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• Title Page
• Copyright Page
• Dedication
• Brief Contents
• Contents
• Preface
• Acknowledgments
• About the Author
• Foreword
• 1 Choices: Money, Medicine, and Health
• Questions
• 1.1 WHAT IS ECONOMICS?
• Terms of Trade
• Value
• Can We Pay Somebody to Care?
• Financing Health Care
• Full Cost: Paying for Medical Care
• 1.2 THE FLOW OF FUNDS
• Health Care Spending in the United States
• Sources of Financing
• Health Care Providers: The Uses of Fund
• 1.3 ECONOMIC PRINCIPLES AS CONCEPTUAL TOOLS
• Scarcity (Budget Constraints)
• Opportunity Cost
• Willingness to Pay
• Trade
• Money Flows in a Circle
• The Margin: What Matters?
• Maximization: Marginal Costs and Marginal Benefits
• Choice: Are Benefits Greater than Costs?
• Investment
• Contracts: Complex Exchanges to Deal with Timing and Risk
• Organizations Adapt and Evolve
• Distribution: Who Gets What
• 1.4 HEALTH DISPARITIES
• 1.5 WHOSE CHOICES: PERSONAL, GROUP, OR PUBLIC?
• 1.6 SOCIAL SCIENCE AND RATIONAL CHOICE THEORY
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 2 Demand and Supply
• Questions
• 2.1 THE DEMAND CURVE
• The Diamonds–Water Paradox: An Example of Marginal Analysis
• Consumer Surplus: Marginal versus Average Value of Medicine
• Ceteris Paribus
• Individual, Firm, and Market Demand Curves
• 2.2 THE SUPPLY CURVE
• Marginal Revenue
• 2.3 PRICE SENSITIVITY
• Price Elasticity and Marginal Revenue
• Price Discrimination
• 2.4 IS MONEY THE ONLY PRICE?
• 2.5 INPUTS AND PRODUCTION FUNCTIONS
• Production Functions
• Marginal Productivity
• 2.6 MARKETS: THE INTERSECTION OF DEMAND AND SUPPLY
• 2.7 NEED VERSUS DEMAND
• How Much is a Doctor Visit Worth?
• The Demand for Medical Care is Derived Demand
• The Demand for Health: What Makes Medical Care Different
• 2.8 DETERMINANTS OF HEALTH
• 2.9 EFFICIENCY
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 3 Cost–Benefit and Cost-Effectiveness Analysis
• Questions
• 3.1 COST–BENEFIT ANALYSIS IS ABOUT MAKING CHOICES
• An Everyday Example: Knee Injury
• Stepwise Choices: Yes or No? How Much?
• Calculating Marginal and Average Costs
• Defining Marginal: What Is the Decision?
• 3.2 MAXIMIZATION: FINDING THE OPTIMUM
• Declining Marginal Benefits
• Optimization: Maximum Net Benefits
• Expected Value
• 3.3 THE VALUE OF LIFE
• 3.4 QUALITY-ADJUSTED LIFE YEARS (QALYs)
• Discounting Over Time
• QALY League Tables
• 3.5 PERSPECTIVES: PATIENT, PROVIDER, PAYER, GOVERNMENT, SOCIETY
• Distribution: Whose Costs and Whose Benefits?
• CBA and Public Policy Decision Making
• CBA Is a Limited Perspective
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 4 Health Insurance: Financing Medical Care
• Questions
• 4.1 METHODS FOR COVERING RISKS
• Savings
• Family and Friends
• Charity
• Private Market Insurance Contracts
• Social Insurance
• Strengths and Weaknesses of Different Forms of Risk Spreading
• 4.2 INSURANCE: THIRD-PARTY PAYMENT
• Why Third-Party Payment?
• Variability
• Third-Party Transactions
• Who Pays? How Much?
• How Are Benefits Determined?
• 4.3 RISK AVERSION
• 4.4 ADVERSE SELECTION
• 4.5 MORAL HAZARD
• Welfare Losses Due to Moral Hazard
• Ex Ante Moral Hazard
• 4.6 TAX BENEFITS
• 4.7 EFFECTS OF HEALTH INSURANCE ON LABOR MARKETS
• 4.8 HISTORY OF HEALTH INSURANCE
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 5 Insurance Contracts and Managed Care
• Questions
• 5.1 SOURCES OF INSURANCE
• Employer-Based Group Health Insurance
• Medicare
• Medicaid
• State Children’s Health Insurance Program
• Other Government Programs and Charity
• The Uninsured
• 5.2 CONTRACTING AND PAYMENTS
• Insurance Companies are Financial Intermediaries
• Risk Bearing: From Fixed Premiums to Self-Insurance
• Purchasing Medical Care For Groups
• Medical Loss Ratios
• Claim Processing
• The Underwriting Cycle
• ERISA, Taxes, and Mandated Benefits
• Other People’s Money: Rising Costs and Mediocre Results
• 5.3 CONSUMER-DRIVEN HEALTH PLANS: HIGH DEDUCTIBLES AND HEALTH SAVINGS ACCOUNTS
• Defined Contribution Health Plans
• 5.4 MANAGED CARE
• Closed-Panel Group Practice HMOs
• IPA-HMOs and Open Contracts
• Managed Care Contract Provisions
• The Range of Managed Care Contracts: POS, PPO, HMO
• Management: The Distinctive Feature of Managed Care
• Provider Networks and Legal Structure
• Contractual Reforms to Control Costs
• 5.5 UNRESOLVED ISSUES: SPLIT INCENTIVES, DIVIDED LOYALTIES
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 6 Physicians
• Questions
• 6.1 FINANCING PHYSICIAN SERVICES: REVENUES
• Copayments, Assignment, and Balance Billing
• Physician Payment in Managed Care Plans
• Incentives: Why Differences in the Type of Payment Matter
• A Progression: From Prices to Reimbursement Mechanisms
• 6.2 PHYSICIAN INCOMES
• 6.3 PHYSICIAN FINANCING: EXPENSES
• Physician Practice Expenses
• The Labor versus Leisure Choice
• The Doctor’s Workshop and Unpaid Hospital Inputs
• Malpractice
• 6.4 THE MEDICAL TRANSACTION
• Asymmetric Information
• Agency: Whose Choices?
• 6.5 UNCERTAINTY
• 6.6 LICENSURE: QUALITY OR PROFITS?
• How Does Licensure Increase Physician Profits?
• Supply and Demand Response in Licensed versus Unlicensed Professions
• How Does Licensure Improve Quality?
• A Test of the Quality Hypothesis: Strong versus Weak Licensure
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 7 Medical Education, Organization, and Business Practices
• Questions
• 7.1 MEDICAL EDUCATION
• 7.2 THE ORIGINS OF LICENSURE AND LINKAGE TO MEDICAL EDUCATION
• AMA Controls over Physician Supply, 1930–1965
• Breaking the Contract: The Great Medical Student Expansion of 1970–1980
• Building Pressure: Fixed Domestic Graduation Rates, 1980–2010
• 7.3 ADJUSTING PHYSICIAN SUPPLY
• The Flow of New Entrants and the Stock of Physicians
• Immigration of International Medical Graduates
• Growth in Non-MD Physicians
• Balancing Supply and Incomes: Tracing the Past and Projecting the Future
• 7.4 GROUP PRACTICE: HOW ORGANIZATION AND TECHNOLOGY AFFECT TRANSACTIONS
• 7.5 KICKBACKS, SELF-DEALING, AND SIDE PAYMENTS
• 7.6 PRICE DISCRIMINATION
• 7.7 PRACTICE VARIATIONS
• 7.8 INSURANCE, PRICE COMPETITION, AND THE STRUCTURE OF MEDICAL MARKETS
• 7.9 CHOICES BY AND FOR PHYSICIANS
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 8 Hospitals
• Questions
• 8.1 FROM CHARITABLE INSTITUTIONS TO CORPORATE CHAINS: DEVELOPMENT OF THE MODERN HOSPITAL
• 8.2 HOSPITAL FINANCING: REVENUES
• Sources of Revenues
• 8.3 HOSPITAL FINANCING: EXPENSES
• 8.4 FINANCIAL MANAGEMENT AND COST SHIFTING
• 8.5 HOW DO HOSPITALS COMPETE?
• Competing for Patients
• Competing for Physicians
• Competing for Contracts
• Measuring Competitive Success
• Measuring the Competitiveness of Markets
• 8.6 ORGANIZATION: WHO CONTROLS THE HOSPITAL AND FOR WHAT ENDS?
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 9 Management and Regulation of Hospital Costs
• Questions
• 9.1 WHY DO SOME HOSPITALS COST MORE THAN OTHERS?
• 9.2 HOW MANAGEMENT CONTROLS COSTS
• Short-Run versus Long-Run Cost Functions
• Uncertainty and Budgeting
• 9.3 CONFLICT BETWEEN ECONOMIC THEORY AND ACCOUNTING MEASURES OF PER UNIT COST
• Timing
• Whose Costs?
• 9.4 ECONOMIES OF SCALE
• The Hospital Is a Multiproduct Firm
• Contracting Out
• 9.5 QUALITY AND COST
• Technology: Cutting Costs or Enhancing Quality?
• Improved Efficiency May Raise Total Spending
• 9.6 HOSPITAL CHARGES, COSTS, AND PRICES: CONFUSION AND CHAOS
• Chargemaster and Negotiated Fees
• Cost Finding: Gross Revenues and the RCCAC
• Medicare as a Standard for Pricing
• 9.7 CONTROLLING HOSPITAL COSTS THROUGH REGULATION
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 10 Long-Term Care
• Questions
• 10.1 DEVELOPMENT OF THE LONG-TERM CARE MARKET
• 10.2 AGE AND HEALTH CARE SPENDING
• 10.3 DEFINING LTC: TYPES OF CARE
• 10.4 MEDICAID: NURSING HOMES AS A TWO-PART MARKET
• 10.5 CERTIFICATE OF NEED: WHOSE NEEDS?
• Money and Quality
• Competing for Certificates of Need, Not for Patients
• Evidence on the Effects of Certificates of Need
• 10.6 COST CONTROL BY SUBSTITUTION
• 10.7 CASE-MIX REIMBURSEMENT
• 10.8 LONG-TERM CARE INSURANCE
• Is Long-Term Care “Medical”?
• 10.9 RETIREMENT, ASSISTED LIVING, AND THE WEALTHY ELDERLY
• 10.10 FINANCIAL REIMBURSEMENT CYCLES
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 11 Pharmaceuticals
• Questions
• 11.1 PHARMACEUTICAL REVENUES: SOURCES OF FINANCING
• Inpatient Pharmaceuticals
• 11.2 USES OF FUNDS
• Retail Pharmacies
• Wholesalers
• Insurance Companies and PBMs
• Pharmaceutical Firms
• Cost Structure
• 11.3 HISTORY AND REGULATION OF PHARMACEUTICALS
• 11.4 RESEARCH AND DEVELOPMENT
• 11.5 PHARMACOECONOMICS AND TECHNOLOGY ASSESSMENT
• 11.6 INDUSTRY STRUCTURE AND COMPETITION
• Value, Cost, and Marketing
• The Role of Middlemen: Distribution versus Marketing
• Research Productivity
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 12 Financing and Ownership of Health Care Providers
• Questions
• 12.1 WHAT IS FINANCING?
• 12.2 VALUE AND RATE OF RETURN
• The Time Value of Money
• Interest Rates and Present Value
• IRR: The Internal Rate of Return
• Human Capital: Medical Education as an Investment
• Risk
• Valuing Assets
• 12.3 UNCORRELATED (INDEPENDENT) AND CORRELATED (SYSTEM) RISKS
• Which Is Riskier: Nursing Homes or Drug Companies?
• Assessing Business Risk
• 12.4 OWNERSHIP AND AGENCY
• Equity and Debt
• Who Owns the Business? Who Owns the Patient? Agency Issues
• The Role of Financial Intermediaries
• 12.5 CAPITAL FINANCING: HOSPITALS
• 12.6 HMO OWNERSHIP AND CAPITAL MARKETS: SUCCESS AND FAILURE
• Business Risks for an HMO
• Kaiser Health Plan: The Evolution of an HMO
• Group Health Association: A Consumer Co-op Gets Bought Out by a Franchise Chain
• 12.7 ENTREPRENEURSHIP AND PROFITS
• U.S. Healthcare: A Profitable Growth Company
• 12.8 HEALH CARE FOR PROFIT, OR NOT
• Differences Between For-Profit and Nonprofit Behavior
• Charity Care: For Real or for Show?
• For-Profit or Not-for-Profit: Which is Better?
• Medical Care is Difficult: Risk, Information Asymmetry, Social Justice
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 13 Macroeconomics of Medical Care
• Questions
• 13.1 WHAT IS MACRO?
• Micro and Macro Perspectives on Spending
• 13.2 THE CONSUMPTION FUNCTION
• The Permanent Income Hypothesis
• Shared Income
• Public and Private Decisions
• Budget Constraints: Borders that Matter
• 13.3 ADJUSTING TO CHANGE: DYNAMICS
• Permanent Income and Adjustment of Health Spending to GDP
• Adjustment to Inflation
• Adjustment to GDP: Rates of Change and Time Series Analysis
• 13.4 FORECASTING FUTURE HEALTH EXPENDITURES
• 13.5 COST CONTROLS: SPENDING GAPS AND THE PUSH TO REGULATE
• Capacity Constraints and Budget Constraints
• 13.6 WORKFORCE DYNAMICS: “SPENDING” IS MOSTLY LABOR
• Employment
• Wages
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 14 The Role of Government and Public Goods
• Questions
• 14.1 THE ROLES OF GOVERNMENT
• Markets are Perfectly Efficient, but Only with Perfect Competition
• Government in a Mixed Economy
• How Government Works
• The Voluntary Sector
• Government is Necessary, and Costly
• Markets are Costly, Limited, and Always Regulated
• 14.2 GOVERNMENT HEALTH FINANCING
• 14.3 LAW AND ORDER
• 14.4 PUBLIC GOODS AND EXTERNALITIES
• Privatizing Public Goods
• Insurance Makes Any Good More Public
• Externalities
• The Coase Theorem: Transaction Costs and Property Rights
• 14.5 MONOPOLY AND MARKET FAILURE
• 14.6 INFORMATION
• Rational Consumer Ignorance
• Social Costs Depend on the Number of People
• Milk or Bread: Which Is More Public?
• Infectious Disease Externalities
• Epidemics
• The Sanitary Revolution: A Moral Campaign for Public Health
• Formation of the U.S. Public Health Service
• 14.7 DRUGS, SEX, AND WAR: PUBLIC HEALTH IN ACTION
• Addiction
• Sexual Behavior
• Who Counts as a Citizen? Abortion and Other Dilemmas
• War and Public Health
• 14.8 POLITICS, REGULATION, AND COMPETITION
• Politicians: Entrepreneurs Who Try to Get Votes
• Government as the Citizen’s Agent
• Public Goods Make Almost Everybody Better Off But Nobody Happy
• Winners and Losers
• 14.9 TRUST, CARE, AND DISTRIBUTION
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 15 History, Demography, and the Growth of Modern Medicine
• Questions
• 15.1 ECONOMIC GROWTH HAS DETERMINED THE SHAPE OF HEALTH CARE
• 15.2 BIRTH RATES, DEATH RATES, AND POPULATION GROWTH
• 15.3 THE STONE AGE
• 15.4 THE AGRICULTURAL AGE
• Investment and Trade
• Civilization, War, and Government
• The Decline of Civilizations Leads to Population Declines
• The Plague
• Food Supply Determines Population
• The Rise of Economics
• The Malthusian Hypothesis
• 15.5 THE INDUSTRIAL AGE
• Why Malthus Was Wrong
• Demographic Transition
• Demographic Change, Income Distribution, and the Rise of the Middle Classes
• 15.6 THE INFORMATION AGE
• 15.7 INCOME AND HEALTH
• 15.8 REDUCING UNCERTAINTY: THE VALUE OF LIFE AND ECONOMIC SECURITY
• The Value of Risk Reduction
• Social Security and Health Insurance
• 15.9 THE RISE OF MODERN MEDICINE
• Preconditions for Change
• The Growth of Medical Science and Technology
• Did Better Medical Care Increase Life Expectancy?
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 16 International Comparisons of Health and Health Expenditures
• Questions
• 16.1 WIDE DIFFERENCES AMONG NATIONS
• Size of the Market
• 16.2 MICRO VERSUS MACRO ALLOCATION: HEALTH AS A NATIONAL LUXURY GOOD
• 16.3 CAUSALITY: DOES MORE SPENDING IMPROVE HEALTH?
• 16.4 LOW-INCOME COUNTRIES
• Health Care in Ghana
• Sudan
• 16.5 MIDDLE-INCOME COUNTRIES
• China
• The Health Care System of Mexico
• Poland
• 16.6 HIGH-INCOME COUNTRIES
• Health Care in Japan
• The Health System in Germany
• The Expensive Exception: The United States
• 16.7 INTERNATIONAL TRADE IN HEALTH CARE
• People and Ideas
• Services
• Equipment
• Pharmaceuticals
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 17 Economic Evaluation of Health Policy: The Patient Protection and Affordable Care Act of 2010
• Questions
• 17.1 PPACA 2010: DESCRIPTION OF MAIN ELEMENTS
• Coverage Rules
• State Health Insurance Exchanges
• Individuals
• Employers: Positive and Negative Incentives to Provide Benefits
• Medicare: ACOs, IPAB, Bundled Payments, and the Donut Hole
• Medicaid: Major Expansions with Federal Funding
• Prevention and Other Provisions of PPACA
• Still Uninsured: The Undocumented and Some Other Outsiders
• 17.2 STATEMENT OF THE PROBLEM: AFFORDABILITY
• Rising Costs Slowly Create a Crisis
• The Middle Class Gets Stretched: A Leveraged Gap in Coverage
• Macro Affordability: The Growth Gap
• 17.3 USING EXISTING PLANS AS MODELS
• States
• The Federal Employees Health Benefits Plan
• 17.4 UNRESOLVED ISSUES
• Equity
• Defining Essential Benefits
• The OPM Legacy: Third-Party Payment and Cost Shifting
• Price Transparency: A Conspiracy of Silence
• The Uninsured: Still There, Still Have to be Paid For
• Unfunded Health and Retirement Benefits
• Defined Benefits, Defined Services, or Defined Contribution
• Who Bears the Risk?
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• 18 Value for Money in the Future of Health Care
• Questions
• 18.1 FORCING THE QUESTION: WHO GETS HEALTHY AND WHO GETS PAID?
• 18.2 SPENDING MONEY OR PRODUCING HEALTH?
• 18.3 DYNAMIC EFFICIENCY
• 18.4 DISTRIBUTION, DISTRIBUTION, DISTRIBUTION
• 18.5 PATH DEPENDENCE AND THE POSSIBILITIES FOR REFORM
• How Did We Get Here?
• What Did Medicine Miss?
• What Went Wrong? Notable Failures and Unresolved Dilemmas
• 18.6 THE PATH FORWARD: STEP BY STEP
• 18.7 THE SHAPE OF HEALTH CARE SPENDING TO COME
• 18.8 THE LONG RUN: 2050 AND BEYOND
• Suggestions for Further Reading
• Summary
• Problems
• Endnotes
• Glossary
• Index