W2-1 (ECONOMICS OF HEALTHCARE)

Trends in Healthcare Services

You are a member of a presidential commission appointed to consider a mandatory national health insurance plan and the question of how to fund the plan is being discussed.

Specifically, three separate options are being considered to generate an average of $4,000 per worker—a flat mandatory premium, a doubling of the current 7.65% payroll tax that comes out of people's pay to cover social security and Medicare, and a 7% increase in income tax.

Think about funding plans from the perspective of three workers:

• One who makes $25,000 per year
• One who makes the same in salary but also has $1,000 in investment income
• One who makes $85,000 per year, including $10,000 in investment income

Based on the above scenario, answer the following questions:

• Which of the three funding measures, considering the relative financial contributions it imposes on individuals such as these, would you support and why?
• How has the emergence of different types of health insurance plans—FFS, health maintenance organizations (HMOs), preferred provider organizations (PPOs), and capitation—affected the trends in healthcare services today?
• What economic and societal factors affect the demand and pricing of healthcare services in today's health insurance market?