Lecture Issues in economics today - Chapter 21

When you finish this chapter, you should: Define the key terms of economics and opportunity cost and understand how a production possibilities frontier exemplifies the trade-offs that exist in life, distinguish between increasing and constant opportunity cost and understand why each might happen in the real world, analyze an argument by thinking economically, while recognizing and avoiding logical traps.
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Lecture Issues in economics today - Chapter 21 Chapter 21 MedicaidMcGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. Chapter Outline • THE WHAT’S, THE WHO’S AND THE HOW MUCH’S • WHY MEDICAID COSTS SO MUCH • MEDICAID AND THE ELDERLYMcGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. The What’s • Medicaid – covers health care for the poor – was established in 1964 – was in full force in 1967 – part of President Johnson’s Great Society Programs – paired with Medicare (which covers health care for those over 65) – is a state-administered program with federal matching funds.McGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. The Who’s • Covers (1994) – 18 million children – 18 million adults – 60% are female (75% of adults are women) – 45% white; 24% black; 17% Hispanic (11% “unknown”) • Children are eligible if – they are under 19 and in households with income less than 133% of the poverty rate. – they are under 1 and in households with income less than 185% of the poverty rate • Adults are eligible if they qualify for – TANF (Temporary Aid to Needy Families) – SSI (Supplemental Security Income) • Not all poor are covered – 50% of those who live in households with income below 150% of the poverty line are not covered.McGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. The How Much’s • The federal government pays states a matching grant (ranging from 50% to 70%) that depends on the income of the state. • The total federal government obligation is $120 billion • The total state obligation is $60 billionMcGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. More Details • States establish reimbursement rates for procedures – rates must be high enough so that patients have adequate coverage. • States may choose to exclude some procedures – most states choose not to cover abortions. • Doctors and hospitals may choose not to accept Medicaid patients – If they accept any patients for any procedure they must accept all patients for all procedures. It is an “all-or-nothing” proposition.McGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. Why Medicaid Costs So Much • Per patient expenditures per year on Medicaid are substantially higher (about 20%) than non-Medicaid patients. • In part, this is a feature of the clientele – The poor tend to be less healthy and need more expensive treatments. – Medicaid pays for nursing home expenses of the poor.McGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. Medicaid’s Impact on Overall Health Care Prices P P S S P* P* Dpoor+nonpoor Dpoor+nonpoor Dpoor Dnonpoor Dpoor Dnonpoor Qpoor Qnonpoor Qnonpoor Qpoor Q/t Q/t WithoutMedicaid WithMedicaidMcGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. Medicaid and the Elderly • Medicare is the program for the elderly. • Medicaid is the program for the poor. • If a patient is poor and over 65, Medicaid pays for Medicare premiums, deductibles and most of the co- payments.McGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. Expenses by Age Group (1996) • Medicaid expenses per patient – overall $4,250 – Children under 5 $1,406 – Elderly 75-84 $8,956 – Elderly over 85 $12,169 • Children make up half the Medicaid population and account for 22% of expenses. • Those over 65 make up for 13% of the Medicaid population and account for 35% of expenses.McGrawHill/Irwin ©2002TheMcGrawHillCompanies,Inc.,AllRightsReserved. Getting Medicaid to Pay for Nursing Homes • People have to show very little income and have very few assets in order for Medicaid to pay for nursing home care. • To determine Medicaid eligibility, the government looks at financial records ...