The Economics of Healthcare Resources
This topic presents an introduction to the economics of US healthcare, with a focus on the major players including consumers, providers, private insurance, and government. It covers the challenges and opportunities for the US healthcare system including quality, costs, and access. An application of supply and demand analysis to healthcare markets is discussed. It compares U.S. health outcomes to those of other countries. Students are introduced to various data sources on US and global healthcare.
- Identify the challenges facing the U.S. healthcare industry (1,2,3,16)
- Describe reasons for current trends in healthcare expenditures(1,2,3,16)
- Explain why and how private consumers obtain health insurance (3)
- Describe the basic features of medical insurance (16)
- Describe the role of information in health insurance and health service delivery (2,16)
- Explain how changes in the demand for and supply of medical services impact healthcare spending and costs (1,2,3,16)
- Explain the reasons for government intervention in the health insurance markets (2,3,6)
- Explain how government provides healthcare through government-funded programs such as Medicare and Medicaid (2,3,6)
- Describe the merits and demerits of single-payer health care program(2,16)
- Compare trends in healthcare spending and health outcomes across countries (16)
NOTE: This module meets Ohio TAGs 1, 2, 3, 6 & 16 for an Intro to Microeconomics course
Recommended Textbook Resources
Chapter 16 from the book Theory and Applications of Economics (v. 1.0). This resource covers the basics of health economics. It provides a good discussion of the role of economic analysis in healthcare. It also explains the challenges faced by households, providers, and the government. It contains past data, but contains important links that will be useful to students and instructors as they seek updated information and data on healthcare. Instructors are able to supplement the text information by using the recommended Alternative Resources.
Supplemental Content/Alternative Resources
Alternative Video Resources
- Introduction to the US Healthcare System: This video, a joint production of the Khan Academy and Brookings Institution explains the major players in the US healthcare sector. It discusses how the different players interact to seek services, provide services, and pay for services.
- Health of the Healthcare System: An animated video from the Kaiser Family Foundation and explained by Julie Rovner. It discusses the health of the US healthcare system by looking at four key areas: how healthy Americans are, the quality of care Americans receive, how much it costs, and how accessible it is. This is done in comparison to the healthcare systems of other advanced economies.
- The Economics of Healthcare: Crash Course Economics #29: A short video that is a quick overview on the economics of healthcare. Students will find this useful as they begin the lesson on US healthcare.
Alternative Web Resources
- Kaiser Family Foundation: This link to the Kaiser Family Foundation would allow students to obtain current information on healthcare issues. Students may obtain articles and data on healthcare useful for policy discussion in an on ground or online course.
- Health System Tracker: This comprehensive data hub by the Peterson-Kaiser Health System Tracker provides information on healthcare spending, quality of care and access. This will be very useful to students seeking quick and updated information on healthcare.
- World Health Organization (WHO): This WHO resource allows students to provide summary data on health outcomes including spending and quality, for various countries.
- Congressional Budget Office: This is a timely report on the potential features, advantages, and drawbacks of a single-payer health care system. The instructor may refer to this as a source of information on debates on healthcare systems. Alternatively, a more detailed discussion of Medicare will achieve a similar outcome.
Active Learning Exercise
Go to: https://fred.stlouisfed.org/
Search: Health Expenditures Per Capita, and Check <Health Expenditures Per Capita> and <Health Services Expenditures Per Capita>
Click: Add to Graph
Using the Graphs: Discuss annual changes in per capita health expenditures during the last two recessionary periods. Discuss changes in per capita health expenditures in the most recent five-year period. Find a current article from the public press (within the past year) and identify reasons for current trends on US healthcare.
National Center for Health Statistics Data Finder: Using this link, select categories of expenditures over time on which students will report. These may include expenditures by source of funds, Medicare expenditures, and Medicaid expenditures. Explain how expenditures have changed over time and provide reasons why the changes have occurred.
Kaiser Family Foundation: This link to the Kaiser Family Foundation informs students about emerging issues in healthcare. Students may obtain articles that examine emerging issues in health care and present a short report that discusses its implications for healthcare costs, healthcare access, and quality of healthcare. The focus should be on positive economic analysis.
World Health Organization (WHO): This WHO resource allows students to provide summary data on health outcomes including spending and quality, for various countries. The instructor may ask students to review health data on countries in various regions of the world and submit a short report on their findings compared to the US.
Questions and Problems
The Economics of Healthcare
Questions and Problems
Instructors can add a Google Doc of the Economics of Healthcare Questions and Problems to their Google Drive or download a Word File of the Economics of Healthcare Questions and Problems.
- Identify the major players in the US healthcare system.
- How do Americans pay for health care?
- Identify the major challenges facing the US healthcare system.
- How does the US healthcare system compare with those of other advanced economies (e.g. Canada, UK)
- Why does the traditional demand analysis not fit neatly to the US healthcare market?
- Why does the traditional supply analysis not fit neatly to the US healthcare market?
- What are the major causes of annual growth in US healthcare costs?
- Why does the US government intervene in the US healthcare market?
- Households, employers, private insurance, state government, federal government, providers (hospitals, nurses, care facilities), pharmaceuticals.
- Private insurance, out-of-pocket, Medicaid, Medicare, other third-party payers.
- Increasing healthcare costs per capita; how uninsured Americans will obtain healthcare; increasing healthcare spending to GDP; access to health services particularly in small/rural communities; commitment of private insurers to pay for certain care including preexisting conditions; commitment of medical providers to provide services given increasing costs.
- Growing gap in health expenditures as percent of GDP between the US and other advanced economies; per capita health expenditures higher in the US than in comparable advanced economies; decreasing growth rate in per capita health expenditures in the U.S. and other advanced economies; the outcomes on access and quality relative to other advanced economies are mixed in spite of higher per capita US health spending.
- Price that consumers pay is dependent on private Insurance agreement, negotiated fees by Medicare and Medicaid; health services are fairly heterogeneous; healthcare can be viewed simultaneously as current service and human capital investment.
- Providers (hospitals) tend to be not-for-profit entities; dominance by a few large providers in each area; significant professional barriers to entry; government providers of healthcare services.
- Technological advances; profit motive of private insurers; drug prices; inelasticity of demand.
- Presence of externalities; improve/ensure healthcare access; provide information on quality of care, drugs, and prices; improve commitment by providers and private insurers