PH 150D Midterm Review Guide
Reading Guide:
1. Challenges of Rising Health Care Costs (Orszag and Ellis, 2007)
•4.6% of GDP spent on Medicaid and at the same rate, we’ll be spending 20% by 2050
•Total healthcare spending: 8% of GDP in 1975, 16% 2007, 20% by 2016
•Increased costs pressure to reduce private sector gross rates and states’ finance of Medicaid
•Increase in obesity put upward pressure on health care
•Consumers’ demand more services when they pay a lower share of the costs
•Factors that lead to rising health care costs:
oDevelopment and diffusion of new medical technology (main driver)
oManner in which insurers pay for and oversee health delivery (fee for service
encourages providers to perform more expensive services)
oDeclining proportions paid by recipients of the services
•More expensive care is NOT better care
•Higher costs in US aren’t accompanied with measurable advantages overall
•Fed spending in Medicare and Medicaid: expected total of 4.6% of GDP
•Social Security going up to 4.8% seniors have a lot of weight
•Increase in spending not due to increase in disease, but increase in development and diffusion
of new medical technologies and therapies
•Fee for service: encourages efficiency but also incentive to provide more
•Out of pocket expenditure has decreased (deductible/copay increased) consumers demand
more but pay less
•More expensive care doesn’t mean better quality challenge is to reduce costs without hurting
outcomes
2. The Value of Medical Spending in the US, 1960-200 (Cutler et al 2006)
•Compares the gains in life expectancy with increased cost of care between 1960-2000
•Exponential increase on amount spent per year life gained through the 4 decades
•At 65, costs rose more rapidly than life expectancy
•1990-2000: cost per year life of life gained was $145,000 (1970: $7400)
•US spends more on health care than any other country but with poorer outcomes
•Medical spending has increased substantially past 40 years but the money’s provided good value
•Spending increases in med care for elderly associated with high cost per year of life gained
•Individual spending has tripled in share of GDP
•Used 4 age groups to estimate life expectancies and med spending based on mortality
rate/costs of year assumed portion of gains due to medical care, but proof suggested that
only ½ due to med care
•2 causes related to death: smoking & external factors (accidents, suicide, homicide)
•Medical spending increased more than 10%/year for 4 decades due to development/use of
new med tech
•Return on spending high cultural differences, lifestyle, social systems confound international
comparison
•Goal is to constantly improve efficiency flaws in study: didn’t take into account obesity
or AIDS
oBased on mortality alone, not on quality of life
3. Employer-Sponsored Insurance – Riding the Health Care Tiger, Blumenthal
•Various approaches that employers and insurers use to deal with problems of cost and
quality, success of activities, and how employer-sponsored insurance will evolve
•Strategies to cut cost and improve quality/efficiency available to employees:
