Health Care

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Effect of delayed reimbursement on utilization of medical services

December 19, 2011 in Health Care in Developing Nations, Health Insurance, Optimal Ins (Theory) | No comments

A recent paper by Hai Zhong (2011) finds that health insurance that provides immediate reimbursement for health care services significantly increases the likelihood of patients seeking outpatient treatment in China compared to reimbursement beneficiaries with a delay. China isn’t the only country where insurance companies provide delayed reimbursement. In fact, in France patients pay the full cost of physician visits up front and only later are reimbursed 70 percent of the cost.

Why would the delayed reimbursement make a difference? I can think of three reasons.

  1. Liquidity Constraints.  Some individuals may not be able to afford the payment.  Poor individuals may literally not have the capital to pay for these services up front.  Getting loans from formal institutions (e.g., banks) or informal ones (e.g., friends and family) may be costly either in terms of interest of obligations to family and friends.  Even if an individual is rich, acquiring extra money may be costly (e.g., trip to ATM, ATM fees, interest on credit card).
  2. Probability of Non-Payment.  Although may policies are written where payment is assured, in practice reimbursement rates will not be 100 percent.  For instance, individuals could fail to submit the correct forms for reimbursement, they could move addresses, or the patient could die.  In addition, patients may have some uncertainty surrounding the benefits covered and thus they may not be 100% sure that they will receive reimbursement.  Beneficiaries may not trust their insurance plan; they may assume it is trying to cheat them and thus with some non-zero probability the beneficiary will not get paid.
  3. Reflection of value.  Even if a patient is rich and payment probabilities are 100%, the patient may still be less likely to use the service if they don’t need it if they realize the true cost.  Alternatively, patients who realize a service is valuable may also be more likely to use it.
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Adequate health care for 9/11 first responders

September 11, 2011 in Current Events | No comments

The New Jersey Star-Ledger reports:

“Since the dust settled and dispersed a decade ago, thousands of first responders have been diagnosed with pulmonary, respiratory, skin and blood disorders, as well as cancer. Hundreds have died, according to New York City officials and other groups, although not all of the deaths have been linked directly to Ground Zero.

Many of the sick and dying have endured years of financial instability due to job and benefits losses. A lifeline was thrown in January when the James Zadroga 9/11 Health and Compensation Act finally found its way to President Obama’s desk, surviving a sea of due process, politics and bureaucracy.

But for many others, relief isn’t coming.”

The question is, what medical costs are the 9/11 first responders entitled to?  Should they get medical care for life?  Should they only be covered for illnesses related to their 9/11 service?  If so, what is the burden of proof the first responders need to establish to that 9/11 caused their illness?

Further, those involved in 9/11 aren’t the only ones who risk their lives to save others.  Should all first responders recevive comprehensive medical coverage?  If so, how comprehensive is comprehensive?

Most importantly, who should pay for this coverage?

On 9/11, Americans must not only commemorate the service of many heroic individuals, but must also determine how much health care these individuals deserve.

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Brazil’s Health Care System

August 1, 2011 in International Health Care Systems | 4 comments

Today, I will review Brazil’s health care system.

According to the Economist:

“Created in 1989 from the merger of two state systems, one for those in formal work and the other for everyone else, it is exceptional in Latin America, which by and large continues with the two-tier public system Brazil abandoned. The 1988 constitution declared health care to be the right of the citizen and its provision the duty of the state. ICESP enshrines that promise: according to Paulo Hoff, its clinical director, its patients, both poor and better-off, get care which compares well to that of his private patients at the nearby Sírio-Libanês Hospital.”

Brazil’s Programa Saúde da Família (PSF), launched in 1994, is one step towards interdisciplinary basic health care for most Brazilians.  The PSF implements a national policy for primary care settings with the aim of substituting part of the traditional model of primary care based on medical specialists. As its name says, its main focus is on families instead of individuals, and it is organized around multidisciplinary Family Health Teams, formed by a core of professionals such as physicians, nurses, dentists, psychologists and social workers, as well as community health agents, a kind of “barefoot doctor”. Brazil has currently (August 2009) approximately 30,000 of these teams, deployed in 5,241 of its 5,656 municipalities.  By 2005 over 80% of municipalities had been reached. However, since these consisted mostly of small rural municipalities, this covered 35% of the population.

But there is a gap between the aspirations of SUS and the reality. Funding is an inadequate hotch-potch, part-state, part-federal, and varies wildly from place to place. More than two-thirds of ICESP’s (Instituto do Câncer) budget of 350m reais ($225m) comes from São Paulo’s state government. Few other states are rich enough to provide such generous top-ups. SUS’s family doctors reach only one Brazilian in two. Another quarter have private-health insurance; the remainder, mostly poor people, live in remote rural areas or violent urban slums where the service is lacking. They must either pay out of pocket or take their chances in crowded hospital emergency rooms.”

Further, basic indicators are not as good as peer countries.  Life expectancy is lower than in Mexico, Argentina, Venezuela and Chile, and the infant mortality rate is the highest among these countries.

“A recent survey of Brazilian health care published in the Lancet, an international journal, argued that SUS gets poor value for the money it spends on drugs, because too much goes on complying with court orders granted to patients who use the constitution’s lofty promises to demand expensive treatments not automatically covered by the system. And too much of the budget still goes to hospitals rather than the Family Health Programme, says Michele Gragnolati of the World Bank.”

Read the rest of this entry »

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Share of Federal Budget Spent on Health Care Jumped in 2009

June 20, 2011 in HC Statistics | 1 comment

In 2008, 38 percent of the federal government’s revenue was spent on health care.  In 2009, however, this figure jumped to 54 percent of total revenues.  Although federal health spending only increased by 17.9%, a decline in revenues of a similar magnitude caused this large change.  Surprisingly, state and local spending on healthcare barely budged.  In 2008, state an local spending was 26 percent of total revenues, and this figure only inched up to 27 percent in 2009.  In 2009, households still contributed 6% of their income (just like in 2008) and business’s health care expense remained constant at 8 percent of cost in 2009.

Other highlights from the California Health Care Foundation’s 2011 edition of Healthcare 101 include:

  • Health spending grew 4.0% in 2009, an all-time low, and the smallest annual increase on record.
  • While health spending by private insurers only grew 1.3% in 2009, Medicare spending grew by 7.9% and Medicaid by 9.0%.
  • Households contribute the largest share to the financing of health care (28%) followed closely by the federal government (27%).
  • Spending on home health care (10.0%) grew the fastest, while spending on the capital-intensive category, structures and equipment, declined (– 2.7%).
  • In 2009, spending growth on prescription drugs rose for the first time since 2006, to 5.3%.
  • Hospital care (31%) and physician and clinical services (20%) account for slightly more than half of all health spending.

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    A Flexner Report on U.S. Health Care

    June 3, 2011 in Licensure, Supply of Medical Services | 6 comments

    A recent article in The New Republic examines some of the cunundrums facing today’s health care system.  Most significantly, the article mentions that ”In the war against disease, we have unwittingly created a kind of medicine that is barely affordable now and forbiddingly unaffordable in the long run.”

    The article offers a few suggestions of how to address many of the U.S. healthcare systems ills.  For instance, it makes a compelling case that more resources should be spent on health care for the young and middle aged relative to the elderly (since a health improvement for a young person benefits them over more years typically than an older person).

    One of the major proposals of the article was “a top-down, bottom-up study of the entire U.S. health system, with a view toward taking it apart and reconstructing it in a manner adapted to our nation’s needs—a multiyear, multidisciplinary project whose aim would be to change the very culture of American medicine.”

    The authors motivates the study using the Flexner Report as a precedent:

    “At the turn of the twentieth century, U.S. medical education was a disgrace, and care of the sick, except in a certain few facilities, was almost as bad. Something had to be done. In 1908, the newly founded Carnegie Foundation for the Advancement of Teaching stepped in, hiring a 42-year-old educator named Abraham Flexner to embark on a study of medical education in North America. His report, published two years later, became a clarion call for drastic change. Subsequently, armed with a total of $600 million provided by the Carnegie and Rockefeller philanthropies and other contributors, Flexner visited 35 schools in the United States and Canada, and provided the financial wherewithal for the changes so desperately needed. The result of this remarkable effort was that, within ten years, U.S. medical schools became the prototype upon which all others tried to fashion themselves; our nation’s medicine, like the vastly improved institutions that gave it new life, became the gold standard for the world.”

    Was the Flexner Report a force only for good.  Although its true that the Flexner report lead to the improvements in medical education, it also helped to turn medicine into a cartel-like occupation.   As physician education requirements increased and the number of medical school spots decreased, the supply of American-educated physicians has not kept pace with need.  Physicians use their smaller numbers to increase their fees.  Further, by restricting the provision of certain medical services to certain specialties, physicians have been able to restrict competition and drive up prices.  Flexner may have increased quality, but it also increased cost.  [For more posts regarding my thoughts on licensure, see here]

    On a side note, the notion that we need a single study of the U.S. healthcare system is not revolutionary.  Taking a bird’s eye view of health care is useful but many current academics, policymakers, and researchers in the private sector are already in the process of identifying the areas where the U.S. health care system could be improved.

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    Health care in India

    April 23, 2009 in Health Care Around the World, International Health Care Systems | 3 comments

    Highlights from The Economist’s article on Health Care in India:

    • India spends only about 5% of GDP in medical care.  Of this spending only one fifth is public spending.
    • With an overwhelmed public sector, relatively low levels of insurance, a premium is put on frugal innovation.  Fortis, a hospital chain in New Delhi, elects to have ‘world class’ scanners, but not necessarily the newest.
    • Surgical procedures are also innovative.  Vivek Jawali has developed an open heart surgery procedure where the patient is still awake.  ”Because such ‘beating heart’ surgery causes little pain and does not require general anaesthesia or blood thinners, patients are back on their feet much faster than usual. This approach, pioneered by Wockhardt, an Indian hospital chain, has proved so safe and successful that medical tourists come to Bangalore from all over the world.”
    • Health IT use in U.S. hospitals: 20%
    • Health IT use in Indian hospitals: 60%
    • Tiered pricing: Aravind, the world’s biggest eye-hospital chain, employs “a tiered pricing structure that charges wealthier patients more (for example, for fancy meals or air-conditioned rooms), letting the firm cross-subsidise free care for the poorest.”
    • “In health care, as in life, there is need for both Ferraris and Tata Nanos.”

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