Lecture 22
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This document discusses the rise of managed care in the US healthcare system. It outlines several problems with relying solely on economic and implicit rationing to control costs, including that economic rationing did not work and implicit rationing was not enough to control skyrocketing costs. It also examines why the free market model fails for healthcare, noting issues around information problems for patients, product uncertainty, and physician incentives. The document then introduces explicit rationing/managed care approaches that involve controls on both costs through Diagnosis Related Groups (DRGs) and controls on treatments provided through managed care organizations.
Lecture 22
- 1. Stephen Hansell, Ph.D. Department of Sociology Institute for Health Research http://sakai.rutgers.edu shansell@rci.rutgers.edu 609-203-2830
- 2. Class 22 – The Rise of Managed
- 3. I. Rationing A. Economic rationing • oldest type of rationing B. Implicit rationing • a ste limit of money that is set for each patient and the doctor decided how much care a patient needs • it is better but it still did not solve problems C. Explicit rationing / outpatient care • the largest form of rationing now •
- 4. II. Economic and implicit rationing not enough A. Economic rationing did not work • fee for service rises up cost B. Implicit rationing did save some money 1. saves money by limiting inpatient care and sending expensive patients outside the hospital 2. eg. they cut down on hospital stay days C. Implicit rationing not enough to control skyrocketing costs in US medical care system
- 5. III. Free market model A. Assumes consumers can decide what services to buy • the consumers dont have complete info • the consumers cant make all the decision • they cannot make a wise informed decision B. Assumes laws of supply and demand will 1. Distribute goods and services to sickest 2. Control costs C. Assumes link between costs and quality of service • how do you measure the quality of service
- 6. IV. Free market model works well when buying a car A. Customer easily collects information on car B. Test the car C. Decide what car to buy D. Negotiate the best deal with salesman
- 7. V. Free Market fails in health care A. Problems of information about quality of care 1. Patient can't get good information – you cannot finout how successful the surgery is gonna be – yo dont know the success rate – you dont know the kill rates – you never know how much it will cost until the procedure after the hospital decides on the budget – patients dont know what info is useful and they often ignore the important parts
- 8. 2. Patient can't understand good information – patients test the quality of the medical care not based on the care but the other effects like the reduction of anxiety – getting off of work 3. Patient may not want real information – no one wants to get tested for aids 4. Role of doctor stable and self-sustaining – patients stop taking the meds if there are side effects – patients trust doctors with everything cz they dont wanna deal with the horrible consequences – this gives a doctor enormous power over the patient
- 9. B. Problems of product uncertainty 1. Effectiveness of much modern medical care is uncertain – few medical treatments have been throughly and scientifically evaluated – new treatment is spread more by word of mouth than by actual studies 2. Doctors often prescribe treatment without knowing if it will work – they follow a cost/benefit ratio - if they assume it might work and might not harm they just prescrbe the medicine 3. Patient has little control over treatment process – you cannot tell doctors what to do. you are just told to walk away
- 10. C. Active norms of treatment D. Physician pay not related to patient outcomes • rural communities often have less physicians. • doctors are not paid according to the no of patients they cure E. Uninsurable risks • patient that does not have ahealth care plan and will cost someone lots of money • for profit insurance plan - like the healthy • non profit insurance plan avoids the healthy • psychiatric insurance is hard to get insurance for so the for profit people dont like it F. Erratic demand F. people randomly decide they are sick randomly... they are never sick during a holiday G. gun shot wounds and knifings go up on friday and saturday nights H. but heart attack is totally random and you can never plan it - so you need a team ready at all times and that drives up cost G. Externalities G. things that drives up everyones cost H. eg failure to get immunized so the kid falls sick, parents have no money, they go on medicade and you pay for them I. unwanted pregnency - unwanted children are very expensive, we pay for their sicknesses and jail term and stuff J. failure of new mothers to use prenatal care K. positive - people give money to medical research generously
- 11. H. Prices not related to changing demand • there is never a price tag • if you get affiliated with a prestigious hospital, you will pay more • when a specialty has more certified specialists, the cost goes down. • physicians pay is due to how many others there are, if there are too many physicians, they just make it harder to get into medschool I. Restricted entry into medical profession J. Professional dominance by physicians • they always dominate all areas of medicine and they dont wanna give up control to lower people like nurses K. Misallocated supply • strong incentives to do more work on you, more procedures, more bills, more pay... and you never know if you need it, you just do it cz doc asked for it L. Malpractice lawsuits • drives up costs a lot • it gives doctors an incentive to do better and not make mistakes. But you generally dont get anything when you sue a doctor. its very hard to win. • juries respect a physicians judgement. • so defensive mechanisms drives them to test for everything just to save their butt • physicians have economic fators that influence their income = no of other physicians in the faculty and those mosti in need of services are ususally in leasft for
- 12. A. Explicit rationing B. exclusive rationing / managed care comes in 2 forms 1. Controls on costs (DRG’s) 1. Controls on treatments provided (managed care)
- 13. VII. Diagnostic related groups (DRG's) VIII. controls on cost also known as drg’s – basically a dollar limit on the amount you can spend to treat a particular diagnosis – people in oragon tried to come up with an average for the hosptals and it is not really possible ... there are a lot of uncertainties – they came up with a list of 467 and decided how much should each cose, but htey couldnt pay for all if they – so they classified them according to how important the disease is and then tried to treat them, but people went crazy. my bleeding ulcer is a it more c=seriu, you wikk u – thats how medicare works... they have a set amount of money A. Explicit controls on costs A. Pay according to medical diagnosis of patients B. Definitional problems
- 14. C. Political problems D. Financial problems E. DRG's were implemented nationally by Medicare and Medicaid
- 15. Stephen Hansell, Ph.D. Department of Sociology Institute for Health Research http://sakai.rutgers.edu shansell@rci.rutgers.edu 609-203-2830