WEEK 5

Question 1

resources

Answer 1

Human and physical capital

Question 2

Production

Answer 2

Human and physical capital with human service and supplies generates outputs, which is production.

Question 3

Investment

Answer 3

i. The production of capital resources is called investment activity
ii. the effects themselves are designed to last for several years or more.
iii. A teaching unit in a hospital can train (produce) an intensive care (ICU) nurse by using the resources of existing nurse educators, classrooms, and hospital equipment. The expenditure in time and resources for training is an example of investment output, as it results in the production of trained, specialist nurses.

Question 4

consumption (utilization)

Answer 4

i. The use of output for current wants is called consumption activity
ii. Curing a common cold using drugs is a consumption activity, because the treatment is brief.
In order to produce any type of output, there must be inputs (which include human services and supplies), many of which themselves need to be produced. Human and physical capital resources are combined to yield output. The use of the services of a radiologist and a radiological technician, or the use of computerized axial tomography (CAT) scan equipment to produce a CAT scan image are examples of the production of consumption services in health care. Such tests are viewed as satisfying the current wants that a patient is seeking to satisfy (the results can be viewed as outputs or outcomes).

Question 5

Capacity

Answer 5

If a hospital has 100 beds, then a measure of capacity might be 36,500 bed days in a year (365 days × 100 beds available per day). Typical capacity measures include hospital or nursing home bed days, medical practitioners, and specific types of equipment such as magnetic resonance imaging (MRI) machines.

Question 6

occupancy rate

Answer 6

Occupancy, the relationship between output and capacity, is often measured as a percentage. Often, full capacity is defined as less than 100 percent occupancy (e.g., 85 percent may be considered full capacity). One reason a hospital need not be 100 percent filled to be considered fully occupied, is because at high occupancy rates (above 85 percent), hospitals get very crowded as a result of the movement of patients in and out.

Question 7

show how investment, consumption, and capacity are related.

Answer 7

a. One feature of the healthcare sector is that much of the human capital investment activity is a by-product of medical care consumption activity.
b. Investment activity adds to capacity, allowing a higher level of output—consumption, investment, or both—to be produced. This relationship is important in health economics.

There is an adage in health care that an available bed is a filled bed, and the belief persists that the presence of doctors generates a demand for their services. While such assertions must be examined carefully, there is strong evidence that additional capacity will always be used, sometimes beyond the flat-of-the-curve; that is, beyond the point at which it contributes to better health.

Question 8

identify appropriate measures of resources and utilization.

Answer 8

a. The economic statistics that researchers choose to use depends on the purpose of the analysis they are undertaking. To illustrate the use of resource and utilization data, cross-provincial comparisons of beds and hospital admissions are used. Assume that the purpose is to compare bed availability and hospital inpatient utilization among the provinces.
b. In comparing provinces, putting data on a per capita basis is much more meaningful than simply using unadjusted numbers.
Because there are considerable differences in populations among the provinces, researchers must standardize their data by putting it in the form of population rates.

Question 9

a. consumers, patients, and taxpayers (who are often the same people).

Answer 9

i. In a health care system, consumers can be individuals or households; however, health care behavior is better suited to analysis on an individual level.

Question 10

providers of insured medical services, including physicians and hospitals.

Answer 10

Suppliers include both the providers of health care (physicians, hospitals, nursing homes) and the providers of insurance.

Question 11

providers of other provincially funded services, such as public health agencies and long-term care providers; such services are considered noninsured services.

Answer 11

i. Third parties are payers. Third parties can be governments (who collect taxes and pay providers) and private insurers (who collect premiums and pay providers).

Question 12

federal, provincial, and local governments.

Answer 12

i. Regulators are usually government agencies or commissions that oversee the behavior of suppliers, although the regulators themselves may be neither consumers nor suppliers.

Question 13

define market, and identify the key economic characteristics of a market.

Answer 13

a. A market is a form of economic organization that has commercial connotations. In the health care system, it is the organization through which health care is delivered by a provider and paid for by a consumer. Thus, it is an organization of consumers, providers, and third parties. Health care markets are more complex than many other types of markets and have their own unique characteristics. One of the more complicating factors in health care markets is the key role that third parties, as collectors of taxes or premiums, and as payers, play.
b. The main characteristic of any market is the number of buyers and sellers; another is the ease with which a seller may enter the market. If entry is restricted (i.e., if the cost of entry is high), it may have an effect on how the suppliers behave.

Other characteristics of health care markets include the payment mechanisms for consumers and suppliers. Many health care markets are organized as triangles, with money and services flowing between consumers, providers, and third parties.

Question 14

insured health care services

Answer 14

re those which, when consumed, are paid for, at least in part, by a third party (an insurer or the government). Under the Canada Health Act (CHA), which was enacted in 1984, insured services were classified as those that are “medically necessary.” Under the CHA, all residents of Canada are entitled to these medically necessary services, and such services are paid for under the various provincial health plans.

Question 15

The five principles of Medicare

Answer 15

are public administration, comprehensiveness, universality, portability, and accessibility. Under public administration, the plan must be administered publicly, not on a for-profit basis. Under comprehensiveness, all relevant services must be made available. Under universality, the province must cover all residents. Under portability, the provinces must allow for coverage of individuals who move from one province to another. Under accessibility the provinces must reasonably compensate hospitals and doctors.

Question 16

non-insured services are services

Answer 16

for which an individual has no insurance coverage; the individual pays for them out-of-pocket. For First Nations and Inuit peoples, non-insured services (e.g., eyeglasses, specified drugs, dental care, vision care, medical supplies and equipment, short-term crisis intervention mental health counselling and medical transportation), while not covered under provincial health plans, are paid for directly by the federal government (through the First Nations and Inuit Health Branch of Health Canada Non-Insured Health Benefits Program). There is usually a limit to how much Health Canada will pay for these services.

Question 17

Funding

Answer 17

refers to a payment to a provider to guarantee that the provider meets its overall expenses.

Question 18

Reimbursement

Answer 18

refers to paying the provider for specific services rendered to a single patient. Some provincial governments give hospitals a global budget, which covers all care-related operations—such a payment is part of the funding mechanism.

Question 19

Out-of-pocket price

Answer 19

that is directly paid for healthcare services by the consumer and is not subsequently recovered from an insurer or government. The out-of-pocket price is the burden that falls directly on the consumer as a result of his or her use of medical care.

Question 20

Premium

Answer 20

The payment made to an insurance company in return for insurance coverage.

Question 21

Loading charge

Answer 21

is The portion of an insurance premium that is over and above the amount expected to cover payment for insured services.

Question 22

identify the key economic units, and describe the flow of funds in the traditional provincial health care systems in Canada.`

Answer 22

Insured services are paid for directly by payments from the provincial government to the health care providing units, and each province has specific ways of paying hospitals and physicians.

Although it does not identify which services are insured services, the Canada Health Act (1984) specifies that provinces are to fund 100 percent of all such services (i.e., no out-of-pocket payments are to be charged for these services).

For the other (non-insured) health care services that are funded by the provincial government, such as nursing home care and home care, each provincial government can pay for whatever portion of these services it chooses, and may require that the consumer pay a direct (out-of-pocket) price.

Individuals and employers pay premiums to insurance companies to cover the cost of non-insured services that are not provincially funded. Such services are paid for out-of-pocket by a consumer, or by an insurer if the consumer has insurance coverage.

Provincial governments reimburse (or fund) providers (hospitals, doctors, home health care, etc.) for services provided to the insurees.

Under the federal/provincial Medicare system, patients do not have any out-of-pocket costs for medically necessary, insured services. However, nursing home care, home care, chiropractor, optometrist, and physiotherapy services are not considered insured services, and many provinces when they cover them at all, impose additional out-of-pocket fees for these services.

Question 23

The bases for provider funding or reimbursement are as follows:

Answer 23

i. Generally, hospitals are given a global budget, which is a fixed sum paid to a hospital to provide for its operating expenses during the year.
ii. Doctors are paid on a fee-for-service basis, which means that they are paid for each service (procedure, test, examination, etc.) provided, according to a provincially determined fee schedule
iii. Home care funding is usually based on a budget paid to the home care agency.
iv. Nursing homes are reimbursed on a per-day basis, with an additional per-day payment being charged to the patient.

Question 24

identify the key economic units, and describe the flow of funds in the regionalized provincial health care systems in Canada.

Answer 24

a. Under the traditional health care system, providers of hospital care, home care, and long-term care operate under separate boards. This situation changed in Saskatchewan in 1993 and in Alberta in 1994, when these provinces formed regional health care organizations.
b. Within a given area, the separate boards of most hospitals, public health agencies, and some residential long-term care nursing homes were disbanded, and the ownership of these agencies was transferred to a single regional board.
Under the old system, a patient who was discharged from a hospital and who was to receive home care after discharge, would receive that care from a separate agency, whereas with the regional boards, all health services are administered under one board

	d. Each regional board receives a budget intended to cover the costs of care for the population of that region. It is up to the regional board to allocate budgets to the hospitals, nursing homes, and home care services within its region (and under the board’s authority).