Term
| Taxation on a market setting |
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Definition
| Taxation on a market setting can cause the market to not behave at equilibrium! This may be for a variety of reasons (minimum wage, preventing from charging too much on something, etc), this can lead to a surplus or shortage! In addition, the net loss of allocation efficiency (how much is lost from not performing at equilibrium) is known as dead weight loss! |
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Term
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Definition
| Deadweight loss is the loss of economic efficiency that occurs when a market does not perform at market efficiency. This can occur for a number of reasons, one of which is taxation! |
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Term
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Definition
This is what you spend monthly, weekly, yearly, etc in order to get insurance coverage!
Determining how much you pay for a Premium can be determined by an equation:
Prem = E(ben) + ADMIN + TAX + PROFIT |
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Term
| Price of Health Insurance |
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Definition
The price of health insurance determines how much must be spent in premiums in order to receive 1$ in benefits! The price covers how much you spend in premiums divided by how much benefit you are actually receiving.
We can use the price to determine how much cover our premium is paying for!
EX: if we pay 1.25 in insurance price, then we know 1$ of that premium is on coverage (benefits to us), and the remaining 25 is the "loading fee", or everything else the insurance needs to give you that dollar benefit! |
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Term
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Definition
This is a tricky concept but think of it as the part of the fee that the health insurance provider needs for a certain amount of benefit!
Think of this equation
Price = 1 + LOADING Fee
Price = 1 + [(ADMIN + TAX + PROFITS + e) / BEN]
Loading Fee = (ADMIN + TAX + PROFITS + e) / BEN
Loading fee with a bunch of other equations will tell you that it is formally written as the amount you spend on a premium divided by the benefits. In other words, the loading fee is what is spent on health insurance premium that does not go toward your benefit, but instead goes to Administration (admin), taxes, the insurance companies profits, and calculation error (e).
*remember, you can use the price someone pays for insurance to find the loading fee! |
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Term
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Definition
This is a clause in an insurance care that states the consumer must pay a fixed out of pocket amount before insurance begins during a year. Once the deductible is paid, the insurance coverage kicks in!
EX: An insurance coverage makes the individual pay the initial 200 dollars for healthcare expenses for the year |
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Term
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Definition
When a consumer is injured and needs to use their insurance, it is when the consumer pays a fixed percentage of the cost of the healthcare needed, and the insurance picks up the rest
EX: a coinsurance rate of 15% means you pay 15 and the insurance pays 85%
*As the insurance coverage increases, the Coinsurance rate DECREASES. They are inversely related |
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Term
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Definition
A copayment is a fixed amount paid by the consumer that is INDEPENDENT of the market price or actual cost of medical care.
EX: everytime you visit the doctor, you pay 10 dollars.
*Because copayments are independent of costs of health care, but coinsurance rates depend on the cost of healthcare, coinsurance rates make consumers much more sensitive to a change in the actual price of healthcare! |
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Term
| Coinsurance rates on a Consumers demand |
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Definition
A decrease in the coinsurance rate causes a movement down the effective demand curve (curve only reflective of what the consumer pays) AND a SHIFT, or ROTATE the nominal demand curve (the demand curve that included the total price of health care) for how much healthcare coverage.
*Coinsurance rate of 0% means 100% insurance coverage, and the nominal demand curve is vertical!
*Also, coinsurance rates make customers more sensitive to changes in the price of healthcare than copayments, because coinsurance rates correlate with the price of healthcare, and copayments are independent of them |
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Term
| Copayments on Consumers Demand |
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Definition
Copayments decrease cause a movement down the effective demand curve (the one people actually face), but DO NOT cause a rotation in the nominal demand curve (the curve that includes the total price of healthcare. This is because the copayment is no correlated with the price of healthcare, the amount of copay you may is INDEPENDENT to it, compared to the coinsurance rate, which is a percentage of the total amount!
*Coinsurance rate make consumers sensitive to medical care price change, but copayments do not! |
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Term
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Definition
| This is the demand curve that reveals the consumers demand to pay without health insurance coverage. It is essentially the amount that the consumer sees when dealing with insurance coverage. BOTH changes in the coinsurance rate and copayment cause movement down the effective demand curve. |
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Term
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Definition
| This is the demand curve that people face when dealing with insurance coverage that includes the price of healthcare seen by the insurance provider, or includes what is paid from the coinsurance rate. A SHIFT RIGHT or rotation right is caused from a decrease in Coinsurance rate, and it is UNAFFECTED by changes in copayment |
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Term
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Definition
| Elasticity measures the responsiveness of quantity demanded to a change to an independent factor (income, own price, etc) |
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Term
| Price Elasticity of Demand |
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Definition
AKA Own Price Elasticity of Demand! It is the measure that gauges how much a consumer changes consumption of a good when price changes! (it is "consumption" elasticity essentially)
It is represented as the change in Quantity divided by the change in price
(Change in Q)/ (Change in P) = Ed
Price Elasticity of demand |
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Term
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Definition
This is when a consumer is less sensitive to a change in price, or the change in price is greater than the change demanded. Inelastic is considered when the absolute value of elasticity is greater than 0 but less than 1!
Change in P > Change in Q OR
0 < (Change in Q)/(Change in P) < 1 |
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Term
| Income Price Elasticity of Demand |
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Definition
Income elasticity of demand is the percent change in quantity demanded divided by the percentage of change in income! It is represented as:
Ey = (Change in Quantity)/(Change in income)
*This also dictates inferior and normal goods! If the price increases and you buy less of it, its an inferior good! Ey being negative infers an inferior good! |
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Term
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Definition
This measures the extent to which demand for a product changes when the price of another good is altered.
Ec = (change in quantity of good X)/ (Change in price of good Z)
When Ec (cross price elasticity) is negative, it means this goods are complements! When positive, it means they are substitutes |
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Term
| General Elasticity Formula for a Variable Y with respect to change in X |
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Definition
| Elastity of Y on "X" demanded = (Percent change in "X" demanded)/ (Percent change in variable Y) |
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Term
| Pharmaceutical Patent Protection |
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Definition
| This is one of the ways, the most important way the government induces a barrier of entry on the pharmeceutical industry. A patent gives a firm who innovates and creates a drug legal right to be the sole producer of that drug for up to 20 years! This allows for the firm to make economic profit, so they have incentive to go into business. This causes firms to take risky and costly, but socially valuable research, they would not do if not for the profitability of the drug market! |
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Term
| Advertising in the Pharmaceutical Industry |
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Definition
| Advertising in the pharmaceutical industry takes up 20-30% of what drug companies make! However, their effects are not fully understood, as we don't know we do not know how much this expenditure effects consumers, and how much it influences their behavior! |
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Term
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Definition
Formulary is a list of drugs that specify which medications are approved to be prescribed under a particular insurance policy. They are based on efficacy, safety, and cost effectiveness, and may also include clinical information such as side effects and doses.
The list of drugs available to consumers provides financial incentives for patients to buy less expensive drugs! AKA encourage generic brand consumption
*When not on the formulary, a patient has to pay much more of the cost for the drug, sometimes 100% of the cost |
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Term
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Definition
An orphan drug is a drug designed to specifically treat a rare medical condition (the condition itself is known as an orphan disease).
Orphan drugs are drugs for very rare diseases |
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Term
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Definition
It is a line written on a production function to represent the efficient allocation of resources. Each perspecitve "line" represents an amount of quantity created with 2 inputs, one on the x and one on the y axis. The place where the isocost curve and isoquant curve are tangent is the optimal output!
*Think the outward going lines! |
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Term
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Definition
| This is the tangent line of the isoquant line, that finds the optimal level of input for both inputs on both axis's! |
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Term
| US Healthcare System compared to UK/ Canada |
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Definition
In the US, the majority of healthcare coverage is privately financed, leading to quick, better quality coverage, but it is more expensive and there are sometimes gaps in coverage
In the UK/Canada, healthcare is usually universally covered. This leads to longer wait times and less quality, but it is much more affordable |
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Term
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Definition
| A budget Constraint is a representation of all the goods and services a consumer may purchase given the current prices within their income. (Think of an Isocost curve as a budget constraint!) |
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Term
| For Profit Hospital Behavior |
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Definition
| A for profit hospital operates under the same theory as a firm with monopoly power. They operate where Marginal Benefit equals marginal cost (where profit is maximized) and produce at that quantity. Where that quantity crosses the Demand (or average revenue) curve is the price! Picks the highest price that yields the highest profit |
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Term
| Not For Profit Hospital Behavior |
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Definition
A not for profit hospital does not behave under a "profit Maximizing" model like for profits do. Instead, it operates under a "quantity maximizing model." It operates where average cost is equal to average revenue, or where average cost crosses the demand curve! This is the highest amount of input they can yield at the lowest price while still economically breaking even
*Even though they use the quantity maximizing model, firms do not always perform at maximum quantity, due to the quantity-quality tradeoff! |
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Term
| Optimal Mix of Quantity and Quality for Not for Profit Hospitals |
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Definition
Hospitals that are non profit operate under the quantity maximizing model, or when average revenue equals average cost. However, they do not always perform at this point. Instead, they also use the Quality/Quantity maximization model, which determines which level of each they desire. As quality increases, average cost increases, causing a new equilibrium and a new "maximum quantity" at that cost! The quantity/quality maximizing model acts like a production possibility frontier or a budget constraint!
*Which point they pick on the Quality/Quantity model (optimal mix) depends on the firms utility! |
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Term
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Definition
This occurs when one is employed in a company that uses an employer sponsored insurance plan. When this occurs, employees cannot take their boss-sponsored insurance policy to other jobs! They must search for new insurance if they want to switch jobs. Because of this, employees experience the "job lock" or being stuck in their current job in order to ensure they keep the same insurance coverage
Job Lock DECREASES Labor market Efficiency |
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Term
| Price Ceiling on a Perfectly Competitive Market |
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Definition
A price ceiling on a perfectly competitive market (assuming that the ceiling is below market equilibrium) will cause a shortage! This is because suppliers at that price only want to supply a certain amount, where as consumers demand more than suppliers are willing to give out at that price!
*Price ceilings cause shortages, they are represented by having demand > supply! |
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Term
| Price Ceiling on a Imperfect Competition Market |
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Definition
| Price ceilings in an imperfectly competitive market like a monopoly cause the price to go closer to the equilibrium price, and if the ceiling is low enough, will cause the market to behave at the equilibrium price! Governments can force monopolies to not charge their profit maximizing (MR=MC) price, and instead charge a price closer to economic equilibrium |
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Term
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Definition
This is the idea that jointly sharing resources, or producing two things together, is more cost efficient than producing them separately!
EX: Colleges offer undergrad and Grad education at the same location, rather than paying for a separate one of each. Use same teachers, classrooms, etc, leads to higher productivity and is an economies of scope |
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Term
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Definition
This is a process that occurs in the LONG RUN of costs. It is the process of a firm getting larger and specializing its work force of labor and capital, resulting in a lower cost. It represents the DOWNWARD SLOPING portion of the Long run cost curve, and it is what gives long run cost curves the first part of the U shape.
It is due to INCREASING RETURNS TO SCALE that leads to this curve sending the cost down |
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Term
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Definition
This is a process that occurs in LONG term cost. It is when the firm gets too large and starts to effect productivity. This causes the cost to produce more to increase, and represents the curving Upward at the end of the long run cost curve. (This is in part why the LRC curve is U shaped).
This curving of the cost upward is due to decreasing returns to scale! |
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Term
| Increasing Returns to Scale |
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Definition
| This is the process of an increase in input leads to a PROPORTIONALLY greater increase in output. (EX Doubling inputs and yielding 3 times the output). This is caused from when firms initially choose to increase size in the long run, and causes economies of scale to occur. The increasing returns to scale shows the cost curve sloping down to horizontal in the long run cost curve |
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Term
| Decreasing Returns to Scale |
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Definition
| This is the process of when increasing input leads to a proportionally smaller increase in output (ex like tripling your inputs, but only seeing an increase in output by double). This is caused from dis economies of scale, or the process of the firm getting too big and losing efficiency. It is represented on the long run cost curve as the cost curve sloping upward and increasing |
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Term
| Constant Returns to Scale |
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Definition
| This occurs when there is a 1 to 1 ratio of input put in and resulting output put out in a long term cost analysis. It represents the horizontal center of the long run cost curve, showing no PROPORTIONAL change in the amount of output with an increase in input. |
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Term
| Volume Discounts in the Purchase of Inputs |
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Definition
| This is when buying inputs, you typically will receive a discount when buying them in large quantities. |
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Term
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Definition
A substitute goods are good that compete with each other for consumers in a perfectly competitive market. Think if price of apples goes up, people will buy more oranges!
*When cross price elasticity is Positive (and greater than 1), it means those goods are Substitutes!
Ec = (change in quantity X)/ (change in price Y)
If Q goes up as P goes down, it means Ec will be positive! |
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Term
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Definition
Complement goods are goods that aid eachother in consumer consumption. Think if the price of peanut butter decrease, people will buy more jelly!
*In cross Price Elasticity, if Ec is negative, that implies the goods are complements! Ie the price of 1 decreasing means less quantity demanded for the other! |
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Term
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Definition
An unpriced, byproduct of production or consumption that adversely or beneficially affects another party not directly involved. It is the unintentional effects of consuming/ producing something
*this can be positive AND negative |
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Term
| Taxes as means of Correcting Externalities |
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Definition
| Taxes are means of threat or fines to discourage socially harmful behavior. When people don't incur the cost of an externality in their private costs, it gets assessed into societies social cost! Taxing discourages this and reduces social cost! This can be either taxing people when the smoke (decrease side, demand of cigarettes) or taxing companies when they produce pollution (cause them to reduce supply of something). |
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Term
| Subsidy as means of Correcting Externalities |
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Definition
| Subsidies are used to encourage socially beneficial activity that otherwise is undervalued in the marketplace. It can support positive behavior or give incentive to stop negative behavior, in an effort to reduce social cost! |
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Term
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Definition
| Private costs are the costs seen by an indiviudal consumer. Social costs are the shared costs of a community. When an action of an individual's cost is not seen in their private costs, it incurs onto societies social cost as an externality! (EX smoking a cigarette incurs social cost of secondhand smoke). Governments can reduce social cost and turn those into private costs with subsidies and taxes |
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Term
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Definition
| Medicare part D is the most recent expansion/ reform of Medicare, implemented in 2006. This was a way to ensure that more Americans were covered in prescription drug coverage! This was done so by allowing people to do what they did before, which was have Medicare cover medical and have a private insurance cover prescription drugs, or you could have Medicare and a private insurance cover both. This allowed for people to buy private insurance to cover the "doughnut hole," which is a gap in insurance coverage between 2930 and 4700 where to coinsurance rate is 100 in Medicare (people pay that out of pocket!) By getting Medicare AND private insurance people can cover expenses under this amount |
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Term
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Definition
| The Doughnut Hole is formally expressed as when Prescription drug coverage costs between 2930 and 4700 dollars, Medicare will not cover any of that and the coinsurance rate was 100! This problem was solved by implementing Medicare Part D, which allowed both private and Medicare coverage to cover this gap! |
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Term
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Definition
The variation in the delivery and consumption of physician service over geographical regions.
EX the number of C-sections varies between countries.
-Where you are effects the doctor care given |
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Term
| Physician Practice Hypothesis |
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Definition
This is a hypothesis made to try and explain the small area variations, or geographical differences, between how each region utilizes their medical care. It is the idea that the per capita variations, particularly surgeries, explain the different clinical options regarding the type of care.
AKA the more an area makes gives the physician more options on how to proceed, especially when it comes to surgery |
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Term
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Definition
| This is one of the hypotheses to describe the small area variations, or the geographical differences in doctor care/ how people utilize it. It is the theory that in a particular area, a physician will become adept or "enthusiastic" to treating people a certain way, and each doctor at each region has their own type of preference. This results in the different types of medical care given for different areas |
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Term
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Definition
AKA Total Output!
Typically in the short run total product curve, total product increases at an increasing rate, and then increases at a decreasing rate, and then ends up decreasing! This is because there is originally an increasing, then a diminishing, then an initial increase but then decrease over productivity related to the on the total product.
It can also be formally written as
q = f(n,k)
where "n" is the amount of health input (nurse hours), k is the capital and CONSTANT, and "q" is the health product |
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Term
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Definition
The change in total output associated with a one unit change in the variable input (not capital!). In the Marginal Product curve, it increases up to a certain point, and then begins to decrease, creating a "hill." This shows that there is a diminishing marginal productivity, that even goes negative after a certain point! (It goes negative when the TP curve goes down).
It can be formally written as MP = Change in Q/ Change in "n"
Remember n is amount of medical input, q is amount of medical output
*MARGINAL is the curve that goes negative |
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Term
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Definition
It is formally written as the total number of output by the total number of variable (medical) input. The AP curve is essentially the derivative of the TP curve, or the "slope of the slopes." The slope of the TP curve increases until a point, and then begins to decrease. It is like the MP curve, except it will never go negative, where the MP curve goes negative when the slopes begin to go negative.
Formally this is written as:
AP = q/n
(Rise over Run), or total medical product over total medical input |
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Term
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Definition
This is known as the sum of your variable and fixed costs, in the short run. Although redundant it is important to note that it has the distinct two, with the fixed cost being where the curve crosses the vertical axis. The total cost curve is essentially mirror of the total product curve. As the slope increases in the total product curve, it represents higher levels of productivity, and thus lower costs and a lower slope in the total cost curve, and vice versa!
Overall, Short run total cost is written as: STC = w x n +(r x K)
Where K and therefore r are constant (fixed cost), where n (hours of labor) and wage (hourly payment) are variable! |
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Term
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Definition
| This is the cost of adding one more unit of output, and like total cost varies depending on how much you have produced. It's curve also mirrors that of the marginal product curve, except the "hill" is upside down. In more economic terms, te marginal cost curve begins at where the fixed cost is, and decreases as you produce more, until a certain point is reached, and then cost begins to increase again. This follows suit with the law of diminishing productivity |
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Term
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Definition
his is the amount of cost divided by the number of output. Its curve like the others is the reciprocal of the average product curve. It is also the "slope of the slopes" or derivative of the total cost curve!
All in all, the way to write the Short run average cost (or at least the variable cost, since fixed cost is the same regardless of output) is:
SAVC = STVS/q |
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Term
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Definition
This is the sum of all the costs over a long given period. Because firms can make plans to change in their future, there are NO fixed costs, as even capital (constant K) can be changed! This results in the long run cost curve, becoming essentially a connection of the asymptotes of all the short run cost curves, allowing firms to pick the best one.
Long run cost can be written as:
LTC = SRVC(q,w,k) + r x K
but know that K is NOT constant, subject to change leaving no Fixed cost |
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Term
| Why are Short Run Cost Curves U shaped? |
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Definition
| Short Run cost curves are U shaped because of the law of diminishing productivity setting in eventually making it productive to produce only a certain amount of product. |
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Term
| Why are Long Run Cost Curves U Shaped? |
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Definition
| The Long Run Cost Curve is U shaped due to economics and dis economies of scale. It is the trend of companies specializing, becoming proficient enough to reach the efficient outcome (economies), and when a company becomes too large and the economies of scale become exhausted (diseconomies) when this occurs. |
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Term
| Short Run VS Long Run Cost Curves |
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Definition
There are two Major differences in the two costs (and their curves)
-Short run includes fixed costs, long run does not
-Short run curves are U shaped due to law of diminishing productivity, long run ones are curved due to economies (and diseconomies) of scale |
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Term
| Law of Diminishing Productivity |
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Definition
| This is the idea that as you increase the level of output you produce, the less and less efficient your firm becomes. Eventually your firm will reach a productivity end point, and from there adding more just increases costs while REDUCING output! |
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Term
| Barriers of Entry for Physicians |
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Definition
Barriers of entry are quite large for Physicians, as they have to go through medical school, licensing, time it takes, residency program, etc. to become one!
*People argue over time this barrier of entry has weakened as doctors get away from their own practice, but the barriers are still quite high
NOTE licensing is a barrier of entry to physicians! |
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Term
| When both demand and supply decrease simultaneously |
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Definition
| When they both decrease, Quantity is guaranteed to decrease, but by how much depends. Price can increase, stay the same, or increase, but it depends! |
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Term
| When demand and supply increase simultaneously |
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Definition
| When they increase simultaneously, Quantity is guaranteed to increase! But by how much depends. Price can increase, decrease, or stay the same, and this depends on how much of each changes. |
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Term
| When demand decreases and supply increases simultaneously |
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Definition
| When demand decreases, but supply increases, the price is guaranteed to decrease! But how much depends. Quantity can increase, decrease, or stay the same, but that also depends! |
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Term
| When Demand Increases and Supply Decreases |
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Definition
| The price is guaranteed to increase, but by how much depends! The quantity can decrease, stay the same, or increase, but that depends! |
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Term
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Definition
When a seller will sell the same good to different consumers at different prices. The SAME good for different prices.
EX senior discounts
*this only works when firm holds some sort of market power |
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Term
| Coinsurance Rates over time |
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Definition
| Over time, the insurance coverage of individuals has increased! Consequently, that means over time the coinsurance rates have decreased! |
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Term
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Definition
Transaction costs refer to costs associated with incurring an economic exchange. Under perfect competition, we assume there are NO transaction costs
*if transaction costs occur, consumers will not purchase items at economic equilibrium. |
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Term
| Condition for Optimal Input Use |
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Definition
| The optimal mix of inputs is where the isoquant curve is tangent with the isocost curve. That allows for the best allocation of inputs knowing the desired isoquant output. |
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Term
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Definition
This is when a consumer will alter their behavior knowing that they have health insurance. Consumers take fewer precautions knowing they will be covered!
EX: not trying to not get sick, knowing insurance will cover doctor expenses |
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Term
| Two Properties of Being a Public Good |
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Definition
| To be a public good you must exhibit Non-rival consumption (one person consumes without diminishing it), and excludability (make it hard to exclude people/ make it costly to make people pay for it) |
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Term
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Definition
This is one of 2 properties of a Public Good. It is the idea that if someone uses or consumes this good, it will not deteriorate its value for the next person!
An example of this would |
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Term
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Definition
| This is one of the two properties needed to be a public good. It is the idea that a public good must have low excludability, or that it must be costly to exclude non-paying individuals. An example is a public park. Everyone benefits from it who goes, but it is very hard to determine who is actually paying for it, making it a PUBLIC good |
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Term
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Definition
| A private good is a good that is exclusive to the consumer that owns it. It is either rival in consumption (using it alters the ability of someone else doing so), highly exclusive (not high in cost to exclude not paying individuals) or both! |
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Term
| Two ways to measure the value of life |
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Definition
-Willingness to Pay Approach
-The present value/ human capital approach |
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Term
| Present Value of Potential Lost/ Human Capital Approach |
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Definition
This is one of the ways to measure the value of a human life. It equates how much value of output one is projected to produce in their lifetime to aid the market, and places that as the value of their life.
*According to this approach, an unemployed person had little value of their life |
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Term
| Willingness to pay approach |
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Definition
This is one of the ways to measure the value of a human life. It is based on how much someone is willing to pay for small reductions in the probability of dying. The more you are willing to pay, the more you value your life.
*This is show in things such as smoke alarms, wearing your seatbelt, etc. |
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Term
| Supplier Induced Demand (SID) Hypothesis |
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Definition
This is the idea that doctors abuse their role as medical advisers (take advantage of their asymmetric medical information) to improve their own economic self interest.
This can include prescribing unnecessary medical care, like follow up visits, excessive number of tests, etc. |
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Term
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Definition
| This is the idea that doctors and patients do not know the same amount of information on medical care. It is believed that this had lead doctors to take advantage of medical care consumers by prescribing them unnecessary medical care, increasing the doctors economic gain |
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Term
| Policy Changes to Medicare Over the years |
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Definition
-Diagnosis-Related Groups (DRG) system
-Resource Based Relative Value Scale (RBRVS) System
-Medicare Volume Performance Standard (VPS)
-Medicare Part D |
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Term
| Diagnosis Related Groups (DRG) System |
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Definition
| This is one of the reforms made to Medicare over the years. In this case, hospitals were reimbursed for providing care to specific groups, based on their symptoms. Essentially, each case they treated in a specific group they were reimbursed, with the amount of each reimbursement depending on the group. This was done to increase medical care efficiency |
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Term
| Resource-Based Relative Value Scale (RBRVS) System |
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Definition
| This one one of the reforms to Medicare. In 1992 they started reimbursing physicians based the time, effort, or resources necessary for them to put in a certain amount of care. They were then reimbursed a fee based on how much of their time/ effort/ resources was consumed |
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Term
| Medicare Volume Performance Standards (VPS) |
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Definition
| This was a reform made to the Medicare system in 1990. The government wanted to seize more control over the growth of their Medicare Expenditures. So they established the VPS, or a limit on the amount of expenditures that can be spent on Medicare each year. Based on whether or not the limit is met, or exceeded, helps the government decide on the physician fees (and growth) for the next year! |
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Term
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Definition
Medicare is uniformly run by the federal government, while Medicaid is a matching program of state government funds.
-Medicare focuses on providing healthcare for the aged and disabled, medicaid is a program more geared toward helping those in economic hardship |
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Term
| Trends in Mode of Physician Practice |
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Definition
| Over time, physicians have moved from working in small practices to larger multidoctor modes of production. The number of physicians who own their own practice has decreased, the number of 1 and 2 doctor practices has decreased, while the number of physcians who get paid a salary has increased, and the total number of physicians in mid size practice has increased from 13.1-19.4%. Overall, we can deduce these trends as physcians are moving away from private small practices and into much larger ones |
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Term
| Production/Cost/Efficniency and Physician Service |
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Definition
Doctor Services have certain efficency trends to maximize production and reduce costs. They are:
-Marginal Productivity for doctors is much greater than that of other medical inputs like nurses, aka doctors are the most efficient
-Efficiency increases greatly with the input of more "physician extenders" like PAs and nurses
-Group Practices are much more efficient than solo practices
Overall:
1. doctors have highest marginal productivity
2. PAs and Nurses greatly increase efficiency
3. Better in groups than in solo practice
*NOTE physicians practice also deals with moderate economies of scale |
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Term
| Economies of Scale and Physician Service |
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Definition
| It is noted that there is a moderate economies of scale when dealing with doctor practices, or that as you increase the number of input (doctor hours) you get an increasing proportion output (happy patients) for a little while until the curve flattens out |
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Term
| Manage Care Organizations (MCOs) on the Physician Market |
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Definition
MCOs have a large role in the doctor market, as almost 90%! of physicians have a contract with at least 1 MCO.
-This also explains the trend to larger practices, are large, cost efficient, multidoctor places are much more likely to be able to accept discounts from MCOs |
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Term
| Manage Care Organizations (MCOs) |
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Definition
| These are organizations that are used to improve healthcare quality and maximize healthcare benefits! The are federally funded |
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Term
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Definition
Medicare = 32%
Out of Pocket = 28%
Medicaid = 22%
Private Insurance = 9%
Other = 9%
*NOTE Medicare and Medicaid combine for 54%!!
-Government, then individual consumers are the two largest providers for nursing home care |
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Term
| Coefficients in a Multiple Linear Regression |
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Definition
| Coefficients in a multiple linear regression represent how much that one variable influences the independent variable! |
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Term
| R-Squared Value in Multiple Linear Regreesion |
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Definition
| The R squared value represents how much the variables in your regression make up the total value of the dependent variable (how representative all the factors are) |
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Term
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Definition
A t stat represents how much your calculated value differs from the standard error value (or t stat bell curve). When the T stat value is far away enough from the center of the standard deviation curve, it allows you to state your results weren't a result of chance, rather they were statistically significant!
*"How far away" is dictated by the alpha level |
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Term
| Correlation does not prove causation |
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Definition
| Just know this one! Correlation means two things are related, causation means one causes the other! |
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Term
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Definition
| This is the process a doctor goes through of recommending a diagnostic test or treatment that is not necessarily the best option for the patient, but an option that mainly serves the function to protect the physician against being sued. Doctors are encourages to over utilize medical services to stave off malpractice suits! |
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Term
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Definition
This is one of the ways Managed Care Organizations (MCOs) try to contain medical costs. The do so by implementing programs that do utilization reviews, either current, retrospective, or prospective (past, present, future) to see how well physicians are making medical decisions and eliminate unnecessary medical care
-Overall it is a way to contain medical costs set by doctors |
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Term
| Integrated Delivery System (IDS) |
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Definition
| THIS IS A TYPE OF ACO, or one way of combining multiple health services together to reduce cost. This is when you combine physicians and hospitals into one single entity, or a physicians practice with a hospital that is run by a single ownership and structure. It can differ from how much revenue, management, risk etc. is shared, but it is a combination of medical outputs to increase efficiency! |
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Term
| Accountable Care Organizations (ACO) |
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Definition
When the Affordable care act was passed, one of the sections were that it would encourage the creation of ACOs, or accountable care organizations. These are organizations that in one way or another, combine medical services like physicians and hospitals together to provide specialized, cost efficient service. ACOs are expected to receive bonuses for the amount of cost they save while providing a certain standard of care!
NOTE: integrated delivery systems (IDS)s are a type of ACO, where the whole operation is run by 1 source of management. An ACO can include all sorts of ways of incorporating medical services together |
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Term
| How did Tax Exemption of employer-provided Health Insurance come to be? |
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Definition
| During WWII, when wage ceilings were imposed in medical businesses, the only way to compensate for not being able to raise wages was to offer their employees medical insurance. This was fine for sometime, however, the employees never reported that as part of their income. By the time the government mandated that they reported it, employees revolted when they attempted to tax them as well. The initial delay of reporting is what lead to the tax exemption of this coverage! employees never reported this insurance coverage on their taxes, and by the time the government mandated that they reported it, employees revolted when they attempted to tax them as well. The initial delay of reporting is what lead to the tax exemption of this coverage! |
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Term
| How Medical Employer Based Health Insurance Came to be thanks to WWII |
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Definition
During WWII, the hospital insurance market and the level of competition among hospitals intensified. Mean while, the Federal Government had implemented wage and price controls on healthcare services! This increase in competition, but inability to offer higher wages due to the wage ceiling, lead Medical businesses to offer something else: private insurance coverage to those who work for them! Thus employers began insuring their employees as a means of compensating for the fact they could not raise their wage.
*Unfortunately, employees never reported this insurance coverage on their taxes, and by the time the government mandated that they reported it, employees revolted when they attempted to tax them as well. The initial delay of reporting is what lead to the tax exemption of this coverage! |
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Term
| Coinsurance Rates on Demand for Healthcare |
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Definition
| The lower the coinsurance rate, the higher the amount of insurance coverage. This leads to a greater demand for healthcare, and a larger total price/ quantity demanded. The lower coinsurance rate also leads to less out of pocket spending for the consumer! |
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Term
| Patterns overtime in productivity and real compensation for medical service |
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Definition
| They have both increased overtime, with productivity increasing at a higher rate than compensation. This has caused the gap between productivity of works and compensation to those workers to increase over time! |
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Term
| Mendocino (Stay Well) Insurance Plan |
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Definition
| This is a plan for health insurance where consumers pay is directly related to annual claims, or how many times they claim their insurance a year! This will cause people to participate in wellness incentives (eating better, not smoking, etc) to avoid going and having to pay for each visit! |
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Term
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Definition
| This is when there is only 1 buyer of a good/ service exists in a market, and they are able to dictate their price AND quantity. |
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Term
| Monopsony Power in the Nurses Industry |
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Definition
| Hospitals display Monopsony power (buyer power) for nurses! Because of this, they put the wages much lower than what equilibrium would be. This causes a "shortage" in the number of nurses, when in reality the shortage is a shortage of nurses willing to work at that low wage! |
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Term
| Minimum Wage in the Monopsony Labor Markets |
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Definition
When firms with buyer power or monopsony power, they set wages too low and it causes "shortages" of workers, but in reality its a shortage of workers willing to work at that wage. To compensate for this, a minimum wage is set to bring the wage closer to equilibrium wage, increasing the quantity of workers
*This is how the monopsony power from hospitals is fixed in the nursing market |
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Term
| Fee For Service Payment scheme |
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Definition
This is one way to pay a Physician for care. Fee For service is when you receive your medical service, and then you pay whatever the service costs once the service is done
This yields NO risk for the Physician |
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Term
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Definition
This is one way to pay a physician for care. A fixed payment scheme is when you are given set an amount to pay for medical services before you receive treatment, and then you receive treatment. This can lead to a consumer paying more than or less than what the actual cost of care is. In some cases, the medical service may have to reimburse the difference if the consumer paid way too much!
This scheme yields moderate risk, of making the consumer pay too much |
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Term
| 3 Key Provisions to the Affordable Care Act (ACA) |
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Definition
THIS WAS ONE OF THE READINGS.
The 3 key provisions were:
1. New Consumer Protections
2. Improving quality and lowering costs
3. Increasing Acess
CP, Q+C, Acessibilty
CPQCA
see-pee-Q-see-ayy |
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Term
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Definition
This was one of the ways the Affordable Care Act (ACA) was revised in 2010 to help consumers. This one was to provide more healthcare protections to consumers, and it did so by
-putting info for consumers online
-prohibiting dney coverage of children based on pre exisiting conditions
-prohibit insurance companies from rescinding coverage
-Eliminating Lifetime limits on insurance
-Regulating Annual Limits
-Appealing Insurance Company Decisions
-Establishing Consumer Assistance Programs in the States |
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Term
| Improving Quality and Lowering Costs |
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Definition
This was one the ways the Affordable Care Act (ACA) was reformed in 2010 to help people attain better healthcare. This way did so by:
- Providing small business health insurance tax credits
-offering relief for 4 millions seniors who hit the Medicare "donut hole"
-Providing Free Preventative Care
-Preventing Disease and Illness
-Cracking Down on Heathcare Fraud |
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Term
| Increasing Access to Affordable Care |
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Definition
This was one of the ways the Affordable Care Act was reformed in 2010 in order to ensure more healthcare to more individuals. This way did so by:
-Providing access to insurance for uninsured Americans with pre-existing conditions |
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Term
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Definition
This was Gruber's Economic Analysis of the Affordable Care Act. It was the idea that the Affordable Care act needed all 3 of these things to be successful and provide affordable care. The three "stools" are
-Insurance companies should offer insurance to any applicant based on age and tobacco use, not underlying heatlh status
-There should be a requirement that makes all residents purchase insurance
-Subsidies make insurance affordable for those below the poverty line
*This essentially guatentees affordable healthcare insruance for all, but they theory is that they need all 3 (no discrimination, everyone has to buy, and the govt subsidize those that cant afford) in order to work! |
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Term
| "Medical Care and Its Delivery" |
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Definition
| This was one of the readings. It stated that we are spending too much money on healthcare, and not enough on other ways that can improve our health! It claimed that the medical sector getting extra money, but no much room to grow, has lead to economic inefficiency in the way the US is dealing with the lack of health |
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Term
| Healthcare Spending Connecticut Style |
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Definition
| This was one of the readings. In this reading it noted how CT allocates its healthcare resources. It notes how CT is overall well off in being 42nd in "healthcare burden," but it has other issues. It notes that CT is dead last in hospital spending, but spends the most on nursing homes! The article ran a regression to explain this, and argued that Medicare reimbursement policies, and things the hospital service can't really control are what effects the low expenditure on hospitals! They predict low spending on hospitals will continue in the future |
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Term
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Definition
| This was one of the readings. In it it examined why CTs healthcare costs were so high. It argued to help with this cost, plans should include incentives for consumers to adopt healthy lifestyles! |
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Term
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Definition
| This was one of the readings. It claimed that healthcare costs were high because consumers and insurers are unable to meet eachother halfway. Insurers need to balance financial protection of insurance with consumers needing to be "good consumers" or exhibit healthier lifestyles to not rely on insurance so much! |
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Term
| Reshaping Health Insurance |
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Definition
| This was one of the readings. It talked in depth about the Mendocino plan, a plan of insurance that gives consumers incentive to live healthy lifestyles. By rewarding consumers to live healthy, it meant less reliance on health insurance, which would benefit the health care sector by reducing costs! |
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Term
| Reforming Health Care - A case study for the stay well insurance plan |
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Definition
| This was one of the readings. This one advocated for the need of the stay well health insurance plan (Mendocino plan). It stated that a change in structure was needed to the healthcare system due to over usage of healthcare insurance providers! Felt consumers needed to exhibit healthier lifestyles and rewarding them to do so would be beneficial |
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Term
| The Painful Burden of Healthcare Costs |
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Definition
| This was one of the readings. It claimed that there needed to be a change in the structure of healthcare in order to solve the issue of healthcare costs. It said one solution is removing health insurance from the work place, but that is not feasible because of the fact they are untaxed. It argued the best way to improve healthcare cost is to have consumers exhibit healthy lifestyle choices by rewarding them (mendocino plan!) |
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Term
| The Importance of the Individual Mandate - Evidence from Massachusetts |
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Definition
| This one was of the readings. It talked about how important the "individual mandate" clause of the Affordable care was. It stated that by forcing all people to get health insurance, it will cause even healthier people to become insured, and the more healthy people insured, will lead to less reliance on health insurance itself. The act makes people who don't necessarily need or utilize their insurance to pay coverage! |
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Term
| How Competitive Are State Insurance Markets? |
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Definition
| This was one of the readings. It studied how much competition was faced state by state for health insurance. It found that the level of competition varied greatly between the states, and with the Affordable Care Act and other policies, the competition for health insurance looks like its going to INCREASE over time |
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Term
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Definition
| This was one of the readings. It stated how difficult it was to reduce the number of uninsured individuals, and argued that there is too much reliance and ignorance in healthcare. Argued that people don't know how much a visit to the dentist, physician, or prescription drug really costs, just blindly pay it. This ignorance is part of the problem for such high healthcare expenditure! |
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Term
| What are the two ways a Physician is Paid? |
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Definition
The Fee for Service Scheme
The Fixed Payment Scheme
Fee for service yields NO risk for the physician, but a fixed payment does yield moderate risk (of forcing the consumer to pay too much) |
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