Chapter 5 Outline
A. Recap
1. Partial-cost payments and the federal tax exemption for employer-provided health insurance are the two likeliest sources of excess spending on health care. The case. for other suspected causes of excess spending is less convincing.
B. Policy Implications
1. The policy actions required to lower health care costs, raising partial-cost payments, reducing the frequency of ineffective and inappropriate procedures, and eliminating the tax exemption, are obvious. The methods of achieving hese goals and how far to go are not clear.
2. Vouchers, coupons that can be used by the recipient to pay for something, ay be one way to reduce overspending for Medicaid and Medicare.
a. Proponents argue that under a voucher system recipients would make better health care choices because they would be faced with a greater share of the costs of their own health care. A voucher system would also increase consumer choice and enhance competition among health care providers.
b. Critics of a voucher system argue that consumers may make poor choices in regard to health insurers.
3. Economists argue that managed care organizations, organizations established principally for the purpose of reducing health care costs, could substantially reduce health care costs.
a. There are three principal types of managed care organizations: health maintenance organizations (HMOs), Independent Practice Associations (IPAs), and Preferred Provider Organizations (PPOs).
b. It is thought that insurance plans will do the health care price shopping for consumers by making agreements with providers for lower prices. These plans will attract more enrollees from increasingly cost-conscious employers. This raises the possibility of the industry going a long way in reforming itself.
4. Although eliminating the tax exemption would increase efficiency, the insurance companies, hospitals, doctors, business firms, and workers who benefit from this deduction make its elimination unlikely.
Return to Textbook Materials Page