The Answer to the Great Question of Life the Universe and EverythingIs Fortytwo said Deep Thought with infinite majesty and calm I think the problem to be honest with you is that youve never actually known what the question is ID: 778806
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Slide1
Chapter 10: Life, Health, and Health Care
“The Answer to the Great Question of Life, the Universe and Everything...Is... Forty-two, said Deep Thought with infinite majesty and calm.
..
I think the problem, to be honest with you, is that you’ve never actually known what the question is.”
Douglas Adams
Slide2Some Questions about the Value of LifeIs Life Priceless, or Just Highly Valuable?
If your life was worth infinity, would you be in class today?
What we mean by LIFE?
What do we mean by the VALUE of Life? Market Value?
WHOSE value of life?
Slide3Methods of Estimating the Value of LifeDiscounted Future EarningsRequired Compensation via Wage-risk studies
estimate the relationship between added risk of death and (higher) earnings holding all other influences on wages constant.
Divide the added earnings per unit of added risk by the added risk.
The answer is the estimated value of life.
Formula: Value of a Statistical Life = ∆income (all else equal) /∆ death risk
Slide4A Value of Life ExampleIf an average worker earns $3,000 more for each .001 increase in risk, her value of life would be $3,000/.001, or $3 million.
Slide5More ExamplesIf Evil requires $200 to face an additional 1/1000 risk of death, his implicit value of life would be $200/.001, or $200,000. If Ernie required $2,000 to face the same additional .001 risk of death, his value of life would be $2,000/.001, or $2,000,000 dollars.
Your Turn 10-2:
You have a choice of two jobs, extreme skier (a very dangerous but thrilling occupation) or instructor for beginning skiers. How much EXTRA money would you require in order to take the extreme skiing job? If the risk of death for the instructor is zero per year and the risk of and the extreme job has a death risk of .002 per year, what is your value of life?
Slide6Case Study: Child Safety Seats in AutosYour Turn 10-3: Assume
that
18.3 million young children ride in cars.
Child safety seat use rose by about 60 percent after the car seat requirements were passed. If
about 3/4 of the 60 percentage point increase in seat use was due to new child car seat laws, about how many children were riding in car seats because of these laws?
If 161 lives were saved by the law, what is the change in the risk of death due to these laws?
What are the total benefits of the law if the value of a child’s life is assumed to equal $5,000,000?
If car seats cost $30 per child in those days, what is the total cost of the law? (Hint: every child using a seat because of the law pays this cost)
Slide7Another Case Study: Child Safety Seats in Airplanes
YOUR TURN 10-5:
Safety Seats in Airlines.
Assume that there are 5 to 10 thousand young children flying per day. If
the average airline ticket for each infant cost $200, how much in total would families have to pay in order to buy an extra seat for all infants in a given year? (Hint,
find
the total number of infants flying per
year from this range of daily flights.)
Given the total added cost for families, how much would U.S. families have to pay per life saved if 3/5 of a life is saved each year? Is this figure reasonably close to the estimated value of a statistical life? Since the average family is now free to choose to buy an airline seat for their infant (the primary effect of this tragedy), will they do so?
Try to explain how this regulation might have actually caused the total number of infants dying in travel related accidents (not just airlines) to rise
slightly.
Slide8Quality-Adjusted Life Years (QALY)The basic principle of quality adjusted
life years is that a year spent in perfect health is more valuable to the average person than a year spent in some state of ill health.
In the QALY model the quality of life is measured by establishing a set of health categories, such as perfect health, relatively good health, relatively poor health, bedridden, or persistent vegetative state.
The
weights assigned to perfect health and other categories are determined through various survey and experimental techniques
.
Example:
The “time
tradeoff”
experiment could ask “
Would you prefer to live 5 years in perfect health or Y (10, 15, etc.) years in a bedridden state
? If the answer is 15 years 5/15 would become the weight for a year spent bedridden.
Slide9Your Turn 10-7: a QALY questionAssume that there are two health categories, (1) perfect health/active lifestyle and (2) healthy but inactive.
If
you had a choice of 30 more years of perfect health, what is the minimum number of remaining years you would accept in the healthy but inactive category?
If
the weight assigned to a year in perfect health is 30/30 or 1, what is the weight you would assign to the inactive category based on your first answer?
Slide10U.S. Health Care Costs
Slide11Health and Health CareGood health and long average lifespans are produced by a set of factors including nutrition, physical activity, environment, human biology, and health care
.
McKeown
(1976) and
Fogel
(2004)
argue that the
reduction in infectious diseases occurred before the development of effective vaccines, but after the improved nutrition that followed the first agricultural and industrial revolutions.
Cutler and Miller argue that the
decline in mortality from disease
is correlated
strongly with the development of water filtration and modern sewage systems (Cutler and Miller, 2005).
Neither
position suggests a significant role for doctors, hospitals, or medical technology in the reduction in
premature mortality.
Slide12Methods of Physician PaymentFee for
Service:
A
predetermined amount is paid for each appointment, test, or procedure performed by the doctor.
Episode of Care
Payment
(also known as a case rate) pays a single amount for all of the services needed by a patient during a given illness or injury.
Capitation
, or annual payment per patient, pays the doctor a set amount per year
whether
or not the person requires active care during that year.
Pay for Performance (P4P):
Pay for performance typically involves bonuses paid to health care providers who meet pre-determined standards for quality or cost of care.
Slide13Market Failure in Health CareH
ealth
care as practiced in the U.S. creates significant financial
externalities because
the uninsured receive some free care in hospital emergency rooms as well as local
clinics.
A more universal externality associated with health care is the potential effect of infectious
disease. Proper health care can reduce this externality, but hospitals sometimes harbor disease.
Unequal information is a universally present externality. As
highly trained professionals, doctors tend to have access to far more information than any other participant in the health care process.
Slide14The U.S. Health Care System
Slide15Insurance CoverageAs
of 2012 forty-eight percent of all Americans were covered under an employer-sponsored insurance plan. Five percent were covered by individually purchased insurance. Among publicly funded programs, Medicare and Medicaid covered fourteen percent and sixteen percent of the population,
respectively. About 15% were uninsured.
Medicare
is a federally funded program that provides health insurance for the elderly (over age 65) and some non-elderly with disabilities
.
Medicaid
,
for qualified low income households, is
jointly funded by the federal government and the
states. Qualifications differ widely across states.
Slide16Trend in U.S. Health Care Spending
Slide17Sources of U.S. Health Care Spending
Slide18Third Party Payment Effects: Market and Individual Note that with full payment by third parties such as insurance companies consumers will act as though the price is zero.
Slide19Cost Sharing: Demand Side Cost Containment
Consumers might share the cost of care through co-payments, annual premiums, and/or annual deductibles.
In Figure 10-5 first compare the full price and free coverage options. All other choices involve some type of cost sharing between the patient and the insurance company and all reduce the quantity of doctor visits below free coverage.
Slide20Supply Side Price Containment: Managed Care Organizations Over Time
Slide21The Affordable Care Act
In 2009, President Obama signed the
Patient Protection and Affordable Care Act
(ACA, also known as Obamacare). The
ACA
had three major objectives: expanding insurance coverage, containing the growth in health care spending, and
improving
the quality of care.
The
law establishes
state level insurance exchanges
through which individuals can purchase health insurance.
The
law also contained
mandates
(required insurance purchase) for both individuals and employers
.
Subsidies
are provided for
low to moderate income households and
Medicaid
coverage
is expanded
to
all households with incomes below the poverty
level
in states that agree to do so.
Political ideology strongly affects views on the act, so evidence from non-political research institutes such as the Kaiser Family Foundation is recommended.
Slide22ConclusionRational analysis of the value of life is potentially useful in weighing the costs and benefits of safety regulations, pollution policies, nuclear waste storage, or many other issues.
Health analysis measures such as Quality Adjusted Life Years are commonly used to assess the cost-effectiveness of medical procedures and the costs of diseases or unhealthy activities.
This chapter also discussed
U.S. health
care, with an emphasis on
health care costs in the
U.S. and its recent health care reform.