Unbiased Analysis of Today's Healthcare Issues
In a typical market, an increase in the consumers’ willingness to pay will increase price and increase quantity (see graph). On the other hand, a decrease in willingness to pay will decrease price and decrease quantity. This axiom of economics does not hold in the health care market; at least not according to a 1998…
Ever wonder what Newt Gingrich is up to? You may be surprised to learn that he’s working to change healthcare in the U.S. Mr. Gingrich has founded the Center for Health Transformation. On the Consumer Health World Blog, Gingrich proposes dividing Medicaid into 3 different programs. Capabilities Program – This program would help both Americans…
Jason has insurance and his brother Nosaj does not. Jason utilizes more medical services than Nosaj. Is this situation occuring because Jason is truly sicker than Nosaj (adverse selection), or is this because since Jason has insurance, medical services are cheaper for him than Nosaj (moral hazard)? Disentangling the problems of moral hazard and adverse selection…
Why is publicly provided health care so expensive? One reason is the the fraud which is bound to occur. The New York Times reports (“Hospital Grew…“) that New Jersey’s largest health care provider–St. Barnabas Health Care System–bilked $630 million from the federal government between 1995 to 2003. Medicare pays extra cash to hospitals for the…
Yesterday, I reviewed one paper claiming PPS along with competition reduced cost, but these cost reductions occurred mostly for the most expensive (read most sick) patients. Continuing the PPS theme, today we will look at a 1995 article in Econometrica in which David Cutler attempts to measure “The Incidence of Adverse Medical Outcomes under Prospective…
Prospective Payment Systems (PPS) and competition go hand in hand. Without competition, a PPS gives hospitals and physicians the incentive to minimize health care outlays. A competitive fee-for-service (FFS) system-to which most Americans were accustomed to in the 1980s-can lead to severe cost increases due to the problem of moral hazard. Combining PPS and competition…
A common justification for Medicare is that the public health insurance system has an overhead cost which is about 2% of claims, while the private sector has administrative costs between 20%-25% of claims. This tells us that Medicare is the best system for America…right? Merrill Mathew’s of the Council for Affordable Health Insurance (CAFI) summarizes…
The National Governors Association (“Florida Invests $308 Million in New Medicaid Computer System“) reports that Electronic Data Systems (EDS) has won a contract to “develop a new Medicaid computer system beginning March 1, 2008” for the state of Florida. The system is supposed to help participants navigate Florida’s Medicaid system, file claims, and report fraud.…
Medicaid currently covers 55 million poor and disabled Americans; these 55 million individuals have much change to look forward to. In February of this year, the President signed the Deficit Reduction Act (DRA)of 2005. According the Kaiser Family Foundation, the act will reduce federal spending on Medicaid by $39 billion between 2006 and 2010, while giving states…
“People generally don’t have a clue about what the health care they are consuming costs,” Michael O. Leavitt, the Secretary of Health and Human Services told reporters in a WebMD article (“Gov’t releases hospital prices“). With a new initiative in hand, Mr. Leavitt hopes that consumer ignorance will soon dissipate. Yesterday, officials at the Centers…