Transcript 投影片 1

CH 1
Factors accounting for the growth of importance in the
health sector


Global health and longevity gains
Expansion of health sector throughout the world
Global Distribution of Longevity Gains
Global Distribution of LE
LE (China v.s. US)
Health Care Expenditures in the
United States, 1960-2007
1960
1970
1980
1990
2000
2005
2007
Nominal health expenditures $27.5
(billions of dollars)
74.9
253.9
714.0
1,353.3
1,987.7
2,241.2
Annual rate of growth
-(average annual % change
from previous period shown)
10.5%
13.0
10.9
5.9
8.9
6.2
Nominal per capita health
expenditures
$148
356
1,102
2,813
4,790
6,697
7,421
Health expenditures as
percentage of GDP
5.2%
7.2
9.1
12.3
13.8
16.0
16.2
Source:
CMS Homepage: http://www.cms.hhs.gov/NationalHealthExpendData/downloads/tables.pdf
The Health Care Industry is
Rapidly Evolving

Advances in medical technology and drugs
are dramatically improving patient care
 But,

these improvements are costly
Aging U.S. population
% 65 years+
1950
8.1
1970
9.8
2008
12.8
Which category has the largest share
of health care expenditures?

Hospital Care

Physician Care

Prescription Drugs
Uses of Health Care Funds in the United States 2006
Nursing homes
6%
Home health
care 3%
Investments 7%
Hospital services
31%
Prescription
drugs 10%
Program
administration
7%
Public health 3%
Physician
services 21%
Other 8%
Dental services
4%
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PHARMACEUTICAL INDUSTRY

U.S. prescription drug expenditures reached
$228b in 2007

Industry highly dependent on research and
development (R&D)
 $897m

to bring a new drug to market
Aggressive marketing to physicians,
hospitals, pharmacists, and even the patient
PHARMACEUTICAL INDUSTRY

Pfizer
 $48.3b
 40.8%
in sales in 2008
of sales come from 4 drugs: Lipitor,
Lyrica, Celebrex, Norvasc.
Important Institutional Features of Health Care
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Asymmetric Information
Health insurance
Externality
Government intervention
Economic Model
P (price)
A’
A
E
B
B’
X (quantity)
Market Equilibrium
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Supply curve(suppliers)
Demand curve (consumers)
Equilibrium price and quantity
Suppliers and Consumers
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Suppliers
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Hospitals (clinics)
Doctors
Nurses
Consumers

Patients
Equilibrium quantity and prices

Quantity


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Visits
Admissions (hospital days)
Price


Payment per visit
Payment per hospital day
Assumptions for efficient market






Numerous consumers
Numerous suppliers
Consumers search for the quality of care
Consumers search for the low price
Suppliers compete with each other
In the end, efficient market ensures that consumers can purchase
quality care at the low cost
Information



Do consumers (patients) know the quality of care?
Do consumers (patients) search for the low cost?
Do suppliers (doctors) compete with each other?
Asymmetric information
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Asymmetric information refers to the case that one party to a
transaction has information pertinent to the transaction
that the other party does not possess
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Examples

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The doctor knows more than the patient
The insurance purchaser knows more than the insurer
Competition is a big issue in light of asymmetric information
Health insurance
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Because the health expenditure is random, risk adverse people
would seek to reduce expenditure risk by obtaining health
insurance (e.g. dialysis patients)
Nonetheless, consumption decisions would be distorted due to
health insurance. Consumers would like to use more than they
want when facing the lower prices (moral hazard)
Also, asymmetric information would patients to conceal personal
information---high risk consumers purchase good insurances,
and good insurances need to charge a even higher price to cover
its costs. In the end, no insurers are willing to offer insurance
contract (adverse selection)
Externality
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

Consumption externality (e.g. vaccinations)
Financial externality
Moral externality (access of care)
Government intervention

Health sector is highly regulated industry

Entry barriers




Doctors
Hospitals
Drugs
Price


Regulated prices
Insurer sets up the payment price to doctors
Government intervention

Providing health insurance



Provision of health care


US: Medicare (the elderly), Medicaid (the poor)
Taiwan: National Health Insurance
Public clinics or hospitals
Financing the health care


Taxation
Subsidy
Share of health related research