This paper investigates the effects of market-wide changes in health insurance by examining the single largest change in health insurance coverage in American history: the introduction of Medicare in 1965. I estimate that the impact of Medicare on hospital spending is over six times larger than what the evidence from individual-level changes in health insurance would have predicted. This disproportionately larger effect may arise if market-wide changes in demand alter the incentives of hospitals to incur the fixed costs of entering the market or of adopting new practice styles. I present some evidence of these types of effects. A back of the envelope calculation based on the estimated impact of Medicare suggests that the overall spread of health insurance between 1950 and 1990 may be able to explain about half of the increase in real per capita health spending over this time period.

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The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare

This paper addresses some of the issues related to health care in the United States. In so doing, I give primary emphasis to questions involving access to health care. Even so, I limit the discussion of any particular topic to its most important facets. The principle of selection involves various criteria: insofar as possible, I discuss those issues that are important at a system level (particularly as they impinge on the allocation of resources), that involve economic arrangements influencing behavior and performance, and that can be illuminated by the economist's perspective. I attempt to give primary emphasis to those variables whose influence is far ranging.

In so doing, of course, we cannot examine every network of interrelations. Although this simplifies the discussion, we pay a price for incompleteness. There is little choice, however. One of the difficulties with the health field stems from the fact that everything is interrelated: that intervention on one front has “side effects” on other fronts; that intervention designed to accomplish one purpose sometimes fails to do so because other factors that appear unrelated are not changed. To discuss everything is impossible. On the other hand, to say nothing because we cannot discuss everything is irresponsible.

Finally, we will have to reach judgments even in spite of the relative weakness of the data available for analysis. We know far less, for example, about the availability of services (particularly if corrected for quality differentials) than we would like to. So, too, with the impact of differences in utilization on levels of health. The current refrain often seems to be, “But we have no output measures.” That, regrettably, is frequently the case. Nevertheless, just as we cannot be silent because of the complexity of intertwined relations, neither can we be silent because of insufficiency of data. We can use experience and judgment to arrive at (tentative) conclusions. Not knowing everything does not mean we know nothing.

On Achieving Access and Equity in Health Care

Hedonic prices and composite commodities

Physician Fee Inflation: Evidence from the Late 1960s

Health insurance, by reducing net price to the consumer and increasing the opportunities for revenue to the provider, has profound effects, among other things, on the volume, content and distribution of services, their prices, and the capacity of providers to produce them. The magnitude and nature of these effects depend, partly, on the design of insurance benefits and, partly, on the nature of the health care system, particularly its current and potential capacity and the methods it uses to pay providers. Those who believe that the unique aim of insurance is to protect against unpredictable expenses attempt to suppress these effects, mainly by imposing financial disincentives to utilization which, in turn, reduce protection for those who need it most. Those who wish to reform the system have a broader range of objectives which include protective efficacy, cost control, quantitative adequacy, qualitative adequacy, efficiency of production, efficiency of allocation, equity, and redistribution of capacity. An analysis of the effects of insurance in the light of these objectives reveals favorable as well as unfavorable consequences. The provision of comprehensive benefits generates the necessity for a fundamental change in the organization of health services, if the advantages are to be fully realized and the disadvantages minimized.

Issues in national health insurance.

This paper is concerned with the differential impact of the Medicaid program on state incomes in 1967-68 Benefits and costs of the program are calculated for each state and the results are evaluated in terms of the perceived original intent of the program planners It was found that although the program favors the poor in all states with Title XIX plans, it does so at the expense of extreme horizontal inequity The conclusion is that federal incentives for the development of comprehensive state Medicaid programs are inadequate to insure an equitable system for the distribution of program benefits and costs

Bruce Stuart

Papers

Equity and Medicaid.