Sticker Shock! Economics and Health Care Pricing

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.title[
# Sticker Shock! Economics and Health Care Pricing
]
.subtitle[
## and health economics at Emory
]
.author[
### Ian McCarthy | Emory University
]
.date[
### Tuesday, August 23, 2022
]

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# Health care in the U.S.

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<iframe width="800" height="500" src="https://www.youtube.com/embed/u2AFI_M-QGg?start=135&end=197" frameborder="0" allowfullscreen></iframe>
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# Some thought on U.S. health care...

1. [Quality is "Meh"](#health)

2. [Lots of reasons](#complex)

3. [Economics can help](#economics)

4. [What we're doing at Emory](#emory)

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name: health

# Spending and Quality

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# Health improvements worldwide

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# But the U.S. is unique

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  ![](images/anim2.gif)
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# The U.S. has very high spending

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  ![](images/us-spend-compare.png)
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# And our spending doesn't pay off in some areas

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  ![](images/anim4.gif)
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# And our spending doesn't pay off in some areas

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  ![](images/anim5.gif)
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name: complex

# Why?

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# 1. Too many uninsured

.center[
  ![:scale 75%](images/kff-uninsured.png)
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# 2. Really high prices

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![:scale 60%](images/price-comparison.png)
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# 2. Really high prices

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![:scale 60%](images/price-compare2.png)
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# 2. Really high prices

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![:scale 60%](images/price-compare3.png)
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# 2. Really high prices

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![:scale 70%](images/price-compare4.png)
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# 2. Really high prices

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![:scale 70%](images/price-compare6.png)
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# 3. Variation in quantity

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  ![](images/dartmouth_map.png)
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  ![:scale 80%](images/dartmouth_dist.png)
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# 4. Variation in prices

Some variation due to different "prices" for different people

- Negotiation with private insurers (bargaining problem)
- Set payment from Medicare and Medicaid
  - Medicaid managed care (80%)
  - Medicare Advantage (45%)
- Uninsured patients (charge amounts)

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Price `\(\neq\)` charge `\(\neq\)` cost `\(\neq\)` patient out-of-pocket spending
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# 4. Variation in prices

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  ![:scale 60%](images/DifferentPrices.jpg)
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<div class="smalltext">Source: <a href="https://healthcarepricingproject.org/">Health Care Pricing Project</a></div>

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# 4. Variation in prices

.pull-left[
  ![:scale 80%](images/HC_var_withinmkt_hip_ga_atlanta.png)
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.pull-right[
  ![:scale 80%](images/HC_var_withinmkt_kmri_ga_atlanta.png)
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<div class="smalltext">Source: <a href="https://healthcarepricingproject.org/">Health Care Pricing Project</a></div>

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name: economics

# Where does economics fit in here?

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# Health care and economics (in general)

Lots of interesting economic issues in health care (not all unique to the U.S.):

1. Extremely heterogeneous products
2. Asymmetric information between patients and physicians
3. Unobservable quality (experience good)
4. Unpredictable need (inability to shop in many cases)
5. Distortion of incentives due to insurance
6. Adverse selection (asymmetric information between patients and insurers)

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# How is the U.S. unique?

These factors exist in other markets and in other countries, but...

- Health care is unique in the combination of these issues
- U.S. is unique in the extent of these issues in health care (policy problems)
- We have a market based system but **without much competition**...

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# Trends in competitiveness
Almost any way you define it, hospital markets are more and more concentrated (less competitive) in recent decades.
- 1990: 65% of MSAs highly concentrated, 23% unconcentrated
- 2006: 77% highly concentrated, 11% unconcentrated

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# Hospital concentration over time

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  ![:scale 110%](images/GHT1.png)
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.pull-right[
  ![:scale 110%](images/GHT2.png)
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<div class="smalltext">Source: <a href="https://www.aeaweb.org/articles?id=10.1257/jel.53.2.235">Gaynor, Ho, and Town (2015). The Industrial Organization of Health Care Markets. Journal of Economic Literature.</a></div>

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# Effects of reduced competition
1. Higher prices
2. Lower quality, [2020 NEJM Paper](https://www.nejm.org/doi/full/10.1056/NEJMsa1901383)
3. Maybe lower costs (but not passed on to lower prices)<br>

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# Why?
Historical perception of hospital competition as "wasteful" and assumption that more capacity means more (unnecessary) care:
- Certificate of need laws
- Certificate of public advantage
- Scope of practice laws
- Any willing provider laws
- Site-based payment differentials (encourage vertical integration)

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# Where do we go frome here?

1. Adopt sensible policies

2. Antitrust enforcement

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name: emory

# What are we doing at Emory?

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# Health economics at Emory

Graduate program:
- Economics program focus on health as a subfield of economics
- 20-30% of our graduate students are specifically interested in health

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# Health economics at Emory

Undergraduate program:
- Significant interest in health policy and pre-med
- Recent launch of joint major in economics and human health
- 35 majors right now

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# Health economics at Emory

Rollins School
- Strong collaboration with Department of Health Policy and Management
- Coauthorship
- Classes and graduate student committees

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# Some success stories

Undergraduate: 
- Many examples of placements in health-related companies (startups, consulting, Aetna)
- MPH at Johns Hopkins and Michigan
- Harvard Law School and Harvard Medical School
- Rising senior in Econ-HH, featured speaker at Georgia CTSA Conference and accepted to World Stroke Conference in Singapore

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# Some success stories

Econ PhD Graduates:
- Eric Nesson (Ball State)
- James Robinson (UAB)
- Otto Lenhart (Glasgow)
- Kaylyn Sanbower (U.S. Department of Justice)

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# Some success stories

Rollins PhD Graduates:
- Lindsay Allen (WVU, now Northwestern)
- Manasvini Singh (UMass Amherst)

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name: health

# Thank You!