Term
|
Definition
• Intellectual health
• Emotional/social health
• Life expectancy
Physical health |
|
|
Term
|
Definition
| Heart disease (cancer is #2) |
|
|
Term
| Quality Adjusted Life-Year (QALY) |
|
Definition
shows how we can hypothetically convert “quality” of life into years of good health
They allow us to compare different procedures
Does not allow measures to differ by individual |
|
|
Term
| Life expectancy circa 2009 |
|
Definition
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|
Term
| Most individuals that lack health insurance are.... |
|
Definition
Most are young adults with jobs
• Most are low income
• But about 20% have HH incomes > $50,000
• Minorities, unmarried, and less educated are more likely to be uninsured |
|
|
Term
| Why are so many individuals uninsured |
|
Definition
Some choose to forego insurance
• Some Medicaid eligible but have not taken
up
• Some cannot afford it (preexisting conditions, etc.)
• Uninsured get implicit insurance through “uncompensated care |
|
|
Term
| How much the US GDP goes to healthcare? |
|
Definition
18% of GDP on healthcare
more than any other country
...followed by
• France, Netherlands: 11.9% • Sweden: 9.6% |
|
|
Term
| What is causing rise in healthcare cost growth rates |
|
Definition
• Technological progressnew procedures • Rising incomegreater demand
• Patient is not footing the bill
• Aging population
• More expensive conditions (e.g., HIV/AIDS) • Medical malpractice awards
• “Easy access” – no waiting lists, etc. • Other? |
|
|
Term
| Cost of developing a new drug is... |
|
Definition
around $800million
technology accounts for over half of the rise in spending |
|
|
Term
| What is medical malpractice |
|
Definition
about 5% of growth in healthcare costs
• Legal costs
• Direct cost of awards • Attorney fees
• Insurance premiums: $230K for
neurosurgeons
• Defensive medicine: Unnecessary procedures
• Indirect costs: specialist shortages due to premiums |
|
|
Term
| Cheapest way to treat a heart attack |
|
Definition
| aspirin, demonstrates inefficiency of healthcare spending |
|
|
Term
| Proof of inefficient healthcare spending |
|
Definition
nontransparent pricing: bills are complicated and few patients know their true cost
use of aspirin |
|
|
Term
| Why do people want insurance? |
|
Definition
Individuals are budget constrained
Individuals are risk averse |
|
|
Term
| General example for quantifying risk aversion |
|
Definition
• You have two choices
1. I give you $X
2. I flip a coin. Heads you get $10. Tails you get $0.
• Risk neutral person is indifferent if X=$5
• Risk averse person prefers option 1 if X=$5
• WhatifX<$5?
• Suppose risk averse person is indifferent between option 1 and option 2 if X = $3
• That implies she is willing to pay $2 (=$5-$3) for the reduction in uncertainty
• This explains the market for insurance |
|
|
Term
| Implication of insurance: risk is not very important for small gains or losses |
|
Definition
| meaning poorer people buy insurance |
|
|
Term
|
Definition
• Fixed amount paid each time a medical service is used
• Typically does not count towards a deductible |
|
|
Term
|
Definition
| The percentage of the medical bill that the patient must pay for |
|
|
Term
|
Definition
| • Amount insured must pay before insurance coverage begins |
|
|
Term
|
Definition
• The maximum amount insured can pay in a year
• Some policies have a “lifetime” out-of-pocket max |
|
|
Term
| Insurance Coverage Example |
|
Definition
• Bob’s insurance has a $200 deductible and a 10% coinsurance
• Bob had two medical visits this year. The first one cost $100, the second one cost $400.
• Bob’s total costs are 100 + 100 + 300*0.1 = $230
• The insurer pays 300*0.9 = $270 |
|
|
Term
| What is expected cost and its calculation? |
|
Definition
Probability an event occurs times the cost
Suppose a heart attack costs $50,000 to treat. If you have a 10% chance of having a heart attack, the expected cost of a heart attack is 0.1 x 50,000 = $5,000 |
|
|
Term
| Actuarially fair insurance |
|
Definition
| Insurance where the premium is equal to the expected cost |
|
|
Term
|
Definition
| The mathematical difference between the premium and expected cost |
|
|
Term
| Risk Premium and expect cost example |
|
Definition
• You face a 2% chance of a $50,000 surgery
• You pay $1,250 a year for medical insurance that covers this procedure
• What is the risk premium?
• Premium is equal to $1250
• Expected cost is 0.02*50,000 = 1000 • Risk premium = $1250-1000 = $250 |
|
|
Term
| In term of fairness most insurance is or is not actuarially fair? |
|
Definition
is not
May still be worth buying if you are sufficiently risk averse and the potential loss is large |
|
|
Term
| What affects the price and availability of insurance? |
|
Definition
• Cost of payouts
• Administrative costs and profits • Competition
• Adverse selection |
|
|
Term
|
Definition
is a situation where an individual’s behavior changes (usually at the cost of somebody else) because s/he does not bear the full costs of her behavior
• Ex ante (before the event) moral hazard
• Ex post (after the event) moral hazard |
|
|
Term
|
Definition
Affects the probability that the event occurs
• Example: people exercise less and eat worse when they
have insurance |
|
|
Term
|
Definition
• Affects the magnitude of the payout
• Example: an individual chooses an expensive medical procedure that provides little benefit because s/he does not pay for it |
|
|
Term
| Solutions to Moral hazard associated with medical expenses |
|
Definition
Deductible and coinsurance (rand experiment)
Managed care (HMO): Contain costs by requiring referrals, etc.
“Death panels”: Prohibit patients from getting certain treatments |
|
|
Term
| Examples ofadministrative costs associated with pricing and availability of insurance |
|
Definition
• Staff required to run the company, pay bills, etc. • Advertising
• Disease management
• Customer service
• E.g., nurse giving health advice over a telephone • Investigating fraud and waste |
|
|
Term
| What are the 3 adverse selection problems associated with offering insurance |
|
Definition
low risk individuals forego insurance
individuals allocated inefficiently into insurance plans
only individuals who know their costs are higher than the premium will buy the plans |
|
|
Term
| Solutions to adverse selection problem |
|
Definition
• Require everybody to purchase insurance • E.g., mandate
• Subsidize insurance coverage
• Allow insurers to charge different prices to different types of consumers |
|
|
Term
| Private Insurance targeted at |
|
Definition
|
|
Term
| Who pays for healthcare benefits |
|
Definition
Employees
• Employers rarely openly cut wages when they introduce benefits
• Instead, reduce raises or hire new workers at lower wages
• Corporations could increase salaries instead |
|
|
Term
| 3 main reasons employers compensate employees with healthcare coverage |
|
Definition
• Cost advantage to the employer
• Recruitment of certain types of workers • Tax incentives |
|
|
Term
| How does offering coverage offer a cost advantage to the employer? |
|
Definition
variability of a large group’s costs is smaller than for an individual, small firms at disadvantage b/c risk not spread out over many employees
Economies of scale: Large groups can spread administrative costs out across more people |
|
|
Term
| How does offering coverage work as better recruitment techniques for certain types of workers? |
|
Definition
Employees who value health benefits may have characteristics that employers value
increase worker productivity
Similar to the mandate, employers can require all group members to purchase the same insurance
• Low-risk individuals will therefore not drop out of the insurance pool
• Adverse selection problem also explains why employers provide life insurance, disability insurance, and annuities |
|
|
Term
| Example of tax benefits associated with employer offering insurance |
|
Definition
tax deductible for the employer
Employees do not pay federal or state income tax on benefits
Also, no payroll tax |
|
|
Term
| How can employers pass on the cost of health insurance without employees getting upset? |
|
Definition
offset it and make them pay for some of the costs
Passing on the costs of health insurance depends on:
1. The value of the benefits
2. The insurance costs of a firm’s competitors
3. The cost sensitivity of the firm and the employee |
|
|
Term
| First company to offer health insurance |
|
Definition
| blue cross blue shield: hospital and doctor coverage |
|
|
Term
| Early insurers offered indemnity insurance, what is this? |
|
Definition
• Typical policies had deductible and coinsurance up to some
maximum amount (e.g., $1,500)
• Above that amount, care was free
• Patients had freedom to choose providers |
|
|
Term
|
Definition
insurers just pay posted prices that
hospitals and physicians customarily charge
• Easy for physicians and hospitals to increase prices |
|
|
Term
|
Definition
pays on the basis of intensity, not value
A physician’s Hippocratic oath is to do what is in best interest of the patient -Medical malpractice exacerbates this (physician do the most intensive procedure just in case)
It also encourages companies to develop new, intensive procedures |
|
|
Term
| Where does innovation come from? |
|
Definition
| scientists, for profit firms |
|
|
Term
|
Definition
• Medical costs increased drastically
• Employers providing health insurance had to pay more every year
• Passed this on in form of lower wages
• Taxes had to increase to pay for Medicare, Medicaid
• Reform is imminent |
|
|
Term
| What are some ways healthcare providers can save money? |
|
Definition
• Regulate/deny unnecessary care
• Prohibit patients from going to expensive providers • Bargain for lower prices |
|
|
Term
|
Definition
refers to a variety of different techniques intended to reduce healthcare costs and improve quality of care for patients
Goal is cost containment
• Prior approval for tests and procedures (“utilization review”) • Deny care for unnecessary treatments
• Encourage patients to use some medications over others • Limit use of certain hospitals and procedures
• Bargain with providers
• Unlike indemnity insurance, managed care restricts access to providers |
|
|
Term
| Managed care - Health Maintenance Organizations (HMO) |
|
Definition
Require customers to select a primary care physician
• Physician acts as “gatekeeper” to other medical services
• Patients need referrals to see specialists
• Group/staff HMO’s
• Physicians are salaried employees |
|
|
Term
| Managed care - Preferred Provider Organizations (PPO) |
|
Definition
• Give customers large discounts to providers partnered with the organization
• Tend to be more expensive than HMO’s but offer more flexibility
• Scheduled elective hospital procedures must be “pre- certified”
• Out-of-network care available but very expensive |
|
|
Term
| Managed care’s effect on prices |
|
Definition
Patients typically have copays rather than deductibles
Physician fees fell by approximately 30 percent
• Physicians still paid for quantity rather than quality
• Hospitals less likely to purchase newer technologies under managed care
Ultimately did lower the costs but did not increase the quality |
|
|
Term
| Why is managed care so unpopular? |
|
Definition
• Quality did not improve
• Cost savings not clearly visible to patients • Their premiums are paid for mostly by employers • Effects on wages is not obvious |
|
|
Term
| Why didn't quality go up with managed care? |
|
Definition
• In the case of health insurance, it is difficult to provide quality and make a profit
• “Free riding” problem: if insurance company improve a doctor’s facilities then their competitors benefit
• Benefits come in the future but many people switch plans a lot
• Adverse selection
• High quality may attract sicker individuals
• Insurance companies try to enroll only healthy individuals |
|
|
Term
| Defined contribution medical expense plans |
|
Definition
• Employer makes several plans available to employees • E.g., HMO, PPO, etc.
• Employer contributes fixed amount
• Employee responsible for the remainder |
|
|
Term
|
Definition
Medical Flexible Spending Accounts are used for health expenses not covered by the employer’s plan
Generally, only employees contribute
• Employee annual contribution limit of $2,500
• Employees can be given debit cards to make payments
• “Use it or lose it”
• Unused funds do not rollover past the end of the plan year
FSA’s are risky: Employees lose money when they overestimate their medical expenses |
|
|
Term
|
Definition
• High-deductible health plan
• Savings account
• Once savings account is depleted employee must pay deductible
• Reduces moral hazard |
|
|
Term
|
Definition
| Dominant form of consumer-directed health plans • Only employer contributes to the savings account • No dollar limit • Unlike FSA’s, unused contributions carry over to subsequent years • Account can pay for any medical-related expense not covered by the plan • Can not be used to cover employee’s premiums • Like with FSA’s, employees do not “own” their HRA |
|
|
Term
|
Definition
• HRA advantages:
• More flexible plan alternatives with lower deductibles
• HSA advantages:
• Employees can spend money on non-medical expenses • Employees can contribute and own the account
• Healthy groups will accumulate savings with an HSA
• Healthy employees not as affected by reduction in benefits via HSA • Switching to an HSA may upset unhealthy employees |
|
|
Term
| Cafeteria plans (“Section 125 plans”) |
|
Definition
• Participants choose among: • Qualified benefits
• “Cash”
• “Qualified benefit” – Any welfare benefit excluded from taxation (e.g., health insurance)
• “Cash” – Any taxable benefit not specifically prohibited
• Employee health care contributions are tax exempt! • Usually, only the employer contributions are tax exempt
Employees design their own package |
|
|
Term
| McCarran-Ferguson Act (1945) |
|
Definition
• Gives states substantial regulatory authority for insurance
• Partially exempts insurers from federal antitrust laws |
|
|
Term
| National Association of Insurance Commissioners (NAIC) |
|
Definition
| tries to encourage uniformity of regulation, but much variation exists |
|
|
Term
| Group eligibility requirements |
|
Definition
• Employer-sponsored health insurance often called “group insurance”
• About 1⁄2 of states require minimum size of 5-10 people
• Covered position
• Individual employer, negotiated trustee-ship, trade association • Probationary period
• 0-6 months
• Full time
• Minimum 30+ hours |
|
|
Term
|
Definition
• Employers not required to cover dependents
• If dependent coverage offered, eligible dependents are:
• Spouse
• Children < 26, disabled any age |
|
|
Term
|
Definition
• New plan must cover anyone:
• Covered by previous plan
• In an eligible classification of the new plan
• Participants must be notified
• Special situation: preexisting condition
• Benefits correspond to greater of either old or new plan (HIPAA) • Treatment of deductible – partial credit |
|
|
Term
| National Labor Relations Act (1935) |
|
Definition
• NLRA protects rights of private-sector employees to form unions and engage in collective bargaining
• Employer-provided health insurance is a “mandatory” bargaining subject |
|
|
Term
| Age Discrimination in Employment Act (1967) |
|
Definition
• Can not reduce benefits for employees aged 65+ even though these employees cost more
• Can not offer plans to encourage elderly employees to opt for Medicare instead of employer’s insurance
• E.g., cannot offer to pay for Medicare’s premiums • Does not apply to retired employees |
|
|
Term
| Employee Retirement Income Security Act (1974) |
|
Definition
• Divides employee benefits into two types:
• Pension plans
• Welfare plans |
|
|
Term
| Consolidated Omnibus Budget Reconciliation Act (1985) (COBRA) |
|
Definition
• Health coverage for qualifying beneficiaries must be extended at group rates for up to 3 years following a “qualified event”
• Death of employee, termination, divorce, employee eligibility for Medicare, child ceases to be dependent
• Employee must be offered continuation but not automatic coverage
• Employee notified within 44 days of the “qualified event”
• Employee has up to 149 days (measured from “qualified event”) to make a decision |
|
|
Term
|
Definition
• COBRA removes the employer subsidy
• What types of employees do we expect to sign up for COBRA?
• Employees with high expected health costs
• COBRA has proven costly to employers
• Adverse selection: only elected by 20% of employees and they have costs that are 150-200% of claim costs for active employee |
|
|
Term
| Americans with Disabilities Act (1990) |
|
Definition
• Employers must offer “reasonable accommodation” to disabled employees
• Employers must provide health insurance regardless of disability status
• But, employers allowed to charge disabled individuals more (if actuarially warranted) |
|
|
Term
|
Definition
“Health Insurance Portability and Accountability Act”
• Prohibits discrimination for those changing jobs based on: • Health status, claims history
• Genetic information
• Disability
• HIPAA solves preexisting condition problem for individuals with continuous insurance |
|
|
Term
|
Definition
| Covers individuals 65+ and some disabled/medical conditions |
|
|
Term
|
Definition
benefits (hospital) - hospital stays, nursing facility, home health care and hospice care
Nearly universal for those age 65+
Covers end-stage renal (kidney) disease
Disabled persons at any age if eligible to receive SS benefits for two years because of disability |
|
|
Term
|
Definition
• No premiums
• Deductible of $1,156
Variable copays for hospice, hospital stays, nursing facilties |
|
|
Term
|
Definition
benefits (doctor visits)
• Automatically covered if receive part A
• Provides benefits for most medical expenditures not covered by Part A
• Physician and surgeon fees
• Diagnostic tests, physical therapy
• Radiation therapy, medical supplies
• Medical equipment rental, prosthetics • Lots more
• Parts A and B together are fairly comprehensive for hospital and doctor visits |
|
|
Term
|
Definition
• Monthly premium commonly deducted from SS checks • Premium only covers about 25% of expected costs
• Deductible of $140 (2012) • 20% coinsurance |
|
|
Term
|
Definition
Medicare Advantage
• Participants pay Part B and Part D premiums to govt
• Receive services from the MA plan
• Two purposes:
Expand choice
Reduce costs and increase efficiency
• Include Medicare HMOs, Medicare PPOs and Private fee-for-service |
|
|
Term
|
Definition
prescription drug coverage
• Anyone eligible for Part A/B also eligible for Part D
• Covers prescription drugs |
|
|
Term
|
Definition
| little or no coverage in the middle of the plan |
|
|
Term
|
Definition
• A health insurance policy sold by private insurance companies
• Designed to cover “gaps” in Medicare coverage:
• Coinsurance, deductibles, etc.
• Other benefits such as emergency care during travel outside of the US
• Does NOT cover drugs
• Policies are highly standardized and regulated by federal
law
• Cannot use Medigap together with Medicare Advantage |
|
|
Term
|
Definition
Part A is financed by payroll taxes paid by workers and employers
max 2.9 % between employer and employee
Parts B and D financed primarily by transfers from the general fund of the U.S. Treasury and by monthly part B premiums paid by beneficiaries |
|
|
Term
| Affordable Care Act (Obamacare) will add additional medicare tax of.. |
|
Definition
.9% of earnings
• For individual tax return filers earning over $200,000 • For joint return filers earning over $250,000 |
|
|
Term
| Overall status of medicates funding |
|
Definition
expenses are beating total income and are only expected to increase. to combat this doctors would receive 25% less from medicare payments which is likely not feasible
Part A fund by payroll taxes expected to run out 2026 under rosy assumptions.
parts b and d assumed not to run out because of reduction in doctors payments to keep in balance |
|
|
Term
| The "doc" fix SGR; Sustainable Growth Rate |
|
Definition
• Method used to ensure cost growth does not exceed GDP growth
• If it does, reduce physician payments
• Can be adjusted/postponed by Congress • This has happened every year since 2003
• Current law
• Physician payments reduced by 25% in 2014 • Growth limited to rate of GDP growth
• This will not happen!
• Physicians would stop serving Medicare patients
• Repealing the SGR would cost about $300 billion
• Official estimates assume this does not happen, even though most people think SGR is unrealistic |
|
|
Term
| What is driving increasing costs associated with medicare |
|
Definition
• Demographics (just like social security)
• Huge number of current and future beneficiaries
• Rising average cost per beneficiary
result:
taxes and premiums go up |
|
|
Term
|
Definition
federal and state means-tested program that helps low income and disabled individuals pay for health care expenses
• Low income elderly can qualify for both Medicaid and Medicare – if so, nearly all expenses are covered
• “Dual eligibles”
Medicaid is administered by states (voluntary participation in program)
Funded by both states and federal government
• Largest health insurance program in the US |
|
|
Term
|
Definition
State Children’s Health Insurance Program
Often integrated in with Medicaid
Covers uninsured children in families whose income levels are too high for Medicaid |
|
|
Term
| Affordable Care Act – Medicaid expansion |
|
Definition
• Beginning in 2014, almost all individuals under age 65 in families with income below 138% of Federal Poverty Level will be eligible
• Expected to add over 20 million people to the program
• Biggest change to Medicaid since inceptio |
|
|
Term
|
Definition
Two tests must be met:
1.Categorical test
Children
Pregnant women and parents of dependent children Aged
Blind
Disabled
• • • • •
2.Income and assets test |
|
|
Term
| Two types of eligible groups |
|
Definition
Optional populations” - women with breast cancer
“Mandatory populations” - children |
|
|
Term
| Means testing for Medicaid |
|
Definition
Income and asset tests - usually at multiple of federal poverty level
Eligibility differs depending on group
“Medically needy”: Individuals who don’t meet income tests but have large medical expenses |
|
|
Term
| Medicaid mandatory benefits |
|
Definition
• Includes some inpatient and outpatient services • Nursing facility services (for age ≥ 21)
• Dental services for children |
|
|
Term
|
Definition
• Nursing facility services (for age < 21)
• Prescription drugs |
|
|
Term
| How do Medicaid coverage plans work? |
|
Definition
| • Medicaid sends benefit payments directly to health care providers (FFS) or managed care organizations • Some plans require premiums and copays |
|
|
Term
| Oregon Health Insurance Experiment |
|
Definition
In 2008, Oregon expanded its Medicaid program by lottery
• Findings were mixed:
• Health care utilization increased • Financial hardship decreased
• Rates of depression decreased, but no statistically significant effects on blood pressure, cholesterol, etc. after two years |
|
|
Term
|
Definition
• Medical reimbursement rates are set by states
• Disproportionate share hospital program
• Federal government puts some limits on state payment rates
Financing is shared between state and federal governments |
|
|
Term
| Medicaid Drug Rebate Program (1990) |
|
Definition
• Pharmaceutical rebates in return for Medicaid coverage
• Lowers cost of drugs |
|
|
Term
| Illinois Medicaid liabilities |
|
Definition
• June 30, 2012: $1.9 billion in unpaid bills
• Governor Quinn: cuts are necessary
• Has not specified how this will happen
• Difficult because eligibility and benefits set by federal government |
|
|
Term
| Whats causing growth of medicaid |
|
Definition
• Affordable Care Act
Large expansion in eligibility
• Aging population
Elderly need long-term care
• Healthcare costs are increasing |
|
|
Term
|
Definition
• Long-term care (nursing homes) not covered by Medicare
• U.S. spends over $150 billion per year on LTC
• Average annual cost of a nursing home is over $75,000 per year
• Much of this is covered by Medicaid
• About 1/3 of all Medicaid spending is for long-term care
• Costs growing much faster than inflation
• Only 10-15% of 65+ population have private insurance
against long-term care insurance
• Medicaid coverage encourages “spending down” of assets |
|
|
Term
|
Definition
• Reduce uninsured population by 32 million
Expand Medicaid (16 million)
Establish health insurance exchanges (24 million) • Decline in private insurance (-8 million)
Cost control
• Medicare savings of $716 billion (2013-2022) • •Medicaid savings
Raise revenue
New payroll tax
• Taxes on drugs, devices, insurers, and Cadillac plans |
|
|
Term
|
Definition
• New insurance regulations
• Medicaid expansion
• Individual mandate
• Health insurance exchanges
• Employer mandate
• Medicare cost control
• Funding |
|
|
Term
| New insurance regulations with ACA |
|
Definition
“guaranteed issue” for individual health market • Insurers must offer policies regardless of health status
partial “community rating”
Cannot price discriminate based on health status
• But, premiums can vary based on age, geography and tobacco use • Strict bounds on the variations
No charge for certain preventive care and medical screenings
Max limit of 20% for administrative costs and profit
Ban on lifetime and annual coverage caps |
|
|
Term
|
Definition
• PCIP, a high-risk insurance pool plan, bridges the gap
No waiting period
Premiums not based on health status |
|
|
Term
| Expansion of Medicaid eligibility under ACA |
|
Definition
Medicaid extended to those with incomes < 138% of the federal poverty level
Federal government (initially) pays 100% of the increase in costs |
|
|
Term
| Pros and Cons of expanding Medicaid under ACA |
|
Definition
• Pros:
Federal gov’t subsidizes 100% of expansion now and 90% later
Free coverage for your citizens
• Cons:
Administrative costs
Need to pay for 10% of expansion eventually
Will federal subsidies decrease in future?
Alternative: partial Medicaid expansion
• Those left out can buy from the insurance exchanges |
|
|
Term
| What is the individual mandate associated with the ACA? |
|
Definition
• Begins January 1, 2014
• Applies if not covered by employer, Medicare, or Medicaid • Individual must purchase an approved insurance policy
• Fine for noncompliance initially low but then increases
• 2016: fine is larger of ($695, 2.5% HH income)
...still not everyone will have insurance" unauthorized immigrants, members of indian tribes, some poor. |
|
|
Term
| Purpose of a mandate to purchase insurance? |
|
Definition
• Guarantee issue and community rating regulations
May cause market collapse
• Individual mandate intended to prevent collapse
• Penalty for noncompliance is a fine |
|
|
Term
| Two possible sources of Congressional power to mandate |
|
Definition
Commerce and necessary and proper clauses
Taxing power |
|
|
Term
| Authorized under commerce clause? |
|
Definition
Insurance is interstate commerce so people who have insurance can be regulated
• Arguments for:
They self insure
They get subsidies when they go to ER
• Arguments against:
Government requires ER to provide care
Novel ruling: court rewrote the “penalty” to be a “tax” so
law would be constitutional! |
|
|
Term
| Enforcment concerns with individual mandate? |
|
Definition
• The fine for noncompliance is limited
• Will young, healthy people purchase insurance? • Policies are guaranteed issue and community rated
• May be cheaper to wait until sick
• Could lead to adverse selection |
|
|
Term
| What are health insurance exchanges under ACA |
|
Definition
Exchanges target those lacking employer coverage
• One-stop shop for individuals and small businesses
• Compare different policies
• Provides subsidies if income < 400% of FPL
States have three options:
• Run it themselves
• Let it be run by federal government
• Partnership
Four levels of coverage (different deductibles)
• Bronze, silver, gold and platinum
• At least one silver and one gold must be offered
Only difference is level of consumer cost sharing
• Cost sharing ranges from 10% (platinum) to 40% (bronze) |
|
|
Term
| Why are exchanges facing problems? |
|
Definition
Large number of states asking federal government to run their programs
• -->Large volume
Real-time, accurate income verification difficult to come by
• Required in order to determine subsidies
May have trouble making individuals purchase plans because the penalty is relatively low |
|
|
Term
| What is the employer mandate under the ACA |
|
Definition
• Requires firms with more than 50 employees to offer health insurance
• Purpose: reduce government’s costs by discouraging firms from dumping employees onto exchanges
Penalty for noncompliance:
• $2,000 per employee, excluding first 30 employees |
|
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Term
| Small employer tax credits (2010) |
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Definition
Eligibility:
• Less than 25 employees
• Average employee wages of less than $50,000
• Pay at least 50% of employees’ premiums
Benefit: tax credits
• Amount depends on number of employees and their income levels |
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Term
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Definition
Reduce payments to hospitals, doctors and insurers
• Main source of cost savings
Creation of Independent Payment Advisory Board (IPAB)
• Makes cuts to keep growth below nominal GDP + 1%
• Cuts automatically become law unless Congress makes alternative cuts
Accountable Care Organizations (ACO)
• Reward good care
Closing of the “donut hole” (2020) |
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Term
| How will ACO's reduce costs |
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Definition
Paid according to outcomes, not just procedures
Bundling: pay for an “episode” rather than FFS
• Better incentives for quality care
• Better incentives to reduce unnecessary care
Medicare Shared Savings program
• ACO’s must meet 33 quality measures
• Portion of savings go to the ACO’s |
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Term
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Definition
All recommendations implemented automatically within 6
months unless Congress finds other means
15-member panel
IPAB prohibited from rationing care, restricting benefits, raising premiums, or changing eligibility criteria |
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Term
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Definition
Authority is limited
Legislative risk
• Congress may override IPAB recommendations
Lower administrative costs (b/c fewer insurers) |
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Term
| Cost savings associated with ACA |
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Definition
Medicare
• Reduce payment rates
• Reduce funding for Medicare Advantage policies
• Reduce Medicare home health care payments
• Reduce some payments to hospitals
Medicaid
• Reduce drug spending by increasing drug rebate
• Reduce some payments to hospitals |
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Term
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Definition
• Increase Medicare payroll tax by 0.9% for high earners (2013)
• Impose 3.8% tax on unearned income for high-income taxpayers (2013)
• Limit FSA contributions to $2,500 (2013)
• Increase threshold for deducting medical expenses (2013)
• Fees on drug firms, insurers, medical devices (2014)
• 40% excise tax on “Cadillac” insurance policies (2018) |
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Term
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Definition
| Total effect: reduce net budget deficit by $121 billion |
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Term
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Definition
Gradual loss of kidney function
Ultimately fatal
Five stages
• Stage 5 is “end stage renal disease”
end stage renal disease requires dialysis |
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Term
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Definition
• Process for removing water and waste from the blood
• Artificial replacement for kidneys
• Typically performed in a stand-alone clinic
• Imperfect replacement for a kidney
• Most patients eventually die of cardiovascular disease
• Average cost of about $70,000 per year
• Accounts for over 10% of entire Medicare budget |
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Term
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Definition
kidney transplant
save 100k compared to dialysis
illegal to compensate donors in any way |
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Term
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Definition
• Incompatible pairs exchange kidneys with each other
• One party may renege and back out after first operation • Thus, operations must be performed simultaneously
• This is complicated |
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Term
| Advantages of kidney market |
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Definition
Saves money for individuals and taxpayers (through Medicare)
Waitlist disappears
Better quality of life than dialysis
Safer than black market
Existing estimates put market price around $25-50K
• Transplant surgeries cost about $125,000
Only one country in the world with a kidney market:
• Iran
• Does not have a waitlist for kidney transplants |
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Term
| Concerns about legalization |
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Definition
Repugnance
• Humans are not just providers of spare parts
Will only rich people be able to afford transplants?
Exploiting the poor
• Do poor countries become a source of organs?
Donor might die from surgery
• Current donor mortality rate is 0.03%
Altruistic donors may stop donating |
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Term
| Alternative: kidney matching markets |
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Definition
Al Roth
• Designed registry and matching program for kidney donors
Donor chain
• Begins with altruistic donor who does not need a kidney in return
• Does not require simultaneous operations
Roth’s program matches donor-recipient pairs efficiently
• Maximizes the number of matches
• Mathematically, chains cannot provide kidneys to
everyone |
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Term
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Definition
• Taxes imposed on federal, state, and local levels
• Smoking bans are commonplace
• Many college campuses are banning smoking...
• Smoking rates are declining in U.S.
Estimated to kill about 400,000 per year in US
Projected to kill about 10 million worldwide in 2030 |
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Term
| Cigarette regulation issues |
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Definition
Freedom to choose without interference
Can create a black market
Irrational and myopic consumers consume too many cigarettes and harm themselves
Second-hand smoke is a negative externality
Smoking increases government health care costs |
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Term
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Definition
Unlike bans, taxes raise revenue
CBO study shows bans unambiguously worsen the deficit
Bans are much more strict
• Bans require everyone to stop consuming completely
• Taxes reduce consumption among those who value the good the least |
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Term
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Definition
| Created to replace savings acts Both employers and employees can contribute • Only employer’s contributions are tax exempt • Unlike FSA’s and HRA’s, account belongs to the employee • Savings in one account can be rolled over into a new HSA account • Unused funds accumulate tax free • Can be invested in CD’s, stocks, bonds, etc. Withdrawals are tax free if used for medical expenses |
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