Respond to the question assigned to you. Include the question at the beginning of your post. Then respond to the initial post of two other students. Ask probing questions. Always include citations and references in correct APA format. Ensure you reply to any follow-up questions by the professor.1. What factors must exist for there to be an efficient market?2. What does it mean when there is market failure? Give an example of market failure in the healthcare market?3. What is the economic impact of government price controls? Provide an example of price controls in the healthcare area.4. What economic rationale supports the government provision of health insurance to the poor?5. What are the characteristics of a “public good”? Why is it difficult for a private company to provide a public good?6. Do you think licensing of physicians increases quality of health care?7. What is the impact of physician licensing on the quantity of physicians, does licensing increase or decrease the quantity?8. What market failure does the regulation of nursing home quality issues address?Assigned Question:Martin, Beverly Question #8
What Market Failures Exist in Health
Care Market Impacting ACA
Development
Pre sentat io n to Ge o rge M a so n E n core L e a rn in g
JA N E M AR IE M ULV E Y, Ph .D.
j m@mu lvey hea lt h. com
Janemarie Mulvey, Ph.D.
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1
Overview
? Unique Characteristics of Health Care Markets
? “Market Failures” in Health Care
Asymmetric Information
? Rising health are costs
? Rising number of uninsured
?
Janemarie Mulvey, Ph.D.
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2
How “Normal” Economic Markets Stay in
Check
Prices help to equilibrate
supply and demand
? Demand: Prices go up –
consumers demand less
? Supply: Prices increase – firms
willing to supply/produce more
? Markets: Impacted by number
of firms, flow of information,
specific regulations
Janemarie Mulvey, Ph.D.
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3
Why Healthcare Markets Are Different:
Demand Side
Patients Do Not Behave the Same
Way as Consumers
Demand In Health Care Less Sensitive to Price
(Inelastic) When Health Insurance Present
? Demand is not sensitive to price
because of health insurance
coverage
? Some emergency care is necessary
regardless of price
?Asymmetric Information on:
? Appropriateness of medical care
? Quality of Care
? Prices Charged for Services
Janemarie Mulvey, Ph.D.
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4
Why Health Care Markets Differ: Supply Side
Doctors/Medical Providers Do Not Behave in the Same Way as Other
Firms
?Entry into the industry is restricted by medical licensing
?Advertising and competition not generally in medical markets (this has
been changing recently with drug ads)
?Advice given by physicians is supposed to be completely divorced from
self-interest
?Doctors can price discriminate and charge different fees for different
patients
Janemarie Mulvey, Ph.D.
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5
Imperfect Information in Health Insurance
Markets Distorts Premiums
“Adverse Selection”
“BUT AT LEAST I HAVE FLOOD INSURANCE!!!!”
?Those who need insurance the
most (e.g. pre-existing condition)
are more willing to purchase it
?Leads to higher premiums
Need to expand risk pool and
include both healthy and
unhealthy enrollees
Janemarie Mulvey, Ph.D.
This Photo by Unknown Author is licensed under CC BY-NC-ND
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6
How Insurers Control “Adverse Selection”
Group health (employer-sponsored) plans:
? Generous employer premium subsidies (cover about 71% of premiums) lead to
higher participation rates
? Higher participation rates lead to larger risk-pool
Individual insurers:
? Medical underwriting (using age, health status, existence of pre-existing
conditions)
? Exclude coverage for pre-existing conditions (** banned under Affordable
Care Act)
7
“Market Failures” in Health Care
? Asymmetric Information (quality, treatment options, risk of insured)
? Rising Cost of Healthcare (Public and Private Plans)
? Current growth in health care spending is unsustainable in the long-run
? By 2025:
? Health care is projected to consume $1 of every $5 of our economy
? The public sector will finance nearly half of all health care spending (47%)
? Rising Number of Uninsured and Underinsured
?
?
?
?
Individuals with pre-existing condition cannot get insurance (prior to ACA)
Many “basic” policies did not cover needed care
Premiums unaffordable for lower income households
44 Million Uninsured prior to ACA enactment
Janemarie Mulvey, Ph.D.
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8
Rising Cost of Health Care
Janemarie Mulvey, Ph.D.
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1
Projections of Growth in Health Care
Spending are Unsustainable in Long-Run
•Health spending is growing faster than growth in the economy
•By 2025, health spending will consume about 20 percent of our
economic resources
•Biggest long-run factor will be faster growth in medical prices and
population aging
10
Sectors of Health Care Spending and
Influence on Future Growth
•Largest component is hospital
spending. Uninsured more likely
to use more expensive hospital
services
•Smaller but fastest growing
component is prescription drugs.
Over next 10 years growth rate of
6.7% nearly double the rate of
growth of hospital and physician
services.
Janemarie Mulvey, Ph.D.
Where Does Health Care Dollar Go?
Prescription
Drugs
12%
Dental
5%
Home Health
and NH Care
9%
DME
2%
Hospital
Care
37%
Other
12%
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Physicians and
Clinical Services
23%
11
Other Factors Leading to
Rising Health Care Costs
?50% of total health care consumed by top
5% of health care users
?Nearly 90% of total health care consumed
by top 25% of health care users
?Chronic Conditions and Lifestyle
Janemarie Mulvey, Ph.D.
Concentration of Health Care
Expenditures (2012)
Percentile Rank by Health Care Expenditures
? Technology use and lack of costeffectiveness studies
?Administrative expenses
?Concentration of Health care
costs
Top 50%
97.3
Top 25%
86.7
Top 10%
66
Top 5%
50
Top 1%
22.7
0
20
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40
60
Percent of Expenditures
80
100
12
Lifestyle and Chronic Conditions
?Many of these medical
conditions are preventable or
less costly if identified or treated
early
?For example: Obesity strongly
correlated with these conditions
?New study found that obesity is
linked to 13 most common forms of
cancer
Share of Expenditures by Top 5%
of Users Within Top 5 Medical
Condition
Heart Disease
73
Trauma-Related Disorders
58
Cancer
82
Mental Disorders
41
COPD/Asthma
56
0
20
40
60
80
100
Source: Center for Financing, Access, and Cost Trends, AHRQ, 2012
Janemarie Mulvey, Ph.D.
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13
Rising Rate of Uninsured
Janemarie Mulvey, Ph.D.
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1
Prior to Health Reform: 44 Million Were
Uninsured
Sources of Health Insurance Coverage: Prior to Reform
Tricare/VA
3%
Medicare
16%
44 million
uninsured
Uninsured
14%
Medicaid
14%
Employment Based
47%
Janemarie Mulvey, Ph.D.
Individual Market
6%
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15
Myth: The Uninsured Are
Unemployed and Poor
15% of fulltime workers
and 28% of
part-time
workers
were
uninsured
UNINSURED BY FIRM SIZE
1,000 +
21%
100 to 999
13%
50 to 99
8%
Public Sector
5%
UNINSURED BY POVERTY LEVEL
SelfEmployed
13%
300% or
more
23%
< 100% Poverty 29% Income Level of 100% Poverty: Single $11,670 Married $15,730 < 50 40% 200% to 299% 18% Couple w/child 100% to $19,790 199% Poverty 30% Source: Employee Benefit Research Institute, based on March 2013 CPS Janemarie Mulvey, Ph.D. DO NOT REPLICATE OR REDISTRIBUTE WITHOUT PERMISSION 16 Purchase answer to see full attachment