Nov 16, 2020 in Health

Health Economics and Financing

Health Economics and Financing

3) It does not matter for the hospital administrator what patients to admit, whether sicker than average or less sick than average. The point is that at the hospitals there are diagnostically related group (DRG) payments, which are based on the diagnosis of the patient. These payments include the covering of the full hospital stay and all backup services; so there is no difference for the hospital administrator concerning the patients salary (Getzen, 2010).


The administrator of LTC facility wants to admit patients who are healthier than average because the government pays a fixed price per day for nursery homes for every patient. Therefore, it is more profitable to accept healthier patients. However, in some states, there are the mix reimbursement systems, which increase payment in terms of a need index to encourage gravely sick patients care.

4) Nursing homes compete for certificates of needs (CON) but not for patients. Particularly, with constant overfull demand, the CON possession has become very valuable. Government decides to whom the CON should be issued, which allows building of new nursing homes. If an owner of a nursing home manages to get CON, the constant flow of Medicaid patients is guaranteed. In this regard, there is no need for doing marketing, buying new furniture, providing high technologies or service of higher quality for new patients attraction (Getzen, 2010). Supply restrictions denote higher prices for patients with private insurance.

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10) LTC insurance is not as popular as other hospital insurances, for example, Medicare. It has a lot of disadvantages concerning risks. One of them is that a person must purchase it in advance of an expected need. Specifically, it is believed that it is better to save this money in case of the long treatment care because it is available for people over 70 years old. As a result, the purchaser may die before the insurance will be valid (Getzen, 2010). On the other hand, payments of the other hospital insurances are made in advance with preferential tax treatment by employers. Also, to derive benefits from LTC insurance, a purchaser must be sent to a nursing home. It means that he or she pays for a stay in the nursing home but not for medical treatment, which leads to health improvement or reduce of a possibility of premature death. Thus, the beneficiaries of this insurance are not the patients, but their children and Medicaid.

1) The price of a drug is determined by therapeutic efficacy and the usefulness of a drug in treating a disease. A number of years needed for conduction of all clinical researches or improvement of the process of production are not determinants of the drug price (Getzen, 2010).

2) Fixed costs (such as discovery, research and development, regulatory approval, market launch, etc.) dominate in the economics of pharmaceutical industry. Working expenses of producing one more unit make up less than 20% of the price. Hence, when fixed costs are refunded, the selling of each unit makes almost a net profit. This fact makes billions investment into marketing worthwhile (Getzen, 2010).

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3) Not all economic exchanges have a monetary price. Economists usually use the term price for denoting things someone has to abandon to get something he or she wants in exchange. Concerning health care, the treatment price includes the factors of time, pain, and risk of death. Thus, a great difference between a monetary price and a price of time or pain is that the money is transferred to the other party in the transaction (Getzen, 2010). Time and pain of the patient are individual costs that do not provide any benefit for a provider. The politician would pay a monetary price of changing insurance legislation to cover hospital-sponsored health maintenance organizations to hospital management. Laws of regulating the exchange make trade less expensive.

5) Concerning capitation or payment per person, there is no difference for the hospital how many patients were admitted from the group (which is covered by the plan) or how long they stayed at the hospital. To be more precise, it is got paid a certain amount of money per month within a group (Getzen, 2010).

2) The monopoly is the main aspect of the economic organization of the U.S. medical care which results into market failure. Along with the natural monopoly, caused by certain circumstances, there is monopoly created by politicians interference. For example, a CON law (banning the construction of competitive institutions), licensure (profession monopoly), quality regulations (e.g. controlling over a type of drug), etc. Monopoly price setting makes the market ineffective (Getzen, 2010).

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4) The service is of public good when it is funded through the third-party insurance rather than individually (Getzen, 2010). Public sources present a very low level of the payment for dental care. Medical programs, such as Medicare, do not cover dental expenditures or cover only routine services. In this way, dental care is mostly paid for privately. As for hospital care, there are a lot of public insurances that cover a high proportion of health care expenditures.

6) More people prefer to use Medicare as compared to Medicaid because of such requirement as age. Medicaid is used primarily by people who have little or no income. Medicaid rules vary by state since it is administered at the state level. People pay taxes during their working life, which contribute to Medicare funding. If a person has paid for Social Security, part of Medicare is free. It is available for all people who are 65 years old and older, and their income level does not matter. Conversely, Medicaid is available only for poor and disabled people, such as physically challenged, who are not able to work (Getzen, 2010).


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