Health Economics PDF

HEALTH FINANCING SYSTEMS : HOW IS HEALTHCARE BEING FUNDED? HOW HEALTHCARE SERVICES ARE FUNDED? Dr Khaled Al-Surimi, PhD Professor Healthcare management department College of Business LEARNING OUTCOMES By the end of this session, you should be able to……. 1. Define healthcare financing 2. Explain the...

HEALTH FINANCING SYSTEMS : HOW IS HEALTHCARE BEING FUNDED? HOW HEALTHCARE SERVICES ARE FUNDED? Dr Khaled Al-Surimi, PhD Professor Healthcare management department College of Business LEARNING OUTCOMES By the end of this session, you should be able to……. 1. Define healthcare financing 2. Explain the main functions (Pillars) of healthcare financing Resource collection, Risk pooing, and Resource allocation 3. Describe the main goals of healthcare financing 4. Identify the main sources of financing for the health sector. 5. Compare and contrast these different financing sources. DEFINING HEALTHCARE FINANCING The WHO defines health financing as “ a function of health system concerned with the mobilization, accumulation, and allocation of money to cover the health needs of the people, individually and collectively ”. Healthcare financing provides a mechanism for paying healthcare costs - Liaropoulos, L., Goranitis, I. Health care financing and the sustainability of health systems. Int J Equity Health 14, 80 (2015). https://doi.org/10.1186/s12939-015-0208-5 - https://www.who.int/health-topics/health-financing#tab=tab_1 DEFINING HEALTHCARE FINANCING Health financing is a core function of health systems that can enable progress toward universal health coverage (UHC) by improving effective service coverage and financial protection https://extranet.who.int/nhptool/BuildingBlock.aspx HEALTH FINANCING CORE FUNCTIONS § Resource mobilization § How do we get the money? § Resource Pooling § How do we spread the risk? § Resource allocation (Purchasing) § How do we pay providers for healthcare services? https://www.who.int/westernpacific/health-topics/health-financing#tab=tab_1 https://www.fpfinancingroadmap.org/learning/health-financing-concepts/health-financing-basics HEALTH FINANCING AND RISK POOLING HEALTH FINANCING FUNCTIONS FRAMEWORK Source: Schieber and Maeda 1997, The World Bank HEALTH CARE FINANCING GOALS Putting in place proper health financing mechanisms can ensure that different population groups, especially the most vulnerable and highrisk groups, can access care and be protected from catastrophic expenditures and impoverishment due to health payments. The goal of health financing policy is to move towards universal health coverage (UHC) by ensuring adequate spending on health at national and local levels and effective allocation of financial resources to different types of public and personal health services. https://www.who.int/westernpacific/health-topics/health-financing#tab=tab_1 MAIN SOURCES OF HEALTH FINANCING: 1. General Revenue Or Taxation. 2. Insurance Schemes. 3. Community Financing. 4. Direct Out Of Pocket Payments. 5. External Source of Financing. 1. GENERAL REVENUE OR TAXATION. v Definition: This refers to the funding of healthcare services through taxes or revenue collected by the government from individuals and businesses. These taxes can be specific (levied on particular goods such as tobacco or alcohol), general (such as value-added taxes), or through income and corporate taxes. GENERAL REVENUE OR TAXATION. Strengths: Provides a steady and predictable source of financing. Allows for universal coverage and access to health services. Reduces financial barriers to care, as it is not directly linked to the ability to pay at the point of use. Weaknesses: Can be politically challenging to increase tax rates. The wealthy may end up subsidizing the poor, which some might view as unfair. May not be responsive to consumer preferences if the government does not allocate resources efficiently. Example: The National Health Service (NHS) in the United Kingdom is primarily funded through general taxation 2. INSURANCE SCHEMES v Definition: Health insurance schemes involve pooling risks and resources so that the financial burden of health care costs is spread across many individuals, with payments made regularly through premiums or payroll taxes. Types: Social Insurance Private Insurance 2. INSURANCE SCHEMES Strengths: Spreads financial risk across a larger pool of individuals. Can provide comprehensive coverage. May offer a choice of providers and services. Weaknesses: Can be expensive for individuals and employers. May have issues with adverse selection and moral hazard. Can be complex to administer and require significant oversight. Example: The Medicare and Medicaid programs program in the United States is federal health insurance. 3. COMMUNITY HEALTH FINANCING v Definition: Community financing refers to health financing schemes that are organized at the community level, often targeting populations that are not covered by formal insurance schemes. These can include community health funds, microinsurance, or other indigenous forms of mutual health organizations. 3. COMMUNITY HEALTH FINANCING Strengths: Promotes community ownership and solidarity. Can be tailored to the specific needs of a community. Often has low administrative costs. Weaknesses: May only provide limited financial protection due to small risk-pooling pools. Often covers only basic services. Can be financially unstable and unsustainable without external support. Example: The Dhaka Community Hospital in Bangladesh operates a community-based health insurance scheme for informal sector workers. 4. OUT-OF-POCKET PAYMENTS v Definition: § This is the payment made by individuals at the point of receiving healthcare services without any prepayment or risk pooling mechanism in place. 4. OUT-OF-POCKET PAYMENTS Strengths: Simple to understand and administer. Users may have a greater sense of ownership over the services they use. This can lead to a more direct relationship between provider and patient. Weaknesses: This can lead to catastrophic health expenditures and impoverishment. Discourages people from seeking care, which can exacerbate health issues. Not equitable as it depends on the ability to pay. Illness might remain untreated because of a lack of funds Example: In many low-income countries, a significant portion of healthcare financing comes from out-of-pocket payments due to the lack of extensive insurance coverage. 5. EXTERNAL SOURCE OF FINANCING vDefinition: External financing refers to the funds that come from international donor agencies, foreign governments, international NGOs, and other entities outside of the country to support health services, usually in low- and middleincome countries 5. EXTERNAL SOURCE OF FINANCING Strengths: Can provide significant resources for health systems that are underfunded. Often targets specific health challenges like infectious diseases or maternal health. Can support innovations and infrastructure development. Weaknesses: Can create dependency and may not be sustainable in the long term. May not always align with the country’s own health priorities. Risk of fluctuations due to changes in donor policies or global economic conditions. Example: The Global Fund to Fight AIDS, Tuberculosis, and Malaria provides external financing to countries to combat these diseases, often supplementing their own domestic health budgets. OVERALL SUMMARY DIFFERENT FINANCING METHODS AVAILABLE AND ORGANIZATION OF THE FINANCING SYSTEMS Health Financing Systems Methods of public financing External financing “Aid” Methods of private financing Internal financing Social insurance systems (illness) Public systems of health services Unified System Fragmented System User payments For-profit or Non-profit private insurance Medical savings voluntary or compulsory Social contributions employers employees FINANCIAL INCENTIVES IN HEALTH: DEMAND-SIDE AND SUPPLY-SIDE FINANCING https://www.fpfinancingroadmap.org/learning/health-financing-concepts/health-financing-basics HOW MUCH WE SPEND ON HEALTH AND HEALTHCARE HTTPS://DATA.WORLDBANK. ORG/INDICATOR/SH.XPD.CH EX.GD.ZS?VIEW=MAP ASSIGNMENT Complete the following Modules on the Basics of Health Economics course (self-paced ) Module 8: Health Financing Overview Module 9: Risk pooling THE END HEALTH PROVIDER PAYMENTS How do Healthcare Providers get paid? Dr Khaled Al-Surimi, PhD Professor Healthcare Management Department College of Business Learning Outcomes By the end of this session, you should be able to……. 1. Identify the different major healthcare service providers 2. Describe different types of healthcare provider payment methods 3. Compare and contrast each type of healthcare provider payment methods 4. Explain the relationship between provider behavior and insurer MAIN AGENDA… HEALTHCARE PROVIDERS TYPES PHYSICIAN PAYMENT METHODS HOSPITAL PAYMENT METHODS MANAGEMENT OF PROVIDER BEHAVIOR BY INSURERS Recap: Defining HealthCare Financing The WHO defines health financing as “ a function of health system concerned with the mobilization, accumulation, and allocation of money to cover the health needs of the people, individually and collectively ” Healthcare financing provides a mechanism for paying healthcare costs - Liaropoulos, L., Goranitis, I. Health care financing and the sustainability of health systems. Int J Equity Health 14, 80 (2015). https://doi.org/10.1186/s12939-015-0208-5 - https://www.who.int/health-topics/health-financing#tab=tab_1 Recap: Health Financing Core Functions ▪ Resource Mobilization ▪ How do we get the money? ▪ Resource Pooling ▪ How do we spread the risk? ▪ Resource Allocation (Purchasing) ▪ How do we pay providers for healthcare services? https://www.who.int/westernpacific/health-topics/health-financing#tab=tab_1 https://www.fpfinancingroadmap.org/learning/health-financing-concepts/health-financingbasics MAJOR HEALTHCARE SERVICE PROVIDERS Hospital Long-term care facility (LTC) Physician Pharmaceutical Home Care Hospice (Palliative care) HEALTH PROVIDER PAYMENT METHODS Physician Payments Fee-for-service Capitation Per case or episode Salary Hospital Pavement Global budget Per case Capitated Per diem Fee-for-service Retrospective costs PHYSICIAN PAYMENT METHODS PHYSICIAN PAYMENT METHODS Fee-forservice (FFS) Capitation Per case or episode (Bundel) Salary Fee-for-Service (FFS) Definition: A payment model where physicians are paid for each service, test, or procedure performed. Payment is dependent on the quantity rather than the quality of care. ▪ Advantages: ▪ It can incentivize providers to offer more comprehensive diagnostic and treatment options. ▪ Ensures that providers are compensated for every service they deliver. ▪ Disadvantages: ▪ This may encourage overutilization of healthcare services, increasing overall healthcare costs. ▪ Does not incentivize preventive care or care coordination. ▪ Example: A physician bills for each visit, test, and procedure. For instance, if a patient needs an X-ray, blood test, and consultation, the provider bills for each separately. Capitation Definition: A payment arrangement where physicians receive a set amount for each enrolled patient assigned to them, per period of time, whether or not that patient seeks care. ▪ Advantages: ▪ Encourages efficiency in healthcare delivery and may reduce unnecessary healthcare services. ▪ Simplifies billing and payment processes. ▪ Disadvantages: ▪ This may lead to under-provision of care, as physicians might be incentivized to minimize services to reduce costs. ▪ Physicians bear the financial risk if the costs of services exceed the capitation payment. ▪ Example: A primary care physician is paid a fixed monthly rate for each patient in their care, regardless of how many times the patient is seen. Bundled Payments (Per case or episode) Definition: A single, comprehensive payment for all services related to a specific treatment or condition over a period of time or episode of care. ▪ Advantages: ▪ Encourages coordination among all providers involved in a patient's care. ▪ Can reduce unnecessary services and promote cost-effective treatment plans. ▪ Disadvantages: ▪ Complexity in determining the bundle price and dividing payments among multiple providers. ▪ Physicians may avoid high-risk patients whose costs may exceed the bundled payment. ▪ Example: A single payment covers all of the care for a patient’s knee replacement surgery, including the pre-operative visit, the surgery itself, and all post-operative care and rehabilitation. Salary-Based Payment Definition: Physicians are employed and paid a fixed salary by the hospital, clinic, or health system they work for, regardless of the number of services they provide. ▪ Advantages: ▪ Provides financial stability for physicians. ▪ Can promote teamwork and discourage competition among physicians within the same organization. ▪ Disadvantages: ▪ May reduce the individual incentive for high productivity or efficiency. ▪ Might not adequately reward those who provide higher levels of care or take on more complex cases. ▪ Example: A physician working for a public or private hospital earns a yearly salary independent of the number of patients seen or procedures performed PHYSICIAN PAYMENT METHOD INCENTIVES Fee-for-service method The provider has an incentive to generate more services, especially if the fee exceeds the marginal cost of production Insurer has an incentive to monitor for excessive use of services provided Capitation The provider has an incentive to reduce the volume of visits and intensity of service provided because of the financial risk incurred Insurer has an incentive to monitor for low quality and underutilization of care PROFIT-MAXIMIZING MODEL OF FEEFOR-SERVICE PAYMENT Useful for analyzing the effects of the level of rates in a fee-for-service payment system Because the physician is paid a fixed rate per unit of service provided, the number of units produced will depend on the payment rate and marginal costs for the specific service Another important factor is the relative profits of fees paid for different services The incentive is created to increase the volume of care provided The fee schedule can influence both the type of services performed and the location of performance of the service HOSPITAL PAYMENT METHODS HOSPITAL PAYMENT METHODS Retrospective cost basis Prospective feefor-service system Per diem fees Per case or per admission payment Per case payment with adjustment for outliers Diagnosis related groups Capitation Global budget Retrospective Cost Basis Definition: This is a payment method where hospitals are reimbursed after services are delivered, based on actual costs incurred. ▪ Advantages: ▪ Ensures hospitals can recover the costs of services provided. ▪ Hospitals are less likely to under-provide care since reimbursement is based on cost. ▪ Disadvantages: ▪ This can lead to higher healthcare costs due to a lack of incentives to control spending. ▪ May encourage overutilization of services. ▪ Example: A hospital submits detailed costs for a patient's stay after discharge, and the payer reimburses these costs. Prospective Fee-for-Service System Definition: Hospitals are paid a predetermined fee for each service provided, established in advance. ▪ Advantages: ▪ Simple and transparent payment structure. ▪ Providers know in advance how much they will be paid for each service. ▪ Disadvantages: ▪ Can encourage volume over value, leading to potential overuse of services. ▪ Does not incentivize cost control or efficiency. ▪ Example: A hospital charges a set fee for an MRI scan, regardless of the actual cost or outcome for the patient. Per Diem Fees Definition: A fixed payment is made per day for a patient's care, regardless of the number or type of services provided during that day. ▪ Advantages: ▪ Simplifies billing and can make costs more predictable for payers. ▪ Encourages efficient delivery of services within a day. ▪ Disadvantages: ▪ May not account for the variability in costs of services needed from day to day. ▪ Hospitals may have an incentive to extend the length of stay to increase reimbursement. ▪ Example: A patient's daily hospital stay is billed at a flat rate, including all the routine services provided on that day. Per Case or Per Admission Payment Definition: A single payment is made for all the care provided during a single hospital admission. Advantages: Encourages hospitals to provide care efficiently for each case. Simplifies the billing process for both providers and payers. Disadvantages: This may lead to early discharge to minimize costs. Hospitals may be disincentivized to admit sicker patients who may require more resources. Example: A hospital receives a lump sum payment for the entirety of a patient's stay for a specific surgical procedure. Per Case Payment with Adjustment for Outliers Definition: Similar to per-case payments, but with adjustments made for cases that require unusually high costs ("outliers"). ▪ Advantages: ▪ Provides a safety net for hospitals treating patients with unexpectedly high costs. ▪ Aligns incentives for cost control while acknowledging the need for flexibility. ▪ Disadvantages: ▪ Complexity in determining what qualifies as an outlier and how adjustments are calculated. ▪ Potential for disputes between hospitals and payers regarding outlier status. ▪ Example: A hospital receives additional payment for a patient who had complications during surgery requiring extended ICU care beyond what is typical for the procedure. Diagnosis Related Groups (DRGs) Definition: A system where hospital payments are determined by the patient's diagnosis, with each diagnosis grouped into a category with a fixed payment rate. ▪ Advantages: ▪ Encourages efficiency and cost control by standardizing payments. ▪ Reduces the incentive to provide unnecessary services. ▪ Disadvantages: ▪ This may lead to under-provision of care if the DRG payment is lower than the cost of services needed. ▪ Complexity in coding and classification can lead to administrative burdens. ▪ Example: A hospital is paid a fixed amount for treating a patient with acute appendicitis, covering all related services. Capitation Definition: A payment model where a hospital is paid a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care. ▪ Advantages: ▪ Encourages preventive care and efficient use of healthcare resources. ▪ Provides predictable revenue for providers. ▪ Disadvantages: ▪ Risk of under-service if the capitation payment is too low. ▪ May not adequately cover the costs of patients with chronic or severe conditions. ▪ Example: A healthcare system is paid a monthly fee for each member of a health plan, regardless of whether the member uses services. Global Budget Definition: A fixed total budget given to a hospital or health system for a defined period, covering all healthcare services. ▪ Advantages: ▪ Promotes strategic planning and prioritization of services. ▪ Can stabilize healthcare spending and encourage system-wide efficiency. ▪ Disadvantages: ▪ May limit funds available for unexpected expenses or new treatments. ▪ Risk of reduced service quality if the budget is inadequate. ▪ Example: A regional health authority allocates a set annual budget to a hospital, within which the hospital must manage all operational costs and patient care services. OTHER PAYMENT METHODS: Value-Based Purchasing (VBP) Definition: A payment model that rewards hospitals for the quality of care they provide, with incentives tied to performance on specific measures of quality and efficiency. ▪ Advantages: ▪ Aligns hospital payments with patient outcomes and satisfaction. ▪ Can improve the quality of care and patient experience. ▪ Disadvantages: ▪ May be challenging for hospitals to meet performance benchmarks, especially those serving high-risk populations. ▪ Requires robust data collection and reporting systems to monitor and manage performance measures. ▪ Example: A hospital receives higher reimbursement rates from payers for demonstrating low rates of hospital-acquired infections and high patient satisfaction scores. OTHER PAYMENT METHODS: Pay-for-Performance (P4P) Definition: A payment model that offers financial incentives to physicians and hospitals who meet certain performance measures for quality and efficiency. ▪ Advantages: ▪ Promotes higher quality care by incentivizing best practices and guideline adherence. ▪ Aligns financial incentives with health outcomes and patient satisfaction. ▪ Disadvantages: ▪ This may lead to a focus on easily measured aspects of care rather than complex patient needs. ▪ Risk adjustment is complex and imperfect, potentially disadvantaging providers serving high-risk populations. ▪ Example: Physicians or hospitals receive bonuses for meeting targets such as high rates of vaccinations or controlled blood sugar levels in diabetic patients. Overall Summary on the Common Healthcare Provider payment methods Payment Method Fee-for-Service (FFS) Capitation Bundled Payments Definition Payment for each service rendered. Characteristics Incentivizes high volume of services. Encourages Advantages Disadvantages Simple, ensures payment for Can lead to unnecessary every service, offers patient testing/treatments, doesn't focus choice. on outcomes. Examples Traditional doctor visits, diagnostic tests. Set amount per Predictable costs, Primary care physician Risk of under-service, patient per period, efficiency, focus on preventive incentivizes keeping patients payments in some managed may not cover all patient needs. regardless of services. healthy. care organizations. care. Single payment for all Simplifies Complexity in services related to a Encourages billing, focuses on entire defining bundles, potential for Joint replacement surgery, treatment or condition. coordinated care, efficiency. care episode. care skimping. maternity care bundles. Value-Based Payments (VBP) Payments adjusted based on care quality, outcomes, and efficiency. Focus Directly Potential Pay for Performance (P4P) Financial incentives for meeting specific performance measures. on quality improvements, efficiency. ties payments to performance metrics. for gaming the system, data collection burdens. Providers share in savings from reducing Shared Savings Programs healthcare spending. Incentivizes cost reduction while maintaining quality. Potential for additional revenue, promotes efficient care. Complex arrangements, risk of reduced care quality. Accountable Care Organizations (ACOs). Financial risk for providers, complex to administer. Some state Medicaid programs, alternative payment models. Global Payment Rewards Aligns Requires high-quality, cost-effective care. incentives with patient health outcomes. robust measurement and data analysis. Fixed annual payment Encourages overall health for all care for a management, long-term care patient or population. focus. Flat fee for direct access to primary care Simplifies billing, emphasizes Direct Primary Care (DPC) services. patient-provider relationship. Predictable spending, rewards preventive care. Enhanced access for patients, reduced administrative burden. Hospital Value-Based Purchasing (VBP) Program. Quality incentive programs in Medicare. Out-of-pocket costs for patients, Membership-based primary may not cover specialist care. care practices. MANAGEMENT OF PROVIDER BEHAVIOR BY INSURERS MANAGEMENT OF PROVIDER BEHAVIOR BY INSURERS Overall case management Preadmission management – Second opinions – Preadmission testing Concurrent management – Concurrent review – Discharge planning Post-hospital review – Retrospective review – Claims denials Provider behavior can be regulated before, during, or after hospital admission, or a combination of these three time periods. Before hospitalization, insurers can require providers to seek permission (pre-authorization); during hospitalization, insurers can monitor the length of stay or use of procedures (concurrent review); and following hospitalization, insurers can conduct reviews and deny claims (retrospective review). PRINCIPAL-AGENT RELATIONSHIPS Exist when one entity or individual (the agent) acts on behalf of another individual or entity (the principal) The arrangement works well when the agent is an expert at making necessary decisions that are in the best interest of the principal If there is a conflict of interest between the agent and principal in carrying out the conditions of the arrangement, then the arrangement will usually not work well The provider, acting as an agent, typically faces at least two principals: the patients being served and the insurers RELATIONSHIPS BETWEEN INSURER AND PROVIDER Insurers must pay providers a given amount when the provider renders services to members of the insurance plan Payment to the provider includes – The average costs incurred by providers for that service – Profits that are reasonable – Risks incurred under the payment type Insurer incurs transaction costs associated with – Searching for product or service availability – Characteristics of the products offered by providers – Prices – Costs of negotiating and preparing contracts – Costs of monitoring providers’ performance – Costs of enforcing terms of contracts Assignment Complete the Modules on the Basics of Health Economics course (self-paced ) – Module 10: Resource Allocation THE END HEALTH INSURANCE Dr Khaled Al-Surimi, PhD Professor Healthcare management department College of Business LEARNING OUTCOMES By the end of this session, you should be able to……. 1. Explain basic terms and concepts in health insurance 2. Describe the history development of health insurance 3. Identify the main types and models of health insurance 4. Explain why health insurance is important 5. Explain the concept of moral hazard and adverse selection and their implications 6. Explain factors influencing demand for insurance RECAP: HEALTH FINANCING CORE FUNCTIONS ▪ Resource mobilization ▪ How do we get the money? to make sure as citizens are protected from financial catastrophic ▪ Resource Pooling ▪ How do we spread the risk? ▪ Resource allocation (Purchasing) ▪ How do we pay providers for healthcare services? https://www.who.int/westernpacific/health-topics/health-financing#tab=tab_1 https://www.fpfinancingroadmap.org/learning/health-financing-concepts/healthfinancing-basics RECAP. :HEALTH INSURANCE AND RISK POOLING to spread the risk between people so if any of them gets sicks. they will all have access to care. RECAP. DEFINITION AND INSURANCE SCHEMES ❖ Definition: ▪ Health insurance schemes involve pooling risks and resources so that the financial burden of health care costs is spread across many individuals, with payments made regularly through premiums or payroll taxes. ▪ Types: ▪ Social Insurance ▪ Private Insurance payed by the government or company paid by you (out-of-pocket). public funded private funded RECAP: HEALTH INSURANCE AND HEALTHCARE FINANCING SYSTEMS KEY CONCEPTS AND TERMS IN HEALTH INSURANCE KEY CONCEPTS AND TERMS IN HEALTH INSURANCE Deductible you have to pay before the insurance will pay Benefits Copayment Coinsurance Premiums Urgent Care Out-of-pocket maximum fixed Health Savings Account (HAS you have to pay deductible after Coinsurance and Co payment after these 3 you reached the out of pocket maximum the remaining amount the insurance will pay it Part of the insurance behavior of consumer KEY CONCEPTS AND TERMS step 1 DEDUCTIBLE the treatment cost 500, but you have to pay 100. after you reach your detuctible after copayment or coinsurance if you choose detuctible, 500 if something wrong happen, based on this premium is 30qr if i don’t chose i will end up pay 100qr ▪ The amount you pay out-of-pocket for healthcare expenses before an insurance provider will pay any expenses. ▪ After you pay your deductible, you usually pay only a copayment or coinsurance for covered services, and your insurance company pays the rest ▪ Higher deductibles generally lead to lower premium costs but mean higher initial expenses for the insured when seeking care For example: If your health plans deductible is $1,500, you’ll pay 100% of eligible healthcare expenses until the bills total $1,500. After you pay the deductible, you then share the cost with your health plan by paying either copayments or coinsurance. this a way of controling Moral hazard, behavior of consumer KEY CONCEPTS AND TERMS step 2 COPAYMENT Fact: you dont have to follow these step such as deductible, but the premium will be high a fixxed amount of money A copayment (or “copay”) is a fee you pay at the time of service when you receive a specific medical service or supply. For example, your health insurance plan may require a $15 copayment for an office visit or brand-name prescription drug. KEY CONCEPTS AND TERMS COINSURANCE Coinsurance is a percentage fee that you pay for medical services or supplies once your deductible has been paid. For example: Your plan might cover 80% of your medical bill. You will have to pay the other 20%. The 20% is the coinsurance. Detuctible yes ( choice ) One of these use: copayment Coinsurance Premiums the amount you pay each month (or each year) to keep your insurance policy active KEY CONCEPTS AND TERMS PREMIUMS These are regular payments made by or on behalf of the insured individuals to the insurance company to maintain coverage Premium amounts can vary based on several factors, including the level of coverage, the insured's age, lifestyle, and in some cases, medical history. KEY CONCEPTS AND TERMS BENEFITS/COVERAGE Benefits are what’s covered under a health insurance plan. Covered benefits and services that are not included are defined in the health insurance plan's coverage documents. The term Coverage refers to the range of medical services and treatments that the health insurance policy agrees to fund. Coverage can include doctor visits, hospital stays, surgeries, prescriptions, and sometimes preventive care and mental health services, varying significantly between different policies and providers. KEY CONCEPTS AND TERMS HEALTH SAVINGS ACCOUNT (HSA) a policy that they dont take tax, saving money for health purposes. An account that lets you save for future medical costs. Money put in the account is not subject to federal income tax when deposited. Funds can build up and be used year to year to pay for deductibles, copayments, coinsurance, and other medical expenses. They are not required to be spent in a single year. KEY CONCEPTS AND TERMS less severe, isn’t life threatening if untretted in the same time. URGENT CARE An urgent care center is a convenient option when illness strikes outside of your doctor’s regular office hours. Urgent care is an alternative when an illness, injury or condition is serious enough that you need care right away but not so severe that it requires hospital emergency room care. KEY CONCEPTS AND TERMS OUT-OF-POCKET MAXIMUM ▪The out-of-pocket maximum is your portion of the bill after insurance has covered their part. BRIEF HISTORY OF HEALTH INSURANCE BRIEF HISTORY OF HEALTH INSURANCE 19th Century Early 20th Century Early 21st Century Pre Early 20th Century Late 20th to Early 21st Century Late 19th Century Mid 21st Century Late 19th Century 20th Century 21st Century BRIEF HISTORY OF HEALTH INSURANCE ▪ Early Forms and Mutual Aid Pre-19th Century: Early forms of health insurance can be traced back to ancient times when guilds or benevolent societies offered mutual aid to their members. However, these were not health insurance in the modern sense but rather community-based support systems. ▪ Industrialization and Social Insurance Late 19th Century: The Industrial Revolution brought about significant social and economic changes, leading to the emergence of modern health insurance systems. Germany, under Chancellor Otto von Bismarck, introduced the first system of social health insurance in the 1880s as part of broader social welfare reforms. This model inspired similar systems in other European countries 19th Century Early 20th Century Early 21st Century Pre Early 20th Century Late 20th to Early 21st Century Late 19th Century Mid 21st Century Late 19th Century 20th Century 21st Century BRIEF HISTORY OF HEALTH INSURANCE ▪ Expansion of Health Insurance Models Early 20th Century: Various models of health insurance began to emerge across the world. The United Kingdom introduced the National Insurance Act in 1911, providing health insurance coverage to workers. Other countries developed their own systems, often influenced by the Bismarck or Beveridge models, the latter named after William Beveridge, which aimed at universal health coverage (UHC) funded by general taxation. 19th Century Early 20th Century Early 21st Century Pre Early 20th Century Late 20th to Early 21st Century Late 19th Century Mid 21st Century Late 19th Century 20th Century 21st Century BRIEF HISTORY OF HEALTH INSURANCE ▪ Post-World War II Developments Mid-20th Century: The aftermath of World War II saw a significant expansion of health insurance and welfare states in many countries. The National Health Service (NHS) was established in the UK in 1948, providing healthcare free at the point of use, funded by taxation. Many other countries, especially in Western Europe and Scandinavia, expanded or introduced public health insurance systems during this period. 19th Century Early 20th Century Early 21st Century Pre Early 20th Century Late 20th to Early 21st Century Late 19th Century Mid 21st Century Late 19th Century 20th Century 21st Century BRIEF HISTORY OF HEALTH INSURANCE ▪ Global Trends and Challenges Late 20th to Early 21st Century: As healthcare costs escalated, countries around the world faced challenges in maintaining and reforming their health insurance systems. The United States, with its unique employer-based insurance system, introduced significant reforms through the Affordable Care Act in 2010 to expand coverage and control costs. Other countries have pursued reforms to address issues of accessibility, affordability, and sustainability. 19th Century Early 20th Century Early 21st Century Pre Early 20th Century Late 20th to Early 21st Century Late 19th Century Mid 21st Century Late 19th Century 20th Century 21st Century BRIEF HISTORY OF HEALTH INSURANCE ▪ Universal Health Coverage (UHC) 21st Century: There has been a growing international movement towards Universal Health Coverage (UHC), driven by the World Health Organization (WHO) and other global health organizations. UHC aims to ensure that all people have access to the healthcare services they need without financial hardship. Many countries are working towards this goal, each adapting the concept of UHC to their specific context and healthcare system. 19th Century Early 20th Century Early 21st Century Pre Early 20th Century Late 20th to Early 21st Century Late 19th Century Mid 21st Century Late 19th Century 20th Century 21st Century TYPES OF HEALTH INSURANCE MODELS TYPES OF HEALTH INSURANCE MODELS Bismarck Model Out-of-Pocket Model Beveridge Model National Health Insurance Model Mixed Models Managed Care and Health Maintenance Organizations (HMOs) TYPES OF HEALTH INSURANCE MODELS Bismarck Model - Social Health Insurance Model Characteristics: Named after Otto von Bismarck, who implemented the first health insurance system in Germany in the 1880s, this model uses an insurance system typically funded jointly by employers and employees through payroll deduction. Coverage: It aims to cover all citizens and is characterized by private health insurance plans that have to accept everyone, with no profit on basic care. Countries: Germany, France, Belgium, Japan, and Switzerland use variations of this model. he is a socialist simillar to Qatar, as money comes from government TYPES OF HEALTH INSURANCE MODELS Beveridge Model - Universal healthcare system Characteristics: Named after social reformer William Beveridge, this model involves health care being provided and financed by the government through tax payments, just as the police and public library services are. Coverage: There are no medical bills; healthcare is a public service, aiming for universal coverage. Healthcare providers can be government employees in some cases. Countries: The United Kingdom, Italy, Spain, and most Scandinavian countries are examples where the Beveridge Model is in place. TYPES OF HEALTH INSURANCE MODELS National Health Insurance Model Characteristics: This model combines elements of both Bismarck and Beveridge models. It uses public insurance to pay for healthcare services delivered by private providers. Coverage: Everyone in the country is covered, and the system is funded through taxes. The government has significant leverage to negotiate lower prices for pharmaceuticals and services. Countries: Canada, South Korea, and Taiwan are examples of countries using the National Health Insurance model. TYPES OF HEALTH INSURANCE MODELS Out-of-Pocket Model Characteristics: In countries with no systematic healthcare system, patients pay for all healthcare services out of their own pockets. The quality and access to healthcare are directly related to the individual's ability to pay. Coverage: This model is prevalent in many low-income countries where a significant portion of healthcare expenses is out-of-pocket, leading to disparities in access and quality. Countries: Many developing countries in Africa, Asia, and Latin America primarily use this model, though many are working towards more structured healthcare systems. TYPES OF HEALTH INSURANCE MODELS Mixed Models Characteristics: Many countries employ a mixture of the previous models or variations of them to meet their healthcare needs. For example, some may have a Beveridge model for the broader population but allow for private insurance and care for those who prefer it or can afford it. Countries: Australia and India are examples where mixed models are in operation, combining public and private insurance elements and healthcare provision. TYPES OF HEALTH INSURANCE MODELS Managed Care and Health Maintenance Organizations (HMOs) Characteristics: Particularly in the United States, managed care and HMOs represent a network or organization that provides or arranges managed care for health insurance, self-funded health care benefit plans, individuals, and other entities, acting as a liaison with healthcare providers on a prepaid basis. Coverage: The focus is on agreements with healthcare providers and services to provide care at reduced costs, and it includes mechanisms to encourage the use of care providers within the network. TYPES OF HEALTH INSURANCE TYPES OF HEALTH INSURANCE Private Health Insurance: Offered through private companies, this can be employer-sponsored or purchased by individuals. Policies and coverage details can vary widely. Public/Government Health Insurance Programs funded and managed by government entities are designed to provide coverage to specific groups such as the elderly, disabled, or low-income families. Examples include Medicare and Medicaid in the United States. Universal Health Coverage (UHC) Aimed at providing all citizens within a country access to necessary healthcare services without financial hardship, funded through taxation, social insurance, or a combination of methods. HEALTH INSURANCE: PURPOSE AND BENEFITS Financial Protection Health insurance protects individuals and families from the potentially high costs of medical care, reducing the risk of financial hardship due to illness or accidents Access to Care Insured individuals have better access to healthcare services, including preventive care, which can lead to earlier diagnosis and treatment of health conditions. Health Improvement people who have insurance go to healthcare By facilitating access to healthcare services, health insurance contributes to the overall health and wellbeing of the population, potentially reducing the incidence of severe health conditions and improving life expectancy. HEALTH INSURANCE: CHALLENGES AND CRITICISMS Cost and Affordability The rising cost of healthcare and insurance premiums is a significant concern, making it difficult for some individuals and families to afford coverage Coverage Gaps Not all health insurance policies cover every type of medical service, leading to gaps in coverage that can result in significant out-of-pocket expenses for some services or treatments. Complexity The complexity of health insurance policies and the healthcare system can make it challenging for individuals to understand their coverage and rights fully. WHY DOES HEALTH INSURANCE MATTER? Why is Health insurance important? WHY DOES HEALTH INSURANCE MATTER? Financial Protection Public Health Improvement Access to Care Economic Stability Equity and Accessibility Mental Health Support WHY DOES HEALTH INSURANCE MATTER? Financial Protection Prevents Bankruptcy: Medical care can be prohibitively expensive, especially in emergencies or for chronic conditions. Health insurance helps protect individuals and families from the financial ruin that can result from unexpected medical expenses. Cost Sharing: Through mechanisms like premiums, deductibles, and copayments, health insurance spreads the financial risk of healthcare costs across many individuals, making it more manageable for everyone. WHY DOES HEALTH INSURANCE MATTER? Access to Care ▪ Timely Medical Attention: Individuals with health insurance are more likely to seek medical attention when needed, without delay due to concerns about costs. ▪ Preventive Services: Many health insurance plans cover preventive services and screenings, which can detect health issues early when they are more treatable and less costly. ▪ Better Health Outcomes: Regular access to healthcare services leads to better disease management, reduced complications, and improved overall health outcomes. WHY DOES HEALTH INSURANCE MATTER? Economic Stability Reduces Absenteeism: By promoting health and well-being, health insurance can reduce absenteeism and increase productivity in the workforce. Supports Healthcare Providers: Insurance payments to healthcare providers support hospitals, clinics, and private practices, contributing to the stability and availability of healthcare services. WHY DOES HEALTH INSURANCE MATTER? Public Health Improvement ▪ Disease Control: Health insurance enables more individuals to participate in vaccination programs and infectious disease screenings, contributing to the control and reduction of communicable diseases. ▪ Health Data Collection: Insurance claims and health data help in monitoring public health trends, facilitating research, and informing public health policy and strategies. WHY DOES HEALTH INSURANCE MATTER? Equity and Accessibility ▪ Reduces Inequality: By providing a mechanism for more equitable access to healthcare, health insurance can help to reduce health disparities across different socioeconomic groups. ▪ Universal Coverage Goals: In countries with universal health coverage (UHC), health insurance is a key component in ensuring that all citizens have access to necessary healthcare services without financial hardship. WHY DOES HEALTH INSURANCE MATTER?? Mental Health Support ▪ Comprehensive Care: Many insurance plans now include coverage for mental health services, recognizing the importance of mental well-being as part of overall health. ▪ This support is crucial for individuals dealing with mental health issues who might otherwise be unable to afford treatment. MORAL HAZARD AND ADVERSE SELECTION Moral hazard dont abuse the insurance comany (dont behave differently after getting insurance) Moral hazard occurs when the behavior of an insured individual changes in a way that increases the likelihood or magnitude of a claim after obtaining insurance coverage This change in behavior happens because the individual is less concerned about the risk due to the financial protection provided by insurance It might lead to less incentive for individuals to maintain a healthy lifestyle or take preventive health measures. Implications: Insurance companies often implement strategies like co-payments, deductibles, and co-insurance to share costs with policyholders and discourage unnecessary use of medical services. These mechanisms aim to make insured individuals more conscious of the costs associated with their healthcare decisions MORAL HAZARD AND ADVERSE SELECTION you only about to get sick so you buy insurance Adverse Selection so there will be a mandatory insurance (to adress this problem). Adverse selection refers to a situation where there is an imbalance in information between the insurer and the insured, leading to individuals who are more likely to use insurance being more inclined to purchase it. For example, in health insurance, individuals who know they have health issues or are at higher risk of needing medical care are more likely to seek insurance coverage than those who consider themselves healthy Implications: To combat adverse selection, insurers may use underwriting practices to assess the risk of applicants, including health screenings or questionnaires. Some health insurance systems, especially those aiming for universal coverage, use mechanisms such as mandatory insurance for all citizens to ensure that the risk pool is as broad and diverse as possible, thereby mitigating the effects of adverse selection MORAL HAZARD AND ADVERSE SELECTION Addressing moral hazard and adverse selection Both moral hazard and adverse selection present challenges to the sustainability and efficiency of insurance systems. Policymakers and insurers employ various strategies to address these issues, including the design of insurance products, regulatory measures to ensure broad participation and incentives for healthy behaviors. Understanding and mitigating the effects of moral hazard and adverse selection are crucial for maintaining a balanced and fair insurance market that can provide financial protection and access to care for the widest possible population. FACTORS IMPACTING DEMAND FOR HEALTH INSURANCE Consumer tastes and preferences Level of wealth Medical expenses in the event of illness Likelihood of illness Price of insurance Behavioral assumption HEALTH FINANCING AND INSURANCE DEPARTMENT AT MOPH, QATAR https://www.moph.gov.qa/english/derpartments/policyaffairs/hfid/Pages/default.aspx THE END ASSIGNMENT ▪ Complete the following Modules on the Basics of Health Economics course (selfpaced ) ▪ Module 9: Risk pooling