20 -- Part 2: CHAPTER 1 Five Foundations of Economics
The situation is problematic on two fronts.
No one wants a child to die of medical care because his family doesn't have health insurance.
John Q pitals transfer the cost of treating the uninsured by takes matters into his own hands and takes the raising fees for the other services that they provide.
Society picks up the tab for uninsured people to get a transplant.
The film is about the costs and benefits of giving up one's life to provide a heart for transplant.
The situation affects two patients.
The full cost of medical care is not covered by insurance.
The insurance policy requires a small copayment for medical care.
They both get sick five times in a year.
She will only go to the doctor's office three times because she pays the full cost of treatment.
If he goes to the doctor's office five times, he will have to pay a total of $50.
The rest of the cost is paid by the insurance company.
The impact of a $10 copayment on healthcare costs is large.
The consumer is responsible for the entire cost of an office visit if they don't have insurance.
There is a need for a $100 medical care.
The consumer has little reason not to seek medical attention even for minor problems that will respond to home treatment because the insurance companies are paying most of the cost.
The lower copayment helps explain why insurance costs are so high.
Consumers worry about the price, while producers worry about profits.
As much as we might like to think that medical providers only care about our health, we must acknowledge that they are providing a service for which they expect to be paid.
When the price goes up, healthcare providers are willing to provide more health care.
Market power is enjoyed by producers of medical care.
Licensing requirements affect the market by limiting the supply of certain healthcare providers.
It takes a long time to become a skilled medical provider.
Nurses must become registered before they can practice, and Health Insurance and Health Care licenses must be obtained from a medical board.
There are restrictions on entering the medical profession that limit the supply of workers.
There are barriers to entry into the medical profession.
The wages of these medical workers increase when the quantity supplied decreases.
Many medical facilities don't face competition.
Many small communities have only one hospital.
The nearest hospital is the default option for most patients in these cases.
Because economies of scale are important in the provision of medical care, even large metropolitan areas tend to have only a few large hospitals.
As the population base expands, larger hospitals can afford to offer more services than smaller hospitals can.
The hospital needs to develop a particular expertise in order to provide certain services.
The availability of specialized care is a good thing.
Hospitals are able to charge higher fees as they become larger and more specialized.
The Medicare and Medicaid programs hold the market power of suppliers in check.
The supply of certain workers is limited by entering the medical profession.
The insurance companies push back against certain medical charges by limiting the amount they reimburse.
Lasik eye surgery is not typically reimbursed by insurance plans.
Consumer demand is elastic for some services.
Overall medical costs have gone up.
Over the last 20 years, the quality of medical care around the globe has improved rapidly and international travel has become more convenient.
A patient can have a cardiac surgery in India, a hip replacement in Egypt, and a face- lift in Brazil.
The rapid growth of medical tourism is explained by supply and demand.
Wealthy medical tourists from the United States look for better outcomes than they can get in their home country.
The majority of people who seek medical care abroad do so for two reasons: cost and wait times.
The cost of medical care is lower in a developing country than it is in a developed country.
Health insurance is not readily available in many locations within developing countries, which leads to a policy of cash payment for healthcare services and also suppresses demand.
There are long wait times for certain procedures.
The United Kingdom and Canada are the top destinations for medical tourism.
The main reason for medical tourism in the US is the lower cost.
Many procedures performed abroad cost less than in developed countries.
The cost of a transplant in the United States can be more than in Taiwan.
The cost of knee and hip replacements in Panama and Costa Rica is a quarter of the cost in the United States, and some insurance plans offer incentives to have them done there.
Patients agree to leave the country for this type of surgery because their insurance company will pay all their travel related expenses and waive the typical out of pocket expenses that would be incurred from copays and deductibles.
Medical tourism has led to the creation of medical "safaris," where patients go to South Africa or South America for cosmetic surgery, stay in luxurious accommodations, and take in the savanna or rain forest while recovering.
Suppose that the United States scraps its current healthcare system, and citizens are covered for all medical care with no copayments or deductibles.
Each patient's out- of- pocket expense would be zero if there were no copayment or deductible.
The amount of medical care demanded by each patient would increase from point A to point B.
We apply what we've learned about health care.
We compare the healthcare systems in the United States and Canada.
There is a shortage of human organs for transplant.
We live in a world of scarcity and rationing is a fact of life.
Understanding how different rationing mechanisms are used in medical care is the simplest way to think about healthcare.
The consumer's ability to pay is the primary rationing mechanism in the United States.
A consequence of using prices to ration medical care is that close to 35 million U.S. citizens don't get medical care because they can't afford it.
This doesn't mean that medical care there is unlimited.
In Canada, there are wait times, fewer doctors, and limited availability of drugs.
There is a trade off.
The perfect set of incentives is not created by a medical system.
In the United States, a large majority of citizens have the means to pay for medical care, have access to some of the best medical facilities in the world, and face relatively short wait times.
Under the current U.S. system, access to the best facilities is limited and wait times for the poor are longer.
The system of private health care makes it difficult to eliminate the differences between the rich and poor.
In Canada, each citizen is treated equally, but access to immediate medi cal treatment is more restricted.
Table 18.1 shows that Canada spends less than the United States per capita.
There are many ways.
The rates that are paid to medical providers are set by the government.
Doctors are not allowed to have private practices.
Hospitals get grants from the government to cover their costs.
Canada's Health Act requires government funding for medically necessary share through taxes.
70% of all medical expenses are funded by the Canadian government, with the remaining 30% being generated by prescription medications, long- term care, physical therapy, and dental care.
In the United States, private insurance is the same as it is in these areas.
Patients seeking medical care in Canada are more likely to seek care in the US.
You might think that this fact is odd.
Canada has national health care and health services there are covered by the Canadian Health Act.
There is a difference between access and availability.
People with conditions that are not life threatening face long waits because of Canada's tight control over medical costs.
It is helpful to compare our situation to other countries.
The United States and Canada have different healthcare systems.
70% of all health-related expenses are paid by the government in Canada's single-payer system.
The United States' system is mostly funded by the private sector and the government pays about half of health-related expenses.
Health care is an example of trade-offs.
The benefits and costs of a private versus a public source are discussed in the CIA World Factbook.
Unlike humans, dogs in Canada don't have to wait for scans or treatment, but the pet owner has to pay the full cost.
Every country's healthcare system was ranked by the WHO in 2000.
France was the first to arrive.
The United States finished 37 out of 192 nations.
Researchers looked at health care in 19 industrialized nations.
Again, France finished first.
The United States was last.
These findings continue to be confirmed by more recent studies.
The French don't like the idea of socialized health care.
People in both countries get private insurance through their employer.
Patients can choose preferred providers in both healthcare systems.
French citizens have health insurance at a higher rate than people in the United States.
In France there is compulsory national health insurance and supplemental private insurance that most people purchase.
France's mandatory national health insurance takes care of 70% of patient needs, and supplemental private insurance is quite affordable.
The way coverage works for the sickest patients is different between the U.S. and French systems.
The most serious conditions in France are completely covered.
In the United States, patients' out- of- pocket expenses for the most serious conditions often require supplemental insurance, and experimental procedures and drugs are rarely covered.
The French report that they are quite satisfied with their healthcare system, while similar surveys in the United States find a much more mixed reaction, with roughly half the population happy and the other half concerned.
None of this is cheap.
The average person in France pays 20% of their income to support the national healthcare system.
French firms are reluctant to hire workers because they have to pay payroll taxes.
Workers in the US pay more for medical care than they do in France because of the higher costs of private insurance and out of pocket expenses.
The lower costs of providing medical care in France can be traced to the government's control of the amount of compensation that hospitals and providers receive.
The French use monopsony power to control costs.
In order to keep the system solvent, healthcare costs in France have risen rapidly, which has led to cuts in services.
A lot of people donate blood to help save other people's lives.
They make transplants and other surgeries possible.
The same level of generosity does not apply to organ donations.
Thousands of deaths occur each year because the quantity of replacement organs demanded exceeds the amount of replacement organs supplied.
If people were allowed to sell organs, many deaths would be avoided.
The National Organ Transplant Act of 1984 makes it illegal to do so in the United States.
People can sell sperm, platelets, and ova if they want to.
The prices determine who donates.
The donors are not paid for their services.
Two consequences have been created by this discrepancy.
In the United States, more than 7,000 patients on transplant waiting lists die each year.
The demand for human organs has created a billion dollar black market.
The market for organs.
A person's life can go on even if they have two kidneys and only one healthy one.
There are risks associated with donation, including the surgery and recovery, as well as no longer having a backup organ.
Since there are roughly 300 million spare kidneys in the United States, there is a large pool of potential donors who are good matches for recipients waiting for a transplant.
The curve becomes a vertical line at point QS.
Many people donate their organs to friends and family in need.
Others participate in exchange programs in which they donate a kidneys to someone they don't know in exchange for someone else donating a kidneys to a friend or family member.
Increasing prices would reconcile a shortage.
An equilibrium market price of $15,000 is shown.
If the sale of kidneys were legal in the United States, Econo mists estimated that this would be the market price.
Thousands of people die each year waiting for a transplant.
A lot of people have a low quality of life while waiting for a transplant.
A black market for organ transplants has developed outside the United States because patients waiting for a transplant die without one.
The supply of organs is limited due to restrictions on the sale of kidneys, as shown by Supplyrestricted.
A black market develops with an illegal price.
Doctors, hospitals, staff, and patients are required to circumvent the law when there is a shortage of organs.
The black market price is higher than it would be if there was a market for human kidneys.
A shortage of vital organs is caused by altruism not providing enough organs to meet demand.
The supply of human organs must be rationed.
It is a matter of efficiency if the rationing takes place through markets, waiting in line, or some other mechanism.
Markets may be one way to prevent deaths.
The ethical considerations are significant.
If viable artificial organs can be created, the ethical dilemma is over.
Medical science is making progress towards a solution to the organ shortage.
If you're not comfortable with markets determining the price, remember that relying solely on altruism isn't enough.
Incentives and behavioral economics are needed to increase the supply of organs.
Tax deductions, college scholarships, or guaranteed health care for organ donors are some of the proposals along this line.
In the event of death, people would be required to opt out of organ donations.
The suggestions would reduce the ethical dilemma while still using the power of economics to save lives.
The donor is paid to travel to a fertility clinic and receive hormone treatments.
After the donor's ova are removed, they are fertilized in a laboratory and implanted into a woman who is infertile.
The procedure works with a little luck.
Depending on her track record as a donor, the donor gets between $5,000 and $15,000.
There are risks to the procedure, including a high incidence of multiple births among recipients, as well as rare but potentially serious problems for donors.
Everyone would not feel comfortable volunteering for surgery.
The existence of a market allows a trade that can benefit both the donor and the recipient.
Most transplants use organs from dead people.
Live donors can give part of their organ to a needy recipient.
Major surgery can take between 4 and 12 hours to complete.
The recovery time for the donor is usually two to three months.
There is still a shortage of live organs for transplant.
The National Organ Transplant Act needs to be repealed.
The move would establish a price that would eliminate the shortage.
One way to increase donations would be to allow donors to claim a tax deduction equal to the value of the portion of the organ donated.
The administrator of the wait list thinks that the officers wouldn't be so judgmental if one of their own had enough trouble getting people to volunteer.
The doctor who it is.
If donors learned that we do the transplant and that he is not driven, they would approve the transplant and save lives.
By the end of the episode, we see that the economic and ethical most accept their fate within the current system.
People often debate the merits of universal health care versus private medical care as if the issue involves just those two factors.
The misconception that frames the political debate about health care obscures the important economic considerations at work on the micro level.
The healthcare debate requires complex trade- offs and exists on many margins.
Different healthcare issues affect how well our nation's overall healthcare system functions.
The impact of third parties on the incentives that patients face complicates the analysis of supply and demand.
In which society's overarching concern is how to best spend so large a amount of money, health care straddles the boundary between micro economic analysis, which focuses on individual behavior, and macroeconomics, which focuses on macroeconomics.
Health decisions are part of our lives.
We have created a primer to help you understand the law.
The law does not create health insurance.
Young adults can stay on their parents' plan.
It was common for young adults to forgo health care due to low income.
Most young adults qualify for federal subsidies or Medicaid through the Health Insurance Marketplace.
Premium tax credits are available to Americans.
The cost of insurance premiums was determined by the new health insurance exchanges.
A wide range of new benefits must be included in all new plans sold on or off the marketplace.
Rather than spread across just a few treatments at no additional out of pocket cost, these are shared more broadly across large groups of people.
If you don't have coverage, you can use the Preventive care is much cheaper than addressing health insurance marketplace to serious medical issues too late, so this provision of buy a private insurance plan.
If you don't, the ACA is intended to lower costs.
The cost of insurance on or off for every month you are without health insurance is unaffected by the factors on your federal income tax return if you get an exemption or if you have a preexisting condition.
Based on health status, the fee acts as a negative incentive.
It's not possible to be dropped from ages people to sign up for insurance.
The cost of coverage when you are sick.
The changes spread your marketplace health insurance more evenly and encourage people to get scale.
People who make less money.
One out of every six dollars spent in the US is spent on medical care.
Micro forces that lead to fundamental changes to the healthcare system will have a large impact on our economy.