Exam 18: Value for Money in the Future of Health Care

Health economists view all incentives as monetary in tracing the money trail in a medical decision.

Dr. Getzen remarks that care and information management will likely become more important than production and treatments in medical care. What characteristics of the U.S. population lend support to this statement?

Comment on the following statement. The net effect of all these changes will on balance be beneficial, yet most are apt to be painful and resisted by some constituency.

According to the 2001 study by Cutler and McClellan, what kind of treatment is likely to cost more than it is really worth?

Comment on the expected trends in the magnitude of the health expenditures growth rates in the very long run.

Economics is the science which studies how scarce resources are allocated among unlimited needs and wants. In health economics, the term "allocation" can be restated as "distribution": the distribution of resources, the distribution of health, the distribution of medical care, and the distribution of provider incomes.

Behavioral economics studies the decision making by individuals which may or may not conform to neoclassical economic theory of individuals as rational utility maximizers. Other applications of behavioral economics apply to financial decision making. Cass Sunstein and Richard Thaler are known for their work in the use of defaults in pension plans. They show that placing employees in a voluntary savings plan and giving them the option to opt out results in higher savings rates than offering employees pension savings plans and not placing them in a default savings plan. Thus, a nudge to a more socially efficient outcome is employed. How might this nudge be applied to employee health insurance plan choice?

Assume a patient has a rare disease. The only known option for treatment at this stage of the disease is an experimental drug which costs $200,000 and has been clinically proven to provide a life expectancy gain of 2 months. Why would the patient's insurance company be likely to deny the pre-certification for the treatment? Why would it be difficult to convince a patient's family that a third round of an experimental treatment might only add at most two months of life expectancy at a cost of $200,000 and would not be economically efficient?

Path dependence is the sociologist's way of saying that it is unlikely that the changes to the U.S. system will be made which totally do away with providers already in the system. For example, it is unlikely that private physician practices will be done away with in favor of a more efficient system where physicians give up their ownership to government or hospital offered employment.

Suppose health economists are able to quantify the costs and expected benefits to suppliers and consumers of establishing a methadone treatment center for drug addicts in a particular neighborhood. What is the limit to economic analysis in informing the community debate?