National Health Policy Exam

Application #4

Managed Care

A form of health insurance

Managed Competition

A way of structuring the market for health insurance

Ways insurers could deter high-risk consumers:

• Not working with doctors in areas with lots of unhealthy people

• Not working with the best doctors for high-cost conditions

• Not covering drugs that only high-cost patients use

• Providing information in buildings not accessible to disabled people

Policy Trilemma/Triple Aim

Policy choice involves a tradeoff between Health, Wealth, and Equity. 

Problems that health-related markets have that make achieving our goals difficult:

• Adverse Selection (Sick people willing to pay more for Health Insurance

• Moral Hazard

• Market Power

• Health Disparities 

Beveridge Model

United Kingdom, Canada, Sweden, Australia, Scandinavia, New Zealand

Bismarck Model

France, Germany, Hapan, Switzerland, The Netherlands, Israel, South Korea

Besides health care system, what are differences across countries that could affect health outcomes?

• Culture

• Resources

• Preferences for Health

• Inherent Health

Correlations, NOT a causal relationship between the health system and outcomes

Health Production Frontier (HPF)

How much health a country can produce with a given amount of spending 

Three positions Relative to the Frontier

Efficient = ON the frontier

Inefficient = BELOW the frontier

Infeasible = ABOVE the frontier

If we assume we’re on the frontier, how do we decide where to be?

The US spending more on Healthcare means the government has less to spend on:

• Education

• National Defense

• Other welfare programs, etc.

Patent

Exclusive rights for developers to manufacture their drug as a monopoly for a limited time

US Patent Time

~ 20 Years

Pharma Prices in the UK:

NHS sets the price that they are willing to buy drugs at

Why allow pharmaceutical monopoly rents?

• No one will want to go through R&D if they know they’re not going to make their money back!

• Protects companies against generics entering the market “too soon”

• More willing to face the uncertain R&D process

Pharma companies tend to focus innovation on products for the _______ market because americans pay higher prices for these products though compared to what other contries pay

American

If there is a lot of demand for a product, Q sold is ___, P can also be ___ = Big Proft!

Big, Big

Orphan/Rare Diseases

These diseases affect fewer than 200,000 people in the US

Examples of Orphan/Rare Diseases

Cystic Fibrosis, Lou Gehrig’s Disease, Tourette’s Syndrome, Narcolepsy.

What did the Orphan Drug Act of 1983 do?

Intended to increase market innovation on these diseases in the US. 

• 7 Years of Market Exclusivity in addition to the usual patent

• No competitors for the same drug indication will be approved during this time

• Also gets tax reimbursement for 50% of clinical trial expenses 

The Two Extremes of drug regulation:

1. Let every drug be sold right away:

• People benefit from good drugs quickly

• People are harmed or killed by bad drugs

2. Spend a long time testing drugs until you are 100% sure that there are no harmful side effects 

• No one is harmed by bad drugs

• People die while waiting for a drug you’re testing

Goal is usually to try and minimize

Type I Errors

Want to reduce “direct” harm

How is health care provided in the American Model?

Privately (employer Sponsored or Directly Purchased)

Equity

Providing everyone with the same opportunity to be as healthy as possible

Health

Providing high-quality care and improving health outcomes

Wealth

Keeping care affordable for the government and its citizens 

Difference between FFS Insurance Plans and Managed Care Insurance Plans:

• Managed Care Insurance involves a fixed payment every month for the Health Insurance

• FFS Insurance Plans, you pay for each individual service. :