Humbio 3B Midterm

• Moral hazard describes when protection from risk changes people's behavior and generates inefficient outcomes. Society tends to bear the full cost of individuals' actions.
• Ex-ante moral hazard leads people to use less preventive care and demand for medical care is higher.
• Ex-post moral hazard is when insurance reduces the price to the insured individual, making it below the price of society as a whole. Insured individuals consume care when society's marginal cost is greater than society's marginal benefit.
• A steep marginal curve slope indicates inelasticity.
• Moral hazard occurs because insurance does not allow supply and demand to balance normally.
• Insurance can be thought of as subsidizing the purchase of insurance and moving demand higher than it would otherwise be.
• As demand elasticity increases, potential moral hazard increases.
• Medical care has a price elasticity of 0.2, which is considered inelastic.
• Preventive care is more elastic than hospitalization.
• Moral hazard results in the consumption of less beneficial health care.
• A deductible is an amount that patients have to pay entirely themselves before their insurance will contribute.
• Coinsurance is a percentage of the bill that the patient must pay.
• A copayment is a fixed dollar amount that the patient must pay per encounter.
• An out-of-pocket-maximum is a cap on the amount of out-of-pocket payments a patient is required to make in a given time period.
• Increasing cost sharing will reduce utilization, moral hazard, and risk protection.
• High-deductible health plans are increasingly more popular.
• In a principal-agent situation, the patient is the principal.
• Supplier-induced demand is demand for services the seller creates, not necessarily from the buyer.
• Fee for service system is when practices get paid for each service their providers do. Practices get higher fees for more complicated services.
• Fee for service increases the amount of services for each patient. These treatments also tend to be more profitable for the practices. It also encourages the development of more expensive treatment options and does not necessarily make people healthier.
• Health insurance and asymmetric information tend to incentivize people to get fewer treatments.
• Capitation means practices get paid per person, per unit of time. Practices are left in charge of a panel for a given period of time.
• Capitation tends to get patients fewer services and shift towards the cheapest payments possible. It's better to have healthier patients in the panel, so it might be better than FFS. Encourages the development of cheaper treatment options.
• Capitation and asymmetric information could push forward inefficient underuse.
• In fee for service systems, intermediaries retain risk. Capitated systems shift risk from intermediaries to providers.
• In 2016, 71% of physician practice revenue was from Fee from Service.
• To fix the healthcare market there are two main options: abandon aspects of market-functioning and use command and control or rely on private and public intermediaries and the government to fix the issues.
• Insurance shifts responsibility to the intermediaries, thus they can have more data and expertise than patients.
• Intermediaries who keep health care costs controlled should be able to charge a lower premium, and thus if they continue to sell a sufficiently good product, be more successful in selling policies.
• If the purchasers of insurance trade off the benefits and costs of different insurance policies, then insurers will make policies that encourage optimal utilization and prices.
• Care use and prices are influenced by: patient cost sharing, provider payment, selective contracting, oversight and management of utilization, and managing the set of covered services.
• Selective contracting is when insurance companies pick a set of providers (network) to work with.
• An open panel means patients can use any provider.
• A closed panel indicates patients must choose from the set of in-network providers or the intermediary will not pay.
• A semi-open or semi-closed panel is when patients get lower out-of-pocket costs when staying in the network but have the option not to.
• Gatekeepers state that patients must see a primary care physician first before seeing a specialist.
• Utilization review/management require pre-authorization for the use of some services.
• The 3 Health Plan types are: Traditional Indemnity (conventional), Preferred Provider Organization (PPO), and Health Maintenance Organization (HMO)
• Conventional plans have minimal attempts to influence care and have significant cost sharing.
• PPOs often have more cost-sharing than HMOs. They have a semi-closed panel, no gatekeeper, some utilization review, and FFS.