Charles E. Phelps - Health Economics

CHARLES E. PHELPS

University of rochester

As with previous editions, this edition revises and updates all data tables where new data are available. The advent of the Patient Protection and Affordable Care Act (PPACA) in 2010 has led to changes in many chapters of Health Economics , most notably in the organization and focus of . However, rather than just appending a discussion of the PPACA at the end of the book, the fifth edition integrates PPACA issues (as appropriate) throughout the book.

• integrates the PPACA into the overall market equilibrium analysis.
• discusses key requirements in the PPACA, including the requirement that all people in the U.S. must have health insurance coverage, the requirement that employers provide health insurance for their employees, and the importance of the PPACA rule eliminating the use of pre-existing conditions in health insurance underwriting.
• also discuss a new health care delivery model envisioned in the PPACAthe Accountable Care Organization.
• expands the discussion of regulated prices for hospital care to include Medicares new linkage of outcomes of care to reimbursement and the encouragement of Accountable Care Organizations, both facets of the PPACA legislation.
• summarizes the entire PPACA and expands the previous economic analysis of universal insurance in the U.S. to include what options are available to address each issue, and how the PPACA actually dealt with the key issues surrounding implementation of universal insurance coverage.

Other significant changes to this edition are:

• expands the discussion of cost-effectiveness analysis, including (in addition to a discussion of Quality-Adjusted Life Years) a new analysis of the Disability Adjusted Life Years (DALY) measure that is used by the World Bank, the World Health Organization, and many European nations.
• explores physician practice ownership patterns, taking note of recent changes such that over half of all physician practices are now owned by hospitals.
• expands the discussion of International Medical Graduates including new data and discussion that links together IMG certification and quality and medical resident fill rates.
• extends the discussion of nursing practice, including a new analysis of internationally trained nurses and their role in the U.S. nursing market.
• explores the analysis of the tax subsidy to health insurance by introducing explicitly the share of health insurance premiums paid by employers into the analysis and new data and forecasts of the extent of the tax expenditure attributed to the exclusion of employer paid health insurance from the tax base.
• introduces new estimates of the insurance loading fee by employer group size, using the first firm estimates of this relationship in the literature.
• expands and adds new data on the discussion of the market shares held by different types of health insurance plans.
• examines the changes in the Medicare Part B deductible over time.
• adds a new discussion about the extent of enrollment in Medicare Advantage (Part C) programs as an alternative to traditional Medicare coverage.
• explores ambulatory surgery and its effect on hospital occupancy, as well as an expanded discussion of hospice use as an end-of-life alternative to hospitalization.
• adds a new discussion about the relationship between quality of care and negligence lawsuits.
• approaches the topic of transfusion-related illnesses to discuss the extent of this externality in a wide set of nations, rather than focusing wholly on the United States.

The study of health economics is becoming more important and more useful. The health care sector continues to grow in size, both in absolute dollars and as a portion of the overall economic activity of the United States. In terms of employment, now about one person of six in the country is employed in the health care sector.

The governments role in health care has become increasingly important through the years, beginning with the founding of the U.S. Public Health Service in 1798. Many people point to the 1965 creation of Medicare and Medicaid as a landmark step in the governments role in health care. In 2010, however, sweeping new legislation heightened the governments role in health care even morethe Patient Protection and Affordable Care Act (PPACA), sometimes referred to in shorthand as the Affordable Care Act. This edition of Health Economics contains numerous new analyses of issues created or highlighted by passage of the PPACA. Readers will find these analyses throughout the book.

The PPACA does not bring legislative change to a halt. Indeed, as this fifth edition goes to press, numerous issues remain unsettled regarding the most basic structures built into the PPACA. Perhaps most important are legal challenges to the very core of the Actthe requirement (mandate) that individuals obtain health insurance coverage of at least a minimum level as defined in the Act. Numerous lawsuits arose shortly after President Obama signed the PPACA into law, most of them challenging the constitutional validity of the individual mandate. Numerous lawsuits challenged the constitutionality of the PPACA, with conflicting rulings from several Circuit Courts of Appeals. As one would expect in such a situation, the Supreme Court accepted certiori on these cases in the autumn of 2011, as this edition went to press. A ruling is expected before the 2012 summer recess of the Supreme Courtafter the publication of this edition.

Readers of this text will find analyses of many of the facets of the PPACA as it was crafted. As the legal landscape changes, this background should allow the reader to understand how the environment may shift in the future, and readers should be able to use the tools and approaches contained in this book to understand the conse quences of various changes. Indeed, readers will find that even the core legal challenge to the PPACAs individual mandate can be analyzed using key economic issues examined throughout this textbook, including understanding how insurance markets work and game-theoretic approaches to understanding how they would work in various alternative legal settings.