Canadian Health Systems and United States Health Systems, Research Paper Example

Introduction

The healthcare industry is made up of various sectors that include home health agencies, hospitals, assisted living facilities, nursing homes, and independent living facilities. Within the current economic environment in the United States, as a whole, the healthcare industry lacks immunity from the financial obstacles and challenges that almost all sectors of the economy currently face. As a result of its dependence on government funds, the healthcare industry faces herculean challenges that it must overcome. Medicare and Medicaid represent the bloodline of the American healthcare system, and without either, the American healthcare system would surely crumble. However, states continue to face stringent budget constraints as well as competing attention for the procurement of federal funds. As such, the healthcare industry continues to experiences significant handicaps, yet there remains potential for growth. The spread of health insurance vis-a-vis Medicare and Medicaid played a prominent role in contributing to the rise in health care spending over the last five decades. Despite the challenges faced by the two government-funded programs and the limitations placed on the programs in the current economic environment it is unequivocal that the American healthcare system depends on such programs, which still have room for economic growth.

The Impact of Medicare and Medicaid: Universal Healthcare?

During the 1960s, the American population increasingly aged, which prompted a health crisis because the elderly earned little to no income after they retired. As such, they proved unable to afford any health insurance, thereby relying on pricey emergency measures and procedures. In 1965, Congress, under the auspices of President Lyndon B. Johnson, provided a corrective for this dilemma by creating Medicare as a facet of the Social Security Act in order to offer health insurance to Americans over the age of sixty five regardless of their race, gender, ethnicity, class, or medical history (Altman and Frist). Since its inception, Medicaid has undergone vast changes with regards to its costs to the taxpayer and government, coverage options, and eligible enrollees. In 2010, Medicare granted access to health insurance to over forty eight million Americans, forty million of which were individuals who were sixty five years of age or over, and eight million younger Americans who suffered from disabilities. In 2011, economic data reveals that Medicare represented the primary payer for approximately fifteen million inpatient stays, which is approximately forty seven percent of the total aggregate inpatient costs in hospitals in the U.S., or one hundred and eighty three billion dollars (Torio and Andrews). Enrollees cover approximately fifty two percent of the health care costs either with out-of-pocket money or through supplemental insurance. Out-of-pocket charges can be quite hefty depending on the type of healthcare service the enrollee requires. Dental, vision, and hearing care–especially for a protracted period of time–are often uncovered by supplemental insurances (“Kaiser Slides”). As such, costs skyrocket, often resulting in the enrollee to forgo certain healthcare treatment.

Lawmakers have most recently reopened a political dialogue about the efficacy and benefits of Medicare in light of President Obama’s universal healthcare program dubbed Obamacare. These discussions have required a reevaluation of Medicare and its economic impact as well as role in American healthcare. One of the primary barometers of economic analysis of health care markets remains the insulation of the recipients of the healthcare service from the actual costs in order to diminish the economic incentive to balance benefits and costs.  The RAND Health Insurance Experiment represents the blueprint for fully comprehending how prices directly impact healthcare demand. The core results from that 1970s study indicate that hiking up the prices of consumers’ health care by approximately ten percentage points would quell the demand for health care by two or more percentage points (). This postulation suggests that infusing price sensitivity retains the potential to lessen the amount of medical care that Americans consume. This notion retains a litany of implications for Medicare reform in which the economy would be boosted by the healthcare policy

Medicare critics contend that the program is inefficient and highly mismanaged, resulted in a huge waste of government funding and taxpayer dollars. Amy Finkelstein conducted a National Bureau of Economic Research Study in 2006 which suggested that since its inception, Medicare spending reflects how personal health care and government has sharply increased. Finkelstein, a recent recipient of the PECASE award, conducted an economic assessment of how the introduction of Medicare impacted government expenditure and the utilization of medical services by the disabled and the elderly. As mentioned previously, Medicare germinated from a U.S. Congress vote in 1965, so any endeavor to ascertain its effect on health care spending deploying solely aggregate data is susceptible to the criticism that ulterior coincident changes in population health or technology can explicate the findings. Finkelstein provides a corrective to this problem by comparing the growth of health care spending on the elderly throughout the United States, taking note that the small group of over sixty five population that paid for private health insurance prior to 1965 profoundly differed traversing various regions.  For example, in the South, Medicare represented an immense expansion of access to health insurance access than it did in the West (Finkelstein and McKnight 1644). Finkelstein thus concludes that the introduction of Medicare hastened the adoption of new medical technologies geared towards prevalent diseases amongst the elderly. Moreover, it spawned an increase in hospital construction to support specialties that Medicare was often used for and supported  Finkelstein’s results suggest that Medicare as a policy that demanded an increase in healthcare within a particular segment of the population resulted in the private sector responding by investing in healthcare facilities and technologies that benefit financially from government and public funding. Reversing such a policy is impossible because of how firmly embedded it is within the economy and healthcare system, yet these findings provide some evidence for the argument that scaling back on Medicaid and/or Medicare could result in the reduction of investment in American health care capital.

A pertinent question to the economic environment in relation to Medicare and Medical and the necessity for reform remains whether the availability of public insurance coverage for certain treatments would increase private attempts to develop new and improved and efficient medical treatments. Finkelstein analyzed this particular issue in relation to vaccines. Her study concluded that after Medicare provided reimbursement to enrollees for influenza vaccines in the absence of copayments and deductibles–a healthcare decision that went into during the early 1990s–research on influenza vaccines proliferated as well. From a more general perspective, by analyzing and assessing various policies that expanded the vaccine market, Finkelstein concludes that for every one dollar spent on expanding the vaccine market, there would be an estimated five cent increase in funds spent on research for new vaccines (Finkelstein). Another study considers the innovative effects of Medicare Part D, which arrived at similar conclusions to that of Finkelstein.**  Margaret Blume-Kohout and Neeraj Sood’s 2008 study concluded that the approbation of Medicare Part D was connected with to exponentially elevated pharmaceutical R&D for drug classes that retained higher Medicare market share, there revealing how upstream innovation decisions take into account the downstream structure of various public insurance and healthcare programs.

The introduction of Medicare Part D is pinpointed as the main contributor to long-term chasm between Medicare’s projected costs and revenues. Nonetheless, Medicare Part D has created many new opportunities for future research on how health policy directly impacts economics costs within the current economic environment.  Economists have hitherto devised  various critical research findings that retain the potential to dictate future changes to Medicare.  Florian Heiss, Daniel McFadden, and Joachim Winter conducted a study in 2010 that focused on the enrollment decisions rendered by certain households that they surveyed prior to the implementation and commencement of Medicare Part D. Once the enrollment period for Medicare Part D finished, the authors subsequently re-surveyed each of the households. They then deployed information from the Medicare Current Beneficiary Survey to devise metrics for the projected drug expenses for the prescriptions that each of the survey participants required. They concluded that the majority of the households will benefit from enrolling in Medicare Part D from a healthcare as well as economic standpoint. Many economics and healthcare experts believe that the introduction of Medicare Part D exponentially increased the use of prescription drugs by between sixty and seventy percent, while other health care programs services remain more or less unaffected.

The Medicare Part D program has newly presented a litany of new features that depend on economic market mechanisms aimed at reducing or mitigating costs, which has spawned new research geared towards identifying both the successes and possible limitations of these various approaches. The findings of one 2009 study looking at how market potency and efficacy impacts the cost of prescription drugs indicates an overwhelming “success.”  Darius Lakdawalla and Wesley Yin concluded that when a private insurer negotiates drug prices and rebates with certain pharmacies, the size of the participant pool of the insurer retains a significant factor on the future outcomes. Over 100,000 participants were linked with a two point five percent decline in pharmacy prices on average, and a five percent decline in pharmacy profits-per-prescription.  The ramifications are propelled mainly by the substitution of therapies for products with viable substitutes. The findings of this study indicate how market competition retains the capacity to mitigate or reduce Medicare costs.

However, there is research on Medicare Part D, however, that indicates that market competition retains far more complex and nuanced effects at the micro level for the patient.  Jason Abaluck and Gruber conducted a study in 2009 that examined various choices made by Medicare Part D participants when they had access to a wide range of potential drug insurance programs.  The authors invoked various cross-disciplinary insights from psychology and behavioral economics to cogitate, construct, and test certain hypotheses regarding the manner in which Medicare beneficiaries select their drug insurance plans. They concluded that participants focus too much on the premium cost of the various plans while ignoring the potential out-of-pocket costs connected with the point-of-use charges. Such logic eschews what a cost-minimizing analyst would advise. As such, it is important to place a limit on participant choice of insurance plans as well as limiting other dimensions. Another viable option is pre-selecting a handful of low-cost options for each enrollee and giving them a choice within the set of particular options (Abalack and Gruber). These suggestions for reform add nuance to a discussion about the place of Medicare within the current economic environment.

Critical Thinking

Critical decisions regarding how to return health policies such as Medicare and Medicaid to economically and fiscally sustainable paths will unequivocally depend the political rather than economic dimension. Denying government public funding for healthcare for a group of individuals or segment of the population is ultimately a political choice rather than an economic one.  The fiscal ramifications, however, of the aforementioned proposed reforms to the currently large entitlement programs can only be fully assessed by looking at the burgeoning and expanding corpus of economics literature that deftly chronicles and quantifies the behavioral effects of Medicare and Medicaid.  Any attempt to assess how reforming these programs would change health status, the probability of utilizing the American healthcare system, and the probability of falling below the poverty line must invoke careful analysis of how past changes in these programs impacted the economy and healthcare system.

Conclusion

Similar to other economic safety nets like Social Security aimed at protecting the vulnerable, fiscal pressures placed on the American  government’s public health insurance programs, most prominently Medicaid and Medicare, have spawned various reform options and proposals.  Comprehending the growth of health care costs is a critical etiology in designing both private and public institutions that are geared towards slow cost growth in their design. Reforms that could possibly be considered include altering provider incentives to reward health outcomes over services carried out, increased patient cost-sharing, redesigned reimbursement coverage and formulas, health promotion incentives, and private market Medicaid and Medical options, among many other reforms. The design and evaluation of Medicare and Medicaid reforms are informed by an immense corpus of economics research on how health care financing impacts the utilization of health care utilization, expenditures, , medical practice patterns, development of technology, the delivery of cost-effective health care, and overall health outcomes. This research elucidates both the cost implications of reform, and the broader implications for the health care system overall.

Works Cited

Abaluck, Jason and Jonathan Gruber. “Choice Inconsistencies Among the Elderly: Evidence from Plan Choice in the Medicare Part D Program,” NBER. 2009. Web. 1 Aug. 2015.  http://www.nber.org/papers/w14759

Altman, Drew and William H. Frist. “Medicare and Medicaid at 50 Years: Perspectives of Beneficiaries, Health Care Professionals and Institutions, and Policy Makers. JAMA 314.4(2015): 384-395. Print.

Finkelstein, Amy and Robin McKnight. “What did Medicare do? The Initial Impact of Medicare on Mortality and out of Pocket Medical Spending.” Journal of Public Economics 92(2008):1644-1668. Print.

Finkelstein, Amy. “Static and Dynamic Effects of Health Policy: Evidence from the Vaccine Industry.” The Quarterly Journal of Economics 119.2(2004): 527-564. Print.

“Kaiser Slides: The Henry J. Kaiser Family Foundation.” Facts.kff.org. N.d. Web. 1 Aug. 2013.

“Medicare and its Impact.” The National Bureau of Economid Research. N.D. wen. 1 Aug. 2015. http://www.nber.org/digest/apr06/w11609.html

Torio, C.M. and R.M. Andrews. “National Inpatient Hospital Costs: The Most Expensive Conditions by Payer, 2011. HCUP Statistical Brief #160.” Agency for Healthcare Research and Quality. Aug. 2013. Web. 1 Aug. 2015.