Health Economics, Healthcare Finance, and Health Policy: What Every Student Needs to Know About the Health Care Field Before Entering It!

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Health Economics, Healthcare Finance, and Health
Policy What Every Student Needs to Know About
the Health Care Field Before Entering It!
Howard P. Forman Department of Diagnostic
Radiology, Yale School of Medicine Yale School of
Management Yale School of Public
Health Department of Economics, Yale
College Howard.Forman_at_Yale.edu
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Agenda

• Why is this important?
• Key Issues in US Healthcare today
• Key Crises, Globally
• What is the current political healthcare agenda?
• What key facts should students be familiar with?
• Questions and Discussion

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Why is this important?

• Interviewers will ask questions for a host of
  reasons
• Uninformed, or unsophisticated, answers are
  increasingly hard to defend
• Need to have some substantive understanding of
  the healthcare climate and basic economics
• Making a decision to practice medicine without
  understanding some of the basics of health
  services and health economics is dangerous!

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Key Domestic Issues

• 46 million people are uninsured and another 30
  million are under-insured
• As healthcare gets more expensive, more people
  are left behind
• Medicare Under-funded and getting more costly
• Medicaid reliant on States Budgets
• New Healthcare Threats
• Managing epidemics particularly a true flu
  pandemic
• Our country has become much more efficient in
  delivering healthcare, but one of the costs is
  capacity
• Globally global warming may mean worsening
  malaria, etc.
• Moral/Ethical Issues Cloning, Stem Cells
• Torts Malpractice Costs

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Health Care Spending (NHE) 2005Highlights

• 1.99 Trillion up by 6.9 (down from 9.1, 8.1,
  and 7.2 in three preceding years) from prior
  year. 6697 per capita up by 5.9
• GDP (nominal) growth 6.3
• 16 of GDP (highest ever, grew by 0.1 this
  year)
• Healthcare, as percent of GDP, has been growing
  since 1997, after a slight downdrift during the
  mid 1990s
• Private spending grew at a 6.3 rate and public
  spending at 7.7 (45.4 of NHE are PUBLIC up
  from 43.9 in 1999)
• Public Expenditures
• Overall Per-Capita 3041
• Federal Per-Capita 2169
• State and Local Per Capita 873
• Total U.K. (Public and Private) lt 3000 (2003
  data was 2317)

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Medicare Highlights(2005 From TR 2006)

• 42.5 million people (35.8 M aged 6.7 M disabled)
  covered
• Combined expenditures growing faster than GDP
  (from 2.6 of GDP in 2002 to 5.3 in 2035 and
  then 13.6 in 2079)
• HI sources of income do not increase
  automatically, while SMI do
• Trust fund 310 Billion Expenditures - 336B
  (330B in benefits) Income - 357B

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HI-Medicare Part A (2005)

• Hospice care (since 1982)
• Inpatient Hospital services
• Skilled nursing facility care
• 22 of beneficiaries actually received HI
  services in 2002
• BBA- 1997 slowed expenditures depletion now
  predicted for 2018
• Average expenditure per enrollee increased by
  10.2 Now 4284

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TR, 2006
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TR, 2006
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Medicare Part B - Supplemental Medical Insurance
(SMI)- 2007

• Physician services
• Home Healthcare Agency Care
• Durable medical equipment (DME)
• Outpatient medical services
• Clinical lab tests
• PT/OT
• Ambulance transportation
• Hep B, Flu, Pneumococcal vaccines
• Pap smear and screening mammography, colon
  screening cholesterol screening.
• Prescription drugs which can not be
  self-administered including certain anti-cancer
  drugs

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SMI Part B/2003 Highlights

• 93 of the 41.8 Million Medicare enrollees are
  enrolled in Part B
• SMI benefits will grow 1.8 faster than GDP going
  forward (assumption)
• 95 of enrollees received services (2000 data)
• Administrative costs are 2.1 of program costs,
  compared with 1.7 for HI
• Average benefit per enrollee is 2915, increasing
  19.6 in past year

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Part B Financing

• Voluntary
• Open to all Part A enrollees and most Americans
  over 65
• Annual deductible
• 50 in 1966
• 60 in 1973
• 75 in 1982
• 100 in 1991
• 124 in 2006
• 131 in 2007
• If it had kept pace with actual charges, more
  than 2000 now!
• Co payments - 20 of allowed charges
• 1966 - 3/month
• Until 1976, premium rate was set to cover 50 of
  program costs
• Since that time and until 1983, the premium rate
  has been allowed to increase at same rate as SS
  benefits (Inflation) which is substantially lower
  than health care inflation

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Part B Financing

• Since health care costs have been rising much
  faster than inflation - - -premiums covered only
  25 by 1983
• In 1984, congress tried to fix system and tried
  to decrease the trend
• By 1995, since health care costs had slowed their
  increases, the monthly premium of 43.80 covered
  25 of actual program costs.
• BBA-1997 - Permanently established that premium
  be 25 of program expenditures.
• 2003 - 58.70/month (8.7 increase) 2004 -
  66.60 (13.5 increase) 2005 - 78.20 (17.4
  increase) 2006 - 88.50 (13.2) 2007 -
  93.50(5.6)
• During the past five years, Medicare SMI has
  grown MUCH faster than the economy as a whole.
• SMI outlays were less than 1.1 of GDP last year
  and will be 4.2 of GDP in 2077 Intermediate
  assumptions

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TR, 2006
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TR, 2006
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Key Global Crises

• HIV (and other infectious diseases) in Lesser
  Developed Nations
• Global warming and malaria
• Infrastructure
• Starvation and Diarrheal Diseases in Children
• Affording healthcare/prescription drugs

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Current Domestic Healthcare Agenda

• Medicare reform Constant What does it mean?
• Medicare Prescription Drug Benefit
• Uninsured Problem Immigration issues
• SCHIP reauthorization - top issue for this year
  ties in with uninsured
• Presidential election will highlight the problems
  with market-based healthcare delivery
• Mental healthcare parity

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Key Issues to be aware of

• What is Medicare, Medicaid, SCHIP?
• Bonus points for Medicare parts A, B, C, and D
• Bonus points for understanding funding of any of
  this..
• How much does our nation spend on healthcare? How
  much is too much? How does this compare to other
  nations?
• What is Universal Health Coverage (Insurance)?
  (Why should you not discuss this topic without
  very very serious thought, in advance)?
• Disparities in healthcare, health services, and
  health
• Ethnic, racial, economic

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Questions?