Transcript document

Chapter 31
(cont.)
Income, Poverty,
and Health Care
Poverty and Attempts to Eliminate It
 Defining poverty
– Official poverty level in 2005 for an urban
family of four was $19,000.
• Adjusted annually for inflation
• Does not include transfer payments
Slide 31-27
International Example: The U. S.
Poverty Level Vs. Incomes Abroad
 The World Bank publishes an annual
report giving the per capita incomes of
about 150 nations.
 Of these, only 26 have per capita
incomes higher than the poverty
income threshold defined for the U.S.
Slide 31-28
Relative Poverty: Comparing Household
Income and Household Spending
Figure 31-7
Source: Bureau of Labor Statistics; U.S. Bureau of the Census
Slide 31-29
Poverty and Attempts to Eliminate It
 Attacks on poverty: major income
maintenance programs
– Social Security
• OASDI
– 90 percent of all employed persons covered
– In 2005, 45 million people received OASDI
payments averaging $875/month
Slide 31-30
Poverty and Attempts to Eliminate It
 Supplemental Security Income (SSI)
– Minimum income for the:
• Aged
• Blind
• Disabled
Slide 31-31
Poverty and Attempts to Eliminate It
 Temporary Assistance to Needy
Families (TANF)
– 5-year limit for each person
– Must seek training and employment
Slide 31-32
Poverty and Attempts to Eliminate It
 Food stamps
– Government-issued coupons that can be
used to purchase food
– In 2005, one in nine citizens received food
stamps
Slide 31-33
Policy Example:
What are Food Stamps Worth?
 Food stamps can only be used to
purchase food items approved for the
program.
 When food stamp coupons are traded
illegally on the underground market,
they are traded at about 65 percent of
their face value.
Slide 31-34
Poverty and Attempts to Eliminate It
 Earned Income Tax Credit Program
– Families with low incomes receive a
graduated benefit
Slide 31-35
Poverty and Attempts to Eliminate It
 No apparent reduction in poverty
– 1973—11 percent
– 1983—15 percent
– 1990—13.1 percent
Slide 31-36
Health Care
 America’s health care situation
– 16 percent of U.S. real GDP is devoted to
spending on health care.
– Per capita spending on health care is
greater in the United States than
anywhere else in the world.
Slide 31-37
Percentage of Total National Income
Spent on Health Care in the United States
Figure 31-8
Source: U.S. Department of Commerce; U.S. Department of Health
and Human Services; Deloitte and Touch LLP; VHA, Inc.
Slide 31-38
Health Care
 Why have health care costs risen so
much?
– The age-health care expenditure equation
• Aging population increases the demand for
health care
– New technologies
– Third-party financing
Slide 31-39
Third Party versus Out-of-Pocket
Health Care Payments
Figure 31-9
Source: Health Care Financing Administration;
U.S. Department of Health and Human Services
Slide 31-40
Health Care
 Price, quantity demanded
– Large percent of medical services payments
made by third parties
– Price to the consumer drops and the quantity
demanded increases
 Moral hazard and consumers
– An individual with a zero deductible for medical
care may engage in a less healthful lifestyle than
one who must pay a $1,000 deductible
Slide 31-41
The Demand
for Health Care Services
Price
At P1 quantity
demanded is Q1.
If the price falls
to zero, quantity
demanded increases
to Q2.
P1
D
Q1
Q2
Quantity of Health Care Services per Year
Figure 31-10
Slide 31-42
Health Care
 Moral hazard as it affects physicians and
hospitals
– Due to third-party payments, patients do not
have to worry about the cost of operations and
medical procedures.
– Physicians and hospitals order more of them
since they are reimbursed on the basis of
medical procedures.
Slide 31-43
Health Care
 Fully 30 percent of Medicare
expenditures are for patients in their
last year of life.
Slide 31-44
Health Care
 Is national health insurance the
answer?
• 40 million Americans are uninsured at some
point during the year
• National health insurance would increase the
amount of national income devoted to medical
services
Slide 31-45
Federal Medicare Spending
Figure 31-11
Source: Economic Report of the President;
U.S. Bureau of Labor Statistics
Slide 31-46
Health Care
 Countering the moral hazard problem:
a Health Savings Account (HSAs)
– A tax-exempt health care account to
which individuals would pay into on a
regular basis and from which medical care
expenses could be paid
Slide 31-47
Issues and Applications: Should U.S. Health
Care Copy Other Nation’s Programs?
 Is the rise in health care costs evidence of a crisis?
 To a certain extent, residents of the U.S. choose to
spend more on health care.
 In other countries, waiting lists for certain
procedures serve to dampen the amount of health
care people receive.
Slide 31-48
Summary Discussion
of Learning Objectives
 Using a Lorenz curve to represent a nation’s income
distribution
– The more bowed a Lorenz curve, the more unequally
income is distributed
 Key determinants of income differences across
individuals
– Age
– Marginal productivity differences
– Discrimination
Slide 31-49
Summary Discussion
of Learning Objectives
 Theories of desired income distribution
– Productivity standard
– Egalitarian principle
 Alternative approaches to measuring and
addressing poverty
– Absolute poverty standard
– Relative poverty standard
Slide 31-50
Summary Discussion
of Learning Objectives
 Major reasons for rising health care costs
– Aging U.S. population
– Higher priced medical technologies
– Third-party financing of health care expenditures
– Moral hazard
Slide 31-51
Summary Discussion
of Learning Objectives
 Alternative approaches to paying for
health care
– Rationing by price
– Rationing by queues
Slide 31-52
End of
Chapter 31
Income, Poverty,
and Health Care