Health Policy Issues: An Economic Perspective / Edition 5

Health Policy Issues: An Economic Perspective / Edition 5

by Paul J. Feldstein

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ISBN-10: 1567934188

ISBN-13: 9781567934182

Pub. Date: 08/01/2011

Publisher: Health Administration Press

This book will help your students understand the economics underlying the issues and politics of healthcare. It presents 36 short, topical chapters that focus on the financing and delivery of medical services. The fifth edition includes updated chapters, figures, and tables as well as a new chapter on comparative effectiveness research and a completely revised


This book will help your students understand the economics underlying the issues and politics of healthcare. It presents 36 short, topical chapters that focus on the financing and delivery of medical services. The fifth edition includes updated chapters, figures, and tables as well as a new chapter on comparative effectiveness research and a completely revised chapter on the new Patient Protection and Affordable Care Act of 2010 (ACA). A summary of the ACA is included in the appendix. By reading this book, your students can begin to think critically and clearly about issues involving physicians, nurses, health insurance, Medicare and Medicaid, competition, the increase of medical expenditures, prescription drugs and the pharmaceutical industry, and more.

Product Details

Health Administration Press
Publication date:
Edition description:
Older Edition
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7.20(w) x 10.20(h) x 1.40(d)

Table of Contents

List of Exhibits xv

Preface xxi

1 The Rise of Medical Expenditures 1

Before Medicare and Medicaid 1

The Increasing Role of Government 1

Changing Patient and Provider Incentives 4

Government Response to Rising Costs 7

A Look Ahead 12

2 How Much Should We Spend on Medical Care? 15

Consumer Sovereignty 15

Economic Efficiency 17

Government and Employer Concerns over Rising Medical Expenditures 19

Approaches to Limiting Increases in Medical Expenditures 22

3 Do More Medical Expenditures Produce Better Health? 27

Medical Services Versus Health 27

Health Production Function 28

Improving Health Status Cost Effectively 30

Relationship of Medical Care to Health over Time 33

4 In Whose Interest Does the Physician Act? 39

The Physician as a Perfect Agent for the Patient 39

Supplier-Induced Demand 40

Increase in Physician Supply 43

Insurers' Response to Demand Inducement 43

HMOs 44

Informed Purchasers 45

5 Rationing Medical Services 49

Government Rationing 49

Rationing by Ability to Pay 50

Decision Making by Consumers of Medical Services 51

Marginal Benefit Curve 52

Price Sensitivity 54

6 How Much Health Insurance Should Everyone Have? 59

Definitions of Insurance Terms 59

Insurance-Purchase Decision Making 61

Tax-Free, Employer-Paid Health Insurance 62

7 Why Are Those Who Most Need Health Insurance Least Able to Buy It? 71

Medical Loss Ratios 73

How Health Insurance Markets Work 75

Additional Legislative Changes Affecting the Health Insurance Market 80

8 Medicare 85

The Current State of Medicare 85

Part A (HI) 85

Part B (SMI) 87

Part C Medicare Advantage Plans 88

Part D Outpatient Prescription Drugs 88

Medigap Supplementary insurance 90

Concerns About the Current Medicare System 90

The Impending Bankruptcy of Medicare 95

Proposals for Medicare Reform 99

Politics of Medicare Reform 102

9 Medicaid 105

An Illustration of Medicaid Eligibility 106

State Children's Health Insurance Program (SCHIP) 107

Medicaid Beneficiaries and Medicaid Expenditures 108

The Patient Protection and Affordable Care Act (PPACA) 111

Medicaid Policy Issues 112

Medicaid Managed Care 114

Reforming Medicaid 115

10 How Does Medicare Pay Physicians? 121

Previous Medicare Physician Payment System 121

Reasons for Adopting the New Payment System 122

Components of the New Payment System 123

Effects of Medicare's Payment System 128

11 Is There an Impending Shortage of Physicians? 135

Definitions of a Physician Shortage or Surplus 136

Consequences of an Imbalance in the Supply and Demand for Physicians 138

Economic Evidence on Trends in Physician Demand and Supply 141

Longer-Term Outlook for Physicians 147

12 The Changing Practice of Medicine 151

Types of Medical Groups 151

Changes in the Size of Medical Groups 152

Reversal of Fortunes of Large Multispecialty Groups 157

Outlook for Medical Group Practices 159

13 Recurrent Malpractice Crises 167

Explanations for the Rise in Malpractice Premiums 167

Objectives of the Malpractice System 171

Proposed Changes to the Malpractice System 175

Enterprise Liability 178

The Effects of Various Tort Reforms 179

14 Do Nonprofit Hospitals Behave Differently than For-Profit Hospitals? 183

Why Are Hospitals Predominately Nonprofit? 185

Performance of Nonprofit and For-Profit Hospitals .186

The Question of Tax-Exempt Status 190

15 Competition Among Hospitals: Does It Raise or Lower Costs? 195

Origins of Non-price Competition 195

Transition to Price Competition 199

Price Competition in Theory 200

Price Competition in Practice 201

16 The Future Role of Hospitals 207

From Medicare to the Present 207

The Hospital Outlook 212

Hospital Revenues 213

Potential Hospital Threats 217

Alternative Hospital Scenarios 220

17 Cost Shifting 225

Setting Prices to Maximize Profits 226

Origins of Claims of Cost Shifting 231

Price Discrimination 232

Conditions Under Which Cost Shifting Can Occur 233

The Direction of Causality 234

18 Can Price Controls Limit Medical Expenditure Increases? 239

Effect of Price Controls in Theory 239

Effect of Price Controls in Practice 242

Global Budgets 245

19 The Evolution of Managed Care 249

Why Managed Care Came About 249

What Is Managed Care? 250

Types of Managed Care Plans 251

How Has Managed Care Performed? 254

One-Time Versus Continual Cost Savings 256

The Change in Managed Care 260

Recent Developments in Managed Care 262

Consumer-Driven Health Care 264

Accountable Care Organizations 265

20 Has Competition Been Tried-and Has It Failed-to Improve the US Healthcare System? 269

Criteria for Judging Performance of a Country's Medical Sector 269

How Medical Markets Differ from Competitive Markets 271

Demand-Side Market Failures 274

Supply-Side Market Failures 277

How Can Medical Markets Be More Competitive? 279

What Might Competitive Medical Markets Look Like? 280

Are the Poor Disadvantaged in a Competitive Market? 281

21 Comparative Effectiveness Research 285

CER and the Role of Government 285

Concerns over How CER Will Be Used 287

Cost-Effectiveness Analysis 290

Quality-Adjusted Life Years 291

The National Institute for Health and Clinical Excellence 294

22 US Competitiveness and Rising Health Costs 297

Who Pays for Higher Employee Medical Costs? 297

Who Pays for Retiree Medical Costs? 301

Possible Adverse Effects of Rising Medical Costs on the US Economy 303

23 Why Is Getting into Medical School So Difficult? 307

The Market for Medical Education in Theory 309

The Market for Medical Education in Practice 309

Accreditation for Medical Schools 310

Recommended Changes 311

24 The Shortage of Nurses 317

Measuring Nursing Shortages 317

Nursing Shortages in Theory 317

Nursing Shortages in Practice 319

Federal Subsidies to Nursing Schools and Students 326

25 The High Price of Prescription Drugs 331

Reasons for the Increase in Pharmaceutical Expenditures 331

Pricing Practices of US Pharmaceutical Companies 339

26 Ensuring Safety and Efficacy of New Drugs: Too Much of a Good Thing? 347

History of Regulation of Prescription Drugs 347

FDA's Stringent Guidelines for Safety and Efficacy 351

27 Why Are Prescription Drugs Less Expensive Overseas? 363

Accuracy of Studies on International Variations in Drug Prices 363

Why Prescription Drugs Are Expected to Be Priced Lower Overseas 366

Public Policy Issues 369

28 The Pharmaceutical Industry: A Public Policy Dilemma 377

Public Policy Dilemma 378

Structure of the Pharmaceutical Industry 378

Development of New Drugs by the US Pharmaceutical Industry 381

The Political Attractiveness of Price Controls on Prescription Drugs 382

Consequences of Price Controls on Prescription Drugs 385

29 Should Kidneys and Other Organs Be Bought and Sold? 393

Sources of Organs for Transplant 393

Donor Compensation Proposals 396

Opposition to Financial Incentives to Organ Donation 398

Additional Considerations 400

30 The Role of Government in Medical Care 403

Public-Interest View of Government 404

Economic Theory of Regulation 406

31 Medical Research, Medical Education, Alcohol Consumption, and Pollution: Who Should Pay? 415

External Costs and Benefits 416

Government Policies When Externalities Exist 419

Divergence between Theoretical and Actual Government Policy 421

32 The Canadian Healthcare System 425

Higher Life Expectancy and Lower Infant Mortality Rate 425

Universal Coverage 427

Controlling Healthcare Costs in Canada 427

Consequences of Strict Limits on Per Capita Costs 432

Is Canada Abandoning its Single-Payer System? 438

Should the United States Adopt the Canadian System? 439

33 Employer-Mandated National Health Insurance 443

The Uninsured 443

Why the Uninsured Do Not Have Health Insurance 447

Consequences of Employer-Mandated Health Insurance 447

Political Consequences of Employer-Mandated Health Insurance 451

34 National Health Insurance: Which Approach and Why? 455

Criteria for National Health Insurance 456

National Health Insurance Proposals 458

Refundable Tax Credits: An Income-Related Proposal 461

35 Financing Long-Term Care 471

The Nature of Long-Term Care 471

Current State of Long-Term Care Financing 473

Why Do So Few Aged Buy Long-Term Care Insurance? 476

Approaches to Financing Long-Term Care 480

36 The Politics of Healthcare Reform 487

Differing Goals of Healthcare Reform 487

The Need for Visible Benefits to the Middle Class and Aged 489

Groups with a Concentrated Interest in Healthcare Reform 492

The Legislative Process 498

The Administration's Objective for Healthcare Reform: A Hypothesis 503

The Years Ahead 506

Appendix A Brief Summary of the Patient Protection and Affordable Care Act (PPACA) of 2010 509

Glossary 517

References 527

Index 543

About the Author 561

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