CHAPTER5The Economicsof Health CareChapterOutlineandLearningObjectives5.1The Improving Health ofPeople intheUnited States5.2Health Care around theWorld5.3InformationProblemsandExternalitiesintheMarketforHealth Care5.4TheDebate over Health CarePolicy in the United States
1 Chapter Outline and Learning Objectives 5.1 The Improving Health of People in the United States 5.2 Health Care around the World 5.3 Information Problems and Externalities in the Market for Health Care 5.4 The Debate over Health Care Policy in the United States CHAPTER 5 CHAPTER The Economics of Health Care
HealthCareintheUnited StatesHealth care expenditure in the United States is higher than anywhereelse in the world.Whyis this the case? ldeas:.High quality of health care. System of payment for health care: Higher demand for health careInthischapter,wewill addresssomeoftheelementsofhealthcarethat make it a rich field of study for economists.@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 2 Health Care in the United States Health care expenditure in the United States is higher than anywhere else in the world. Why is this the case? Ideas: • High quality of health care • System of payment for health care • Higher demand for health care In this chapter, we will address some of the elements of health care that make it a rich field of study for economists
ThelmprovingHealthofPeopleintheUnitedStates5.1LEARNINGOBJECTIVEDiscusstrendsinU.S.healthovertime@2015PearsonEducation,lnc
LEARNING OBJECTIVE © 2015 Pearson Education, Inc. 3 The Improving Health of People in the United States 5.1 Discuss trends in U.S. health over time
HealthOutcomes in the United StatesThelast coupleof centurieshave brought incredible18502013VariableadvancesinhealthoutcomesLife expectancy38.3 years78.7yearsfor Americans.at birth5'7"5'9"Average heightExplanations:(adult males)Improvements in nutritionInfant mortality228.9per1,0005.9per1.000.Public health movement (late(death of a childlive birthslivebirths1gth, early 20th century)aged 1 year orless).Improvementsinsanitation, fooddistribution,etc..FeedbackfrombetterhealthTable 5.1Health in the Unitedto higher incomes to betterStates,1850and2013health@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 4 Health Outcomes in the United States The last couple of centuries have brought incredible advances in health outcomes for Americans. Explanations: • Improvements in nutrition • Public health movement (late 19th, early 20th century) • Improvements in sanitation, food distribution, etc. • Feedback from better health to higher incomes to better health Health in the United States, 1850 and 2013 Table 5.1 Variable 1850 2013 Life expectancy at birth 38.3 years 78.7 years Average height (adult males) 5’7” 5’9” Infant mortality (death of a child aged 1 year or less) 228.9 per 1,000 live births 5.9 per 1,000 live births
The Improving Healthof the U.S.PopulationThe most dramaticgains inhealth haveoccurred in the 2oth903,000Deaths0century.Lifeexpectancysper100,000people2.500002,000(Mostly) steady50increasesinlife1,50040expectancy.Deathrate301,00020500Corresponding10decreasesintheo190019201940196019802000death rate(adjusted for lifeexpectancy)Figure 5.1aTheimprovinghealthof theU.S.population:lifeexpectancyatbirthandthedeathrateper100,000people inthe United States5@2015PearsonEducation,lnc
© 2015 Pearson Education, Inc. 5 The Improving Health of the U.S. Population The most dramatic gains in health have occurred in the 20th century. • (Mostly) steady increases in life expectancy. • Corresponding decreases in the death rate (adjusted for life expectancy). The improving health of the U.S. population: life expectancy at birth and the death rate per 100,000 people in the United States Figure 5.1a
Why Is the Death Rate Falling?Medical advances inprevention and1,000oAll causestreatment are800reducing the death600rate.Cardiovasculardiseases400CancerNotice in particular200the fall in the death0rate from cardio-1980198519901995200020052010vasculardisease30Diabetes20Kidneydisease10However deathsLiverdisease0due to some1990199520002005201019801985obesity-relatedFigure 5.1bThe improving healthof the U.S. population:illnesseshaverisenmortality rates6@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 6 Why Is the Death Rate Falling? Medical advances in prevention and treatment are reducing the death rate. Notice in particular the fall in the death rate from cardiovascular disease. However deaths due to some obesity-related illnesses have risen. The improving health of the U.S. population: mortality rates Figure 5.1b
HealthCarearoundtheWorld5.2LEARNINGOBJECTIVEComparethehealthcaresystemsandhealthcareoutcomesintheUnitedStatesandothercountries@2015PearsonEducafion,lnc
LEARNING OBJECTIVE © 2015 Pearson Education, Inc. 7 Health Care around the World 5.2 Compare the health care systems and health care outcomes in the United States and other countries
Sourcesof HealthInsuranceMost health careservices in the UnitedStates are provided byprivate firms.Percentage 70%ofthePayment to those firmspopulation60generally comes through50health insurance.4030Healthinsurance:a20contract under whicha10buyer agrees to makepayments,orpremiums,0Employer-provided MedicaidInidividual Militaryhealth UninsuredMedicarein exchange for theinsuranceinsuranceinsuranceprovider agreeing topayFigure5.2Sourcesofhealthinsuranceinthesome or all of theUnitedStates.March2012:notesome people have more than onebuyer's medical billstype of health insurance.82015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 8 Sources of Health Insurance Most health care services in the United States are provided by private firms. Payment to those firms generally comes through health insurance. Health insurance: a contract under which a buyer agrees to make payments, or premiums, in exchange for the provider agreeing to pay some or all of the buyer’s medical bills. Sources of health insurance in the United States, March 2012; note some people have more than one type of health insurance. Figure 5.2
Sources of HealthInsurance-contAbout 36% havegovernment providedhealthinsurance.Percentage70%oftheInsurancepaymentscan population60taketheformoffee-for50service,where doctors40and hospitals receivea30payment for each service20they provide; or HealthMaintenance10Organizations (HMOs)owhere doctors receive aEmployer-provided MedicaidInidividual Militaryhealth UninsuredMedicareinsuranceinsuranceinsuranceflat fee per patient.Figure5.2SourcesofhealthinsuranceintheUnitedStates.March2012:notesomepeople havemorethanonetype of health insurance.9@2015Pearson Education,Inc
© 2015 Pearson Education, Inc. 9 Sources of Health Insurance—cont. About 36% have government provided health insurance. Insurance payments can take the form of fee-forservice, where doctors and hospitals receive a payment for each service they provide; or Health Maintenance Organizations (HMOs), where doctors receive a flat fee per patient. Sources of health insurance in the United States, March 2012; note some people have more than one type of health insurance. Figure 5.2
Why Are So Many Americans Uninsured?Compared with the rest of the developed world, the United States hasa high proportion of its population uninsuredabout 16%.Some people can afford insurance, but elect to go uninsured andpay for their expenses as they incur them.: Others cannot afford health insurance. When they need healthcare, they generally either go without or use reduced-price or freeservicesThe federal government's health care legislation enacted in 2010 wasmotivated in part by a desire to reduce the number of uninsuredAmericans.10@2015PearsonEducation,Inc
© 2015 Pearson Education, Inc. 10 Why Are So Many Americans Uninsured? Compared with the rest of the developed world, the United States has a high proportion of its population uninsured—about 16%. • Some people can afford insurance, but elect to go uninsured and pay for their expenses as they incur them. • Others cannot afford health insurance. When they need health care, they generally either go without or use reduced-price or free services The federal government’s health care legislation enacted in 2010 was motivated in part by a desire to reduce the number of uninsured Americans