
what is funding
refers to the activity of allocating those monies to alternative activities within the health care sector.
what is job lock
the inability of an employee to freely leave a job because doing so will result in the loss of employee benefits
what is progressive financing
a system of finance when the proportion of income that a person pays increases as income increases
what is proportional financing
a system of finance when the proportion of income that a person pays is constant as income increases
what is regressive financing
a system of finance when the proportion of income that a person pays fall as cinema increases
what is remuneration
it refers to compensation fro individuals employed in the health care sector in return for their labour
what is supplementary private finance
exists when an individual is permitted to opt out of the public plan altogether and finance care privately
what is supplementary private finance
exists when a service that is included within the public plan can also be obtained privately if desired
what is blended funding
a provider’s total funding comprises a mixture of payment mechanisms to optimally balance the contrasting incentives
when are bonus payments given
when providers that meat a target or benchmark pertaining to some aspect of service provision
describe case based funding
providers receive a fixed, specified payment for each case they treat
what is enrolled population
one in which individuals sign up to receive care from a particular provider, which then receives the capitation payment
what is funding mechanism
methods by which funds are transferred among participants in the funding system
what is gaming
strategically assigning patients to reimbursement categories to maximize payments associated with the patients treated
describe geographically defined populations
those associated with regional health authorities, and include residents who live within a defined jurisdiction
what is the principal agent problem
whenever one individual or organization wants to accomplish some task of objective but must contract with another individual or organization to undertake the work necessary to achieve the desired objective
what does it mean to skimp on care
to create an incentive to under-treat patients
what is a global budget
a payment mechanism whereby a provider receives a total budget for a defined period of time
what is the use of performance based payments
to improve the quality of care
what does it mean for a funding scheme to be prospective
the total amount of funding a provider organization receives in return for meeting the health care needs of its enrolees is set before the services are provided
what does it mean for a funding scheme to be retrospective
the total amount of funding that the provider organization receives is determined only after all services have been provided
what are the incentives for fee-for-service
to increase the number of services, and decrease resources used per service
what are the incentives for case-based funding
increase number of cases, and decrease resources per case
what are the incentives for capitation
increase number of enrolees and decrease resources per enrolee
what are the incentives for global budgeting
to increase activities used as basis for justifying budget
what are the incentives for bonus payments and performance based payments
provide the minimum level of services to reach target
