Health Care Financing: Basic Concepts (Nursing)

by Heide Cygan, DNP, RN

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    00:01 The financing of our US health system is complex.

    00:04 In this presentation, I'll discuss the basics of micro and macro economics and how these perspectives influence our system.

    00:13 Micro economic theory is concerned with supply and demand.

    00:17 The supply is the quantity of goods or services that healthcare providers are willing to sell at a particular price.

    00:24 Demand is the consumers willingness to purchase those goods or services at that set price.

    00:31 So in its simplest form, an oversupply of product or service will lead to a decrease in demand.

    00:37 And this typically is where we see prices drop.

    00:41 So how does this all relate to public health policy? Well, supply side policies restrict the supply of a resource.

    00:50 This is often done through limiting the healthcare providers that a patient can see or limiting the types of services that are covered by an insurance plan.

    00:58 These are supply side policies.

    01:02 On the other hand, demand side policies reduce the demand for healthcare services.

    01:08 Most often demand is reduced by increasing the cost of a service.

    01:12 So let's say that the cost of visiting and emergency room increases from $50 per visit to $200 per visit, the demand will surely decrease.

    01:22 Patients don't want to pay that much money unless it's absolutely necessary.

    01:26 So while we often think about supply and demand in relationship to our everyday purchases, it also impacts the availability and our access to health care services.

    01:37 Now we've all experienced supply and demand economics at some point in our lives.

    01:41 Let me give you an example of a situation that I'm managing right now.

    01:46 My daughter wants this very specific dollhouse as a birthday present.

    01:50 It retails for $70.

    01:52 Problem is there's a very high demand for this toy.

    01:55 It's sold out at stores all over the place.

    01:58 But guess what, I can get it on the internet from an independent seller for the low price of $140.

    02:06 And this instance, I'm at somewhat of an advantage.

    02:09 I know the specific product that I need.

    02:12 I know when I need it by and I need it before her birthday.

    02:16 I know exactly how much it costs.

    02:18 I can see where it's available.

    02:20 And I know the quality of the product.

    02:22 This is a true supply and demand scenario.

    02:26 However, and healthcare it's not the same.

    02:30 As a health care consumer, as a patient, do you always know when you're going to need a health care service? How does the patient determine what service is actually needed? How do they know where to get that service? How can they evaluate the quality of the goods and services before they're provided? Healthcare is typically unpredictable, and it's often difficult to research.

    02:51 Different prices are paid for the same service at a different place.

    02:55 Patients have very little information about the cost of services.

    02:59 Because of this, healthcare purchases are not easily understood.

    03:05 So when we examine our health care system from a micro economic perspective, we really have a free market system that's run by supply and demand.

    03:13 However, because of the way that our system is built with a lack of transparency, the system creates a variety of challenges for the patients.

    03:23 Okay, let's shift gears and look at our healthcare system from a macro economic standpoint.

    03:29 The focus of macro economic theory is on the larger view of economic stability and growth.

    03:35 Here, related to our health care system, we look at outcomes and health care spending.

    03:40 So, how does this impact or relate to public health nursing? Well, macro economics is useful in providing large scale perspectives on health care financing.

    03:51 It shows us how health care and health care financing in the United States compares to others around the globe.

    03:57 So let's take a look at what that large scale aggregate picture looks like.

    04:02 To do this, I'm going to share some data reported by the OECD.

    04:06 This is the Organisation for Economic Cooperation and Development.

    04:11 This organization compares healthcare spending and outcomes for countries that are economically similar.

    04:17 Let's first take a look at health care spending in the United States and how it compares to other similar countries.

    04:24 Here we see that the OECD health care spending average is just about $4,000.

    04:31 And let's see if we can find the US.

    04:32 The US is all the way to the left side at nearly $10,000 per capita or per person.

    04:39 But let's not assume that this high level of spending is always a bad thing.

    04:43 It's only bad if you're not getting much return on your investment.

    04:46 So let's look and see just what we're getting for all that money.

    04:50 First, let's examine life expectancy.

    04:53 When compared to other similar countries, citizens of the US have a lower life expectancy.

    04:59 In the United States, we also have higher rates of obesity.

    05:04 We also have lower rates of insurance coverage.

    05:07 So, how do you feel about that return on investment? But, on the other hand, we have better smoking rates, less air pollution, higher cancer survival rates.

    05:20 So now what do you think? Is this a good return on our investment? From a macroeconomic perspective, how does our healthcare system perform? The reality is, is that in some areas, we perform very well, but in others, there's a lot of room for improvement.

    05:36 One way in which we can make changes to our system to impact spending and outcomes is through passing health policies that encourage more effective health care financing models, and promote prevention and health promotion.

    05:48 If you haven't already, I encourage you to listen to the presentation called "Health Insurance Payment Concepts".

    05:54 This explains some of these models and how they impact health care.

    About the Lecture

    The lecture Health Care Financing: Basic Concepts (Nursing) by Heide Cygan, DNP, RN is from the course Public Health and Policy (Nursing).

    Included Quiz Questions

    1. The cost of physical exam increasing from $100 to $200
    2. An insurance plan no longer covering physiotherapy
    3. An insurance plan limiting the amount of providers someone can see
    4. The amount of annual doctors visits being restricted on certain insurance plans
    1. USA spends more than double the OECD average healthcare expenditure
    2. USA has lower cancer survival rates than the OECD average
    3. USA has a higher life expectancy than the OECD average
    4. USA has higher insurance rates than the OECD average

    Author of lecture Health Care Financing: Basic Concepts (Nursing)

     Heide Cygan, DNP, RN

    Heide Cygan, DNP, RN

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