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| Preface | |
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| Acknowledgements | |
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| About the Author | |
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| Foreword | |
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| Terms of Trade: The Flow of Funds Through the Health Care System | |
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| What is Economics? | |
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| Terms of Trade | |
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| Value | |
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| The Flow of Funds | |
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| Health Care Spending in the United States | |
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| Sources of Funds | |
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| Health Care Providers: The Uses of Funds | |
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| Quality | |
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| Public or Private Choices | |
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| Research | |
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| Time | |
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| The Structure of the Economy: Contracts | |
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| Economic Principles as Conceptual Tools | |
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| Trade | |
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| Choice: Are Benefits Greater Than Costs? | |
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| Opportunity Cost | |
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| Scarcity (Budget Constraints) | |
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| Maximization/Marginalism | |
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| Money Flows in a Circle | |
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| Contracts and Organization | |
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| Health Principles | |
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| Health Is Priceless | |
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| And Yet, Money Still Determines Health | |
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| Health Risks Are More Public Than Private | |
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| Individual Choices: Lifestyle Is More Than Medicine | |
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| Measurable Differences in Quality Over Time, or Regions, Are Greater Than Most Differences in Choices Faced by Patients | |
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| Health and the Economy | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Demand | |
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| Need Versus Demand | |
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| The Demand Curve | |
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| The Diamonds-Water Paradox: An Example of Marginal Analysis | |
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| Ceteris Paribus | |
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| Derived Demand | |
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| Individual, Firm, and Market Demand Curves | |
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| Marginal Revenue | |
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| Price Sensitivity | |
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| Price Elasticity and Marginal Revenue | |
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| Price Discrimination | |
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| Is Price the Only Thing That Matters? | |
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| Profit-Maximizing Firms, Supply, and Markets | |
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| Efficiency | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Cost-Benefit and Cost-Effectiveness Analysis | |
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| Cost-Benefit Analysis is About Making Choices | |
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| An Everyday Example: Knee Injury | |
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| Opportunity Cost: Looking at Alternatives | |
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| Expected Value | |
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| Maximization: Finding the Optimum | |
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| Average, Total, and Marginal Costs | |
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| An Example of Marginal Analysis: Costs and Benefits of a Sixth Stool Guaiac | |
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| Measuring Benefits | |
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| Health | |
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| Productivity | |
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| Reductions in Future Medical Costs | |
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| Measuring Costs | |
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| Medical Care and Administration: Charges Versus Costs | |
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| Follow-up and Treatment | |
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| Time and Pain of Patient and Family | |
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| Provider Time and Inconvenience | |
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| The Value of Life | |
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| Quality-Adjusted Life Years (QALYs) | |
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| Discounting Over Time | |
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| QALY League Tables | |
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| Perspectives: Patient, Payer, Government, Provider, Society | |
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| Distribution: Whose Costs and Whose Benefits? | |
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| CBA Is a Limited Perspective | |
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| CBA and Public Policy Decision Making | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Insurance | |
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| Methods for Covering Risks | |
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| Savings | |
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| Family and Friends | |
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| Charity | |
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| Private Market Insurance Contracts | |
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| Social Insurance | |
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| Strengths and Weaknesses of Different Forms of Risk Spreading | |
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| Why Third-Party Payment? | |
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| Variability | |
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| Risk Aversion | |
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| Adverse Selection | |
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| Moral Hazard | |
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| Welfare Losses Due to Moral Hazard | |
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| Open or Closed Funding? | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Insurance Contracts and Managed Care | |
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| Third-Party Transactions | |
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| Tax Benefits | |
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| Who Pays? How Much? | |
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| Managed Care Plans | |
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| How are Benefits Determined? | |
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| Types of Insurance Plans | |
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| Employer-Based Group Health Insurance | |
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| Self-Paid Private Insurance | |
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| Medicare | |
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| Medicaid | |
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| Other Government Programs and Charity | |
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| The Uninsured | |
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| State Children's Health Insurance Program | |
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| Medical Savings Accounts (MSAs) and Defined Contribution "Voucher" Plans | |
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| A Range of Risk Bearing: Fixed Premiums, Administered Services Only, and Self-Insurance | |
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| The Underwriting Cycle | |
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| Erisa, Taxes, and Mandated Benefits | |
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| History of Health Insurance | |
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| Incentives--To Patients, to Payers, and to Providers | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Physicians | |
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| Physician Payment: How Funds Flow in | |
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| Co-pays, Assignment, and Balance Billing | |
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| Physician Payment in Managed Care Plans | |
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| Incentives: Why Differences in the Type of Payment Matter | |
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| A Progression: From Prices to Reimbursement Mechanisms | |
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| Physician Incomes | |
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| Physician Costs: How Funds Flow Out | |
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| Physician Practice Expenses | |
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| The Labor-Leisure Choice | |
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| The Doctor's Workshop and Unpaid Hospital Inputs | |
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| Malpractice | |
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| The Transaction Between Doctor and Patient | |
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| Asymmetric Information | |
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| Uncertainty | |
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| Licensure: Quality or Profits? | |
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| How Does Licensure Increase Physician Profits? | |
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| Supply and Demand Response in Licensed Versus Unlicensed Professions | |
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| How Does Licensure Improve Quality? | |
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| A Test of the Quality Hypothesis: Strong Versus Weak Licensure | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Medical Education, Organization, and Business Practices | |
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| Medical Education | |
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| Human Capital: Medical Education as Investment | |
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| The Origins of Licensure and Linkage to Medical Education | |
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| AMA Controls Over Physician Supply, 1930-1965 | |
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| Breaking the Contract: The Great Medical Student Expansion of 1970-1980 | |
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| Building Pressure: Fixed Domestic Graduation Rates 1980-2002 | |
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| Adjusting Physician Supply | |
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| The Flow of New Entrants and the Stock of Physicians | |
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| Immigration of International Medical Graduates | |
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| Growth in Non-M.D. Physicians | |
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| Balancing Supply and Incomes: Tracing the Past and Projecting the Future | |
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| Group Practice: How Organization and Technology Affect Transactions | |
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| Kickbacks, Self-Dealing, and Side Payments | |
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| Price Discrimination | |
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| Practice Variations | |
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| Insurance, Price Competition, and the Structure of Medical Markets | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Hospitals | |
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| From Charitable Institutions to Corporate Chains: Development of the Modern Hospital | |
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| Revenues: The Flow of Funds into the Hospital | |
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| Sources of Revenues | |
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| Costs: The Flow of Funds Out of the Hospital | |
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| Financial Management and cost Shifting | |
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| Capital Financing | |
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| Organization: Who Controls the Hospital and for What Ends? | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Management and Regulation of Hospital Costs | |
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| Why do Some Hospitals Cost More Than Others? | |
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| How Management Controls Costs | |
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| Short-Run Versus Long-Run Cost Functions | |
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| Uncertainty and Budgeting | |
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| Conflict Between Economic Theory and Accounting Measures of Per Unit Cost | |
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| Timing | |
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| Whose Costs? | |
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| Economies of Scale | |
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| The Hospital is a Multiproduct Firm | |
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| Contracting Out | |
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| Quality and Cost | |
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| Technology: Cutting Costs or Enhancing Quality? | |
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| Improved Efficiency May Raise Total Spending | |
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| How do Hospitals Compete? | |
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| Competing for Patients | |
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| Competing for Physicians | |
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| Competing for Contracts | |
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| Measuring Competitive Success | |
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| Measuring the Competitiveness of Markets | |
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| Controlling Hospital Costs Through Regulation | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Managed Care | |
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| Why Managed Care? | |
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| Costs and Quality | |
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| Management: The Distinctive Feature of Managed Care | |
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| Contractual Reforms to Reduce Costs | |
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| Reforming the Organization to Reduce Cost | |
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| Sources and Uses of Funds | |
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| The Range of Managed Care Plans | |
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| Provider Networks | |
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| Gatekeeping | |
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| Capitation | |
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| Withholds | |
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| Utilization Review | |
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| How Care is Managed: A Mental Health Example | |
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| Individual and System Risks in Health Care | |
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| Kaiser: The Evolution of an HMO | |
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| Ownership and Capital Markets: Signs of Failure | |
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| GHA: A Consumer Co-op Gets Bought Out by a Franchise Chain | |
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| Corporate Advantage | |
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| U.S. Healthcare: A Profitable Growth Company | |
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| The Enthoven "Managed Competition" Plan | |
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| Is Managed Care the Solution to Rising Costs? | |
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| Evidence on Cost Reductions | |
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| Risk Selection | |
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| Quality of Care | |
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| Costs Reductions in IPA HMOs, PPOs, and POS Plans | |
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| Administrative Costs and Profits | |
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| One-Time Savings? | |
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| Backlash: Are There Losers as well as Winners? | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Long-Term Care | |
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| Development of the Long-Term Care Market | |
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| Defining Ltc: Types of Care | |
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| Medicaid: Nursing Homes as a Two-Part Market | |
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| Certificate of Need: Whose Needs? | |
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| Money and Quality | |
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| Competing for Certificates of Need, Not for Patients | |
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| Evidence on the Effects of CON | |
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| Case-Mix Reimbursement | |
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| Substitution | |
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| Financial Reimbursement Cycles | |
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| Continuing Care Retirement Communities and the Wealthy Elderly | |
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| Medicare Catastrophic Coverage Act of 1988 and the Taxpayer Revolt | |
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| The Effects of Aging on Cost and Utilization | |
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| Defining Boundaries: Is Long-Term Care "Medical"? | |
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| LTC Insurance | |
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| The Effects of Aging | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Pharmaceuticals | |
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| How Funds Flow in | |
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| Medicare and Medicaid | |
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| Inpatient Pharmaceuticals | |
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| Uses of Funds | |
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| Retail Pharmacies | |
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| Wholesalers | |
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| Insurance Companies and PBMs | |
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| Pharmaceutical Firms | |
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| Cost Structure | |
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| History and Regulation of Pharmaceuticals | |
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| Research and Development | |
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| Pharmacoeconomics and Outcomes Research | |
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| Industry Structure and Competition | |
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| Market Segmentation: Types of Buyers | |
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| Contractual Responses to Pharmacy Benefits Management | |
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| Value and Cost | |
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| The Role of Middlemen: Distribution Versus Marketing | |
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| Research Productivity | |
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| Trends: Form Follows Function (and Money) | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Introduction to the Macroeconomics of Health | |
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| What is Macro Health Economics? | |
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| Properties of the Individual Versus Properties of the System | |
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| Dynamics: Change Over Time | |
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| Abstractions and Complications | |
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| The Role of Government (Overview of Chapters 14-18) | |
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| Suggestions for Further Reading | |
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| Problems | |
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| Endnotes | |
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| The Role of Government | |
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| The Flow of Government Health Funds | |
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| The Roles of Government | |
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| Government is Necessary, Even for Private Exchange | |
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| Efficiency of Markets Under Conditions of Perfect Competition | |
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| Government in a Mixed Economy | |
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| Law and Order | |
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| Public Goods and Externalities | |
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| Externalities | |
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| The Coase Theorem: Transaction Costs and Property Rights | |
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| Politicians: Entrepreneurs Who Try to Get Votes | |
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| Market Failure | |
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| Monopoly | |
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| Paternalism | |
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| Income Redistribution and Care of the Poor | |
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| Medicaid and Medicare: Dependency or Rights? | |
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| How Government Works | |
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| The Voluntary Sector | |
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| Government as the Citizen's Agent | |
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| Winners and Losers | |
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| Pros and Cons of Regulation and Competition | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Public Goods and Public Health | |
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| Characteristics of Public Goods | |
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| Privatizing Public Goods | |
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| Social Costs Depend on the Number of People | |
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| Insurance Makes Any Good More Public | |
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| Information | |
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| Rational Consumer Ignorance | |
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| Milk or Bread: Which is More Public? | |
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| The Theory of Pure Public Goods | |
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| Public Goods Make Most People Better Off, But Few Happy | |
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| Infectious Disease Externalities | |
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| Epidemics | |
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| HIV/AIDS | |
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| The Sanitary Revolution: A Moral Campaign for Public Health | |
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| Formation of the U.S. Public Health Service | |
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| Sex, Drugs, and War: Public Health in Action | |
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| Who Counts as a Citizen? Abortion and Other Dilemmas | |
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| Addiction | |
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| War and Public Health | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Economic History, Population Growth, and Medical Care | |
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| Economic Growth has Determined the Shape of Health Care | |
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| Birth Rates, Death Rates, and Population Growth | |
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| The Stone Age | |
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| The Agricultural Age | |
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| Investment and Trade | |
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| Civilization, War, and Government | |
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| The Decline of Civilizations Leads to Population Declines | |
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| The Plague | |
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| Food Supply Determines Population | |
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| The Rise of Economics | |
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| The Malthusian Hypothesis | |
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| The Industrial Age | |
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| Why Malthus Was Wrong | |
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| Demographic Transition | |
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| Demographic Change, Income Distribution, and the Rise of the Middle Classes | |
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| The Information Age | |
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| Income and Health | |
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| Income and the Value of Medical Care | |
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| Reducing Uncertainty: The Value of Life and Economic Security | |
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| The Value of Risk Reduction | |
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| Social Security and Health Insurance | |
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| Preconditions for Changing Medical Organization | |
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| The Rise of Medical Technology | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| International Comparisons of Health and Health Expenditures | |
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| Wide Differences Among Nations | |
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| Size of the Market | |
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| Micro Versus Macro Allocation: Health as a National Luxury Good | |
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| Causality: Does More Spending Improve Health? | |
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| Low-Income Countries | |
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| Sudan | |
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| Health Care in Kenya | |
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| Middle-Income Countries | |
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| The Health Care System of Mexico | |
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| Poland | |
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| High-Income Countries | |
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| Costs and Cost Control | |
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| Japan | |
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| The German Health System | |
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| International Trade in Health Care | |
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| Pharmaceuticals | |
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| Equipment | |
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| Services | |
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| People and Ideas | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Dynamics of National Health Spending | |
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| Micro and Macro Perspectives on Spending | |
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| The Consumption Function | |
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| The Permanent Income Hypothesis | |
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| Income Elasticity and Shared Income | |
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| Dynamics | |
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| Permanent Income and Adjustment of Health Spending to GDP | |
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| Adjustment to Inflation | |
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| A Dynamic Model of U.S. Health Expenditures | |
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| Government Cost Controls: Spending Gaps and the Push to Regulate | |
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| Price Controls: The "ESP" Program | |
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| The Voluntary Effort | |
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| Prospective Payment System with Diagnosis-Related Groups | |
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| Why Do People Believe Cost Controls Work? | |
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| "Spending" is Mostly Labor | |
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| Employment | |
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| Wages | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Value for Money in the Future of Health Care | |
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| Forcing the Question: Who Gets Healthy and Who Gets Paid? | |
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| Spending Money or Producing Health? | |
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| Allocation, Allocation, Allocation | |
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| Dynamic Efficiency | |
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| The Future | |
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| Suggestions for Further Reading | |
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| Summary | |
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| Problems | |
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| Endnotes | |
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| Glossary | |
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| Index | |