HEALTH POLICY AND POLITICS IN THE U.S.

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HEALTH POLICY AND POLITICS IN THE U.S.

• Medicare and Medicaid
• Redistribution and Social Justice
• Week 8
• October 9, 2003

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Outline

• Current Events
• Redistribution and Social Justice
• Medicare and Medicaid
• Readings

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Current Events

• Short!

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Role of Government Redistribution

• Charitable (Welfare)
• Benefit from charity
• Government provision reduces free rider problem
• Who supports? Poor?
• Why not provide cash support for poor?
• Welfare aids poor and other providers

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Role of Government Charity

• Conditions of Charity
• Cant benefit poor more than near poor
• Industry that provides services demands this
  legislation.
• Charity reflects the charitable desires of the
  middle-income and upper-income groups and the
  economic interests of the supplier of those
  services.
• Also, beneficiaries usually deserving

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Role of Government Redistribution

• Universal
• Different motivation for redistribution
• Expanding eligibility increases costs
• Must include beneficiary group to share benefit.
• Median voter is typically middle class forms
  coalition with rich or poor.
• Nature of visibility of tax aimed at rich versus
  poor.

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Charitable Redistribution Example

• Food Subsidies
• 1946 National School Lunch Act
• 1954 School Milk
• 1965 Breakfast
• Origin House Agriculture Committee
• Benefit farmers, difficult to see costs
• Justification to find markets and stabilize
  markets

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Charitable Redistribution Example

• Housing for the Poor
• 1937 Wagner-Steagall Act
• Create jobs and help the new poor
• How to deal with problems of new housing
  depressing the market for existing housing
• Post WWII Housing for poor relegated to inner
  cities, members changed to poor and political
  support ended
•  

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Charitable Redistribution Example

• AFDC
• Cash versus in kind services
• Initial goal to support former middle class
  whites. Black constituency had less political
  support and program faltered. Index for inflation
• Powerful producer groups stopped Nixon and Carter
  from changing welfare to cash system.
• Opposition from the welfare bureaucracy

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Universal Redistribution Examples

• Higher Education
• Medical Education
• Farm Policy
• Social Security

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Universal Redistribution

• Medical Education
• Subsidy accrues to middle and upper income
  students.
• Students become part of top quartile of income
  distribution
• Charitable justification
• Why not provide to low income students?

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Medicare

• Interest groups
• Unions
• Aged
• American Medical Association
• Other Providers

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Medicare

• Impacts
• Aged utilization, life expectancy but not all
  benefited equally
• Providers Substantial benefit
• Working non-aged- paid directly via Social
  security and income taxes, also paid with higher
  prices. Not equitable distribution
• Medically Indigent Price/premium increases

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Medicaid

• Interest groups
• Unions
• Aged
• American Medical Association
• Other Providers

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Redistribution Readings

• Daniels
• Fair chances/Best Outcomes
• Do we favor best outcomes?
• Priorities
• Sick/disabled versus less ill
• Aggregation Problem
• Small benefits to many vs. large benefit to few
• Democracy Problem
• Who makes the outcome decisions?

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Redistribution Gruber and Levitt

• Should be use tax credits to expand health
  insurance coverage?
• Microsimulation of five policies
• Refundable tax credit for nongroup insurance
• Nonrefundable credit for nongroup insurance
• Deduction for nongroup insurance expenditures
• Refundable credit for nongroup insurance
  restricted
• Refundable credit for any insurance expenditure

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Redistribution Gruber and Levitt

• Behavioral Consequences in Model
• Those uninsured who would purchase insurance if
  it were subsidized
• Those now holding nongroup insurance who would
  take up the subsidy
• Firms who would drop/reduce group coverage if
  nongroup were subsidized
• Those with group switching to nongroup insurance
• Those dropping group insurance if employers
  raised contributions

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Redistribution Gruber and Levitt

• Base policy
• 13.3B or 3,300/person in 1999 dollars
• 18.4M would take up subsidy
• 4.7 M previously uninsured
• 8.6 M previously covered by nongroup insurance
• 4.7 M previously covered by group insurance
• 0.4 M previously covered by Medicaid

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Redistribution Gruber and Levitt

• Base policy Net effect
• Net 4.0 M decline in previously uninsured
• Net 9.8 M increase in nongroup insurance
• Net 5.4 M decline in those with group insurance
• 1.1 M in firms stopped offering group insurance
  and moved to nongroup
• 0.1 M in firms stopped offering group and became
  uninsured
• 3.6 M switched from group to nongroup insurance
• 0.6 M uninsured because of premium increases

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Redistribution Gruber and Levitt

• 1 Base policy 3,300 per newly insured
• More than cost of insurance
• 2 Credit 3,827 per newly insured
• Only 2 M previously uninsured
• 3 Tax Deduct Total costs 0.8 M
• 0.25 M previously uninsured
• 4Limit Credit Total cost 6.2 B, 2,930 Per
• 2.1 M previously uninsured
• 5 Expand sub. Total cost 62.2 B, 5,000 Per
• 12.4 M previously uninsured

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Stuart Shea

• Framing the debate Medicare Drug Benefits
• Who has benefits?
• How stable are those benefits?
• What is the pattern of switching among benefit
  plans?
• More dont have coverage for part of year than
  snapshot examination indicates

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Stuart Shea

• Fewer than half of Mediare have coverage for full
  two years
• 50.6(30.5) had (no) coverage for year
• 41.5(23.4) had (no) coverage two years
• Demographics have small role
• Gaps in coverage but stable
• Implication need for Medicare Plan

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Poisal Murray

• Comparison of Medicare enrollees with and without
  Drug Coverage
• 1997/1998 similar coverage
• Utilization/spending pattern predictable
• Gap widening 1997 to 1998
• Gap bigger by health status, chronic conditions
  and poverty status

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Frank

• What is pattern of drug pricing and how does it
  vary by payer type?
• Historical observation of price differences
• Difficult to find true price (rebates)
• Pattern observed with VA paying least

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Frank

• Price differences not caused by production/
  distribution costs Price discrimination
• Market Power
• Market Segmented
• Arbitrage Potential

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Frank

• Economics of Prescription Drug Pricing
• Impacts of growth of HMOs,
• Impacts of development of PBMs
• Impacts of use of formulary

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Frank

• Economics of Prescription Drug Pricing
• What is the role of regulation and market
  structure?
• PDMA in 1987
• Distribution system chargebacks, rebates and
  discounts

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Schoenman et al

• Effect of BBA on physician decisions and access
  to care
• Shift in relative payment from surgical
  procedures to E and M or surgeons to
  nonproceduralists
• Level of awareness
• Seriousness of access

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