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Table of Contents Instructor Manual............................................................................................................................ 1 Table of Contents ...................................................................................................................................... 1 Purpose and Perspective of the Chapter ................................................................................................... 2 Cengage Supplements ............................................................................................................................... 2 Chapter Objectives .................................................................................................................................... 2 Complete List of Chapter Activities and Assessments ................................................................ 2 Key Terms .................................................................................................................................................. 3 What's New in This Chapter ...................................................................................................................... 5 Chapter 1: U.S. Medical Care: An Uncertain Future .................................................................................. 6 Chapter Outline ......................................................................................................................................... 6 Teaching Suggestions ................................................................................................................................ 7 Additional Questions for Discussion and Evaluation ................................................................................. 8 Multiple Choice ................................................................................................................... 8 Structured Discussion: .......................................................................................................10

Purpose and Perspective of the Chapter This chapter introduces the student to the economic way of thinking as it relates to the study of the U.S. medical care system. It gives an overview of the Patient Protection and Affordable Care Act (ACA) and discusses why—more than 10 years after it was passed—it has solved some critical issues but has still left many unanswered questions. The chapter then offers a brief summary of the emergence of the modern medical care system, recent changes of medical care delivery and payment structures, and the basics of system design and economic modeling. It ends with a discussion of the current framework for implementing ACA; the bill’s history, both before and after passage; and how America is succeeding on some of the major accomplishments of ACA while dealing with some unintended consequences. The chapter also lays the foundation for the focus and continuity throughout the book and introduces and defines 10 guiding principles.

Cengage Supplements Supplements, including PowerPoints, an Instructor Manual, and a Cognero Test Bank, can be found at www.cengage.com.

Chapter Objectives The following objectives are addressed in this chapter: 1. Understand the nature of the health care crisis in America. 2. Identify the important historical developments affecting health care delivery and finance in the U.S. system. 3. Identify and explain the major reasons for the high and rising cost of medical care. 4. Understand how the third-party payment mechanism and managed care affect health care delivery. 5. Understand the Patient Protection and Affordable Care Act and its importance to the U.S. health care system. 6. Understand the impact of the current health care reforms. 7. Recognize the relevance of economics in studying health care issues. 8. Understand the aspects of medical care that contribute to its uniqueness as a commodity.

Complete List of Chapter Activities and Assessments Chapter Objective 1-1 Describe the history of health system reform in the United States.

Activity/Assessment Additional Discussion Questions #3, 4, and 6

Source (i.e., PPT Duration slide) Instructor’s Manual 5–10 mins

Activity: Knowledge Check 1 Activity Activity: Knowledge Check 2 Answer

PPT slide 9

5–10 mins

PPT slide 10

5 mins

Activity: Self-Assessment

PPT slide 25

10–15 mins

Chapter Objective 1-2 Explain the current health care framework.

1-3 Evaluate the progress made toward system transformation.

1-4 Summarize changes made since the passage of the Affordable Care Act (ACA).

Activity/Assessment Additional Discussion Questions #1 and 2

Source (i.e., PPT Duration slide) Instructor’s Manual 5–10 mins

Activity: Knowledge Check 2 Activity Activity: Knowledge Check 2 Answer Knowledge Check 3 Activity Knowledge Check 3 Answer Activity: Self-Assessment Additional Discussion Questions #5, 7, 8, and 9

PPT Slide 11

5–10 mins

PPT slide 12

5 mins

PPT slide 16

5–10 mins

PPT slide 17

5 mins

Activity: Game: Role Play Activity

PPT Slide 22

Activity: Polling Activity Activity: Self-Assessment Additional Discussion Question #10

PPT Slide 24 5–10 mins PPT slide 25 10–15 mins Instructor’s Manual 5–10 mins

Activity: Self-Assessment

PPT slide 25

PPT slide 25 10–15 mins Instructor’s Manual 5–10 mins 5–20 mins

10–15 mins

Key Terms Public option: A public health insurance plan comparable to Medicaid, designed to compete with private insurance. Uncertainty: A state in which multiple outcomes are possible but the likelihood of any one outcome is not known. Premium: A periodic payment required to purchase an insurance policy. Group insurance: A plan whereby an entire group receives insurance under a single policy. The insurance is actually issued to the plan holder, usually an employer or association. Medicare: Health insurance for the elderly provided under an amendment to the Social Security Act. Medicaid: Health insurance for the poor financed jointly by federal and state governments. Flexner Report: A 1910 report published as part of a critical review of medical education in the United States. The response of the medical establishment led to significant changes in the accreditation procedures of medical schools and an improvement in the quality of medical care. Collective bargaining: The negotiation process whereby representatives of employers and employees agree upon the terms of a labor contract, including wages and benefits.

Cost shifting: The practice of charging higher prices to one group of patients, usually those with health insurance, in order to provide free care to the uninsured or discounted care to those served by Medicare and Medicaid. Certificate of need (CON): Regulations that attempt to avoid the costly duplication of services in the hospital industry. Providers are required to secure a certificate of need before undertaking a major expansion of facilities or services. Employee Retirement Income Security Act (ERISA): Federal legislation passed in 1974 that sets minimum standards on employee benefit plans, such as pensions, health insurance, and disability. The statute protects the interests of employees in matters concerning eligibility for benefits. The law also protects employers from certain state regulations. For example, states are not allowed to regulate self-insured plans and cannot mandate that employers provide health insurance to their employees. Entitlement programs: Government assistance programs where eligibility is determined by a specified criteria, such as age, health status, and level of income. These programs include Social Security, Medicare, Medicaid, Temporary Assistance for Needy Families (TANF), and many others. Prospective payment: Payment determined prior to the provision of services. A feature of many managed care organizations that base payment on capitation. Capitation: A payment method providing a fixed, per capita payment to providers for a specified medical benefits package. Providers are required to treat a well-defined population for a fixed sum of money, paid in advance, without regard to the number or nature of the services provided to each person. Diagnosis-related group: A patient classification scheme based on certain demographic, diagnostic, and therapeutic characteristics developed by Medicare and used to compensate hospitals. Relative-value scale: An index that assigns weights to various medical services used to determine the relative fees assigned to them. Retrospective payment: Payment determined after delivery of the good or service. Traditional fee-for-service medicine determines payment retrospectively. Prospective payment: Payment determined prior to the provision of services. A feature of many managed care organizations that base payment on capitation. Managed care: A delivery system that originally integrated the financing and provision of medical care in one organization. Today, the term encompasses different arrangements designed to coordinate services and control costs. Indemnity insurance: Insurance based on the principle that someone suffering an economic loss receives a payment approximately equal to the size of the loss. Horizontal integration: The merger of two or more firms that produce the same good or service. Vertical integration: Expansion to secure elements of the supply chain to ensure availability of resources to produce a product or service. Examples might include the acquisition of a primary care clinic by a hospital.

Portability: The ability to easily transfer insurance coverage from one plan to another as a covered employee changes jobs. Moral hazard: Insurance coverage increases both the likelihood of making a claim and the actual size of the claim. Insurance reduces the net out-of-pocket price of medical services and thus increases the quantity demanded. Alternative payment models: Payments based on criteria other than fee-for-service, including capitation, bundled payment, and pay for performance. Bundled payment: Single payment for all services and procedures associated with an episode of care. One of the commonly suggested alternatives to fee-for service payment. Accountable care organization (ACO): An integrated care network of physicians, clinics, hospitals, and other health care providers who coordinate to provide comprehensive medical care to a well-defined population of patients. Triple aim: An approach to optimizing health system performance designed along three dimensions: enhancing the patient experience, improving population health, and reducing per capita spending. Integrator: An entity responsible for consolidating the resources required to achieve the Triple Aim. Guaranteed issue: A requirement that insurers must issue a policy to anyone who applies for one with no consideration of health status. Guaranteed renewability: A feature of an insurance policy that requires the insurer to guarantee renewal of the policy as long as premiums are paid, regardless of any changes in the health status of the policy holder. Insurance exchange: A digital marketplace available in every state where individuals can shop for health insurance and receive government subsidies making it more affordable. Game: Bending the rules of the game in order to manipulate the outcome. Adverse selection: A situation where different parties in a transaction have access to different information that may be relevant to the exchange, placing one at a distinct disadvantage in the trade. Economic rent: The amount earned by a factor of production in excess of its opportunity cost. Typically, the supply of the factor is fixed. Natural monopoly: A firm becomes a natural monopoly based on its ability to provide a good or service at a lower cost than anyone else and satisfy consumer demand completely. [return to top]

What's New in This Chapter The following elements are improvements in this chapter from the previous edition: There are several new additions to this chapter. Chief among them are an in-depth discussion of ACA, including the recognition that unless something better is introduced, ACA will remain the bedrock upon which all medical delivery systems, payment structures, and health care system design will be based. This chapter provides not only a background

Solution Manual For Health Economics and Policy, 8th Edition by James W. Henderson Chapter 1-17