How Elastic Is the Demand for Medical Care?

The RAND Health

Insurance Experiment 438
Empirical Evidence: Estimating the Elasticity of Demand for Medical Care 439
Optimal Health Insurance 440
Why Is Insurance So Generous in the United States? 441
Application: Health Savings Accounts 442

15.3 How Generous Should Insurance Be to Medical Providers? . . 445

Managed Care and Prospective Reimbursement 445
The Impacts of Managed Care 447
How Should Providers Be Reimbursed? 448

15.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 448

Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449

Questions and Problems . . . . . . . . . . . . . . . . . . . . . . . . . 449

Advanced Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450

CHAPTER 16 Health Insurance II: Medicare, Medicaid,

and Health Care Reform . . . . . . . . . . . . . . . . . . . . . . . . 453
16.1 The Medicaid Program for Low-income
Mothers and Children . . . . . . . . . . . . . . . . . . . . . . . . . . . 455
How Medicaid Works 455
Who Is Eligible for Medicaid? 456
What Health Services Does Medicaid Cover? 456
How Do Providers Get Paid? 457

16.2 What Are the Effects of the Medicaid Program? . . . . . . . . 457

How Does Medicaid Affect Health? A Framework 457
How Does Medicaid Affect Health? Evidence 458
Empirical Evidence: Using State Medicaid Expansions to Estimate
Program Effects 461

16.3 The Medicare Program . . . . . . . . . . . . . . . . . . . . . . . 462

How Medicare Works 462
Application: The Medicare Prescription Drug Debate 463

16.4 What Are the Effects of the Medicare Program? . . . . . . . . 466

The Prospective Payment System 466
Empirical Evidence on the Move to the PPS 467
Problems with PPS 467
Lesson: The Difficulty of Partial Reform 469
Medicare Managed Care 469
Should Medicare Move to a Full Choice Plan? Premium Support 472
Application: A Premium Support System for Medicare 472
Gaps in Medicare Coverage 474

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