Efr ch1 econ_sr2.4
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Transcript of Efr ch1 econ_sr2.4
Copyright © Springer Publishing Company, LLC. All Rights Reserved.
CHAPTER 1: ECONOMICS OF HEALTH CARE• Explain at least three major characteristics of
the U.S. health care competitive market• Give examples of at least three economic
concepts applied to health care• Evaluate the impact of price on health care
consumer behavior• Summarize the history of health care
economics and policy in the United States
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HISTORICAL CONTEXT
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Stone Age
? 400 BCE Ancient Greece
? 400 ADMiddle Ages
? 1600 England
1776 American
Revolution
1820-1910Florence Nightingale
1910 T. Roosevelt
1920s-1930s Great Depression
1940s WWII
1965 Medicare & Medicaid
1970s-1980s
U.S.
2000-2008 Bush Administration
Present Time: Obama
Administration
Health care in families
Hippocrates, physicians begin charging fees
Hospice, religious orders give care
Poor Laws, “worthy poor”
Self-governance and self-reliance
Trust-busting antitrust laws
Hospitals become “physician workshops,” Flexner Report, technology, need to run hospitals as business, health insurance, and managed care
Health insurance tax exemptions
HMO Act 1974, growth of managed care
Consumer-driven health plans, rising uninsured population, soaring deficit, economic problems
Health reform, global health cost concerns, technology & genomics, ACOs
Germ theory, professional nursing, sanitation
Soaring health care costs
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RELEVANCE OF ECONOMICS TO HEALTH CARE• Size and scope of health care industry• Perceived problems in health care costs• Assumption that health care differs from
other industries• Impact of economic issues and decisions on
patients, providers, and society
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NATIONAL HEALTH EXPENDITURES• America has the most costly health care system in
the world, and costs are rising • U.S. health care expenditures increased from
5.2% to 17.6% of GDP from 1960 to 2009• Expenditures for U.S. health care totaled
$2.6 trillion in 2010• Health care costs are predicted to grow at a
faster rate than the U.S. economy over the coming decade, to $4.6 trillion or 19.8% of the GDP by 2020
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U.S. NURSES• Nurses represent the largest sector of health care
professionals in the United States, with more than three million RNs
• The United States has more nurses than any other country, and is also a major importer of international nurses
• Nursing employment and access to nursing care are influenced by the economics of the health care industry
• Nurses make an important impact on health care costs and cost savings
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COMPETITIVE MARKETS COMPARED TO HEALTH CARE MARKETS• Does price matter?• Uncertainty and information problems• Insurance• Nonprofits• Restricted competition• Need• Government
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MARKETS• Allocate (scarce) resources efficiently• Scarcity implies choices– What goods and services to produce, and how to
produce them– Who receives goods and services
• Competitive markets are based on economic theory– No market is purely competitive– Health care markets cannot be purely competitive
• For example, patients often require care regardless of ability to pay, so free choice and satisfactory substitutes do not always exist 7
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EFFICIENCIES• Technical: inputs minimized or outputs
maximized• Productive: costs of production minimized or
output maximized for a given cost• Allocative: can’t make one person better off
without another person made worse off• Trade-off: when in order to increase or acquire a
benefit or value, one must give up all or part of another benefit or value
• Opportunity cost: the value of the trade-off
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DEMAND CURVE: PRICE AND QUANTITY• Quantity of a product consumers are able and willing to buy
at a given price over a specific time period• As price increases, the quantity of a product demanded
decreases, and vice versa• Substitution effect: the price of a satisfactory substitute
decreases the quantity of the substitute demanded increases
• Income effect: the higher a consumer’s income, the less sensitive the consumer is to changes in price
• Insurance effect: similar to income, so that consumers with health insurance are less sensitive to increases in health care costs
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SUPPLY CURVE: PRICE AND QUANTITY• Quantity of a product that producers want to sell at a
given price over a specific time period• As the price of a product increases, the quantity
supplied increases, and vice versa• Current producers: as the price increases (assuming
production costs do not change), profits increase so there are incentives to increase production
• Prospective producers: as the price increases (assuming production costs do not change), profits increase so there are incentives to enter the market
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ECONOMIES OF SCALE AND SCOPE
Economies of scale:• The long-run average costs
decline as output increases• Minimization of average
costs must also maximize profits
• High fixed costs with relatively low variable costs
Economies of scope:• A firm can jointly produce
two or more goods more cheaply than under separate production of the goods
• Minimize total costs if it maximizes profits
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SURPLUS VS. SHORTAGE
12q*q2 q1
p*Pr
ice
Quantity
Demand Supply
Surplus Shortage
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COMPETITION VS. MONOPOLY
Perfect competition:• Sufficient buyers and sellers
—no power over price• Homogeneous good• Perfect information• No barriers to entry or exit
Monopoly:• No competitors• No close substitutes• Information problems• Barriers to entry or exit
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NURSING LABOR MARKET
Supply:• The nursing workforce
increases during economic downturns
• Increasing wages increases the supply of nurses
• Education and training costs decrease the supply of nurses
• Licensure and certification are barriers to entry in nursing
Demand:• Alternative labor markets for
nurses increase the demand for nurses
• Increased productivity decreases the demand for nurses
• Nursing is a derived demand for health
• Satisfactory substitutes reduce the demand for nurses
• Increased reimbursement increases the demand for nurses
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