System Level Definition/Overview

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“Environment and public health”.

In Section 1 of this course you will cover these topics: Introduction Microeconomic Tools For Health Economics Statistical Tools For Health Economics The Production Of Health The Production, Cost, And Technology Of Health Care

Topic : Introduction

Topic Objective:

At the end of this topic student would be able to:

 Health care demand  Micro-economic evaluation at treatment level  Health care markets  Competitive equilibrium in the five health markets  Evaluation at a wholeWWW.BSSVE.IN system level Definition/Overview:

Health Economics: Health economics is a branch of economics concerned with issues related to scarcity in the allocation of health and health care. Four factors that are important to Health Economics: Government Intervention, Uncertainty, Asymmetric Knowledge, and Externalities. Governments tend to regulate the Healthcare industry heavily and also tend to be the largest payor within the market. Uncertainty is intrinsic to health, both in patient outcomes and financial concerns. The knowledge gap that exists between a physician and a patient creates a situation of distinct advantage for the physician, which is called Asymmetric Knowledge. Finally, there are many effects that happen between two parties without monetary compensation, called externalities, within healthcare, from catching a cold from

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someone to practicing safe sex. What influences health? Health of a country or the residence of that country is greatly dependent not only on the geographic location but the legal and economic stabilities of the nation. With healthcare industry having such a major impact on the economy of a nation(roughly 10%), it becomes the indispensable attention of all governments. A stable legal policy not only aids in the on time improvement of the industry but its impact on the society as well. The exclusive government body focused on the industry enhances the research and development along with the underpinning infrastructure required.

Key Points:

1. Health care demand

The demand for health care is a derived demand from the demand for health, more generally. Health care is demanded as a means for consumers to achieve a larger stock of "health capital." The demand for health is unique, because individuals allocate resources in order to both consume and produce health. Michael Grossman's 1972 model of health production has been extremely influential in this field of study and has several unique elements that make it notable. The model views each individual as both a producer and a consumer of health, as measured in "health stock" or health capital, the flow of which is known as health status. It acknowledges that health care is both a consumption good that yields direct satisfaction and utility, and an investment good, which yields satisfaction to consumers indirectly (more productive, fewer sick days, higher wages, etc.) Since individuals in this model demand health care only as a result of their desire to increase their health stock, health care demand is a derived demand.WWW.BSSVE.IN The model takes into account health production (investments in health such as time spent exercising, money spent on medical care, etc.) as well as the production of non-health goods against the overall utility that results from ones investments. These factors are used to determine the optimal level of health that an individual will demand, taking into account the marginal cost of health capital and depreciation rates.

The optimal level of investment in health occurs where the marginal cost of health capital is equal to the marginal benefit resulting from it (MC=MB). With the passing of time, health depreciates at some rate δ. The marginal benefit of health capital is the rate of return from this capital in both market and non-market sectors. In this model, the optimal health stock can be impacted by factors like age, wages and education. As an example, \delta\, increases with age, so it becomes more and more costly to attain the same level of health capital or health

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stock as one ages. Age also decreases the marginal benefit of health stock. The optimal health stock will therefore decrease as one ages. When studying Health Care, it is beneficial to reference the fundamental laws of Supply and Demand. Health Care, just like anything else, is a finite resource. This is to say, Health Care is a scarce resource - whether one lives in a society in which Health Care is privitized or publicized. In either scenario, demand for Health Care will be high. Logically, demand will increase more if Health Care is made a Public Good. There are positives and negatives to such a system. The most obvious positive is the fact that everyone can receive care. However, what also must be noted is the fact that Universal Health Care will cause a spike in the Demand for it. Being a scarce resource, sacrifices are usually made. This is the main reason why there can be such long waits in a public Health Care system - quality health care is diverted to those who can afford to wait in line the longest.

This is not to say that a privatized Health Care policy does not have its flaws. Health insurance in the United Statesis largely a case of market failure. A large reason for this is asymmetrical information. Someone applying for health insurance knows more about their health than the insurance company does. People who have health care may act more recklessly than if they didn't have it resulting in higher costs for the insurance company. Someone who applies for health insurance as an individual will usually pay higher rates than group plans for an equal level of insurance. Statistically, people who apply individually are more likely to need health care than those with group plans. Healthy people can't get health care via a group plan are more likely to go without any insurance at all. The higher rates for individuals and theWWW.BSSVE.IN low risk of a healthy person needing medical treatment that costs more than their deductible makes insurance more expensive than its worth. Thus individuals are perceived as more risky, individual plans are made more expensive and the rate of healthy people falls further as they decide that it isn't worth the expense.

2. Micro-economic evaluation at treatment level

A large focus of health economics, particularly in the UK, is the microeconomic evaluation of individual treatments. In the UK, the National Institute for Health and Clinical Excellence (NICE) appraises certain new and existing pharmaceuticals and devices using economic evaluation. Economic evaluation is the comparison of two or more alternative courses of action in terms of both their costs and consequences (Drummond et al.). Economists usually

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distinguish several types of economic evaluation, differing in how consequences are measured:

 Cost minimisation analysis  Cost benefit analysis  Cost-effectiveness analysis  Cost-utility analysis

In cost minimisation analysis (CMA), the effectiveness of the comparators in question must be proven to be equivalent. The 'cost-effective' comparator is simply the one which costs less (as it achieves the same outcome). In cost-benefit analysis (CBA), costs and benefits are both valued in cash terms. Cost effectiveness analysis (CEA) measures outcomes in 'natural units', such as mmHg, symptom free days, life years gained. Finally cost-utility analysis (CUA) measures outcomes in a composite metric of both length and quality of life, the Quality Adjusted Life Year (QALY). (Note there is some international variation in the precise definitions of each type of analysis). A final approach which is sometimes classed an economic evaluation is a cost of illness study. This is not a true economic evaluation as it does not compare the costs and outcomes of alternative courses of action. Instead, it attempts to measure all the costs associated with a particular disease or condition. These will include direct costs (where money actually changes hands, e.g. health service use, patient co- payments and out of pocket expenses), indirect costs (the value of lost productivity from time off work due to illness), and intangible costs (the 'disvalue' to an individual of pain and suffering). (Note specific definitions in health economics may vary slightly from other branches of economics.)WWW.BSSVE.IN

3. Health care markets

The five health markets typically analyzed are:

 Healthcare financing market  Physician and nurses services market  Institutional services market  Input factors market  Professional education market

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Although assumptions of textbook models of economic markets apply reasonably well to health care markets, there are important deviations. Insurance markets rely on risk pools, in which relatively healthy enrollees subsidize the care of the rest. Insurers must cope with "adverse selection" which occurs when they are unable to fully predict the medical expenses of enrollees; adverse selection can destroy the risk pool. Features of insurance markets, such as group purchases and preexisting condition exclusions are meant to cope with adverse selection. Insured patients are naturally less concerned about health care costs than they would if they paid the full price of care. The resulting "moral hazard" drives up costs, as shown by the famous RAND Health Insurance Experiment. Insurers use several techniques to limit the costs of moral hazard, including imposing copayments on patients and limiting physician incentives to provide costly care. Insurers often compete by their choice of service offerings, cost sharing requirements, and limitations on physicians.

Consumers in health care markets often suffer from a lack of adequate information about what services they need to buy and which providers offer the best value proposition. Health economists have documented a problem with "supplier induced demand", whereby providers base treatment recommendations on economic, rather than medical criteria. Researchers have also documented substantial "practice variations", whereby the treatment a patient receives depends as much on which doctor they visit as it does on their condition. Both private insurers and government payers use a variety of controls on service availability to rein in inducement and practice variations. The U.S.health care market has relied extensively on competition to control costs and improve quality. Critics question whether problems with adverse selection,WWW.BSSVE.IN moral hazard, information asymmetries, demand inducement, and practice variations can be addressed by private markets. Competition has fostered reductions in prices, but consolidation by providers and, to a lesser extent, insurers, has tempered this effect.

4. Competitive equilibrium in the five health markets

While the nature of healthcare as a private good is preserved in the last three markets, market failures occur in the financing and delivery markets due to two reasons: (1) Perfect information about price products is not a viable assumption (2) Various barriers of entry exist in the financing markets (i.e. monopoly formations in the insurance industry) Ideological bias in the debate about the financing and delivery health markets The healthcare debate in public policy is often informed by ideology and not sound economic theory. Often, politicians subscribe to a moral order system or belief about the role of governments in public life that

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guides biases towards provision of healthcare as well. The ideological spectrum spans: individual savings accounts and catastrophic coverage, tax credit or voucher programs combined with group purchasing arrangements, and expansions of public-sector health insurance. These approaches are advocated by health care conservatives, moderates and liberals, respectively.

5. Evaluation at a whole system level

Often used synonymously with Health Economics Medical economics, according to Culyer, is the branch of economics concerned with the application of economic theory to phenomena and problems associated typically with the second and third health market outlined above. Typically, however, it pertains to cost-benefit analysis of pharmaceutical products and cost- effectiveness of various medical treatments. Medical economics often uses mathematical models to synthesise data from biostatistics and epidemiology for support of medical decision making, both for individuals and for wider health policy.

Topic : Microeconomic Tools For Health Economics

Topic Objective:

At the end of thisWWW.BSSVE.IN topic student would be able to:

 Micro-economic evaluation at treatment level  Health Care

Definition/Overview:

Microeconomics: Microeconomics is a branch of economics that studies how individuals, households and firms make decisions to allocate limited resources, typically in markets where goods or services are being bought and sold. Microeconomics examines how these decisions and behaviours affect the supply and demand for goods and services, which determines prices; and how prices, in turn, determine the supply and demand of goods and services. Macroeconomics, on the other hand, involves the "sum total of economic activity, dealing

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with the issues of growth, inflation and unemployment, and with national economic policies relating to these issues" and the effects of government actions (such as changing taxation levels) on them. Particularly in the wake of the Lucas critique, much of modern macroeconomic theory has been built upon 'microfoundations' i.e. based upon basic assumptions about micro-level behaviour. One of the goals of microeconomics is to analyze market mechanisms that establish relative prices amongst goods and services and allocation of limited resources amongst many alternative uses. Microeconomics analyzes market failure, where markets fail to produce efficient results, as well as describing the theoretical conditions needed for perfect competition. Significant fields of study in microeconomics include general equilibrium, markets under asymmetric information, choice under uncertainty and economic applications of game theory. Also considered is the elasticity of products within the market system.

Key Points:

1. Micro-economic evaluation at treatment level

 Cost minimization analysis  Cost benefit analysis  Cost-effectiveness analysis  Cost-utility analysis

In cost minimization analysis (CMA), the effectiveness of the comparators in question must be proven to be equivalent. The 'cost-effective' comparator is simply the one which costs less (as it achieves the same outcome). In cost-benefit analysis (CBA), costs and benefits are both valued in cash terms. Cost effectiveness analysis (CEA) measures outcomes in 'natural units', such as mmHg, symptom free days, life years gained. Finally cost-utility analysis (CUA)

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measures outcomes in a composite metric of both length and quality of life, the Quality Adjusted Life Year (QALY). (Note there is some international variation in the precise definitions of each type of analysis). A final approach which is sometimes classed an economic evaluation is a cost of illness study. This is not a true economic evaluation as it does not compare the costs and outcomes of alternative courses of action. Instead, it attempts to measure all the costs associated with a particular disease or condition. These will include direct costs (where money actually changes hands, e.g. health service use, patient co- payments and out of pocket expenses), indirect costs (the value of lost productivity from time off work due to illness), and intangible costs (the 'disvalue' to an individual of pain and suffering). (Note specific definitions in health economics may vary slightly from other branches of economics.)

2. Health Care

Health care, or healthcare, is the prevention, treatment, and management of illness and the preservation of mental and physical well being through the services offered by the medical, nursing, and allied health professions. Health care embraces all the goods and services designed to promote health, including preventive, curative and palliative interventions, whether directed to individuals or to populations. The organized provision of such services may constitute a health care system. This can include specific governmental organizations such as, in the UK, the National Health Service or a cooperation across the National Health Service and Social Services as in Shared Care. Before the term "health care" became popular, English-speakers referred to medicine or to the health sector and spoke of the treatment and prevention of illnessWWW.BSSVE.IN and disease. In most developed countries and many developing countries health care is provided to everyone regardless of their ability to pay. The National Health Service, established in 1948 by Clement Atlee's Labor government in the United Kingdom, were the world's first universal health care system provided by government and paid for from general taxation. Alternatively, compulsory government funded health insurance with nominal fees can be provided, as in Italy. Other examples are Medicare in Australia, established in the 1970s by the Labor government, and by the same name Medicare was established in Canadabetween 1966 and 1984. Universal health care contrasts to the systems like health care in the United Statesor South Africa, though South Africa is one of the many countries attempting health care reform. The United Statesis the only wealthy, industrialized nation that does not provide universal health care.

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Topic : Statistical Tools For Health Economics

Topic Objective:

At the end of this topic student would be able to:

 History and Evolution of health insurance  Health care costs  Hospital and medical expense

Definition/Overview:

Health Economics: Health Insurance: Health economics is a branch of economics concerned with issues related to scarcity in the allocation of health and health care. Broadly, health economists study the functioning of the health care system and the private and social causes of health-affecting behaviors such as smoking. A seminal 1963 article by Kenneth Arrow, often credited with giving rise to the health economics as a discipline, drew conceptual distinctions between health and other goals. Factors that are distinguish health economics from other areas include extensive government intervention, intractable uncertainty in several dimensions, asymmetric information, and externalities. Governments tend to regulate the health care industryWWW.BSSVE.IN heavily and also tend to be the largest payor within the market. Uncertainty is intrinsic to health, both in patient outcomes and financial concerns. The knowledge gap that exists between a physician and a patient creates a situation of distinct advantage for the physician, which is called asymmetric information. Externalities arise frequently when considering health and health care, notably in the context of infectious disease. For example, making an effort to avoid catching a cold, or practicing safe sex, affects people other than the decision maker.

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Key Points:

1. History And Evolution Of Health Insurance

The concept of health insurance was proposed in 1694 by Hugh the Elder Chamberlen from the Peter Chamberlen family. In the late 19th century, "accident insurance" began to be available, which operated much like modern disability insurance..This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability insurance. Accident insurance was first offered in the United States by the Franklin Health Assurance Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries arising from railroad and steamboat accidents. Sixty organizations were offering accident insurance in the USby 1866, but the industry consolidated rapidly soon thereafter. While there were earlier experiments, the origins of sickness coverage in the US effectively date from 1890. The first employer-sponsored group disability policy was issued in 1911.

2. Health Care Costs

3. Hospital And Medical Expense

Hospital and medical expense policies were introduced during the first half of the 20th century. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross organizations. The predecessors of today's Health Maintenance Organizations (HMOs) originated beginning in 1929, through the 1930s and on during World War II.

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Topic : The Production Of Health

Topic Objective:

At the end of this topic student would be able to:

 Health plan vs. health insurance  Comprehensive vs. scheduled  Inherent problems with insurance  Adverse selection  Moral hazard  Other factors affecting insurance prices  Health insurance in Australia  Health insurance in Canada  Health insurance in the Netherlands  Health insurance in the United Kingdom  Health insurance in the United States

Definition/Overview:

Health Production: is the art and science of healing. It encompasses a range of health care practices evolved to maintain and restore human health by the prevention and treatment of illness. ContemporaryWWW.BSSVE.IN medicine applies health science, biomedical research, and medical technology to diagnose and treat injury and disease, typically through medication, surgery, or some other form of therapy. The word medicine is derived from the Latin ars medicina, meaning the art of healing. Though medical technology and clinical expertise are pivotal to contemporary medicine, successful face-to-face relief of actual suffering continues to require the application of ordinary human feeling and compassion, known in English as "bedside manner."

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Key Points:

1. Health plan vs. health insurance

Historically, HMOs tended to use the term "health plan", while commercial insurance companies used the term "health insurance". A health plan can also refer to a subscription- based medical care arrangement offered through health maintenance organization, HMO, PPO, or POS plan. These plans are similar to pre-paid dental, pre-paid legal, and pre-paid vision plans. Pre-paid health plans typically pay for a fixed number of services (for instance, $300 in preventive care, a certain number of days of hospice care or care in a skilled nursing facility, a fixed number of home health visits, a fixed number of spinal manipulation charges, etc.) The services offered are usually at the discretion of a utilization review nurse who is often contracted through the managed care entity providing the subscription health plan. This determination may be made either prior to or after hospital admission (concurrent utilization review).

2. Comprehensive vs. scheduled

Comprehensive health insurance pays a percentage (may be 100, 90, 80, 70, 60, 50, percent) of the cost of hospital and physician charges after a deductible (usually applies to hospital charges) or a co-pay (usually applies to physician charges, but may apply to some hospital services) is met by the insured. These plans are generally expensive because of the high potential benefit payout $1,000,000 to 5,000,000 is common and because of the vast array of covered benefits.WWW.BSSVE.IN Scheduled health insurance plans are not meant to replace a traditional comprehensive health insurance plans and are more of a basic policy providing access to day-to-day health care such as going to the doctor or getting a prescription drug. In recent years, these plans have taken the name mini-med plans or association plans. These plans may provide benefits for hospitalization and surgical, but these benefits will be limited. Scheduled plans are not meant to be effective for catastrophic events. These plans cost much less then comprehensive health insurance. They generally pay limited benefits amounts directly to the service provider, and payments are based upon the plan's "schedule of benefits". Annual benefits maximums for a typical scheduled health insurance plan may range from $1,000 to $25,000.

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3. Inherent problems with insurance

Insurance systems must typically deal with two inherent challenges: adverse selection, which affects any voluntary system, and ex-post moral hazard, which affects any insurance system in which a third party bears major responsibility for payment, whether that is an employer or the government. Some national systems with compulsory insurance utilize systems such as risk equalization and community rating to overcome these inherent problems.

4. Adverse selection

Insurance companies use the term "adverse selection" to describe the tendency for only those who will benefit from insurance to buy it. Specifically when talking about health insurance, unhealthy people are more likely to purchase health insurance because they anticipate large medical bills. On the other side, people who consider themselves to be reasonably healthy may decide that medical insurance is an unnecessary expense; if they see the doctor once a year and it costs $250, that's much better than making monthly insurance payments of $40.

The fundamental concept of insurance is that it balances costs across a large, random sample of individuals. For instance, an insurance company has a pool of 1000 randomly selected subscribers, each paying $100 per month. One person becomes very ill while the others stay healthy, allowing the insurance company to use the money paid by the healthy people to pay for the treatment costs of the sick person. However, when the pool is self-selecting rather than random, as is the case with individuals seeking to purchase health insurance directly, adverse selectionWWW.BSSVE.IN is a greater concern. A disproportionate share of health care spending is attributable to individuals with high health care costs. In the US the 1% of the population with the highest spending accounted for 27% of aggregate health care spending in 1996. The highest-spending 5% of the population accounted for more than half of all spending. These patterns were stable through the 1970s and 1980s, and some data suggest that they may have been typical of the mid-to-early 20th century as well. A few individuals have extremely high medical expenses, in extreme cases totaling a half million dollars or more. Adverse selection could leave an insurance company with primarily sick subscribers and no way to balance out the cost of their medical expenses with a large number of healthy subscribers.

Because of adverse selection, insurance companies employ medical underwriting, using a patient's medical history to screen out those whose pre-existing medical conditions pose too

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great a risk for the risk pool. Before buying health insurance, a person typically fills out a comprehensive medical history form that asks whether the person smokes, how much the person weighs, whether the person has been treated for any of a long list of diseases and so on. In general, those who present large financial burdens are denied coverage or charged high premiums to compensate. One large USindustry survey found that roughly 13 percent of applicants for comprehensive, individually purchased health insurance who went through the medical underwriting in 2004 were denied coverage. Declination rates increased significantly with age, rising from 5 percent for individuals 18 and under to just under a third for individuals aged 60 to 64. Among those who were offered coverage, the study found that 76% received offers at standard premium rates, and 22% were offered higher rates. On the other side, applicants can get discounts if they do not smoke and are healthy.

5. Moral hazard

Moral hazard occurs when an insurer and a consumer enter into a contract under symmetric information, but one party takes action, not taken into account in the contract, which changes the value of the insurance. A common example of moral hazard is third-party paymentwhen the parties involved in making a decision are not responsible for bearing costs arising from the decision. An example is where doctors and insured patients agree to extra tests which may or may not be necessary. Doctors benefit by avoiding possible malpractice suits, and patients benefit by gaining increased certainty of their medical condition. The cost of these extra tests is borne by the insurance company, which may have had little say in the decision. Co- payments, deductibles, and less generous insurance for services with more elastic demand attempt to combatWWW.BSSVE.IN moral hazard, as they hold the consumer responsible.

6. Other factors affecting insurance prices

A recent study by PriceWaterhouseCoopers examining the drivers of rising health care costs in theUSpointed to increased utilization created by increased consumer demand, new treatments, and more intensive diagnostic testing, as the most significant driver. People in developed countries are living longer. The population of those countries is aging, and a larger group of senior citizens requires more intensive medical care than a young healthier population. Advances in medicine and medical technology can also increase the cost of medical treatment. Lifestyle-related factors can increase utilization and therefore insurance prices, such as: increases in obesity caused by insufficient exercise and unhealthy food

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choices; excessive alcohol use, smoking, and use of street drugs. Other factors noted by the PWC study included the movement to broader-access plans, higher-priced technologies, and cost-shifting from Medicaid and the uninsured to private payers.

7. Health insurance in Australia

The public health system is called Medicare. It ensures free universal access to hospital treatment and subsidised out-of-hospital medical treatment. It is funded by a 1.5% tax levy. The private health system is funded by a number of private health insurance organisations. The largest of these is Medibank Private, which is government-owned, but operates as a government business enterprise under the same regulatory regime as all other registered private health funds. The Coalition Howard government had announced that Medibank would be privatised if it won the 2007 election, however they were defeated by the Australian Labor Party under Kevin Rudd which had already pledged that it would remain in government ownership.

Some private health insurers are 'for profit' enterprises, and some are non-profit organizations such as HCF Health Insurance. Some have membership restricted to particular groups, but the majority has open membership. Most aspects of private health insurance in Australia are regulated by the Private Health Insurance Act 2007. The private health system in Australiaoperates on a "community rating" basis, whereby premiums do not vary solely because of a person's previous medical history, current state of health, or (generally speaking) their age. Balancing this are waiting periods, in particular for pre-existing conditions (usually referred to withinWWW.BSSVE.IN the industry as PEA, which stands for "pre-existing ailment"). Funds are entitled to impose a waiting period of up to 12 months on benefits for any medical condition the signs and symptoms of which existed during the six months ending on the day the person first took out insurance.

They are also entitled to impose a 12-month waiting period for benefits for treatment relating to an obstetric condition, and a 2-month waiting period for all other benefits when a person first takes out private insurance. Funds have the discretion to reduce or remove such waiting periods in individual cases. They are also free not to impose them to begin with, but this would place such a fund at risk of "adverse selection", attracting a disproportionate number of members from other funds, or from the pool of intending members who might otherwise have joined other funds. It would also attract people with existing medical conditions, who

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might not otherwise have taken out insurance at all because of the denial of benefits for 12 months due to the PEA Rule. The benefits paid out for these conditions would create pressure on premiums for all the fund's members, causing some to drop their membership, which would lead to further rises, and a vicious cycle would ensue. There are a number of other matters about which funds are not permitted to discriminate between members in terms of premiums, benefits or membership - these include racial origin, religion, sex, sexual orientation, nature of employment, and leisure activities. Premiums for a fund's product that is sold in more than one state can vary from state to state, but not within the same state. The Australian government has introduced a number of incentives to encourage adults to take out private hospital insurance. These include:

 Lifetime Health Cover: If a person has not taken out private hospital cover by the 1st July after their 30th birthday, then when (and if) they do so after this time, their premiums must include a loading of 2% per annum. Thus, a person taking out private cover for the first time at age 40 will pay a 20 per cent loading. The loading continues for 10 years. The loading applies only to premiums for hospital cover, not to ancillary (extras) cover.  Medicare Levy Surcharge: People whose taxable income is greater than a specified amount (currently $50,000 for singles and $100,000 for families) and who do not have an adequate level of private hospital cover must pay a 1% surcharge on top of the standard 1.5% Medicare Levy. The rationale is that if the people in this income group are forced to pay more money one way or another, most would choose to purchase hospital insurance with it, with the possibility of a benefit in the event that they need private hospital treatment - rather than pay it in the form of WWW.BSSVE.INextra tax as well as having to meet their own private hospital costs.  Private Health Insurance Rebate: The government subsidises the premiums for all private health insurance cover, including hospital and ancillary (extras), by 30%, 35% or 40%.

8. Health insurance in Canada

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basic medical procedures. Some 65% of Canadians have some form of supplementary private health insurance; many of them receive it through their employers. Private-sector services not paid for by the government account for nearly 30 percent of total health care spending. In 2005, the Supreme Court of Quebec ruled, in Chaoulli v. Quebec, that the province's prohibition on private insurance for health care already insured by the provincial plan could constitute an infringement of the right to life and security if there were long wait times for treatment as happened in this case. Certain other provinces have legislation which financially discourages but does not forbid private health insurance in areas covered by the public plans. The ruling has not changed the overall pattern of health insurance across Canada but has spurred on attempts to tackle the core issues of supply and demand and the impact of wait times.

9. Health insurance in the Netherlands

In the Netherlands in 2006, a new system of health insurance came into force. All insurance companies have to provide at least one policy which meets a government set minimum standard level of cover and all adult residents are obliged by law to purchase this cover from an insurance company of their choice. The new system avoids the two pitfalls of adverse selection and moral hazard associated with traditional forms of health insurance. In the Dutch system, insurance companies are compensated for taking on high risk individuals because they receive extra funding for them. This funding comes from an insurance equalization pool run by a regulator which collects salary based contributions from employers (about 45% of all health care funding) and funding from the government for people whose means are such that they cannot WWW.BSSVE.INafford health care (about 5% of all funding).

Thus insurance companies find that insuring high risk individuals becomes an attractive proposition. All insurance companies receive from the pool, but those with more high risk individuals will receive more from the fund. The remaining 45% of health care funding comes from insurance premiums paid by the public. Insurance companies compete for this money on price alone. The insurance companies are not allowed to set down any co- payments or caps or deductibles. Neither are they allowed to deny coverage to any person applying for a policy or charge anything other than their nationally set and internet published standard policy premiums. Every person buying insurance from that company will pay the same price as everyone else buying that policy. And every person will get the minimum level of coverage. Children under18 are insured for free (the funding coming from the equalization

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pool). In addition to this minimum level, companies are free to sell extra insurance for additional coverage over the national minimum, but extra risks for this are not covered from the insurance pool and must therefore be priced accordingly.

10. Health insurance in the United Kingdom

The UK's National Health Service (NHS) is a publicly funded healthcare system that provides coverage to everyone normally resident in the UK. It is not strictly insurance system because (a) there are no premiums collected, (b) costs are not charged at the patient level and (c) costs are not pre-paid from a pool. However, it does achieve the main aim of insurance which is to spread financial risk arising from ill-health. The costs of running the NHS (est. 104 billion in 2007-8) are met directly from general taxation. Private health care has continued parallel to the NHS, paid for largely by private insurance, but it is used by less than 8% of the population, and generally as a top-up to NHS services. The NHS provides the majority of health care in the UK, including primary care, in-patient care, long-term health care, ophthalmology and dentistry. Recently the private sector has been increasingly used to increase NHS capacity despite a large proportion of the British public opposing such involvement.. According to the World Health Organization, government funding covered 86% of overall health care expenditures in the UKas of 2004, with private expenditures covering the remaining 14%.

11. Health insurance in the United States The US market-WWW.BSSVE.INbased health care system relies heavily on private and not-for-profit health insurance, which is the primary source of coverage for most Americans. According to the United States Census Bureau, approximately 84% of Americans have health insurance; some 60% obtain it through an employer, while about 9% purchase it directly. Various government agencies provide coverage to about 27% of Americans (there is some overlap in these figures). Public programs provide the primary source of coverage for most seniors and for low-income children and families who meet certain eligibility requirements. The primary public programs are Medicare, a federal social insurance program for seniors and certain disabled individuals, Medicaid, funded jointly by the federal government and states but administered at the state level, which covers certain very low income children and their families, and SCHIP, also a federal-state partnership that serves certain children and families who do not qualify for Medicaid but who cannot afford private coverage. Other public

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programs include military health benefits provided through TRICARE and the Veterans Health Administration and benefits provided through the Indian Health Service. Some states have additional programs for low-income individuals. In 2006, there were 47 million people in the United States(16% of the population) who were without health insurance for at least part of that year. About 37% of the uninsured live in households with an income over $50,000.

In 2004, US health insurers directly employed almost 470,000 people at an average salary of $61,409. (As of the fourth quarter of 2007, the total US labor force stood at 153.6 million, of whom 146.3 million were employed. Employment related to all forms of insurance totaled 2.3 million. Mean annual earnings for full-time civilian workers as of June 2006 were $41,231; median earnings were $33,634.) The insurance industry also represents a significant lobbying group in the US. For the 2007-2008 election cycle insurance was the 8th among industries in political contributions to members of Congress, giving $13,411,561, of which 56% was given to Democrats (lawyers and law firms were number 1, giving $59,205,616, of which 80% went to Democrats). The top recipient of insurance industry contributions was Senator Christopher Dodd (D-CT). The leading contributor from the industry as measured by total political contributions was AFLAC, Inc., which contributed $907,150 in 2007..

Topic : The ProduWWW.BSSVE.INction, Cost, And Technology Of Health Care

Topic Objective:

At the end of this topic student would be able to:

 Applications  Pharmacogenomics  Pharmaceutical products  Genetic testing  Human Genome Project  There are two types of cloning:  Improve yield from crops

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 Reduced vulnerability of crops to environmental stresses  Increased nutritional qualities of food crops  Improved taste, texture or appearance of food  Reduced dependence on fertilizers, pesticides and other agrochemicals  Production of novel substances in crop plants  Criticism  Biological engineering  Bioremediation and Biodegradation

Definition/Overview:

Biotechnology: Biotechnology is technology based on biology, especially when used in agriculture, food science, and medicine. The United Nations Convention on Biological Diversity defines biotechnology as:

 Biotechnology: Biotechnology is often used to refer to genetic engineering technology of the 21st century, however the term encompasses a wider range and history of procedures for modifying biological organisms according to the needs of humanity, going back to the initial modifications of native plants into improved food crops through artificial selection and hybridization. Bioengineering is the science upon which all Biotechnological applications are based. With the development of new approaches and modern techniques, traditional biotechnology industries are also acquiring new horizons enabling them to improve the quality of their productsWWW.BSSVE.IN and increase the productivity of their systems. Before 1971, the term, biotechnology, was primarily used in the food processing and agriculture industries. Since the 1970s, it began to be used by the Western scientific establishment to refer to laboratory-based techniques being developed in biological research, such as recombinant DNA or tissue culture-based processes, or horizontal gene transfer in living plants, using vectors such as the Agrobacterium bacteria to transfer DNA into a host organism. In fact, the term should be used in a much broader sense to describe the whole range of methods, both ancient and modern, used to manipulate organic materials to reach the demands of food production. So the term could be defined as, "The application of indigenous and/or scientific knowledge to the management of (parts of) microorganisms, or of cells and tissues of higher organisms, so that these supply goods and services of use to the food industry and its consumers. Biotechnology combines disciplines like genetics, molecular

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biology, biochemistry, embryology and cell biology, which are in turn linked to practical disciplines like chemical engineering, information technology, and robotics. Patho- biotechnology describes the exploitation of pathogens or pathogen derived compounds for beneficial effect.

Key Points:

1. Applications

Biotechnology has applications in four major industrial areas, including health care (medical), crop production and agriculture, non food (industrial) uses of crops and other products (e.g. biodegradable plastics, vegetable oil, biofuels), and environmental uses. For example, one application of biotechnology is the directed use of organisms for the manufacture of organic products (examples include beer and milk products). Another example is using naturally present bacteria by the mining industry in bioleaching. Biotechnology is also used to recycle, treat waste, clean up sites contaminated by industrial activities (bioremediation), and also to produce biological weapons. A series of derived terms have been coined to identify several branches of biotechnology, for example:

1.1 Red biotechnology

Red biotechnology is applied to medical processes. Some examples are the designing of organisms to produce antibiotics, and the engineering of genetic cures through genomic manipulation.WWW.BSSVE.IN 1.2 Green biotechnology

Green biotechnology is biotechnology applied to agricultural processes. An example would be the selection and domestication of plants via micropropagation. Another example is the designing of transgenic plants to grow under specific environmental conditions or in the presence (or absence) of certain agricultural chemicals. One hope is that green biotechnology might produce more environmentally friendly solutions than traditional industrial agriculture. An example of this is the engineering of a plant to express a pesticide, thereby eliminating the need for external application of pesticides. An example of this would be Bt corn. Whether or not green biotechnology products such as this are ultimately more environmentally friendly is a topic of considerable debate.

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1.3 White biotechnology

White biotechnology, also known as industrial biotechnology, is biotechnology applied to industrial processes. An example is the designing of an organism to produce a useful chemical. Another example is the using of enzymes as industrial catalysts to either produce valuable chemicals or destroy hazardous/polluting chemicals. White biotechnology tends to consume less in resources than traditional processes used to produce industrial goods.

1.4 Blue biotechnology

Blue biotechnology is a term that has been used to describe the marine and aquatic applications of biotechnology, but its use is relatively rare.

1.5 The investments and economic output

The investments and economic output of all of these types of applied biotechnologies form what has been described as the bioeconomy.

1.6 Bioinformatics

Bioinformatics is an interdisciplinary field which addresses biological problems using computational techniques, and makes the rapid organization and analysis of biological data possible. The field may also be referred to as computational biology, and can be defined as, "conceptualizingWWW.BSSVE.IN biology in terms of molecules and then applying informatics techniques to understand and organize the information associated with these molecules, on a large scale." Bioinformatics plays a key role in various areas, such as functional genomics, structural genomics, and proteomics, and forms a key component in the biotechnology and pharmaceutical sector.

2. Pharmacogenomics

Pharmacogenomics is the study of how the genetic inheritance of an individual affects his/her bodys response to drugs. It is a coined word derived from the words pharmacology and genomics. It is hence the study of the relationship between pharmaceuticals and genetics. The

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vision of pharmacogenomics is to be able to design and produce drugs that are adapted to each persons genetic makeup. Pharmacogenomics results in the following benefits:

2.1. Development of tailor-made medicines

Development of tailor-made medicines. Using pharmacogenomics, pharmaceutical companies can create drugs based on the proteins, enzymes and RNA molecules that are associated with specific genes and diseases. These tailor-made drugs promise not only to maximize therapeutic effects but also to decrease damage to nearby healthy cells.

2.2. More accurate methods of determining appropriate drug dosages

Knowing a patients genetics will enable doctors to determine how well his/ her body can process and metabolize a medicine. This will maximize the value of the medicine and decrease the likelihood of overdose.

2.3. Improvements in the drug discovery and approval process.

The discovery of potential therapies will be made easier using genome targets. Genes have been associated with numerous diseases and disorders. With modern biotechnology, these genes can be used as targets for the development of effective new therapies, which could significantly shorten the drug discovery process. 2.4. Better vaccines.WWW.BSSVE.IN Safer vaccines can be designed and produced by organisms transformed by means of genetic engineering. These vaccines will elicit the immune response without the attendant risks of infection. They will be inexpensive, stable, easy to store, and capable of being engineered to carry several strains of pathogen at once.

3. Pharmaceutical products

Most traditional pharmaceutical drugs are relatively simple molecules that have been found primarily through trial and error to treat the symptoms of a disease or illness. Biopharmaceuticals are large biological molecules known as proteins and these usually target the underlying mechanisms and pathways of a malady (but not always, as is the case with using insulin to treat type 1 diabetes mellitus, as that treatment merely address the symptoms

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of the disease, not the underlying cause which is autoimmunity); it is a relatively young industry. They can deal with targets in humans that may not be accessible with traditional medicines. A patient typically is dosed with a small molecule via a tablet while a large molecule is typically injected. Small molecules are manufactured by chemistry but larger molecules are created by living cells such as those found in the human body: for example, bacteria cells, yeast cells, animal or plant cells. Modern biotechnology is often associated with the use of genetically altered microorganisms such as E. coli or yeast for the production of substances like synthetic insulin or antibiotics. It can also refer to transgenic animals or transgenic plants, such as Bt corn. Genetically altered mammalian cells, such as Chinese Hamster Ovary (CHO) cells, are also used to manufacture certain pharmaceuticals. Another promising new biotechnology application is the development of plant-made pharmaceuticals. Biotechnology is also commonly associated with landmark breakthroughs in new medical therapies to treat hepatitis B, hepatitis C, cancers, arthritis, haemophilia, bone fractures, multiple sclerosis, and cardiovascular disorders. The biotechnology industry has also been instrumental in developing molecular diagnostic devices than can be used to define the target patient population for a given biopharmaceutical. Herceptin, for example, was the first drug approved for use with a matching diagnostic test and is used to treat breast cancer in women whose cancer cells express the protein HER2.

Modern biotechnology can be used to manufacture existing medicines relatively easily and cheaply. The first genetically engineered products were medicines designed to treat human diseases. To cite one example, in 1978 Genentech developed synthetic humanized insulin by joining its gene WWW.BSSVE.INwith a plasmid vector inserted into the bacterium Escherichia coli. Insulin, widely used for the treatment of diabetes, was previously extracted from the pancreas of abattoir animals (cattle and/or pigs). The resulting genetically engineered bacterium enabled the production of vast quantities of synthetic human insulin at relatively low cost, although the cost savings was used to increase profits for manufacturers, not passed on to consumers or their healthcare providers. According to a 2003 study undertaken by the International Diabetes Federation (IDF) on the access to and availability of insulin in its member countries, synthetic 'human' insulin is considerably more expensive in most countries where both synthetic 'human' and animal insulin are commercially available: e.g. within European countries the average price of synthetic 'human' insulin was twice as high as the price of pork insulin. Yet in its position statement, the IDF writes that "there is no overwhelming evidence to prefer one species of insulin over another" and "[modern, highly-purified] animal insulins

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remain a perfectly acceptable alternative. Modern biotechnology has evolved, making it possible to produce more easily and relatively cheaply human growth hormone, clotting factors for hemophiliacs, fertility drugs, erythropoietin and other drugs. Most drugs today are based on about 500 molecular targets. Genomic knowledge of the genes involved in diseases, disease pathways, and drug-response sites are expected to lead to the discovery of thousands more new targets.

4. Genetic testing

Genetic testing involves the direct examination of the DNA molecule itself. A scientist scans a patients DNA sample for mutated sequences.

There are two major types of gene tests. In the first type, a researcher may design short pieces of DNA (probes) whose sequences are complementary to the mutated sequences. These probes will seek their complement among the base pairs of an individuals genome. If the mutated sequence is present in the patients genome, the probe will bind to it and flag the mutation. In the second type, a researcher may conduct the gene test by comparing the sequence of DNA bases in a patients gene to disease in healthy individuals or their progeny.

Genetic testing is now used for:

 Determining sex  Carrier screening, or the identification of unaffected individuals who carry one copy of a gene for a diseaseWWW.BSSVE.IN that requires two copies for the disease to manifest  Prenatal diagnostic screening  Newborn screening  Presymptomatic testing for predicting adult-onset disorders  Presymptomatic testing for estimating the risk of developing adult-onset cancers  Confirmational diagnosis of symptomatic individuals  Forensic/identity testing

Some genetic tests are already available, although most of them are used in developed countries. The tests currently available can detect mutations associated with rare genetic disorders like cystic fibrosis, sickle cell anemia, and Huntingtons disease. Recently, tests have been developed to detect mutation for a handful of more complex conditions such as

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breast, ovarian, and colon cancers. However, gene tests may not detect every mutation associated with a particular condition because many are as yet undiscovered, and the ones they do detect may present different risks to different people and populations.

5. Controversial questions

Several issues have been raised regarding the use of genetic testing:

5.1 Absence of cure

There is still a lack of effective treatment or preventive measures for many diseases and conditions now being diagnosed or predicted using gene tests. Thus, revealing information about risk of a future disease that has no existing cure presents an ethical dilemma for medical practitioners.

5.2 Ownership and control of genetic information

Who will own and control genetic information, or information about genes, gene products, or inherited characteristics derived from an individual or a group of people like indigenous communities? At the macro level, there is a possibility of a genetic divide, with developing countries that do not have access to medical applications of biotechnology being deprived of benefits accruing from products derived from genes obtained from their own people. Moreover, genetic information can pose a risk for minority population groups as it can lead to group stigmatization. At the individual level, the absence ofWWW.BSSVE.IN privacy and anti-discrimination legal protections in most countries can lead to discrimination in employment or insurance or other misuse of personal genetic information. This raises questions such as whether genetic privacy is different from medical privacy.

5.3 Reproductive issues

These include the use of genetic information in reproductive decision-making and the possibility of genetically altering reproductive cells that may be passed on to future generations. For example, germline therapy forever changes the genetic make-up of an individuals descendants. Thus, any error in technology or judgment may have far- reaching consequences. Ethical issues like designer babies and human cloning have also

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given rise to controversies between and among scientists and bioethicists, especially in the light of past abuses with eugenics.

5.4 Clinical issues

These centers on the capabilities and limitations of doctors and other health-service providers, people identified with genetic conditions, and the general public in dealing with genetic information.

5.5 Effects on social institutions

Genetic tests reveal information about individuals and their families. Thus, test results can affect the dynamics within social institutions, particularly the family.

6. Gene therapy

Gene therapy using an Adenovirus vector. A new gene is inserted into an adenovirus vector, which is used to introduce the modified DNA into a human cell. If the treatment is successful, the new gene will make a functional protein. Gene therapy using an Adenovirus vector. A new gene is inserted into an adenovirus vector, which is used to introduce the modified DNA into a human cell. If the treatment is successful, the new gene will make a functional protein. Gene therapy may be used for treating, or even curing, genetic and acquired diseases like cancer and AIDS by using normal genes to supplement or replace defective genes or to bolster a normal function such as immunity. It can be used to target somatic (i.e., body) or germ (i.e., egg andWWW.BSSVE.IN sperm) cells. In somatic gene therapy, the genome of the recipient is changed, but this change is not passed along to the next generation. In contrast, in germline gene therapy, the egg and sperm cells of the parents are changed for the purpose of passing on the changes to their offspring. There are basically two ways of implementing a gene therapy treatment:

6.1 Ex vivo

Ex vivo, which means outside the body Cells from the patients blood or bone marrow are removed and grown in the laboratory. They are then exposed to a virus carrying the desired gene. The virus enters the cells, and the desired gene becomes part of the DNA of

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the cells. The cells are allowed to grow in the laboratory before being returned to the patient by injection into a vein.

6.2 In vivo

In vivo, which means inside the body No cells are removed from the patients body. Instead, vectors are used to deliver the desired gene to cells in the patients body. Currently, the use of gene therapy is limited. Somatic gene therapy is primarily at the experimental stage. Germline therapy is the subject of much discussion but it is not being actively investigated in larger animals and human beings. As of June 2001, more than 500 clinical gene-therapy trials involving about 3,500 patients have been identified worldwide. Around 78% of these are in the United States, with Europe having 18%. These trials focus on various types of cancer, although other multigenic diseases are being studied as well. Recently, two children born with severe combined immunodeficiency disorder (SCID) were reported to have been cured after being given genetically engineered cells. Gene therapy faces many obstacles before it can become a practical approach for treating disease. At least four of these obstacles are as follows:

6.2.1. Gene delivery tools

Genes are inserted into the body using gene carriers called vectors. The most common vectors nowWWW.BSSVE.IN are viruses, which have evolved a way of encapsulating and delivering their genes to human cells in a pathogenic manner. Scientists manipulate the genome of the virus by removing the disease-causing genes and inserting the therapeutic genes. However, while viruses are effective, they can introduce problems like toxicity, immune and inflammatory responses, and gene control and targeting issues.

6.2.2. Limited knowledge of the functions of genes.

Scientists currently know the functions of only a few genes. Hence, gene therapy can address only some genes that cause a particular disease. Worse, it is not known

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exactly whether genes have more than one function, which creates uncertainty as to whether replacing such genes is indeed desirable.

6.2.3. Multigene disorders and effect of environment.

Most genetic disorders involve more than one gene. Moreover, most diseases involve the interaction of several genes and the environment. For example, many people with cancer not only inherit the disease gene for the disorder, but may have also failed to inherit specific tumor suppressor genes. Diet, exercise, smoking and other environmental factors may have also contributed to their disease.

6.2.4. High costs

Since gene therapy is relatively new and at an experimental stage, it is an expensive treatment to undertake. This explains why current studies are focused on illnesses commonly found in developed countries, where more people can afford to pay for treatment. It may take decades before developing countries can take advantage of this technology.

7. Human Genome Project

The Human Genome Project is an initiative of the U.S. Department of Energy (DOE) that aims to generate a high-quality reference sequence for the entire human genome and identify all the human genes. The DOE and its predecessor agencies were assigned by the U.S. Congress to developWWW.BSSVE.IN new energy resources and technologies and to pursue a deeper understanding of potential health and environmental risks posed by their production and use. In 1986, the DOE announced its Human Genome Initiative. Shortly thereafter, the DOE and National Institutes of Health developed a plan for a joint Human Genome Project (HGP), which officially began in 1990. The HGP was originally planned to last 15 years. However, rapid technological advances and worldwide participation accelerated the completion date to 2003 (making it a 13 year project). Already it has enabled gene hunters to pinpoint genes associated with more than 30 disorders.

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8. There are two types of cloning:

8.1. Reproductive cloning

After a few divisions, the egg cell is placed into a uterus where it is allowed to develop into a fetus that is genetically identical to the donor of the original nucleus.

8.2. Therapeutic cloning

The egg is placed into a Petri dish where it develops into embryonic stem cells, which have shown potentials for treating several ailments.

In February 1997, cloning became the focus of media attention when Ian Wilmut and his colleagues at the Roslin Institute announced the successful cloning of a sheep, named Dolly, from the mammary glands of an adult female. The cloning of Dolly made it apparent to many that the techniques used to produce her could someday be used to clone human beings. This stirred a lot of controversy because of its ethical implications.

9. Agriculture

Improve yield from crops: Using the techniques of modern biotechnology, one or two genes may be transferred to a highly developed crop variety to impart a new character that would increase its yield (30). However, while increases in crop yield are the most obvious applications of modern biotechnology in agriculture, it is also the most difficult one. Current genetic engineeringWWW.BSSVE.IN techniques work best for effects that are controlled by a single gene. Many of the genetic characteristics associated with yield (e.g., enhanced growth) are controlled by a large number of genes, each of which has a minimal effect on the overall yield (31). There is, therefore, much scientific work to be done in this area.

10. Reduced vulnerability of crops to environmental stresses

Crops containing genes that will enable them to withstand biotic and abiotic stresses may be developed. For example, drought and excessively salty soil are two important limiting factors in crop productivity. Biotechnologists are studying plants that can cope with these extreme conditions in the hope of finding the genes that enable them to do so and eventually transferring these genes to the more desirable crops. One of the latest developments is the

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identification of a plant gene, At-DBF2, from thale cress, a tiny weed that is often used for plant research because it is very easy to grow and its genetic code is well mapped out. When this gene was inserted into tomato and tobacco, the cells were able to withstand environmental stresses like salt, drought, cold and heat, far more than ordinary cells. If these preliminary results prove successful in larger trials, then At-DBF2 genes can help in engineering crops that can better withstand harsh environments (32). Researchers have also created transgenic rice plants that are resistant to rice yellow mottle virus (RYMV). In Africa, this virus destroys majority of the rice crops and makes the surviving plants more susceptible to fungal infections (33).

11. Increased nutritional qualities of food crops

Proteins in foods may be modified to increase their nutritional qualities. Proteins in legumes and cereals may be transformed to provide the amino acids needed by human beings for a balanced diet (34). A good example is the work of Professors Ingo Potrykus and Peter Beyer on the so-called Goldenrice(discussed below).

12. Improved taste, texture or appearance of food

Modern biotechnology can be used to slow down the process of spoilage so that fruit can ripen longer on the plant and then be transported to the consumer with a still reasonable shelf life. This improves the taste, texture and appearance of the fruit. More importantly, it could expand the market for farmers in developing countries due to the reduction in spoilage. The first genetically WWW.BSSVE.INmodified food product was a tomato which was transformed to delay its ripening (35). Researchers in Indonesia, Malaysia,Thailand, Philippines and Vietnamare currently working on delayed-ripening papaya in collaboration with the University of Nottingham and Zeneca (36). Biotechnology in cheese production: enzymes produced by micro-organisms provide an alternative to animal rennet a cheese coagulant - and an alternative supply for cheese makers. This also eliminates possible public concerns with animal-derived material, although there is currently no plansto develop synthetic milk, thus making this argument less compelling. Enzymes offer an animal-friendly alternative to animal rennet. While providing comparable quality, they are theoretically also less expensive. About 85 million tons of wheat flour is used every year to bake bread. By adding an enzyme called maltogenic amylase to the flour, bread stays fresher longer. Assuming that 10-15% of bread is thrown away, if it could just stay fresh another 57 days then 2 million tons of flour

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per year would be saved. That corresponds to 40% of the bread consumed in a country such as the USA. This means more bread becomes available with no increase in input. In combination with other enzymes, bread can also be made bigger, more appetizing and better in a range of ways.

13. Reduced dependence on fertilizers, pesticides and other agrochemicals

Most of the current commercial applications of modern biotechnology in agriculture are on reducing the dependence of farmers on agrochemicals. For example, Bacillus thuringiensis (Bt) is a soil bacterium that produces a protein with insecticidal qualities. Traditionally, a fermentation process has been used to produce an insecticidal spray from these bacteria. In this form, the Bt toxin occurs as an inactive protoxin, which requires digestion by an insect to be effective. There are several Bttoxins and each one is specific to certain target insects. Crop plants have now been engineered to contain and express the genes for Bttoxin, which they produce in its active form. When a susceptible insect ingests the transgenic crop cultivar expressing the Btprotein, it stops feeding and soon thereafter dies as a result of the Bt toxin binding to its gut wall. Bt corn is now commercially available in a number of countries to control corn borer (a lepidopteran insect), which is otherwise controlled by spraying (a more difficult process).

Crops have also been genetically engineered to acquire tolerance to broad-spectrum herbicide. The lack of cost-effective herbicides with broad-spectrum activity and no crop injury was a consistent limitation in crop weed management. Multiple applications of numerous herbicidesWWW.BSSVE.IN were routinely used to control a wide range of weed species detrimental to agronomic crops. Weed management tended to rely on preemergence that is, herbicide applications were sprayed in response to expected weed infestations rather than in response to actual weeds present. Mechanical cultivation and hand weeding were often necessary to control weeds not controlled by herbicide applications. The introduction of herbicide tolerant crops has the potential of reducing the number of herbicide active ingredients used for weed management, reducing the number of herbicide applications made during a season, and increasing yield due to improved weed management and less crop injury. Transgenic crops that express tolerance to glyphosate, glufosinate and bromoxynil have been developed. These herbicides can now be sprayed on transgenic crops without inflicting damage on the crops while killing nearby weeds (37). From 1996 to 2001, herbicide tolerance was the most dominant trait introduced to commercially available transgenic crops, followed by insect

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resistance. In 2001, herbicide tolerance deployed in soybean, corn and cotton accounted for 77% of the 626,000 square kilometres planted to transgenic crops;Bt crops accounted for 15%; and "stacked genes" for herbicide tolerance and insect resistance used in both cotton and corn accounted for 8% (38).

14. Production of novel substances in crop plants

Biotechnology is being applied for novel uses other than food. For example, oilseed can be modified to produce fatty acids for detergents, substitute fuels and petrochemicals. Potatos, tomatos, rice, tobacco, lettuce, safflowers, and other plants have been genetically-engineered to produce insulin and certain vaccines. If future clinical trials prove successful, the advantages of edible vaccines would be enormous, especially for developing countries. The transgenic plants may be grown locally and cheaply. Homegrown vaccines would also avoid logistical and economic problems posed by having to transport traditional preparations over long distances and keeping them cold while in transit. And since they are edible, they will not need syringes, which are not only an additional expense in the traditional vaccine preparations but also a source of infections if contaminated. In the case of insulin grown in transgenic plants, it is well-established that the gastrointestinal system breaks the protein down therefore this could not currently be administered as an edible protein. However, it might be produced at significantly lower cost than insulin produced in costly, bioreactors. For example, Calgary, Canada-based SemBioSys Genetics, Inc. reports that its safflower- produced insulin will reduce unit costs by over 25% or more and reduce the capital costs associated with building a commercial-scale insulin manufacturing facility by approximately over $100 millionWWW.BSSVE.IN compared to traditional biomanufacturing facilities.

15. Criticism

There is another side to the agricultural biotechnology issue however. It includes increased herbicide usage and resultant herbicide resistance, "super weeds," residues on and in food crops, genetic contamination of non-GM crops which hurt organic and conventional farmers, damage to wildlife from glyphosate, etc.

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16. Biological engineering

Biotechnological engineering or biological engineering is a branch of engineering that focuses on biotechnologies and biological science. It includes different disciplines such as biochemical engineering, biomedical engineering, bio-process engineering, biosystem engineering and so on. Because of the novelty of the field, the definition of a bioengineer is still undefined. However, in general it is an integrated approach of fundamental biological sciences and traditional engineering principles. Bioengineers are often employed to scale up bio processes from the laboratory scale to the manufacturing scale. Moreover, as with most engineers, they often deal with management, economic and legal issues. Since patents and regulation (e.g. FDA regulation in the U.S.) are very important issues for biotech enterprises, bioengineers are often required to have knowledge related to these issues. The increasing number of biotech enterprises is likely to create a need for bioengineers in the years to come. Many universities throughout the world are now providing programs in bioengineering and biotechnology (as independent programs or specialty programs within more established engineering fields)..

17. Bioremediation and Biodegradation

Biotechnology is being used to engineer and adapt organisms especially microorganisms in an effort to find sustainable ways to clean up contaminated environments. The elimination of a wide range of pollutants and wastes from the environment is an absolute requirement to promote a sustainable development of our society with low environmental impact. Biological processes play aWWW.BSSVE.IN major role in the removal of contaminants and biotechnology is taking advantage of the astonishing catabolic versatility of microorganisms to degrade/convert such compounds. New methodological breakthroughs in sequencing, genomics, proteomics, bioinformatics and imaging are producing vast amounts of information.

In the field of Environmental Microbiology, genome-based global studies open a new era providing unprecedented in silico views of metabolic and regulatory networks, as well as clues to the evolution of degradation pathways and to the molecular adaptation strategies to changing environmental conditions. Functional genomic and metagenomic approaches are increasing our understanding of the relative importance of different pathways and regulatory networks to carbon flux in particular environments and for particular compounds and they will certainly accelerate the development of bioremediation technologies and

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biotransformation processes. Marine environments are especially vulnerable since oil spills of coastal regions and the open sea are poorly containable and mitigation is difficult. In addition to pollution through human activities, millions of tons of petroleum enter the marine environment every year from natural seepages. Despite its toxicity, a considerable fraction of petroleum oil entering marine systems is eliminated by the hydrocarbon-degrading activities of microbial communities, in particular by a remarkable recently discovered group of specialists, the so-called hydrocarbonoclastic bacteria (HCB).

In Section 2 of this course you will cover these topics: Demand For Health Capital Demand And Supply Of Health Insurance Consumer Choice And Demand Asymmetric Information And Agency Imperfect Information: Sid And Sav

Topic : Demand For Health Capital

Topic Objective:

At the end of thisWWW.BSSVE.IN topic student would be able to:

The supply of health care

Final Approach

Definition/Overview:

Health care demand: The demand for health care is a derived demand from the demand for health, more generally. Health care is demanded as a means for consumers to achieve a larger stock of "health capital." The demand for health is unique, because individuals allocate resources in order to both consume and produce health. Michael Grossman's 1972 model of health production has been extremely influential in this field of study and has several unique

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elements that make it notable. The model views each individual as both a producer and a consumer of health, as measured in "health stock" or health capital, the flow of which is known as health status. It acknowledges that health care is both a consumption good that yields direct satisfaction and utility, and an investment good, which yields satisfaction to consumers indirectly (more productive, fewer sick days, higher wages, etc.) Since individuals in this model demand health care only as a result of their desire to increase their health stock, health care demand is a derived demand.

The model takes into account health production (investments in health such as time spent exercising, money spent on medical care, etc.) as well as the production of non-health goods against the overall utility that results from ones investments. These factors are used to determine the optimal level of health that an individual will demand, taking into account the marginal cost of health capital and depreciation rates. The optimal level of investment in health occurs where the marginal cost of health capital is equal to the marginal benefit resulting from it (MC=MB). With the passing of time, health depreciates at some rate δ. The general interest rate in the economy is denoted by r.

The marginal benefit of health capital is the rate of return from this capital in both market and non-market sectors. In this model, the optimal health stock can be impacted by factors like age, wages and education. As an example, increases with age, so it becomes more and more costly to attain the same level of health capital or health stock as one ages. Age also decreases the marginal benefit of health stock. The optimal health stock will therefore decrease as one ages. When studyingWWW.BSSVE.IN Health Care, it is beneficial to reference the fundamental laws of Supply and Demand. Health Care, just like anything else, is a finite resource.

This is to say, Health Care is a scarce resource - whether one lives in a society in which Health Care is privitized or publicized. In either scenario, demand for Health Care will be high. Logically, demand will increase more if Health Care is made a Public Good. There are positives and negatives to such a system. The most obvious positive is the fact that everyone can receive care. However, what also must be noted is the fact that Universal Health Care will cause a spike in the Demand for it. Being a scarce resource, sacrifices are usually made. This is the main reason why there can be such long waits in a public Health Care system - quality health care is diverted to those who can afford to wait in line the longest. This is not to say that a privatized Health Care policy does not have its flaws. Health insurance in the

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United States is largely a case of market failure. A large reason for this is asymmetrical information. Someone applying for health insurance knows more about their health than the insurance company does. People who have health care may act more recklessly than if they didn't have it resulting in higher costs for the insurance company. Someone who applies for health insurance as an individual will usually pay higher rates than group plans for an equal level of insurance. Statistically, people who apply individually are more likely to need health care than those with group plans. Healthy people can't get health care via a group plan are more likely to go without any insurance at all. The higher rates for individuals and the low risk of a healthy person needing medical treatment that costs more than their deductible makes insurance more expensive than its worth. Thus individuals are perceived as more risky, individual plans are made more expensive and the rate of healthy people falls further as they decide that it isn't worth the expense.

Key Points:

1. The supply of health care

Economic evaluation is the comparison of two or more alternative courses of action in terms of both their costsWWW.BSSVE.IN and consequences (Drummond et al.). Economists usually distinguish several types of economic evaluation, differing in how consequences are measured:

 Cost minimisation analysis  Cost benefit analysis  Cost-effectiveness analysis  Cost-utility analysis

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such as mmHg, symptom free days, life years gained. Finally cost-utility analysis (CUA) measures outcomes in a composite metric of both length and quality of life, the Quality Adjusted Life Year (QALY). (Note there is some international variation in the precise definitions of each type of analysis).

2. Final Approach

A final approach which is sometimes classed an economic evaluation is a cost of illness study. This is not a true economic evaluation as it does not compare the costs and outcomes of alternative courses of action. Instead, it attempts to measure all the costs associated with a particular disease or condition. These will include direct costs (where money actually changes hands, e.g. health service use, patient co-payments and out of pocket expenses), indirect costs (the value of lost productivity from time off work due to illness), and intangible costs (the 'disvalue' to an individual of pain and suffering). (Note specific definitions in health economics may vary slightly from other branches of economics.)

Topic : Demand And Supply Of Health Insurance

Topic Objective:

At the end of thisWWW.BSSVE.IN topic student would be able to:

 Health insurance policy  Health plan vs. health insurance  Comprehensive vs. scheduled  Inherent problems with insurance  Adverse selection  Moral hazard  Health insurance in Australia  Health insurance in the United States  Health insurance in the Netherlands  Health insurance in the United Kingdom

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 Health insurance in Canada

Definition/Overview:

Health insurance: The term health insurance is generally used to describe a form of insurance that pays for medical expenses. It is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs. It may be provided through a government-sponsored social insurance program, or from private insurance companies. It may be purchased on a group basis (e.g., by a firm to cover its employees) or purchased by individual consumers. In each case, the covered groups or individuals pay premiums or taxes to help protect themselves from high or unexpected healthcare expenses. Similar benefits paying for medical expenses may also be provided through social welfare programs funded by the government. Health insurance works by estimating the overall risk of healthcare expenses and developing a routine finance structure (such as a monthly premium or annual tax) that will ensure that money is available to pay for the healthcare benefits specified in the insurance agreement. The benefit is administered by a central organization, most often either a government agency or a private or not-for-profit entity operating a health plan.

Key Points:

1. Health insurance policy It is a contract betweenWWW.BSSVE.IN an insurance company and an individual. The contract can be renewable annually or monthly. The type and amount of health care costs that will be covered by the health plan are specified in advance, in the member contract or Evidence of Coverage booklet. The individual policy-holder's payment obligations may take several forms:

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 Copayment: The amount that the policy-holder must pay out of pocket before the health plan pays for a particular visit or service. For example, a policy-holder might pay a $45 copayment for a doctor's visit, or to obtain a prescription. A copayment must be paid each time a particular service is obtained.  Coinsurance: Instead of paying a fixed amount up front (a copayment), the policy-holder must pay a percentage of the total cost. For example, the member might have to pay 20% of the cost of a surgery, while the health plan pays the other 80%. Because there is no upper limit on coinsurance, the policy-holder can end up owing very little, or a significant amount, depending on the actual costs of the services they obtain.  Exclusions: Not all services are covered. The policy-holder is generally expected to pay the full cost of non-covered services out of their own pocket.  Coverage limits: Some health plans only pay for health care up to a certain dollar amount. The policy-holder may be expected to pay any charges in excess of the health plan's maximum payment for a specific service. In addition, some plans have annual or lifetime coverage maximums. In these cases, the health plan will stop payment when they reach the benefit maximum, and the policy-holder must pay all remaining costs.  Out-of-pocket maximums: Similar to coverage limits, except that in this case, the member's payment obligation ends when they reach the out-of-pocket maximum, and the health plan pays all further covered costs. Out-of-pocket maximums can be limited to a specific benefit category (such as prescription drugs) or can apply to all coverage provided during a specific benefit year.  Capitation: An amount paid by an insurer to a health care provider, for which the provider agrees to treat allWWW.BSSVE.IN members of the insurer.  In-Network Provider: A health care provider on a list of providers preselected by the insurer. The insurer will offer discounted coinsurance or copayments, or additional benefits, to a plan member to see an in-network provider. Generally, providers in network are providers who have a contract with the insurer to accept rates further discounted from the "usual and customary" charges the insurer pays to out-of-network providers.  Prescription drug plans are a form of insurance offered through some employer benefit plans in the US, where the patient pays a copayment and the prescription drug insurance part or all of the balance for drugs covered in the formulary of the plan.  Some, if not most, health care providers in the United States will agree to bill the insurance company if patients are willing to sign an agreement that they will be responsible for the amount that the insurance company doesn't pay. The insurance company pays out of network

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providers according to "reasonable and customary" charges, which may be less than the provider's usual fee. The provider may also have a separate contract with the insurer to accept what amounts to a discounted rate or capitation to the provider's standard charges. It generally costs the patient less to use an in-network provider.

2. Health plan vs. health insurance

3. Comprehensive vs. scheduled

Comprehensive health insurance pays a percentage (may be 100, 90, 80, 70, 60, 50, percent) of the cost of hospital and physician charges after a deductible (usually applies to hospital charges) or a co-WWW.BSSVE.INpay (usually applies to physician charges, but may apply to some hospital services) is met by the insured. These plans are generally expensive because of the high potential benefit payout $1,000,000 to 5,000,000 is common and because of the vast array of covered benefits. Scheduled health insurance plans are not meant to replace a traditional comprehensive health insurance plans and are more of a basic policy providing access to day- to-day health care such as going to the doctor or getting a prescription drug. In recent years, these plans have taken the name mini-med plans or association plans. These plans may provide benefits for hospitalization and surgical, but these benefits will be limited. Scheduled plans are not meant to be effective for catastrophic events. These plans cost much less then comprehensive health insurance. They generally pay limited benefits amounts directly to the service provider, and payments are based upon the plan's "schedule of benefits". Annual

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benefits maximums for a typical scheduled health insurance plan may range from $1,000 to $25,000.

4. Inherent problems with insurance

5. Adverse selection

The fundamental concept of insurance is that it balances costs across a large, random sample of individuals. For instance, an insurance company has a pool of 1000 randomly selected subscribers, each paying $100 per month. One person becomes very ill while the others stay healthy, allowingWWW.BSSVE.IN the insurance company to use the money paid by the healthy people to pay for the treatment costs of the sick person. However, when the pool is self-selecting rather than random, as is the case with individuals seeking to purchase health insurance directly, adverse selection is a greater concern. A disproportionate share of health care spending is attributable to individuals with high health care costs. In the US the 1% of the population with the highest spending accounted for 27% of aggregate health care spending in 1996. The highest-spending 5% of the population accounted for more than half of all spending. These patterns were stable through the 1970s and 1980s, and some data suggest that they may have been typical of the mid-to-early 20th century as well. A few individuals have extremely high medical expenses, in extreme cases totaling a half million dollars or more. Adverse selection could leave an insurance company with primarily sick subscribers and no way to balance out the cost of their medical expenses with a large number of healthy subscribers.

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Because of adverse selection, insurance companies employ medical underwriting, using a patient's medical history to screen out those whose pre-existing medical conditions pose too great a risk for the risk pool. Before buying health insurance, a person typically fills out a comprehensive medical history form that asks whether the person smokes, how much the person weighs, whether the person has been treated for any of a long list of diseases and so on. In general, those who present large financial burdens are denied coverage or charged high premiums to compensate. One large USindustry survey found that roughly 13 percent of applicants for comprehensive, individually purchased health insurance who went through the medical underwriting in 2004 were denied coverage. Declination rates increased significantly with age, rising from 5 percent for individuals 18 and under to just under a third for individuals aged 60 to 64. Among those who were offered coverage, the study found that 76% received offers at standard premium rates, and 22% were offered higher rates. On the other side, applicants can get discounts if they do not smoke and are healthy.

6. Moral hazard

Moral hazard occurs when an insurer and a consumer enter into a contract under symmetric information, but one party takes action, not taken into account in the contract, which changes the value of the insurance. A common example of moral hazard is third-party paymentwhen the parties involved in making a decision are not responsible for bearing costs arising from the decision. An example is where doctors and insured patients agree to extra tests which may or may not be necessary. Doctors benefit by avoiding possible malpractice suits, and patients benefit by gaining increased certainty of their medical condition. The cost of these extra tests is borne by the insuranceWWW.BSSVE.IN company, which may have had little say in the decision. Co- payments, deductibles, and less generous insurance for services with more elastic demand attempt to combat moral hazard, as they hold the consumer responsible.

7. Health insurance in Australia

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be privatised if it won the 2007 election, however they were defeated by the Australian Labor Party under Kevin Rudd which had already pledged that it would remain in government ownership. Some private health insurers are 'for profit' enterprises, and some are non-profit organizations such as HCF Health Insurance. Some have membership restricted to particular groups, but the majority have open membership.

Most aspects of private health insurance in Australiaare regulated by the Private Health Insurance Act 2007. The private health system in Australiaoperates on a "community rating" basis, whereby premiums do not vary solely because of a person's previous medical history, current state of health, or (generally speaking) their age. Balancing this are waiting periods, in particular for pre-existing conditions (usually referred to within the industry as PEA, which stands for "pre-existing ailment"). Funds are entitled to impose a waiting period of up to 12 months on benefits for any medical condition the signs and symptoms of which existed during the six months ending on the day the person first took out insurance. They are also entitled to impose a 12-month waiting period for benefits for treatment relating to an obstetric condition, and a 2-month waiting period for all other benefits when a person first takes out private insurance. Funds have the discretion to reduce or remove such waiting periods in individual cases. They are also free not to impose them to begin with, but this would place such a fund at risk of "adverse selection", attracting a disproportionate number of members from other funds, or from the pool of intending members who might otherwise have joined other funds. It would also attract people with existing medical conditions, who might not otherwise have taken out insurance at all because of the denial of benefits for 12 months due to the PEA Rule.WWW.BSSVE.IN The benefits paid out for these conditions would create pressure on premiums for all the fund's members, causing some to drop their membership, which would lead to further rises, and a vicious cycle would ensue.

There are a number of other matters about which funds are not permitted to discriminate between members in terms of premiums, benefits or membership - these include racial origin, religion, sex, sexual orientation, nature of employment, and leisure activities. Premiums for a fund's product that is sold in more than one state can vary from state to state, but not within the same state. The Australian government has introduced a number of incentives to encourage adults to take out private hospital insurance. These include:

 Lifetime Health Cover: If a person has not taken out private hospital cover by the 1st July after their 30th birthday, then when (and if) they do so after this time, their premiums must

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include a loading of 2% per annum. Thus, a person taking out private cover for the first time at age 40 will pay a 20 per cent loading. The loading continues for 10 years. The loading applies only to premiums for hospital cover, not to ancillary (extras) cover.  Medicare Levy Surcharge: People whose taxable income is greater than a specified amount (currently $50,000 for singles and $100,000 for families) and who do not have an adequate level of private hospital cover must pay a 1% surcharge on top of the standard 1.5% Medicare Levy. The rationale is that if the people in this income group are forced to pay more money one way or another, most would choose to purchase hospital insurance with it, with the possibility of a benefit in the event that they need private hospital treatment - rather than pay it in the form of extra tax as well as having to meet their own private hospital costs.

 Private Health Insurance Rebate: The government subsidises the premiums for all private health insurance cover, including hospital and ancillary (extras), by 30%, 35% or 40%.

8. Health insurance in Canada

Most health insurance in Canada is administered by each province, under the Canada Health Act, which requires all people to have free access to basic health services. Collectively, the public provincial health insurance systems in Canada are frequently referred to as Medicare. Private health insurance is allowed, but the provincial governments allow it only for services that the public health plans do not cover; for example, semi-private or private rooms in hospitals and prescription drug plans. Canadians are free to use private insurance for elective medical services such as laser vision correction surgery, cosmetic surgery, and other non- basic medical procedures.WWW.BSSVE.IN Some 65% of Canadians have some form of supplementary private health insurance; many of them receive it through their employers. Private-sector services not paid for by the government account for nearly 30 percent of total health care spending. In 2005, the Supreme Court of Quebec ruled, in Chaoulli v. Quebec, that the province's prohibition on private insurance for health care already insured by the provincial plan could constitute an infringement of the right to life and security if there were long wait times for treatment as happened in this case. Certain other provinces have legislation which financially discourages but does not forbid private health insurance in areas covered by the public plans. The ruling has not changed the overall pattern of health insurance across Canada but has spurred on attempts to tackle the core issues of supply and demand and the impact of wait times.

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9. Health insurance in the Netherlands

The new system avoids the two pitfalls of adverse selection and moral hazard associated with traditional forms of health insurance. In the Dutch system, insurance companies are compensated for taking on high risk individuals because they receive extra funding for them. This funding comes from an insurance equalization pool run by a regulator which collects salary based contributions from employers (about 45% of all health care funding) and funding from the government for people whose means are such that they cannot afford health care (about 5% of all funding). Thus insurance companies find that insuring high risk individuals becomes an attractive proposition. All insurance companies receive from the pool, but those with more high risk individuals will receive more from the fund. The remaining 45% of health care funding comes from insurance premiums paid by the public. Insurance companies compete for this money on price alone. The insurance companies are not allowed to set down any co-payments or caps or deductibles. Neither are they allowed to deny coverage to any person applying for a policy or charge anything other than their nationally set and internet published standard policy premiums. Every person buying insurance from that company will pay the same price as everyone else buying that policy. And every person will get the minimum level of coverage. Children under 18 are insured for free (the fundingWWW.BSSVE.IN coming from the equalization pool). In addition to this minimum level, companies are free to sell extra insurance for additional coverage over the national minimum, but extra risks for this are not covered from the insurance pool and must therefore be priced accordingly.

10. Health insurance in the United Kingdom

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2007-8) are met directly from general taxation. Private health care has continued parallel to the NHS, paid for largely by private insurance, but it is used by less than 8% of the population, and generally as a top-up to NHS services.

The NHS provides the majority of health care in the UK, including primary care, in-patient care, long-term health care, ophthalmology and dentistry. Recently the private sector has been increasingly used to increase NHS capacity despite a large proportion of the British public opposing such involvement.. According to the World Health Organization, government funding covered 86% of overall health care expenditures in the UKas of 2004, with private expenditures covering the remaining 14%.

11. Health insurance in the United States

The US market-based health care system relies heavily on private and not-for-profit health insurance, which is the primary source of coverage for most Americans. According to the United States Census Bureau, approximately 84% of Americans have health insurance; some 60% obtain it through an employer, while about 9% purchase it directly. Various government agencies provide coverage to about 27% of Americans (there is some overlap in these figures). Public programs provide the primary source of coverage for most seniors and for low-income children and families who meet certain eligibility requirements. The primary public programs are Medicare, a federal social insurance program for seniors and certain disabled individuals, Medicaid, funded jointly by the federal government and states but administered at the state level, which covers certain very low income children and their families, and SCHIP,WWW.BSSVE.IN also a federal-state partnership that serves certain children and families who do not qualify for Medicaid but who cannot afford private coverage. Other public programs include military health benefits provided through TRICARE and the Veterans Health Administration and benefits provided through the Indian Health Service. Some states have additional programs for low-income individuals. In 2006, there were 47 million people in the United States(16% of the population) who were without health insurance for at least part of that year. About 37% of the uninsured live in households with an income over $50,000.

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2.3 million. Mean annual earnings for full-time civilian workers as of June 2006 were $41,231; median earnings were $33,634.) The insurance industry also represents a significant lobbying group in the US. For the 2007-2008 election cycle insurance was the 8th among industries in political contributions to members of Congress, giving $13,411,561, of which 56% was given to Democrats (lawyers and law firms were number 1, giving $59,205,616, of which 80% went to Democrats). The top recipient of insurance industry contributions was Senator Christopher Dodd (D-CT). The leading contributor from the industry as measured by total political contributions was AFLAC, Inc., which contributed $907,150 in 2007.

Topic : Consumer Choice And Demand

Topic Objective:

At the end of this topic student would be able to:

 Health insurance in Australia  The private health system  The private health system in Australia Definition/Overview:WWW.BSSVE.IN Moral hazard: Moral hazard occurs when an insurer and a consumer enter into a contract under symmetric information, but one party takes action, not taken into account in the contract, which changes the value of the insurance. A common example of moral hazard is third-party paymentwhen the parties involved in making a decision are not responsible for bearing costs arising from the decision. An example is where doctors and insured patients agree to extra tests which may or may not be necessary. Doctors benefit by avoiding possible malpractice suits, and patients benefit by gaining increased certainty of their medical condition. The cost of these extra tests is borne by the insurance company, which may have had little say in the decision. Co-payments, deductibles, and less generous insurance for services with more elastic demand attempt to combat moral hazard, as they hold the consumer responsible.

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A recent study by Price Waterhouse Coopers examining the drivers of rising health care costs in the US pointed to increased utilization created by increased consumer demand, new treatments, and more intensive diagnostic testing, as the most significant driver. People in developed countries are living longer. The population of those countries is aging, and a larger group of senior citizens requires more intensive medical care than a young healthier population. Advances in medicine and medical technology can also increase the cost of medical treatment. Lifestyle-related factors can increase utilization and therefore insurance prices, such as: increases in obesity caused by insufficient exercise and unhealthy food choices; excessive alcohol use, smoking, and use of street drugs. Other factors noted by the PWC study included the movement to broader-access plans, higher-priced technologies, and cost-shifting from Medicaid and the uninsured to private payers.

Key Points:

1. Health insurance in Australia

The public health system is called Medicare. It ensures free universal access to hospital treatment and subsidised out-of-hospital medical treatment. It is funded by a 1.5% tax levy.

2. The private health system

The private health system is funded by a number of private health insurance organisations. The largest of these is Medibank Private, which is government-owned, but operates as a government businessWWW.BSSVE.IN enterprise under the same regulatory regime as all other registered private health funds. The Coalition Howard government had announced that Medibank would be privatised if it won the 2007 election, however they were defeated by the Australian Labor Party under Kevin Rudd which had already pledged that it would remain in government ownership. Some private health insurers are 'for profit' enterprises, and some are non-profit organizations such as HCF Health Insurance. Some have membership restricted to particular groups, but the majority has open membership. Most aspects of private health insurance in Australia are regulated by the Private Health Insurance Act 2007.

3. The private health system in Australia

The private health system in Australiaoperates on a "community rating" basis, whereby premiums do not vary solely because of a person's previous medical history, current state of

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health or (generally speaking) their age. Balancing this are waiting periods, in particular for pre-existing conditions (usually referred to within the industry as PEA, which stands for "pre- existing ailment"). Funds are entitled to impose a waiting period of up to 12 months on benefits for any medical condition the signs and symptoms of which existed during the six months ending on the day the person first took out insurance. They are also entitled to impose a 12-month waiting period for benefits for treatment relating to an obstetric condition, and a 2-month waiting period for all other benefits when a person first takes out private insurance. Funds have the discretion to reduce or remove such waiting periods in individual cases.

They are also free not to impose them to begin with, but this would place such a fund at risk of "adverse selection", attracting a disproportionate number of members from other funds, or from the pool of intending members who might otherwise have joined other funds. It would also attract people with existing medical conditions, who might not otherwise have taken out insurance at all because of the denial of benefits for 12 months due to the PEA Rule. The benefits paid out for these conditions would create pressure on premiums for all the fund's members, causing some to drop their membership, which would lead to further rises, and a vicious cycle would ensue. There are a number of other matters about which funds are not permitted to discriminate between members in terms of premiums, benefits or membership - these include racial origin, religion, sex, sexual orientation, nature of employment, and leisure activities. Premiums for a fund's product that is sold in more than one state can vary from state to state, but not within the same state. The Australian government has introduced a number of incentives to encourage adults to take out private hospital insurance. These include: WWW.BSSVE.IN

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possibility of a benefit in the event that they need private hospital treatment - rather than pay it in the form of extra tax as well as having to meet their own private hospital costs.  Private Health Insurance Rebate: The government subsidises the premiums for all private health insurance cover, including hospital and ancillary (extras), by 30%, 35% or 40%.

Topic : Asymmetric Information And Agency

Topic Objective:

At the end of this topic student would be able to:

 Adverse Selection

Definition/Overview:

Asymmetric: In economics and contract theory, an information asymmetry (or state of asymmetric information) is present when one party to a transaction has more or better information than the other party. Most commonly, information asymmetries are studied in the context of principal-agent problems. Information asymmetry deals with the study of decisions in transactions where one party has more or better information than the other. This creates an imbalance of powerWWW.BSSVE.IN in transactions which can sometimes cause the transactions to go awry. Examples of this problem are Adverse selection and Moral hazard. In 2001, the Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel was awarded to George Akerlof, Michael Spence, and Joseph E. Stiglitz "for their analyses of markets with asymmetric information."

Information asymmetry models:Information asymmetry models assume that at least one party to a transaction has relevant information whereas the other(s) do not. Some asymmetric information models can also be used in situations where at least one party can enforce, or effectively retaliate for breaches of, certain parts of an agreement whereas the other(s) cannot. In adverse selection models, the ignorant party lacks information while negotiating an agreed understanding of or contract to the transaction, whereas in moral hazard the ignorant

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party lacks information about performance of the agreed-upon transaction or lacks the ability to retaliate for a breach of the agreement. An example of adverse selection is when people who are high risk are more likely to buy insurance, because the insurance company cannot effectively discriminate against them, usually due to lack of information about the particular individual's risk but also sometimes by force of law or other constraints. An example of moral hazard is when people are more likely to behave recklessly after insured, either because the insurer cannot observe this behavior or cannot effectively retaliate against it, for example by failing to renew the insurance.

Key Points:

1. Adverse Selection

A classic paper on adverse selection is George Akerlof's "The Market for Lemons", which defines two primary solutions to this problem, signaling and screening.

1.1 Signaling

Michael Spence originally proposed the idea of signaling. He proposed that in a situation with information asymmetry, it is possible for people to signal their type, thus believably transferring information to the other party and resolving the asymmetry.

This idea was originally studied in the context of looking for a job. An employer is interested in hiring a new employee who is skilled in learning. Of course, all prospective employees willWWW.BSSVE.IN claim to be skilled at learning, but only they know if they really are. This is an information asymmetry.

Spence proposes, for example, that going to college can function as a credible signal of an ability to learn. Assuming that people who are skilled in learning can finish college more easily than people who are unskilled, then by attending college the skilled people signal their skill to prospective employers. No matter how much or how little they may have learned in college, it functions as a signal because their action of going to college is easier for people who possess the saving that they signal by having attended it (a capacity for learning).

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1.2 Screening

Joseph E. Stiglitz pioneered the theory of screening. In this way the underinformed party can induce the other party to reveal their information. They can provide a menu of choices in such a way that the choice depends on the private information of the other party. Examples of situations where the seller usually has better information than the buyer are numerous but include used-car salespeople, mortgage brokers and loan originators, stockbrokers, real estate agents, and life insurance transactions. Examples of situations where the buyer usually has better information than the seller include estate sales as specified in a last will and testament, sales of old art pieces without prior professional assessment of their value, or health insurance consumers of various risk levels. This situation was first described by Kenneth J. Arrow in a seminal article on health care in 1963 entitled "Uncertainty and the Welfare Economics of Medical Care," in the American Economic Review.

George Akerlof used the term asymmetric information later, in his 1970 work The Market for Lemons. He also noticed that, in such a market, the average value of the commodity tends to go down, even for those of perfectly good quality. Because of information asymmetry, unscrupulous sellers can "spoof" items (like software or computer games) and defraud the buyer. As a result, many people not willing to risk getting ripped off will avoid certain types of purchases, or will not spend as much for a given item. It is even possible for WWW.BSSVE.INthe market to decay to the point of nonexistence. Although information asymmetry has recently been noted to be on the decline thanks to the Internet, which allows ignorant users to acquire hitherto unavailable information such as the costs of competing insurance policies, used cars, etc. it is still heavily applied to human resource and personnel economics regarding incentive schemes when the employer cannot continually observe worker effort.

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Topic : Imperfect Information: Sid And Sav

Topic Objective:

At the end of this topic student would be able to:

 Design process  Features  Technical details

Definition/Overview:

SID: The MOS Technology 6581/8580 SID (Sound Interface Device) was the built-in Programmable Sound Generator chip of Commodore's CBM-II, Commodore 64, Commodore 128 and Commodore MAX Machine home computers. It was one of the first sound chips of its kind to be included in a home computer prior to the digital sound revolution. Together with the VIC-II graphics chip, the SID was instrumental in making the C64 the best-selling computer in history, and is partly credited for initiating the demoscene. The SID has U.S. Patent 4,677,890 , which was filed on February 27, 1983 and issued on July 7, 1987. The patent expired on July 7, 2004. Key Points: WWW.BSSVE.IN 1. Design process

The SID was devised by engineer Robert "Bob" Yannes, who later co-founded the Ensoniq digital synthesizer company. Yannes headed a team that included Yannes, two technicians and a CAD operator running Applicon (now a part of the UGS Corp.), who designed and completed the chip in five months' time in the latter half of 1981. Yannes was inspired by previous work in the synthesizer industry and was not impressed by the current state of computer sound chips. Instead, he wanted a high-quality instrument chip, which is the reason why the SID has features like the envelope generator, previously not found in home computer sound chips. Emphasis during chip design was on high-precision frequency control, and the SID was originally designed to have 32 independent voices, sharing a common oscillator.

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However these features could not be finished in time, so instead the mask work for a certain working oscillator was simply replicated three times across the chip surface, creating three voices with a unique oscillator for each voice.

Another feature that was not incorporated in the final design was a frequency look-up table for the most common musical notes, a feature that was dropped because of space limitations. The support for an audio input pin was a feature Yannes added without asking, even though this had no practical use in a computer, although it enabled the chip to be used as a simple effect processor. The masks were produced in 7-micrometer technology in order to gain a high yield: the current state-of-the-art at the time was 6-micrometer technologies. The chip, like the first product using it (the Commodore 64), was finished in time for the Consumer Electronics Show in the first weekend of January 1982. Even though Yannes was partly displeased with the result, his colleague Charles Winterble said: "This thing is already 10 times better than anything out there and 20 times better than it needs to be." The specifications for the chip were not used as a blueprint. Rather, they were written as the development work progressed, and not all planned features made it into the final product. Yannes claims he had a feature-list of which three quarters made it into the final design. This is the reason why some of the specifications for the first version (6581) were accidentally incorrect. The later revision (8580) was revised to match the specification. For example, the 8580 expanded on the ability to perform a logical AND between two waveforms, something that the 6581 could only do in a somewhat limited and unintuitive manner. Another feature that differs between the two revisions is the filter: the 6581 version is far away from the specification. WWW.BSSVE.IN 2. Features

 Three separately programmable independent audio oscillators (8 octave range, approximately 16 - 4000 Hz)  four different waveforms per audio oscillator (sawtooth, triangle, pulse, noise)  One multi mode filter featuring low-pass, high-pass and band-pass outputs with 6 dB/oct (bandpass) or 12 dB/octave (lowpass/highpass) rolloff. The different filter-modes are sometimes combined to produce additional timbres, for instance a notch-reject filter.  Three attack/decay/sustain/release (ADSR) volume controls, one for each audio oscillator.  Three ring modulators.  Oscillator sync for each audio oscillator.

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 two 8-bit A/D converters (typically used for game control paddles, but later also used for a mouse)  external audio input (for sound mixing with external signal sources)  random number/modulation generator

3. Technical details

The SID is a mixed-signal integrated circuit, featuring both digital and analog circuitry. All control ports are digital, while the output ports are analog. The SID features three-voice synthesis, where each voice may use one of at least five different waveforms: square wave (with variable duty cycle), triangle wave, sawtooth wave, pseudo-random (but not white) noise, and certain complex/combined waveforms. Each voice may be ring-modulated with one of the other voices, i.e. the frequency spectrum is convolved and output. The ring modulation, filter, and programming techniques for switching between different waveforms at high speed make up the characteristic sound of the SID. Each voice may be passed through a common, digitally controlled analog filter with variable cut-off frequency and resonance, which is constructed with the aid of capacitors external to the circuit. An external audio in port enables external audio to be passed through the filter.

Upon setting the main output volume/gain on the 6581's 4 bit volume control, a click noise would be produced on the output. This was proportional to the volume difference, both positive and negative, and giving an opportunity to play 4-bit digitized sounds on the commodore 64 (The digitalization/sampling had to be done using external means, typically a simple 8 bit samplerWWW.BSSVE.IN circuit attached to the 8 bit parallel part of the parallel/serial communications port). This flaw was used in several games (probably first on Ghostbusters, whereby pressing the space key everything would stop, but the theme-word "Ghostbusters!" would be played) and in many demos. The sounds produced was typically some words, but most often percussion instruments like drums and the like - the amount of sound possible to store on a fraction of 64 kilobytes was very limited. Also, it was hugely CPU intensive - one had to output the samples very fast (in comparison to the extreme slowness of the 6510 CPU), and one could not do much other activity while a sample was playing. This "defect" was partially corrected in the 8580 used in the Commodore 64C and the Commodore 128DCR. This made digitized sound (samples) very quiet. Fortunately, the volume level could be mostly restored with either a hardware modification, or a software trick involving

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the Pulse waveform. The software trick generally renders one voice temporarily unusable, although clever musical compositions can make this problem less noticeable.

The 6581 and 8580 differ from each other in several ways. The original 6581 was manufactured using the older NMOS process, which used 12V DC to operate. The 8580 was made using the HMOS-II process, which required less power (9V DC), and therefore made the IC run cooler. The 8580 was thus far more durable than the 6581. Additionally, a better separation between the analog and the digital circuits made the 8580 chip's output less noisy and distorted. A simple hardware modification can be added to 6581-based computers to remove most of the noise, but this involves disabling the Audio-In function. A HMOS-II version of the 6581 was produced, the 6582. Like the 8580, this chip used 5 volts and 9 volts for its power supplies. It was never shipped in new Commodore 64s, however due to its lower voltage requirement, Creative Micro Designs later used it in their SID Symphony expansion cartridge.

The original manual for the SID mentions that if several waveforms are enabled at the same time, the result will be a logical AND between them. In reality, the final output isn't exactly a logical AND of the selected waveforms. On the 6581, one notable exception is that all 6581 revisions appear to be capable of using the Sawtooth + Pulse waveform combination, the output from which is actually a logical AND of the Sawtooth and Triangle waveform oscillator values, resulting in a very complex final waveform, even though the Triangle waveform was not explicitly requested. The filter is also different between the two models, with the 8580 beingWWW.BSSVE.IN closer to the designers' actual specification. Despite its documented shortcomings, many SID musicians prefer the flawed 6581 chip over the corrected 8580 chip. The main reason for this is that the filter produces strong distortion that is sometimes used to produce simulation of instruments such as a distorted electric guitar. Also, the highpass component of the filter was mixed in 3 dB attenuated compared to the other outputs, making the sound more bassy. In addition to nonlinearities in filter, the D/A circuitry used in the waveform generators produced yet more additional distortion that made its sound softer and smoother.

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In Section 3 of this course you will cover these topics: The Organization Of Health Insurance Markets Managed Care Nonprofit Firms Hospitals And Long-Term Care Health Care Labor Markets And Professional Training

Topic : The Organization Of Health Insurance Markets

Topic Objective:

At the end of this topic student would be able to:

 Health Insurance  History and evolution  Health plan vs. health insurance  Comprehensive vs. scheduled  Inherent problems with insurance  Adverse selection  Moral hazard  Other factors affecting insurance prices  Health insuranceWWW.BSSVE.IN in Australia  Health insurance in Canada  Health insurance in the Netherlands  Health insurance in the United Kingdom  Health insurance in the United States

Definition/Overview:

Insurance: Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. An insurer is a company selling the insurance. The insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk

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management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.

Key Points:

1. Health Insurance

The term health insurance is generally used to describe a form of insurance that pays for medical expenses. It is sometimes used more broadly to include insurance covering disability or long-term nursing or custodial care needs. It may be provided through a government- sponsored social insurance program, or from private insurance companies. It may be purchased on a group basis (e.g., by a firm to cover its employees) or purchased by individual consumers. In each case, the covered groups or individuals pay premiums or taxes to help protect themselves from high or unexpected healthcare expenses. Similar benefits paying for medical expenses may also be provided through social welfare programs funded by the government. Health insurance works by estimating the overall risk of healthcare expenses and developing a routine finance structure (such as a monthly premium or annual tax) that will ensure that money is available to pay for the healthcare benefits specified in the insurance agreement. The benefit is administered by a central organization, most often either a government agency or a private or not-for-profit entity operating a health plan.

2. History and evolution The concept of healthWWW.BSSVE.IN insurance was proposed in 1694 by Hugh the Elder Chamberlen from the Peter Chamberlen family. In the late 19th century, "accident insurance" began to be available, which operated much like modern disability insurance..This payment model continued until the start of the 20th century in some jurisdictions (like California), where all laws regulating health insurance actually referred to disability insurance. Accident insurance was first offered in the United States by the Franklin Health Assurance Company of Massachusetts. This firm, founded in 1850, offered insurance against injuries arising from railroad and steamboat accidents. Sixty organizations were offering accident insurance in the USby 1866, but the industry consolidated rapidly soon thereafter. While there were earlier experiments, the origins of sickness coverage in the US effectively date from 1890. The first employer-sponsored group disability policy was issued in 1911.

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Before the development of medical expense insurance, patients were expected to pay all other health care costs out of their own pockets, under what is known as the fee-for-service business model. During the middle to late 20th century, traditional disability insurance evolved into modern health insurance programs. Today, most comprehensive private health insurance programs cover the cost of routine, preventive, and emergency health care procedures, and also most prescription drugs, but this was not always the case. Hospital and medical expense policies were introduced during the first half of the 20th century. During the 1920s, individual hospitals began offering services to individuals on a pre-paid basis, eventually leading to the development of Blue Cross organizations. The predecessors of today's Health Maintenance Organizations (HMOs) originated beginning in 1929, through the 1930s and on during World War II. A Health insurance policy is a contract between an insurance company and an individual. The contract can be renewable annually or monthly. The type and amount of health care costs that will be covered by the health plan are specified in advance, in the member contract or Evidence of Coverage booklet. The individual policy- holder's payment obligations may take several forms:

 Premium: The amount the policy-holder pays to the health plan each month to purchase health coverage.  Deductible: The amount that the policy-holder must pay out-of-pocket before the health plan pays its share. For example, a policy-holder might have to pay a $500 deductible per year, before any of their health care is covered by the health plan. It may take several doctor's visits or prescription refills before the policy-holder reaches the deductible and the health plan starts to pay for WWW.BSSVE.INcare.  Copayment: The amount that the policy-holder must pay out of pocket before the health plan pays for a particular visit or service. For example, a policy-holder might pay a $45 copayment for a doctor's visit, or to obtain a prescription. A copayment must be paid each time a particular service is obtained.  Coinsurance: Instead of paying a fixed amount up front (a copayment), the policy-holder must pay a percentage of the total cost. For example, the member might have to pay 20% of the cost of a surgery, while the health plan pays the other 80%. Because there is no upper limit on coinsurance, the policy-holder can end up owing very little, or a significant amount, depending on the actual costs of the services they obtain.  Exclusions: Not all services are covered. The policy-holder is generally expected to pay the full cost of non-covered services out of their own pocket.

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 Coverage limits: Some health plans only pay for health care up to a certain dollar amount. The policy-holder may be expected to pay any charges in excess of the health plan's maximum payment for a specific service. In addition, some plans have annual or lifetime coverage maximums. In these cases, the health plan will stop payment when they reach the benefit maximum, and the policy-holder must pay all remaining costs.  Out-of-pocket maximums: Similar to coverage limits, except that in this case, the member's payment obligation ends when they reach the out-of-pocket maximum, and the health plan pays all further covered costs. Out-of-pocket maximums can be limited to a specific benefit category (such as prescription drugs) or can apply to all coverage provided during a specific benefit year.  Capitation: An amount paid by an insurer to a health care provider, for which the provider agrees to treat all members of the insurer.  In-Network Provider: A health care provider on a list of providers preselected by the insurer. The insurer will offer discounted coinsurance or copayments, or additional benefits, to a plan member to see an in-network provider. Generally, providers in network are providers who have a contract with the insurer to accept rates further discounted from the "usual and customary" charges the insurer pays to out-of-network providers.  Prescription drug plans are a form of insurance offered through some employer benefit plans in the US, where the patient pays a copayment and the prescription drug insurance part or all of the balance for drugs covered in the formulary of the plan.  Some, if not most, health care providers in the United States will agree to bill the insurance company if patients are willing to sign an agreement that they will be responsible for the amount that the WWW.BSSVE.INinsurance company doesn't pay. The insurance company pays out of network providers according to "reasonable and customary" charges, which may be less than the provider's usual fee.

3. Health plan vs. health insurance

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facility, a fixed number of home health visits, a fixed number of spinal manipulation charges, etc.) The services offered are usually at the discretion of a utilization review nurse who is often contracted through the managed care entity providing the subscription health plan. This determination may be made either prior to or after hospital admission (concurrent utilization review).

4. Comprehensive vs. scheduled

Scheduled health insurance plans are not meant to replace a traditional comprehensive health insurance plans and are more of a basic policy providing access to day-to-day health care such as going to the doctor or getting a prescription drug. In recent years, these plans have taken the name mini-med plans or association plans. These plans may provide benefits for hospitalization and surgical, but these benefits will be limited. Scheduled plans are not meant to be effective for catastrophic events. These plans cost much less then comprehensive health insurance. They generally pay limited benefits amounts directly to the service provider, and payments are based upon the plan's "schedule of benefits". Annual benefits maximums for a typical scheduledWWW.BSSVE.IN health insurance plan may range from $1,000 to $25,000.

5. Inherent problems with insurance

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6. Adverse selection

The fundamental concept of insurance is that it balances costs across a large, random sample of individuals. For instance, an insurance company has a pool of 1000 randomly selected subscribers, each paying $100 per month. One person becomes very ill while the others stay healthy, allowing the insurance company to use the money paid by the healthy people to pay for the treatment costs of the sick person. However, when the pool is self-selecting rather than random, as is the case with individuals seeking to purchase health insurance directly, adverse selection is a greater concern. A disproportionate share of health care spending is attributable to individuals with high health care costs. In the US the 1% of the population with the highest spending accounted for 27% of aggregate health care spending in 1996. The highest-spending 5% of the population accounted for more than half of all spending. These patterns were stable through the 1970s and 1980s, and some data suggest that they may have been typical of the mid-to-early 20th century as well. A few individuals have extremely high medical expenses, in extreme cases totaling a half million dollars or more. Adverse selection could leave an insurance company with primarily sick subscribers and no way to balance out the cost of their WWW.BSSVE.INmedical expenses with a large number of healthy subscribers.

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individuals aged 60 to 64. Among those who were offered coverage, the study found that 76% received offers at standard premium rates, and 22% were offered higher rates. On the other side, applicants can get discounts if they do not smoke and are healthy.

7. Moral hazard

Moral hazard occurs when an insurer and a consumer enter into a contract under symmetric information, but one party takes action, not taken into account in the contract, which changes the value of the insurance. A common example of moral hazard is third-party paymentwhen the parties involved in making a decision are not responsible for bearing costs arising from the decision. An example is where doctors and insured patients agree to extra tests which may or may not be necessary. Doctors benefit by avoiding possible malpractice suits, and patients benefit by gaining increased certainty of their medical condition. The cost of these extra tests is borne by the insurance company, which may have had little say in the decision. Co- payments, deductibles, and less generous insurance for services with more elastic demand attempt to combat moral hazard, as they hold the consumer responsible.

8. Other factors affecting insurance prices

A recent study by Price Waterhouse Coopers examining the drivers of rising health care costs in the US pointed to increased utilization created by increased consumer demand, new treatments, and more intensive diagnostic testing, as the most significant driver. People in developed countries are living longer. The population of those countries is aging, and a larger group of senior citizensWWW.BSSVE.IN requires more intensive medical care than a young healthier population. Advances in medicine and medical technology can also increase the cost of medical treatment. Lifestyle-related factors can increase utilization and therefore insurance prices, such as: increases in obesity caused by insufficient exercise and unhealthy food choices; excessive alcohol use, smoking, and use of street drugs. Other factors noted by the PWC study included the movement to broader-access plans, higher-priced technologies, and cost-shifting from Medicaid and the uninsured to private payers.

9. Health insurance in Australia

The public health system is called Medicare. It ensures free universal access to hospital treatment and subsidised out-of-hospital medical treatment. It is funded by a 1.5% tax levy.

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The private health system is funded by a number of private health insurance organisations. The largest of these is Medibank Private, which is government-owned, but operates as a government business enterprise under the same regulatory regime as all other registered private health funds. The Coalition Howard government had announced that Medibank would be privatised if it won the 2007 election, however they were defeated by the Australian Labor Party under Kevin Rudd which had already pledged that it would remain in government ownership. Some private health insurers are 'for profit' enterprises, and some are non-profit organizations such as HCF Health Insurance. Some have membership restricted to particular groups, but the majority have open membership. Most aspects of private health insurance in Australia are regulated by the Private Health Insurance Act 2007.

The private health system in Australiaoperates on a "community rating" basis, whereby premiums do not vary solely because of a person's previous medical history, current state of health, or (generally speaking) their age. Balancing this are waiting periods, in particular for pre-existing conditions (usually referred to within the industry as PEA, which stands for "pre- existing ailment"). Funds are entitled to impose a waiting period of up to 12 months on benefits for any medical condition the signs and symptoms of which existed during the six months ending on the day the person first took out insurance. They are also entitled to impose a 12-month waiting period for benefits for treatment relating to an obstetric condition, and a 2-month waiting period for all other benefits when a person first takes out private insurance. Funds have the discretion to reduce or remove such waiting periods in individual cases. They are also free not to impose them to begin with, but this would place such a fund at risk of "adverse selection",WWW.BSSVE.IN attracting a disproportionate number of members from other funds, or from the pool of intending members who might otherwise have joined other funds. It would also attract people with existing medical conditions, who might not otherwise have taken out insurance at all because of the denial of benefits for 12 months due to the PEA Rule. The benefits paid out for these conditions would create pressure on premiums for all the fund's members, causing some to drop their membership, which would lead to further rises, and a vicious cycle would ensue.

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the same state. The Australian government has introduced a number of incentives to encourage adults to take out private hospital insurance. These include:

 Lifetime Health Cover: If a person has not taken out private hospital cover by the 1st July after their 30th birthday, then when (and if) they do so after this time, their premiums must include a loading of 2% per annum. Thus, a person taking out private cover for the first time at age 40 will pay a 20 per cent loading. The loading continues for 10 years. The loading applies only to premiums for hospital cover, not to ancillary (extras) cover.  Medicare Levy Surcharge: People whose taxable income is greater than a specified amount (currently $50,000 for singles and $100,000 for families) and who do not have an adequate level of private hospital cover must pay a 1% surcharge on top of the standard 1.5% Medicare Levy. The rationale is that if the people in this income group are forced to pay more money one way or another, most would choose to purchase hospital insurance with it, with the possibility of a benefit in the event that they need private hospital treatment - rather than pay it in the form of extra tax as well as having to meet their own private hospital costs.  Private Health Insurance Rebate: The government subsidises the premiums for all private health insurance cover, including hospital and ancillary (extras), by 30%, 35% or 40%.

10. Health insurance in Canada

Most health insurance in Canada is administered by each province, under the Canada Health Act, which requires all people to have free access to basic health services. Collectively, the public provincial health insurance systems in Canada are frequently referred to as Medicare. Private health insuranceWWW.BSSVE.IN is allowed, but the provincial governments allow it only for services that the public health plans do not cover; for example, semi-private or private rooms in hospitals and prescription drug plans. Canadians are free to use private insurance for elective medical services such as laser vision correction surgery, cosmetic surgery, and other non- basic medical procedures. Some 65% of Canadians have some form of supplementary private health insurance; many of them receive it through their employers. Private-sector services not paid for by the government account for nearly 30 percent of total health care spending. In 2005, the Supreme Court of Quebec ruled, in Chaoulli v. Quebec, that the province's prohibition on private insurance for health care already insured by the provincial plan could constitute an infringement of the right to life and security if there were long wait times for treatment as happened in this case. Certain other provinces have legislation which financially discourages but does not forbid private health insurance in areas covered by the public plans.

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The ruling has not changed the overall pattern of health insurance across Canada but has spurred on attempts to tackle the core issues of supply and demand and the impact of wait times.

11. Health insurance in the Netherlands

The new system avoids the two pitfalls of adverse selection and moral hazard associated with traditional forms of health insurance. In the Dutch system, insurance companies are compensated for taking on high risk individuals because they receive extra funding for them. This funding comes from an insurance equalization pool run by a regulator which collects salary based contributions from employers (about 45% of all health care funding) and funding from the government for people whose means are such that they cannot afford health care (about 5% of all funding). Thus insurance companies find that insuring high risk individuals becomes an attractive proposition. All insurance companies receive from the pool, but those with more high risk individuals will receive more from the fund. The remaining 45% of health care funding comes from insurance premiums paid by the public. Insurance companies compete for this money on price alone. The insurance companies are not allowed to set down any co-payments or caps or deductibles. Neither are they allowed to deny coverage toWWW.BSSVE.IN any person applying for a policy or charge anything other than their nationally set and internet published standard policy premiums. Every person buying insurance from that company will pay the same price as everyone else buying that policy. And every person will get the minimum level of coverage. Children under 18 are insured for free (the funding coming from the equalization pool). In addition to this minimum level, companies are free to sell extra insurance for additional coverage over the national minimum, but extra risks for this are not covered from the insurance pool and must therefore be priced accordingly.

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12. Health insurance in the United Kingdom

13. Health insurance in the United States

Public programs provide the primary source of coverage for most seniors and for low-income children and families who meet certain eligibility requirements. The primary public programs are Medicare, a federal social insurance program for seniors and certain disabled individuals, Medicaid, funded jointly by the federal government and states but administered at the state level, which covers certain very low income children and their families, and SCHIP, also a federal-state partnership that serves certain children and families who do not qualify for Medicaid but who cannot afford private coverage. Other public programs include military health benefits provided through TRICARE and the Veterans Health Administration and

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benefits provided through the Indian Health Service. Some states have additional programs for low-income individuals. In 2006, there were 47 million people in the United States(16% of the population) who were without health insurance for at least part of that year. About 37% of the uninsured live in households with an income over $50,000.

Topic : Managed Care

Topic Objective:WWW.BSSVE.IN At the end of this topic student would be able to:

 History of Managed care  Health Maintenance Organization (HMO)  Preferred Provider Organization (PPO)  Point Of Service (POS)  Managed care in indemnity insurance plans  Impacts of managed care

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Definition/Overview:

Managed Care: The term "managed care" is used to describe a variety of techniques intended to reduce the cost of providing health benefits and improve the quality of care ("managed care techniques"), organizations that use those techniques or provide them as services to other organizations ("managed care organizations"), or systems of financing and delivering health care to enrollees organized around managed care techniques and concepts ("managed care delivery systems"). According to the National Library of Medicine, the term "managed care" encompasses programs:

Unnecessary health care costs: Intended to reduce unnecessary health care costs through a variety of mechanisms, including: economic incentives for physicians and patients to select less costly forms of care; programs for reviewing the medical necessity of specific services; increased beneficiary cost sharing; controls on inpatient admissions and lengths of stay; the establishment of cost-sharing incentives for outpatient surgery; selective contracting with health care providers; and the intensive management of high-cost health care cases. The programs may be provided in a variety of settings, such as Health Maintenance Organizations and Preferred Provider Organizations.

The growth of managed care in the US:The growth of managed care in the U.S. was spurred by the enactment of the Health Maintenance Organization Act of 1973. While managed care techniques were pioneered by health maintenance organizations, they are now used by a variety of private health benefit programs. Managed care is now nearly ubiquitous in the U.S, but hasWWW.BSSVE.IN attracted controversy because it has largely failed in the overall goal of controlling medical costs. Proponents and critics are also sharply divided on managed care's overall impact on the quality of U.S.health care delivery.

Key Points:

1. History of Managed care

Paul Starr suggests in his analysis of the American health care system (i.e., The Social Transformation of American Medicine) that Ronald Reagan was the first mainstream political leader to take deliberate steps to reform American health care from its longstanding not-for- profit business principles into a for-profit model that would be driven by the insurance

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industry. In 1973, Congress passed the Health Maintenance Organization Act, which encouraged rapid growth of HMOs, the first form of managed care.

Managed care plans are widely credited with subduing medical cost inflation in the late 1980s by reducing unnecessary hospitalizations, forcing providers to discount their rates, and causing the health-care industry to become more efficient and competitive.Managed care plans and strategies proliferated and quickly became nearly ubiquitous in the U.S.However, this rapid growth led to a consumer backlash. Because many managed care health plans are provided by for-profit companies, their cost-control efforts created widespread perception that they were more interested in saving money than providing health care.In a 2004 poll by the Kaiser Family Foundation, majorities of those polled said they believed that managed care decreased the time doctors spend with patients, made it harder for people who are sick to see specialists, and had failed to produce significant health care savings. These public perceptions have been fairly consistent in polling since 1997.

The backlash included vocal critics, including disgruntled patients and consumer-advocacy groups, who argued that managed care plans were controlling costs by denying medically necessary services to patients, even in life-threatening situations, or by providing low-quality care. The volume of criticism led many states to pass laws mandating managed-care standards.Complying with these mandates increased costs. Meanwhile, insurers responded to public demand by beginning to offer other comprehensive plan options with more comprehensive care networks. In fact, between 1970 and 2005, the share of personal health expenditures paid directly out-of-pocket by U.S.consumers actually fell from about 40 percent to 15 percent.WWW.BSSVE.IN So although consumers faced rising health insurance premiums over the period, lower out-of-pocket costs likely encouraged consumers to use more health care, leading to expenditure growth.

By the late 1990s, U.S. per capita health care spending began to increase again, peaking around 2002.Despite managed care's efforts to control costs, U.S. health care spending continues to outstrip the overall economy, rising about 2.4 percentage points faster than annual GDP since 1970.

Nevertheless, according to the trade association Americas Health Insurance Plans, managed care is nearly ubiquitous in the U.S.; 90 percent of insured Americans are now enrolled in plans with some form of managed care.The National Directory of Managed Care

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Organizations, Sixth Edition profiles more than 5,000 plans, including new consumer-driven health plans and health savings accounts.

2. Health Maintenance Organization (HMO)

Proposed in the 1960s by Dr. Paul Elwood in the "Health Maintenance Strategy", the HMO concept was promoted by the Nixon Administration as a fix to rising health care costs and set in law as the Health Maintenance Organization Act of 1973. As defined in the act, a federally qualified HMO would in exchange for a subscriber fee (premium) allow members access to a panel of employed physicians or a network of doctors and facilities including hospitals. In return the HMO received mandated market access and could receive federal development funds.

HMOs are licensed by the state level, under a license that is known as a certificate of authority (COA) rather than under an insurance license. In 1972 the National Association of Insurance Commissioners adopted the HMO Model Act, which was intended to provide a model regulatory structure for states to use in authorizing the establishment of HMOs and in monitoring their operations. In practice, an HMO is a coordinated delivery system that combines both the financing and delivery of health care for enrollees. In the design of the plan, each member is assigned a "gatekeeper", a primary care physician (PCP) who is responsible for the overall care of members assigned to him/her. Specialty services require a specific referral from the PCP to the specialist. Non-emergency hospital admissions also required specific pre-authorization by the PCP. Typically, services are not covered if performed by a providerWWW.BSSVE.IN not an employee of or specifically approved by the HMO, unless it is an emergency situation as defined by the HMO. Financial sanctions for use of emergency facilities in non-emergent situations were once an issue; however, prudent layperson language now applies to all emergency-service utilization and penalties are rare.

Since the 1980s, under the ERISA Act passed in Congress in 1974 and its preemptive effect on state common law tort lawsuits that "relate to" Employee Benefit Plans, HMOs administering benefits through private employer health plans have been protected by Federal law from malpractice litigation on the grounds that the decisions regarding patient care are administrative rather than medical in nature.

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3. Preferred Provider Organization (PPO)

Rather than contract with the various insurers and third party administrators, providers may contract with preferred provider organizations. They generally agree to a discount from a relative value-based fee schedule or simply a discount from whatever they bill (which is perhaps subject to reasonable, usual, and customary limitation (generally a percentile of national or regional charge data)). The PPO, in turn, promises convenience, less administrative expenses, and/or prompt payment.

In terms of using such a plan, unlike an HMO plan, which has a copayment cost share feature (a nominal payment generally paid at the time of service), a PPO generally does not have a copay and instead offers a deductible and a coinsurance feature. The deductible represents the first dollar of coverage and is paid by the patient. After the deductible is met, the coinsurance portion applies. If the PPO plan is an 80% coinsurance plan with a $1,000 coinsurance out of pocket, then the patient will pay 20% of the allowed provider fee up to $1,000. After this amount has been paid by the patient, the insurer will pay 100% of subsequent costs. Because the patient is picking up a substantial portion of the "first dollars" of coverage, PPO are the least expensive types of coverage.

4. Point Of Service (POS)

A POS plan utilizes some of the features of each of the above plans. Members of a POS plan do not make a choice about which system to use until the point at which the service is being used. In terms ofWWW.BSSVE.IN using such a plan, a POS plan has levels of progressively higher patient financial participation as the patient moves away from the more managed features of the plan. For example, if the patient stays in a network of providers and seeks a referral to use a specialist, they may have a copayment only. However, if they use a network provider, but do not seek a referral, they will pay more, and so on.

5. Managed care in indemnity insurance plans

Many "traditional" or "indemnity" health insurance plans now incorporate some managed care features such as precertification for non-emergency hospital admissions and utilization reviews. These are sometimes described as "managed indemnity" plans.

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6. Impacts of Managed care

The overall impact of managed care remains widely debated. Proponents argue that it has increased efficiency, improved overall standards, and led to a better understanding of the relationship between costs and quality. They argue that there is no consistent, direct correlation between the cost of care and its quality, pointing to a 2002 Juran Institute study which estimated that the "cost of poor quality" caused by overuse, misuse, and waste amounts to 30 percent of all direct health care spending.The emerging practice of evidence-based medicine is being used to determine when lower-cost medicine may in fact be more effective. Critics of managed care argue that "for-profit" managed care has been an unsuccessful health policy, as it has contributed to higher health care costs (25-33% higher overhead at some of the largest HMOs), increased the number of uninsured citizens, driven away health care providers, and applied downward pressure on quality (worse scores on 14 of 14 quality indicators reported to the National Committee for Quality Assurance).

Topic : Nonprofit Firms

Topic Objective: At the end of thisWWW.BSSVE.IN topic student would be able to:  For-profit distinction  Nature and goals  Issues faced by NPOs  On the Internet  Other terminology for the sector

Definition/Overview:

Non-Profit Hospital: Anon-profit hospital, or not-for-profit hospital, is a hospital which is organized as a non-profit corporation. Based on their charitable purpose and most often affiliated with a religious denomination they are a traditional means of delivering medical

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care in the United States. In addition to public hospitals in larger cities and research hospitals affiliated with medical schools they were in the late twentieth century supplemented by competing investor-owned for-profit hospitals. Recently a few lawyers have filed suit on behalf of indigent clients, but have generally been unsuccessful due to ruling by the Federal Courts that the question is a matter for the IRS, the indigent patients lacking standing. The majority (65%) of hospitals in the United States are non-profit.

Key Points:

1. For-profit distinction

Whereas profit-making corporations exist under the premise of earning and distributing taxable business earnings to shareholders, the non-profit organization exists primarily to provide programs and services that are of benefit to others and might not be otherwise provided by local, state, or federal entities. While they are able to earn a profit, more accurately called a surplus, such earnings are retained by the organization for its future provision of programs and services, and are not owned by nor distributed to individuals or stake-holders. In the United States, the laws governing charitable non-profits are based around the Internal Revenue Code, Section 501(c)(3) and the tax-deductible contribution guidelines of Section 170. Corporations classified as such, with gross receipts over $25,000, must report financial activity annually to the IRS, by means of a Form 990.

The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary,WWW.BSSVE.IN testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. The term charitable is used in its generally accepted legal sense and includes relief of the poor, the distressed, or the underprivileged; advancement of religion; advancement of education or science; erecting or maintaining public buildings, monuments, or works; lessening the burdens of government; lessening neighborhood tensions; eliminating prejudice and discrimination; defending human and civil rights secured by law; and combating community deterioration and juvenile delinquency.

NPOs can attain tax exempt status but such status is not automatic. Many non-profits are operated by volunteers, paid staff or a combination of both, usually reserving the senior executive positions to paid personnel while the entry-level and field positions are frequently

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held by volunteers. Additionally, an NPO may have members or participants or beneficiaries or students etc. as opposed to customers in for-profit organizations. They require a board of directors, governance in accord with by-laws or an organizing document, such as a charter or declaration of trust.

2. Nature and goals

NPOs are often charities or service organizations; they may be organized as a not-for-profit corporation or as a trust, a cooperative, or they may be purely informal. Sometimes they are also called foundations, or endowments that have large stock funds. A very similar organization called the supporting organization operates like a foundation, but: they are more complicated to administer, they are more tax favored, and the public charities that receive grants from them must have a specially determined relationship. Foundations give out grants to other NPOs, or fellowships and direct grants to participants. However, the names foundations may be used by any not-for-profit corporation even volunteer organizations or grass roots groups. Applying Germanic or Nordic law (e.g. Germany,Sweden, Finland), NPOs typically are voluntary associations, although some have a corporate structure (e.g. housing cooperatives). Usually a voluntary association is founded upon the principle of one- person-one-vote.

3. Issues faced by NPOs

Capacity building is an ongoing problem faced by NPOs for a number of reasons. Most rely on external fundingWWW.BSSVE.IN (government funds, grants from charitable foundations, direct donations) to maintain their operations and changes in these sources of revenue may influence the reliability or predictability with which the organization can hire and retain staff, sustain facilities, or create programs. In addition, unreliable funding, long hours and low pay can lead to employee burnout and high rates of turnover. Founder's syndrome is an issue organizations face as they grow. Dynamic founders with a strong vision of how to operate the project try to retain control over the organization, even as new employees or volunteers want to expand the project's scope and try new things.

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4. On the Internet

Many NPOs often use the .org or .us (or the CCTLD of their respective country) or .edu top- level domain when selecting a domain name to differentiate themselves from more commercially focused entities which typically use the .com space. In the traditional domain categories as noted in RFC 1591, .org is for "organizations that didn't fit anywhere else" in the naming system, which implies that it is the proper category for non-commercial organizations if they are not governmental, educational, or one of the other types with a specific TLD. It is not specifically designated for charitable organizations or any specific organizational or tax-law status, however; it encompasses anything that does not fall into another category. Currently, no restrictions are enforced on registration of .com or .org, so you can find organizations of all sorts in either of these domains, as well as other top-level domains including newer, more-specific ones which may fit particular sorts of organizations such as .museum for museums or .coop for cooperatives. Organizations might also register under the appropriate country code top-level domain for their country.

5. Other terminology for the sector

There is a growing movement within the non-profit and non-government sector to define itself using more proactive wording. Instead of being defined by non words, organizations are suggesting new terminology to describe the sector. The term civil society organization (CSO) has been used by a growing number of organizations, such as the Center for the Study of Global Governance. The term citizen sector organization (CSO) has also been advocated to describe the sectorWWW.BSSVE.IN as one of citizens, for citizens by organizations such as Ashoka: Innovators for the Public. This labels and positions the sector as its own entity, without relying on language used for the government or business sectors. However, use of terminology by a nonprofit of self-descriptive language such as "public service organization" or other term that is not legally compliant risks confusing the public about nonprofit abilities, capabilities and limitations.

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Topic : Hospitals And Long-Term Care

Topic Objective:

At the end of this topic student would be able to:

 Pneumatic tube conveying systems  The reliability of the electrical power systems  Infrastructure of hospitals  Architecture of Modern hospital  Funding in the modern era, hospitals  Modern era in Europe  Colonial America  Medieval hospitals in Europe  According to Sir John Bagot Glubb:  The earliest recorded hospitals in the medieval Islamic world  Roman Empire  Ancient Asia  History of in ancient cultures, religion and medicine were linked.  Specialized hospitals  General hospitals General  Etymology duringWWW.BSSVE.IN the Middle Definition/Overview:

Hospital: A hospital is an institution for health care providing treatment by specialised staff and equipment, and often but not always providing for longer-term patient stays. Today, hospitals are usually funded by the state, health organizations (for profit or non-profit), health insurances or charities, including direct charitable donations. In history, however, they were often founded and funded by religious orders or charitable individuals and leaders. Similarly, modern-day hospitals are largely staffed by professional physicians, surgeons and nurses, whereas in history, this work was usually done by the founding religious orders or by volunteers.

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Key Points:

1. Etymologyduring the Middle

During the middle Ages the hospital could serve other functions, such as almshouse for the poor, hostel for pilgrims, or hospital school. The name comes from Latin hospes (host), which is also the root for the English words hotel, hostel, and hospitality. The modern word hotel derives from the French word hostel, which featured a silent s, which was eventually removed from the word. (The circumflex on modern French htel hints at the vanished s) Grammar of the word differs slightly depending on the dialect. In the U.S., hospital usually requires an article; in Britainand elsewhere, the word is normally used without an article when it is the object of a preposition and when referring to a patient ("in/to the hospital" vs. "in/to hospital"); in Canada, both usages are found.

2. General hospitals General

The best-known type of hospital is the general hospital, which is set up to deal with many kinds of disease and injury, and typically has an emergency ward to deal with immediate threats to health and the capacity to dispatch emergency medical services. A general hospital is typically the major health care facility in its region, with large numbers of beds for intensive care and long-term care; and specialized facilities for surgery, plastic surgery, childbirth, bioassay laboratories, and so forth. Larger cities may have many different hospitals of varyingWWW.BSSVE.IN sizes and facilities. 3. Specialized hospitals

Types of specialized hospitals include trauma centers, rehabilitation hospitals, children's hospitals, seniors' (geriatric) hospitals, and hospitals for dealing with specific medical needs such as psychiatric problems, certain disease categories, and so forth. A hospital may be a single building or a campus. (Many hospitals with pre-20th-century origins began as one building and evolved into campuses.) Some hospitals are affiliated with universities for medical research and the training of medical personnel. Worldwide, most hospitals are run on a non-profit basis by governments or charities. Within the United States, most hospitals are not-for-profit.

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4. History of in ancient cultures, religion and medicine were linked.

In ancient cultures, religion and medicine were linked. The earliest known institutions aiming to provide cure were Egyptian temples. Greek temples dedicated to the healer-god Asclepius might admit the sick, who would wait for guidance from the god in a dream. The Romans adopted his worship. Under his Roman name sculapius, he was provided with a temple (291 BC) on an island in the Tiber in Rome, where similar rites were performed.

5. AncientAsia

The Sinhalese (Sri Lankans) are perhaps responsible for introducing the concept of dedicated hospitals to the world. According to the Mahavamsa, the ancient chronicle of Sinhalese royalty written in the 6th century A.D., King Pandukabhaya (4th century BC) had lying-in- homes and hospitals (Sivikasotthi-Sala) built in various parts of the country. This is the earliest documentary evidence we have of institutions specifically dedicated to the care of the sick anywhere in the world.Mihintale Hospital is perhaps the oldest in the world. Institutions created specifically to care for the ill also appeared early in India. King Ashoka is said to have founded at least 18 hospitals ca. 230 BC, with physicians and nursing staff, the expense being borne by the royal treasury.However, there are historians who strictly dispute the claim that Ashoka built any hospitals at all, and argue that it is based on a mistranslation, with references to 'rest houses' being mistaken for hospitals. The error is thought to have occurred because similar edicts and records talk of Ashoka importing medicinal supplies. State- supported hospitals later appeared in Chinaduring the first millennium A.D. The first teaching hospital where studentsWWW.BSSVE.IN were authorized to methodically practice on patients under the supervision of physicians as part of their education, was the Academyof Gundishapur in the Persian Empire. One expert has argued that "to a very large extent, the credit for the whole hospital system must be given to Persia".

6. Roman Empire

The Romans created valetudinaria for the care of sick slaves, gladiators and soldiers around 100 BC, and many were identified by later archeology. While their existence is considered proven, there is some doubt as to whether they were as widespread as was once thought, as many were identified only according to the layout of building remains, and not by means of surviving records or finds of medical tools.

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The adoption of Christianity as the state religion of the empire drove an expansion of the provision of care. The First Council of Nicaea in 325 A.D. urged the Church to provide for the poor, sick, widows and strangers. It ordered the construction of a hospital in every cathedral town. Among the earliest were those built by the physician Saint Sampson in Constantinople and by Basil, bishop of Caesarea. The latter was attached to a monastery and provided lodgings for poor and travelers, as well as treating the sick and infirm. There was a separate section for lepers.

7. The earliest recorded hospitals in the medieval Islamic world

The earliest recorded hospitals in the medieval Islamic world refer to the hopital of al-Walid ibn 'Abdul Malik (ruled 705-715 CE) which he built in 86 AH (706-707 CE). It somewhat resembled the Byzantine nosocomia, but was more general as it extended its services to the lepers and the invalid and destitute people. All treatment and care was free of charge and there was more than one physician employed in this hospital. In the medieval Islamic world, the word "Bimaristan" was used to indicate a hospital in the modern sense, an establishment where the ill were welcomed and cared for by qualified staff. In this way, Muslim physicians were the first to make a distinction between a hospital and other different forms of healing temples, sleep temples, hospices, assylums, lazarets and leper-houses, all of which in ancient times were more concerned with isolating the sick and the mad from society "rather than to offer them any way to a true cure." Some thus consider the medieval Bimaristan hospitals as "the first hospitals" in the modern sense of the word.The first public hospitals,psychiatric hospitalsand medicalWWW.BSSVE.IN universitieswere also introduced by medieval Muslim physicians. Between the eighth and twelfth centuries CE Muslim hospitals developed a high standard of care. Hospitals built in Baghdadin the ninth and tenth centuries employed up to twenty-five staff physicians and had separate wards for different conditions. Al-Qairawan hospital and mosque, in Tunisia, were built under the Aghlabid rule in 830 CE and was simple but adequately equipped with halls organized into waiting rooms, a mosque, and a special bath. The hospital employed female nurses, including nurses from Sudan, a sign of great breakthrough. In addition to regular physicians who attended the sick, there were Fuqaha al- Badan, a kind of religious physio-therapists, group of religious scholars whose medical services included bloodletting, bone setting, and cauterisation. During Ottoman rule, when hospitals reached a particular distinction, Sultan Bayazid II built a mental hospital and medical madrasa in Edirne, and a number of other early hospitals were also built in Turkey.

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Unlike in Greek temples to healing gods, the clerics working in these facilities employed scientific methodology far beyond that of their contemporaries in their treatment of patients.

8. According to Sir John Bagot Glubb:

"By Mamun's time medical schools were extremely active in Baghdad. The first free public hospital was opened in Baghdad during the Caliphate of Haroon-ar-Rashid. As the system developed, physicians and surgeons were appointed who gave lectures to medical students and issued diplomas to those who were considered qualified to practice. The first hospital in Egypt was opened in 872 AD and thereafter public hospitals sprang up all over the empire from Spainand the Maghrib to Persia."

9. Medieval hospitals in Europe

Medieval hospitals in Europe followed a similar pattern. They were religious communities, with care provided by monks and nuns. (An old French term for hospital is htel-Dieu, "hostel of God.") Some were attached to monasteries; others were independent and had their own endowments, usually of property, which provided income for their support. Some hospitals were multi-function while others were founded for specific purposes such as leper hospitals, or as refuges for the poor or for pilgrims: not all cared for the sick. Not until later where most hospitals multi-functional, though the first Spanish hospital, founded by the Catholic Visigoth bishop Masona in 580 at Mrida, was a xenodochium designed as an inn for travellers (mostly pilgrims to the shrine of Eulalia of Mrida) as well as a hospital for citizens and local farmers. The hospital's endowmentWWW.BSSVE.IN consisted of farms to feed its patients and guests.

10. ColonialAmerica

It is believed that the first Spanish style hospital founded in the Americas[Western Hemisphere] following Columbus arrival to the island now known as Hispaniola was the Hospital San Nicols de Bari [Calle Hostos] in Santo Domingo, [Distrito Nacional] Dominican Republic. Fray Nicolas de Ovando, Spanish governor and colonial administrator from 1502- 1509, authorized its construction in or after 1504. It is believed that this hospital also served as a church during its lifetime. The first phase of its construction was completed in 1519. Erwin Walter Palm, [former author and professor of Spanish American art, culture, and history] wrote that "the Brotherhood of Our Lady of the Conception continued the

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construction of the hospital in 1533, adding modern elements, including additional buildings." Abandoned in the mid-18th century the hospital now lies in ruins near the Cathedral in the colonial zone in Santo Domingo, DR, amid additional historical New Worldsights.

The Hospital de Jess Nazareno in Mexico City is the oldest hospital in North America. It was founded in 1524 with the economic support of conquistador Hernn Corts to care for poor Spanish soldiers and the native inhabitants. The first hospital in North America north of Mexico is the Htel-Dieu de Qubec. It was established in New France in 1639 by three Augustinians from l'Htel-Dieu de Dieppe in France. The project of the niece of Cardinal de Richelieu was granted a royal charter by King Louis XIII and staffed by colonial physician Robert Giffard de Moncel.

11. Modern era In Europe

In Europethe medieval concept of Christian care evolved during the sixteenth and seventeenth centuries into a secular one, but it was in the eighteenth century that the modern hospital began to appear, serving only medical needs and staffed with physicians and surgeons. The Charit (founded in Berlin in 1710) is an early example. Guy's Hospital was founded in Londonin 1724 from a bequest by wealthy merchant Thomas Guy. Other hospitals sprang up in Londonand other British cities over the century, many paid for by private subscriptions. In the British American colonies the Pennsylvania General Hospital was chartered in Philadelphiain 1751, after 2,000 from private subscription was matched by funds from the Assembly.WWW.BSSVE.IN

When the Viennese General Hospital(Allgemeines Krankenhaus) opened in 1784 (instantly becoming the world's largest hospital), physicians acquired a new facility that gradually developed into the most important research center. During the 19th century, the Second VienneseMedical Schoolemerged with the contributions of physicians such as Carl Freiherr von Rokitansky, Josef koda, Ferdinand Ritter von Hebra and Ignaz Philipp Semmelweis. Basic medical science expanded and specialization advanced. Furthermore, the first dermatology, eye, as well as ear, nose and throat clinics in the world were founded in Vienna, being considered was the birth of specialized medicine. By the mid-nineteenth century most of Europe and the United Stateshad established a variety of public and private hospital systems. In Continental Europe the new hospitals were generally built and run from public

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funds. The National Health Service, the principle provider of healthcare in theUnited Kingdom, was founded in 1948.

In the United States the traditional hospital is a non-profit hospital, usually sponsored by a religious denomination. One of the earliest of these "almshouses" in what would become the United States was started by William Penn in Philadelphiain 1713. These hospitals are tax- exempt due to their charitable purpose, but provide only a minimum of charitable medical care. They are supplemented by large public hospitals in major cities and research hospitals often affiliated with a medical school. In the late twentieth century, chains of for-profit hospitals arose in the USA.

12. Fundingin the modern era, hospitals

In the modern era, hospitals are, broadly, either funded by the government of the country in which they are situated, or survive financially by competing in the private sector (a number of hospitals are also still supported by the historical type of charitable or religious associations). In the United Kingdom for example, a relatively comprehensive, "free at the point of delivery" healthcare system exists, funded by the state. Hospital care is thus relatively easily available to all legal residents (although as hospitals prioritize their limited resources, there is a tendency for 'waiting lists' to be generated for non-emergency treatment, and those who can afford it may take out private healthcare to get treatment faster).On the other hand, many countries, including for example the USA, have in the 20th Century followed a largely private-based, for-profit-approach to providing hospital care, with few state-money supported "charity" hospitaWWW.BSSVE.INls remaining today.Where for-profit hospitals in such countries admit uninsured patients in emergency situations (such as during and after the Hurricane Katrina in the USA), they incur direct financial losses,ensuring that there is a clear disincentive to admit such patients. While for-profit-based systems have produced some of the best hospitals in the world, a proportion of the populace may have little or no access to healthcare services of adequate quality. As quality of healthcare has increasingly become an issue around the world, hospitals have increasingly had to pay serious attention to this. Independent external assessment of quality is one of the most powerful ways of assessing the quality of healthcare, and hospital accreditation is one means by which this is achieved. In many parts of the world such accreditation is sourced from other countries, a phenomenon known as international healthcare accreditation, by groups such as the Joint Commission from the USA and the Trent Accreditation Scheme from Great Britain.

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13. Architecture of Modern hospital

Modern hospital buildings are designed to minimize the effort of medical personnel and the possibility of contamination while maximizing the efficiency of the whole system. Travel time for personnel within the hospital and the transportation of patients between units is facilitated and minimized. The building also should be built to accommodate heavy departments such as radiology and operating rooms while space for special wiring, plumbing, and waste disposal must be allowed for in the design. However, the reality is that many hospitals, even those considered 'modern', are the product of continual and often badly managed growth over decades or even centuries, with utilitarian new sections added on as needs and finances dictate. As a result, Dutch architectural historian Cor Wagenaar has called many hospitals:

 Built catastrophes: Bilt catastrophes, anonymous institutional complexes run by vast bureaucracies, and totally unfit for the purpose they have been designed for. They are hardly ever functional, and instead of making patients feel at home, they produce stress and anxiety.

Some newer hospital designs now try to reestablish design that takes the patient's psychological needs into account, such as providing for more air, better views, and more pleasant color schemes. These ideas harken back to the late 18th century, when the concept of providing fresh air and access to the 'healing powers of nature' were first employed by hospital architects in improving their buildings. Another major change which is still ongoing in many parts of the world is the change from a ward-based system (where patients are treated and accommodatedWWW.BSSVE.IN in communal rooms, separated at best by movable partitions) to a room-based environment, where patients are accommodated in private rooms. The ward- based system has been described as very efficient, especially for the medical staff, but is considered to be more stressful for patients and detrimental to their privacy. A major constraint on providing all patients with their own rooms is however found in the higher cost of building and operating such a hospital, which causes some hospitals to charge for the privilege of private rooms

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14. Infrastructure of hospitals

The surgical, special procedures, radiological, intensive care unit, and patient rooms typically have medical gases, emergency and normal electrical power; and heating, air conditioning and ventilation systems.

15. The reliability of the electrical power systems

The reliability of the electrical power systems that serve a hospital is important. In order to provide higher electrical reliability, the National Institutes of Health, NIH, requires that all secondary substations > 500 kVA at their Bethesda, MDcampus be the spot network type. The spot network substations cost more than other arrangements.

16. Pneumatic tube conveying systems

Pneumatic tube conveying systems are often used to move the actual paper prescriptions for medicines to the Pharmacies, and to move medicines, especially intra-venous, IV, bags to the patient care rooms. Tissue samples can be sent to the Laboratory. Medical notes can be transcribed, printed, and then transported via a Pneumatic Tube Conveying System. As measured by the weight of the item be transferred, the 15 cm (6) diameter tube systems have about 225% of the lifting and moving capacity of a 10 cm (4) system. When the seals are new, the 10 cm tube carriers will move a 1 kg (2+ pound) IV bag. But when the seals on the tube carriers are worn, the tubes can stop moving in the piping, and require a trained technician to recoverWWW.BSSVE.IN the tube carrier. Modern hospitals have information infrastructure such as secured patient information system and PACS.

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Topic : Health Care Labor Markets And Professional Training

Topic Objective:

At the end of this topic student would be able to:

 Hospital  Laboratories and research  Practitioners and professionals  Mental health professionals  Health care systems  Market-based

Definition/Overview:

Health Care Labor Markets: A health care provider or health professional is an organization or person who delivers proper health care in a systematic way professionally to any individual in need of health care services. The health care industry or health profession treats and tends to patients who are injured, sick, disabled, or infirm. The delivery of modern health care depends on an expanding interdisciplinary team of trained professionals.

Delivery of Services: The healthcare industry includes the delivery of health services by health care providers.WWW.BSSVE.IN Usually such services are paid for by the patient or by the patient's insurance company; although they may be government-financed (such as the National Health Service in the United Kingdom) or delivered by charities or volunteers, particularly in poorer countries. There are many ways of providing healthcare in the modern world. The most common way is face-to-face delivery, where care provider and patient see each other 'in the flesh'. This is what occurs in general medicine in most countries. However, healthcare is not always face-to-face; with modern telecommunications technology, in absentia health care is becoming more common. This could be when practitioner and patient communicate over the phone, video conferencing, the internet, email, text messages, or any other form of non-face- to-face communication.

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Growth: The health care industry is one of the world's largest and fastest-growing industries.Consuming over 10 percent of gross domestic product of most developed nations, health care can form an enormous part of a country's economy. In 2003, health care costs paid to hospitals, physicians, nursing homes, diagnostic laboratories, pharmacies, medical device manufacturers and other components of the health care system, consumed 15.3 percentof the GDP of the United States, the largest of any country in the world. For United States, the health share of gross domestic product (GDP) is expected to hold steady in 2006 before resuming its historical upward trend, reaching 19.6 percent of GDP by 2016. In 2001, for the OECD countries the average was 8.4 percent with the United States (13.9%), Switzerland(10.9%), and Germany(10.7%) being the top three. US healthcare expenditures totaled US$2.2 trillion in 2006.According to Health Affairs, USD$7,498 will be spent on every woman, man and child in the United States in 2007, 20 percent of all spending. Costs are projected to increase to $12,782 by 2016.

Key Points:

1. Hospital

A hospital is an institution for health care, often but not always providing for longer-term patient stays. Today, hospitals are usually funded by the state, health organizations (for profit or non-profit), by health insurances or by charities and by donations. In history, however, they were often founded and funded by religious orders or charitable individuals and leaders. Hospitals are nowadays staffed by professionally trained clinicians, whereas in history, this work was usuallyWWW.BSSVE.IN done by the founding religious orders or by volunteers.

2. Laboratories and research

A medical laboratory or clinical laboratory is a laboratory where tests are done on biological specimens in order to get information about the health of a patient. Such laboratories may be divided into categorical departments such as microbiology, hematology, clinical biochemistry, immunology, serology, histology, cytology, cytogenetics, or virology. In many countries, there are two main types of labs that process the majority of medical specimens. Hospital laboratories are attached to a hospital, and perform tests on these patients. Private,or community laboratories receive samples from general practitioners, insurance companies, and other health clinics for analysis. Biomedical research, or experimental medicine, in general

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simply known as medical research, is the basic research or applied research conducted to aid the body of knowledge in the field of medicine. Medical research can be divided into two general categories: the evaluation of new treatments for both safety and efficacy in what are termed clinical trials, and all other research that contributes to the development of new treatments. The latter is termed preclinical research if its goal is specifically to elaborate knowledge for the development of new therapeutic strategies.

3. Practitioners and professionals

Health care professionals include physicians(MD,DO, DC, DVM, DPM), nurse practitioners, physician assistants, support staff, nurses, pharmacists, therapists, psychologists, veterinarians, dentists, optometrists, paramedics, and a wide variety of other individuals regulated and/or licensed to provide some type of health care.

4. Mental health professionals

A mental health professional is a person who offers services for the purpose of improving an individual's mental health or treating mental illness. These professionals include psychiatrists, clinical psychologists, clinical social workers, psychiatric nurses as well as other professionals. These professionals often deal with the same illnesses, disorders, conditions, and issues; however their scope of practice often differs. The most significant difference between mental health professionals is education and training. 5. Health care systemsWWW.BSSVE.IN A health care system is the organization by which health care is provided. Such systems could be endorsed and/or managed by governments or managed completely or partially by private market-based institutions.

6. Market-based

Health insurance is a type of insurance whereby the insurer pays the medical costs of the insured if the insured becomes sick due to covered causes, or due to accidents. The insurer may be a private organization or a government agency. Market-based health care systems such as that in the United States rely primarily on private health insurance.

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In Section 4 of this course you will cover these topics: The Pharmaceutical Industry Equity, Efficiency, And Need Government Intervention In Health Care Markets Government Regulationprincipal Regulatory Mechanisms Social Insurance

Topic : The Pharmaceutical Industry

Topic Objective:

At the end of this topic student would be able to:

 Research and development  Controversy about Drug Development And Testing  Product approval in the US  The cost of innovationWWW.BSSVE.IN  Orphan drugs  Legal issues  Industry revenues  Sales leaders  Patents and generics  Medicare Part D  Mergers, acquisitions, and co-marketing of drugs  Prescriptions  Marketing of Pharmaceutical Industry  To healthcare professionals

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 To insurance and public health bodies  To retail pharmacies and stores  Direct to consumer advertising  Controversy about drug marketing and lobbying  Developing world  Nigerian clinical trial  Charitable programmes  Industry associations

Definition/Overview:

Pharmaceutical company: A pharmaceutical company, or drug company, is a commercial business whose focus is to research, develop, market and/or distribute drugs, mostly in the context of healthcare. They can deal in generic and/or brand medications. They are subject to a variety of laws and regulations regarding the patenting, testing and marketing of drugs.

Key Points:

1. History

The earliest drugstores date back to the Middle Ages. The first known drugstore was opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating throughout the medieval Islamic world and eventually medieval Europe. By the 19th century, many of the drug stores inWWW.BSSVE.IN Europe and North America had eventually developed into larger pharmaceutical companies.

Most of today's major pharmaceutical companies were founded in the late 19th and early 20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, became mass-manufactured and distributed. Switzerland, Germanyand Italy had particularly strong industries, with the UK, US, Belgium and the Netherlandsfollowing suit.

Legislation was enacted to test and approve drugs and to require appropriate labeling. Prescription and nonprescription drugs became legally distinguished from one another as the pharmaceutical industry matured. The industry got underway in earnest from the 1950s, due to the development of systematic scientific approaches, understanding of human biology (including DNA) and sophisticated manufacturing techniques.

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Numerous new drugs were developed during the 1950s and mass-produced and marketed through the 1960s. These included the first oral contraceptive, "The Pill", Cortisone, blood- pressure drugs and other heart medications. MAO Inhibitors, chlorpromazine (Thorazine), Haldol (Haloperidol) and the tranquilizers ushered in the age of psychiatric medication. Valium (diazepam), discovered in 1960, was marketed from 1963 and rapidly became the most prescribed drug in history, prior to controversy over dependency and habituation. Attempts were made to increase regulation and to limit financial links companies and prescribing physicians, including by the relatively new US FDA. Such calls increased in the 1960s after the thalidomide tragedy came to light, in which the use of a new tranquilizer in pregnant women caused severe birth defects. In 1964, the World Medical Association issued its Declaration of Helsinki, which set standards for clinical research and demanded that subjects give their informed consent before enrolling in an experiment. Phamaceutical companies became required to prove efficacy in clinical trials before marketing drugs.

Cancer drugs were a feature of the 1970s. From 1978, Indiatook over as the primary center of pharmaceutical production without patent protection.

The industry remained relatively small scale until the 1970s when it began to expand at a greater rate. Legislation allowing for strong patents, to cover both the process of manufacture and the specific products, came in to force in most countries. By the mid-1980s, small biotechnology firms were struggling for survival, which led to the formation of mutually beneficial partnerships with large pharmaceutical companies and a host of corporate buyouts of the smaller firms. Pharmaceutical manufacturing became concentrated, with a few large companies holdingWWW.BSSVE.IN a dominant position throughout the world and with a few companies producing medicines within each country. The pharmaceutical industry entered the 1980s pressured by economics and a host of new regulations, both safety and environmental, but also transformed by new DNA chemistries and new technologies for analysis and computation. Drugs for heart disease and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a faster approval process.

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basic R&D. The pharmaceutical industry confronted a new business climate and new regulations, born in part from dealing with world market forces and protests by activists in developing countries. Animal Rights activism was also a problem. Marketing changed dramatically in the 1990s, partly because of a new consumerism. The Internet made possible the direct purchase of medicines by drug consumers and of raw materials by drug producers, transforming the nature of business. In the US, Direct-to-consumer advertising proliferated on radio and TV because of new FDA regulations in 1997 that liberalized requirements for the presentation of risks. The new antidepressants, the SSRIs, notably Fluoxetine (Prozac), rapidly became bestsellers and marketed for additional disorders.

Drug development progressed from a hit-and-miss approach to rational drug discovery in both laboratory design and natural-product surveys. Demand for nutritional supplements and so-called alternative medicines created new opportunities and increased competition in the industry. Controversies emerged around adverse effects, notably regarding Vioxx in the US, and marketing tactics. Pharmaceutical companies became increasingly accused of disease mongering or over-medicalizing personal or social problems. There are now more than 200 major pharmaceutical companies, jointly said to be more profitable than almost any other industry, and employing more political lobbyists than any other industry. Advances in biotechnology and the human genome project promise ever more sophisticated, and possibly more individualized, medications.

2. Research and development

Drug discovery WWW.BSSVE.INis the process by which potential drugs are discovered or designed. In the past most drugs have been discovered either by isolating the active ingredient from traditional remedies or by serendipitous discovery. Modern biotechnology often focuses on understanding the metabolic pathways related to a disease state or pathogen, and manipulating these pathways using molecular biology or Biochemistry. A great deal of early- stage drug discovery has traditionally been carried out by universities and research institutions. Drug development refers to activities undertaken after a compound is identified as a potential drug in order to establish its suitability as a medication. Objectives of drug development are to determine appropriate Formulation and Dosing, as well as to establish safety. Research in these areas generally includes a combination of in vitro studies, in vivo studies, and clinical trials. The amount of capital required for late stage development has made it a historical strength of the larger pharmaceutical companies. Often, large

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multinational corporations exhibit vertical integration, participating in a broad range of drug discovery and development, manufacturing and quality control, marketing, sales, and distribution. Smaller organizations, on the other hand, often focus on a specific aspect such as discovering drug candidates or developing formulations. Often, collaborative agreements between research organizations and large pharmaceutical companies are formed to explore the potential of new drug substances.

4. The cost of innovation

Drug discovery and development is very expensive; of all compounds investigated for use in humans only a small fraction are eventually approved in most nations by government appointed medical institutions or boards, who have to approve new drugs before they can be marketed in those countries. Each year, only about 25 truly novel drugs (New chemical entities) are approved for marketing. This approval comes only after heavy investment in pre- clinical development and clinical trials, as well as a commitment to ongoing safety monitoring. Drugs which fail part-way through this process often incur large costs, while generating no revenue in return. If the cost of these failed drugs is taken into account, the cost of developing a successful new drug (New chemical entity or NCE), has been estimated at about 1 billion USD(not including marketing expenses). A study by the consulting firm Bain & Company reported that the cost for discovering, developing and launching (which factored in marketing and other business expenses) a new drug (along with the prospective drugs that fail) rose over a five year period to nearly $1.7 billion in 2003. These estimates also take into account the opportunity cost of investing capital many years before revenues are realized. Because of the veryWWW.BSSVE.IN long time needed for discovery, development, and approval of pharmaceuticals, these costs can accumulate to nearly half the total expense. Some approved drugs, such as those based on re-formulation of an existing active ingredient (also referred to as Line-extensions) are much less expensive to develop. The consumer advocacy group Public Citizen suggests on its web site that the actual cost is under $200 million, about 29% of which is spent on FDA-required clinical trials. For me-too-drugs and for generics, the cost are even less. Calculations and claims in this area are controversial because of the implications for regulation and subsidization of the industry through federally funded research grants.

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2. Controversy about Drug Development And Testing

There have been increasing accusations and findings that clinical trials conducted or funded by pharmaceutical companies are much more likely to report positive results for the preferred medication. In response to public outcry about specific cases in which unfavorable data from pharmaceutical company-sponsored research was suppressed, the Pharmaceutical Research and Manufacturers of America have published new guidelines urging companies to report all findings and limit the financial involvement in drug companies of researchers.As a result of this public outcry and PhRMA response the US congress signed into law a bill which requires phase II and phase III clinical trials to be registered by the sponsor on the NIH website clinicaltrials.gov |rel="nofollow". Drug researchers not directly employed by pharmaceutical companies often look to companies for grants, and companies often look to researchers for studies that will make their products look favorable. Sponsored researchers are rewarded by drug companies, for example with support for their conference/symposium costs. Lecture scripts and even journal articles presented by academic researchers may actually be 'ghost- written' by pharmaceutical companies.Some researchers who have tried to reveal ethical issues with clinical trials or who tried to publish papers that show harmful effects of new drugs or cheaper alternatives have been threatened by drug companies with lawsuits.

3. Product approval in the US In the United States,WWW.BSSVE.IN new pharmaceutical products must be approved by the FDA as being both safe and effective. This process generally involves submission of an Investigational new drug filing with sufficient pre-clinical data to support proceeding with human trials. Following INDapproval, three phases of progressively larger human clinical trials may be conducted. Phase I generally studies toxicity using healthy volunteers. Phase II can include Pharmacokinetics and Dosing in patients, and Phase III is a very large study of efficacy in the intended patient population. A fourth phase of post-approval surveillance is also often required due to the fact that even the largest clinical trials cannot effectively predict the prevalence of rare side-effects. Post-marketing surveillance ensures that after marketing the safety of a drug is monitored closely. In certain instances, its indication may need to be limited to particular patient groups, and in others the substance is withdrawn from the market completely. Questions continue to be raised regarding the standard of both the initial approval

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process, and subsequent changes to product labeling (it may take many months for a change identified in post-approval surveillance to be reflected in product labeling) and this is an area where congress is active. The FDA provides information about approved drugs at the Orange Book site.In the UK, the British National Formulary is the core guide for pharmacists and clinicians.

4. Orphan drugs

There are special rules for certain rare diseases ("orphan diseases") involving fewer than 200,000 patients in the United States, or larger populations in certain circumstances. Because medical research and development of drugs to treat such diseases is financially disadvantageous, companies that do so are rewarded with tax reductions, fee waivers, and market exclusivity on that drug for a limited time (seven years), regardless of whether the drug is protected by patents.

5. Legal issues

Where pharmaceutics have been shown to cause side-effects, civil action has occurred, especially in countries where tort payouts are likely to be large. Due to high-profile cases leading to large compensations, most pharmaceutical companies endorse tort reform. Recent controversies have involved Vioxx and SSRI antidepressants.

6. Industry revenues

For the first timeWWW.BSSVE.IN ever, in 2006, global spending on prescription drugs topped $643 billion, even as growth slowed somewhat in Europe and North America. The United States accounts for almost half of the global pharmaceutical market, with $289 billion in annual sales followed by the EU and Japan.(pdf) Emerging markets such as China,Russia, South Korea and Mexico outpaced that market, growing a huge 81 percent.

US profit growth was maintained even whilst other top industries saw slowed or no growth. Despite this, "..the pharmaceutical industry is and has been for years the most profitable of all businesses in the U.S. In the annual Fortune 500 survey, the pharmaceutical industry topped the list of the most profitable industries, with a return of 17% on revenue." Pfizer's cholesterol pill Lipitor remains the best-selling drug in the world for the fifth year in a row. Its annual sales were $12.9 billion, more than twice as much as its closest competitors:

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Plavix, the blood thinner from Bristol-Myers Squibb and Sanofi-Aventis; Nexium, the heartburn pill from AstraZeneca; and Advair, the asthma inhaler from GlaxoSmithKline. IMS Health publishes an analysis of trends expected in the pharmaceutical industry in 2007, including increasing profits in most sectors despite loss of some patents, and new 'blockbuster' drugs on the horizon. Teradata Magazine predicted that by 2007, $40 billion in U.S. sales could be lost at the top 10 pharma companies as a result of slowdown in R&D innovation and the expiry of patents on major products, with 19 blockbuster drugs losing patent.

7. Sales leaders

The top ten pharmaceutical companies by 2006 sales are:

Rank Company Sales ($m) Growth (%) Market Share (%)

1 Pfizer 45,983 1.8 7.3

2 GlaxoSmithKline 37,034 9.7 5.9

3 Sanofi-Aventis 35,638 5.0 5.7

4 Novartis 28,880 18.0 4.6

5 HoffmannLa Roche 26,596 21.8 4.2

6 AstraZeneca 25,741 10.5 4.1

7 Johnson & Johnson 23,267 4.2 3.7 8 WWW.BSSVE.INMerck & Co. 22,636 2.8 3.6 9 Wyeth 15,683 2.4 2.5

10 Eli Lilly and Company 14,814 7.5 2.4

[Table 1: top ten pharmaceutical companies]

8. Patents and generics

Depending on a number of considerations, a company may apply for and be granted a patent for the drug, or the process of producing the drug, granting exclusivity rights typically for about 20 years. However, only after rigorous study and testing, which takes 10 to 15 years on average, will governmental authorities grant permission for the company to market and sell

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the drug. Patent protection enables the owner of the patent to recover the costs of research and development through high profit margins for the branded drug. When the patent protection for the drug expires, a generic drug is usually developed and sold by a competing company. The development and approval of generics is less expensive, allowing them to be sold at a lower price. Often the owner of the branded drug will introduce a generic version before the patent expires in order to get a head start in the generic market.

9. Medicare Part D

In 2003 the United Statesenacted the Medicare Prescription Drug, Improvement, and Modernization Act (MMA), a program to provide prescription drug benefits to the elderly and disabled. This program is a component of Medicare (United States) and is known as Medicare Part D. This program, set to begin in January 2006, will significantly alter the revenue models for pharmaceutical companies. Revenues from the program are expected to be $724 billion between 2006 and 2015. Pharmaceuticals developed by biotechnological processes often must be injected in a physician's office rather than be delivered in the form of a capsule taken orally. Medicare payments for these drugs are usually made through Medicare Part B (physician office) rather than Part D (prescription drug plan).

10. Mergers, acquisitions, and co-marketing of drugs

A merger, acquisition, or co-marketing deal between pharmaceutical companies may occur as a result of complementary capabilities between them. A small biotechnology company might have a new drugWWW.BSSVE.IN but no sales or marketing capability. Conversely, a large pharmaceutical company might have unused capacity in a large sales force due to a gap in the company pipeline of new products. It may be in both companies' interest to enter into a deal to capitalize on the synergy between the companies. The difference between the value of the two companies after the deal and before the deal is known as the synergy value of the deal.

11. Prescriptions

In the U.S. , prescriptions have increased over the past decade to 3.4 billion annually, a 61 percent increase. Retail sales of prescription drugs jumped 250 percent from $72 billion to $250 billion, while the average price of prescriptions has more than doubled from $30 to $68. Retail prescription drug sales 1995 to 2006 PDF from www.census.gov

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12. Marketing

Pharmaceutical companies commonly spend a large amount on advertising, marketing and lobbying. In the US, drug companies spend $19 billion a year on promotions. Advertising is common in healthcare journals as well as through more mainstream media routes. In some countries, notably the US, they are allowed to advertise direct to the general public. Pharmaceutical companies generally employ sales people (often called 'drug reps' or, an older term, 'detail men') to market directly and personally to physicians and other healthcare providers. In some countries, notably the US, pharmaceutical companies also employ lobbyists to influence politicians. Marketing of prescription drugs in the USis regulated by the federal Prescription Drug Marketing Act of 1987.

13. To healthcare professionals

Physicians are perhaps the most important players in pharmaceutical sales because they write the prescriptions that determine which drugs will be used by the patient. Influencing the physician is often seen as the key to prescription pharmaceutical sales. A medium-sized pharmaceutical company might have a sales force of 1000 representatives. The largest companies have tens of thousands of representatives. Currently, there are approximately 100,000 pharmaceutical sales reps in the United States pursuing some 120,000 pharmaceutical prescribers. The number doubled in the four years from 1999 to 2003. Drug companies spend $5 billion annually sending representatives to physician offices. Pharmaceutical companies use the service of specialized healthcare marketing research companies to performWWW.BSSVE.IN Marketing research among Physcians and other Healthcare professionals.

14. To insurance and public health bodies

Private insurance or public health bodies (e.g. the NHS in the UK) decide which drugs to pay for, and restrict the drugs that can be prescribed through the use of formularies. This, along with the high-margin companies that can realise for their most successful medicines, make pharmaceutical marketing complex. There are a number of firms that specialize in data and analytics for pharmaceutical marketing (Yellowikis).

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Public and private insurers restrict the brands, types and number of drugs that they will cover. Not only can the insurer affect drug sales by including or excluding a particular drug from a formulary, they can affect sales by tiering or placing bureaucratic hurdles to prescribing certain drugs as well. In January 2006, the U.S. instituted a new public prescription drug plan through its Medicare program known as Medicare Part D. This program engages private insurers to negotiate with pharmaceutical companies for the placement of drugs on tiered formularies.

15. To retail pharmacies and stores

Commercial stores and pharmacies are a major target of non-prescription sales and marketing for pharmaceutical companies.

16. Direct to consumer advertising

Since the 1980s new methods of marketing for prescription drugs to consumers have become important. Direct-to-consumer media advertising was legalised in the FDA Guidance for Industry on Consumer-Directed Broadcast Advertisements

17. Controversy about drug marketing and lobbying

There has been increasing controversy surrounding pharmaceutical marketing and influence. There have been accusations and findings of influence on doctors and other health professionals through drug reps, including the constant provision of marketing 'gifts' and biased informationWWW.BSSVE.IN to health professionals; highly prevalent advertising in journals and conferences; funding independent healthcare organizations and health promotion campaigns; lobbying physicians and politicians (more than any other industry in the US; sponsorship of medical schools or nurse training; sponsorship of continuing educational events, with influence on the curriculum; and hiring physicians as paid consultants on medical advisory boards. To help ensure the status quo on U.S.drug regulation and pricing, the pharmaceutical industry has thousands of lobbyists in Washington, DC that lobby Congress and protect their interests. The pharmaceutical industry spent $855 million, more than any other industry, on lobbying activities from 1998 to 2006, according to the non-partisan Center for Public Integrity. Some advocacy groups, such as No Free Lunch, have criticized the effect of drug marketing to physicians because they say it biases physicians to prescribe the marketed drugs

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even when others might be cheaper or better for the patient. There have been related accusations of disease mongering (over-medicalising) to expand the market for medications. An inaugural conference on that subject took place in Australia in 2006. A 2005 review by a special committee of the UKgovernment came to all the above conclusions in a European Union context whilst also highlighting the contributions and needs of the industry.

18. Developing world

The role of pharmaceutical companies in the developing world is a matter of some debate, ranging from those highlighting the aid provided to the developing world, to those critical of the use of the poorest in human clinical trials, often without adequate protections, particularly in states lacking a strong rule of law. Other criticisms include an alleged reluctance of the industry to invest in treatments of diseases in less economically advanced countries, such as malaria; Criticism for the price of patented AIDS medication, which could limit therapeutic options for patients in the Third World, where the most people have AIDS. Under World Trade Organization rules, a developing country has options for obtaining needed medications under compulsory licensing or importation of cheaper versions of the drugs, even before patent expiration (WTO Press Release). Pharmaceutical companies often offer much needed medication at no or reduced cost to the developing countries. Proposals to allow the manufacture of generic AIDS drugs are not without controversy; it is sometimes claimed that this might cause pharmaceutical companies to move away from AIDS drug research and focus their research on other, more profitable areas). In March of 2001, South Africa was sued by 41 pharmaceutical companies for their Medicines Act, which allowed the import and generic productionWWW.BSSVE.IN of cheap AIDS drugs. The case was later dropped after protest around the world.

19. Nigerian clinical trial

In 1996, a pediatric clinical trial conducted on behalf of Pfizer tested the antibiotic Trovan allegedly without first obtaining the informed consent of participants or their parents.

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Topic : Equity, Efficiency, And Need

Topic Objective:

At the end of this topic student would be able to:

 The cost of innovation

Definition/Overview:

Equity: Equity is the concept or idea of fairness in economics, particularly as to taxation or welfare economics. In welfare economics, equity may be distinguished from economic efficiency in overall evaluation of social welfare. Although 'equity' has broader uses, it may be posed as a counterpart to economic inequality in yielding a "good" distribution of welfare. It has been studied in experimental economics as inequity aversion. In public finance horizontal equity is the idea that people with a similar ability to pay taxes should pay the same or similar amounts. It is related to the concept of tax neutrality or the idea that the tax system should not discriminate between similar things or people, or unduly distort behavior Vertical equity is the idea that people with a greater ability to pay taxes should pay more. If they pay more strictly in proportion to their income, this is known as a proportional tax; if they pay an increasingWWW.BSSVE.IN proportion, this is termed a progressive tax, more associated with redistribution.

Key Points:

1. In a Health Care Context

Horizontal equity means treating the same those who are the same in a relevant respect (such as having the same 'need'). Vertical equity means treating differently those who are different in relevant respects (such as having different 'need'), (Culyer, 1995). Health studies of equity seek to identify whether particular social groups receive systematically different levels of care to other groups.

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Topic : Government Intervention In Health Care Markets

Topic Objective:

At the end of this topic student would be able to:

 Health care providers  Services  Facilities  Medical products, research and development  Health care spending  Health care payment  Commercial  Public  Role of government in health care market  Health care debate Definition/Overview:WWW.BSSVE.IN Government Intervention in Health Care Markets: Health care in the United States is provided by many separate legal entities. The U.S.spends more on health care, both as a proportion of gross domestic product (GDP) and on a per-capita basis, than any other nation in the world. Current estimates put U.S.health care spending at approximately 16% of GDP. The health share of GDP is expected to continue its historical upward trend, reaching 19.5 percent of GDP by 2017. In 2007, the U.S.spent a projected $2.26 trillion on health care, or $7,439 per person. According to the Institute of Medicine of the National Academy of Sciences, the U.S. is the only wealthy, industrialized nation that does not have a universal health care system. In the United States, around 84% of citizens have some form of health insurance; either through their employer (60%), purchased individually (9%), or provided by government programs (27%; there is some overlap in these figures). Certain publicly-funded

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health care programs help to provide for the elderly, disabled, children, veterans, and the poor, and federal law mandates public access to emergency services regardless of ability to pay.

U.S.government programs accounted for over 45% of health care expenditures, making the U.S.government the largest insurer in the nation. Per capita spending on health care by the U.S.government placed it among the top ten highest spenders among United Nations member countries in 2004. Americans without health insurance coverage at some time during 2006 totaled about 16% of the population, or 47 million people. Health insurance costs are rising faster than wages or inflation, and "medical causes" were cited by about half of bankruptcy filers in theUnited Statesin 2001. The debate about U.S.health care concerns questions of access, efficiency, and quality purchased by the high sums spent. The World Health Organization (WHO) in 2000 ranked the U.S. health care system first in both responsiveness and expenditure, but 37th in overall performance and 72nd by overall level of health (among 191 member nations included in the study). The WHO study has been criticized both for its methodology and for a lack of correlation with user satisfaction ratings. The CIA World Factbook ranked the United States 41st in the world for lowest infant mortality rate and 45th for highest total life expectancy. A recent study found that between 1997 and 2003, preventable deaths declined more slowly in the United Statesthan in 18 other industrialized nations. On the other hand, the National Health Interview Survey, released annually by the Centers for Disease Control's National Center for Health Statistics reported that approximately 66% of survey respondents said they were in "excellent" or "very good" health in 2006. WWW.BSSVE.IN Key Points:

1. Health care providers

United States health care is provided by a diverse array of individuals and legal entities. Individuals are offered inpatient and outpatient services by commercial, charitable, or governmental entities. The healthcare system is not fully-publicly funded but is a mix of public and private funding. In 2004, private insurance paid for 36% of personal health expenditures, private out-of-pocket 15%, federal government 34%, state and local governments 11%, and other private funds 4%.

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2. Services

"Ambulatory care" refers to health care delivered without a stay in the hospital; most health care in the United Statesoccurs in the outpatient setting. "Home health care services" are generally nursing enterprises, but are usually ordered by physicians. Private sector outpatient medical care is provided by personal care physicians (specialists in internal medicine, family medicine, and pediatric medicine), subspecialty physicians (gastroenterologists, cardiologists, or pediatric endocrinologists are examples) or non-physicians (including nurse practitioners and physician assistants). In 1996, concierge medicine emerged, where enhanced care and services are provided by primary care physicians for a retainer fee.

3. Facilities

There are for-profit hospitals, which are usually operated by large private corporations and there are nonprofit hospitals, which may be operated by county governments, state governments, religious orders, or independent nonprofit organizations. Hospitals provide some outpatient care in their emergency rooms and specialty clinics, but primarily they exist to provide inpatient care. Hospital emergency departments and urgent care centers are sources of sporadic problem-focused care. "Surgicenters" are examples of specialty clinics. Hospice services for the terminally ill who are expected to live six months or less are most commonly subsidized by charities and government. Prenatal, family planning, and "dysplasia" clinics are government-funded obstetric and gynecologic specialty clinics respectively, andWWW.BSSVE.IN are usually staffed by nurse practitioners. 4. Medical products, research and development

Companies provide medical products such as pharmaceuticals and medical devices. The nation spends a substantial amount on medical research, mostly privately funded. As of 2000, non-profit private organizations (such as the Howard Hughes Medical Institute) funded 7%, private industry funded 57%, and the tax-funded National Institutes of Health supported 36% of medical research in the U.S. However, by 2003, the NIH provided only 28% of medical research funding; finance from private industry increased 102% from 1994 to 2003. Research and development for applications is primarily done in commercial labs, while the government and universities fund the majority of general research. Much of this basic research is funded or conducted by governmental research institutes such as the NIH and NIMH.

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5. Health care spending

The Office of the Actuary (OACT) of the Centers for Medicare and Medicaid Services publishes data on total health care spending in the United States. This National Health Expenditure Accounts data includes both historical spending levels and projections of future spending. Spending in 2006 totaled $2.1 trillion, or 16% of GDP. This represented an increase of 6.7% over 2004 spending. Per capita spending was $7,026. Growth in spending is projected to average 6.7% over the period 2007 through 2017. Health care spending is projected to reach 19.5 percent of GDP by 2017. The Congressional Budget Office has found that "about half of all growth in health care spending in the past several decades was associated with changes in medical care made possible by advances in technology." Other factors included higher income levels, changes in insurance coverage, and rising prices. Hospitals and physician spending take the largest share of the health care dollar while prescription drugs take about 10 percent. The use of prescription drugs is increasing among adults who have drug coverage. One analysis of international spending levels in the year 2000 found that while theUS spends more on health care than other countries in the Organisation for Economic Co-operation and Development (OECD), the use of health care services in the US is below the OECD median by most measures. The authors of the study concluded that the prices paid for health care services are much higher in the US.

Health care spending in the United Statesis concentrated. An analysis of the 1996 Medical Expenditure Panel Survey found that the 1% of the population with the highest spending accounted for 27% of aggregate health care spending. The highest-spending 5% of the population accountedWWW.BSSVE.IN for more than half of all spending. These patterns were stable through the 1970s and 1980s, and some data suggest that they may have been typical of the mid-to- early 20th century as well. One study by the Agency for Healthcare Research and Quality (AHRQ) found significant persistence in the level of health care spending from year to year. Of the 1% of the population with the highest health care spending in 2002, 24.3% maintained their ranking in the top 1% in 2003. Of the 5% with the highest spending in 2002, 34% maintained that ranking in 2003. Individuals over age 45 were disproportionately represented among those who were in the top decile of spending for both years. Seniors spend, on average, far more on health care costs than either working-age adults or children. The pattern of spending by age was stable for most ages from 1987 through 2004, with the exception of spending for seniors age 85 and over. Spending for this group grew less rapidly than that of

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other groups over this period. The 2008 edition of the Dartmouth Atlas of Health Care found that providing Medicare beneficiaries with severe chronic illnesses with more intense health care in the last two years of life - increased spending, more tests, more procedures and longer hospital stays - is not associated with better patient outcomes. There are significant geographic variations in the level of care provided to chronically ill patients. Only a small portion of these spending differences (4%) is explained by differences in the number of severely ill people in an area; rather, most of the differences are explained by differences in the amount of "supply-sensitive" care available in an area. Acute hospital care accounts for over half (55%) of the spending for Medicare beneficiaries in the last two years of life, and differences in the volume of services provided is more significant than differences in price. The researchers found no evidence of "substitution" of care, where increased use of hospital care would reduce outpatient spending (or vice versa).Increased spending on disease prevention is often suggested as a way of reducing health care spending. Research suggests, however, that in most cases prevention does not produce significant long-term costs savings. Preventive care is typically provided to many people who would never become ill, and for those who would have become ill is partially offset by the health care costs during additional years of life.

6. Health care payment

Most Americans (59.7%), receive their health insurance coverage through an employer, although this percentage is declining. Costs for employer-paid health insurance are rising rapidly: since 2001, premiums for family coverage have increased 78%, while wages have risen 19% and inflationWWW.BSSVE.IN has risen 17%, according to a 2007 study by the Kaiser Family Foundation. Workers with employer-sponsored insurance also contribute; in 2007, the average percentage of premium paid by covered workers is 16% for single coverage and 28% for family coverage. In addition to their premium contributions, most covered workers face additional payments when they use health care services, in the form of deductibles and co- payments. The government subsidizes employer-paid health care by exempting employer contributions from taxation as income. The value of this tax subsidy is an estimated $150 billion a year. About 9% of the population purchases individual health care insurance. Government sources cover 27% of the population (80.3 million). In 2006, 47 million people in the U.S. (15.8% of the population) were without health insurance for at least part of the year. Among the uninsured population, nearly 38 million were employment-age adults (ages

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18 to 64), and more than 27 million worked at least part time. About 37% of the uninsured live in households with incomes over $50,000. According to the Census Bureau, 36.7 million of the uninsured are legal U.S citizens. Another 10.2 million are non-citizens, but the Census Bureau does not distinguish in its estimate between legal non-citizens and illegal immigrants. It has been estimated that nearly one fifth of the uninsured population is able to afford insurance, almost one quarter is eligible for public coverage, and the remaining 56% need financial assistance (8.9% of all Americans).

A 2003 study in Health Affairs estimated that uninsured people in the U.S. received approximately $35 billion in uncompensated care in 2001. The study noted that this amount per capita was half what the average insured person received. The study found that various levels of government finance most uncompensated care, spending about $30.6 billion on payments and programs to serve the uninsured and covering as much as 8085 percent of uncompensated care costs through grants and other direct payments, tax appropriations, and Medicare and Medicaid payment add-ons. Most of this money comes from the federal government, followed by state and local tax appropriations for hospitals. Another study by the same authors in the same year estimated the additional annual cost of covering the uninsured (in 2001 dollars) at $34 billion (for public coverage) and $69 billion (for private coverage). These estimates represent an increase in total health care spending of 36 percent and would raise health cares share of GDP by less than one percentage point, the study concluded. Another study published in the same journal in 2004 estimated that the value of health forgone each year because of uninsurance was $65$130 billion and concluded that this figure constitutedWWW.BSSVE.IN "a lower-bound estimate of economic losses resulting from the present level of uninsurance nationally."

7. Commercial

The "fee-for-service" business model is the default legal situation where the patient must pay out-of-pocket in full for all services rendered, similar to other service industries. Insurance payments are a form of cost-sharing and risk management where each individual or their employer pays predictable monthly premiums. This cost-spreading mechanism often picks up much of the cost of health care, but individuals must often pay up-front a minimum part of the total cost (a deductible), or a small part of the cost of every procedure (a copayment). Today, most employer-provided health coverage is provided through managed care organizations, which pay substantially lower prices for health care services than an individual

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patient would be charged if paying out-of-pocket. The defining characteristic of managed care, as distinct from traditional insurance, is selective contracting, meaning that the health plan has contracts with some (selected) health care providers. Selective contracting is the mechanism through which managed care organizations bring their market power to bear in negotiating price reductions from health care providers. Managed care organizations also often employ a variety of "incentive payment" schemes which shift onto the provider some of the risk if the enrollee uses a lot of health care. Capitation, in which the provider is paid a fixed sum to care for the enrollee regardless of how much care the enrollee uses, is an example of an incentive payment system. Many managed care organizations also use a "gatekeeper" model, in which an enrollee's primary care physician must provide a referral before the enrollee will be covered to receive specialist care.

Both managed care organizations and traditional insurers also sometimes make use of non- payment cost control mechanisms, such as requiring prior administrative approval or second opinions before covering high-cost procedures. Managed care organizations include both health maintenance organizations (HMOs) and preferred provider organizations (PPOs). In an HMO, health care is covered only for services delivered by providers (such as doctors or hospitals) in the network with whom the health plan has contracts. A PPO covers health care delivered by either in-network or out-of-network providers, but the enrollee's cost is higher when using out-of-network providers. Defying many analysts' expectations, PPOs have gained market share at the expense of HMOs over the past decade. Just as the more loosely managed PPOs have edged out HMOs, HMOs themselves have also evolved towards less tightly managedWWW.BSSVE.IN models. The first HMOs in the U.S., such as Kaiser Permanente in Oakland, California, and the Health Insurance Plan (HIP) in New York, were "staff-model" HMOs, which owned their own health care facilities and employed the doctors and other health care professionals who staffed them. The name health maintenance organization stems from the idea that the HMO would make it its job to maintain the enrollee's health, rather than merely to treat illnesses. In accordance with this mission, managed care organizations typically cover preventive health care. Within the tightly integrated staff-model HMO, the HMO can develop and disseminate guidelines on cost-effective care, while the enrollee's primary care doctor can act as patient advocate and care coordinator, helping the patient negotiate the complex health care system. Despite a substantial body of research demonstrating that many staff- model HMOs deliver high-quality and cost-effective care, they have steadily lost market share. They have been replaced by more loosely managed networks of providers with whom

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health plans have negotiated discounted fees. It is common today for a physician or hospital to have contracts with a dozen or more health plans, each with different referral networks, contracts with different diagnostic facilities, and different practice guidelines.

8. Public

Many individuals not covered by private insurance are covered by government insurance programs such as Medicare and Medicaid, various state and local programs for the poor, and TRICARE and the Veterans Administration, which provide care to veterans, their families, and survivors through medical centers and clinics. In 2006, Medicaid provided health care coverage for 38.3 million low-income Americans and Medicare provided health care coverage for 40.3 million elderly and disabled Americans. One study estimates that about 25% of the country's uninsured, or roughly another 11 million people, are eligible for government health care programs but unenrolled. However, extending coverage to all who are eligible remains a fiscal challenge. It has been reported that the number of physicians accepting Medicaid has decreased in recent years due to relatively high administrative costs and low reimbursements. In 1997, the federal government also created the State Children's Health Insurance Program (SCHIP), a joint federal-state program to insure children in families that earn too much to qualify for Medicaid but cannot afford health insurance. SCHIP covered 6.6 million children in 2006, but the program is already facing funding shortfalls in many states. The government has also mandated access to emergency care regardless of insurance status and ability to pay through the Emergency Medical Treatment and Labor Act (EMTALA),WWW.BSSVE.IN passed in 1986, but EMTALA is an unfunded mandate. 9. Role of government in health care market

The cost impact of a mixed public-private system is subject to debate. Free-market advocates point out that there is direct correlation between government's health care spending and intervention in the health care market and increases in health care costs. Government intervention contributes to a "dysfunctional system of third-party payments" that removes the patient as a major participant in the financial and medical choices that affect costs. Increased utilization is indeed the primary driver of rising health care costs in the U.S., according to a recent study by PriceWaterhouseCoopers. The study cites numerous causes of increased utilization, including rising consumer demand, new treatments, more intensive diagnostic testing, lifestyle factors, the movement to broader-access plans, and higher-priced

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technologies. The study also mentions cost-shifting from government programs to private payers. Low reimbursement rates for Medicare and Medicaid have increased cost-shifting pressures on hospitals and doctors, who charge higher rates for the same services to private payers, which eventually affects health insurance rates. As an example of how government intervention has had unintended consequences, in 1973, the federal government passed the Health Maintenance Organization Act , which heavily subsidized the HMO business model a model that was in decline prior to such legislative intervention. The law was intended to create market incentives that would lower health care costs, but HMOs have never achieved their cost-reduction potential. Piecemeal market-based reform efforts are complex. One study evaluating current popular market-based reform policy packages concluded that if market- oriented reforms are not implemented on a systematic basis with appropriate safeguards, they have the potential to cause more problems than they solve.

10. Health care debate

According to the Institute of Medicineof the National Academy of Sciences, the United States is the only wealthy, industrialized nation that does not ensure universal coverage. There is currently an ongoing political debate centering aroundquestions of access, efficiency, quality, and sustainability. Whether a government-mandated system of universal health care should be implemented in the U.S. remains a hotly debated political topic, with Americans divided along party lines in their views of the UShealth system and what should be done to improve it. Those in favor of universal health care argue that the large number of uninsured Americans creates direct and hidden costs shared by all, and that extending coverage to all would lower costs and improveWWW.BSSVE.IN quality. Opponents of government mandates or programs for universal health care argue that people should be free to opt out of health insurance and that government programs would require higher taxes, increase bureaucratic inefficiencies, increase utilization, and reduce health care quality. Opponents also claim that the current level of government involvement in US health care contributes to higher costs, and point to free-market solutions to increase efficiency, stimulate innovation, and make consumers rather than third parties more responsible for cost decisions. Both sides of the political spectrum have also looked to more philosophical arguments, debating whether people have a fundamental right to have health care provided to them by their government.

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Topic : Government Regulationprincipal Regulatory Mechanisms

Topic Objective:

At the end of this topic student would be able to:

 Emergency Medical Treatment and Active Labor Act (EMTALA)  Price of prescription drugs  Health care regulation and oversight  Overall system effectiveness  Inefficiencies  Shared costs of the uninsured  Variations in provider practices  Poorly coordinated care  Administrative costs  Coverage gaps  Medical underwriting and the uninsurable  Health disparities among minorities  Racism and health

Definition/Overview:WWW.BSSVE.IN

Regulatory inefficiencies and inequities: The healthcare industry is likely the most heavily regulated industry in the United States. A Cato Institute study suggests that this regulation provides benefits in the amount of $170 billion but costs the public up to $340 billion. The study found that the majority of the cost differential arises from medical malpractice, FDA regulations, and facilities regulations. Part of the cost arises from regulatory requirements that prevent technicians without medical degrees from performing treatment and diagnostic procedures that carry little risk.

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Key Points:

1. Emergency Medical Treatment and Active Labor Act (EMTALA)

EMTALA, enacted by the federal government in 1986, requires that hospital emergency departments treat emergency conditions of all patients regardless of their ability to pay and is considered a critical element in the "safety net" for the uninsured. However, the federal law established no direct payment mechanism for such care. Indirect payments and reimbursements through federal and state government programs have never fully compensated public and private hospitals for the full cost of care mandated by EMTALA. In fact, more than half of all emergency care in the U.S.now goes uncompensated. According to some analyses, EMTALA is an unfunded mandate that has contributed to financial pressures on hospitals in the last 20 years, causing them to consolidate and close facilities, and contributing to emergency room overcrowding. According to the Instituteof Medicine, between 1993 and 2003, emergency room visits in the U.S.grew by 26 percent, while in the same period, the number of emergency departments declined by 425. Hospitals attempt to bill uninsured patients directly under the fee-for-service model, but most such people cannot pay their hospital bills, and escape into bankruptcy when hospitals seek legal process against them. Mentally ill patients present a unique challenge for emergency departments and hospitals. In accordance with EMTALA, mentally ill patients who enter emergency rooms are evaluated for emergency medical conditions. Once mentally ill patients are medically stable, regional mental health agencies are contacted to evaluate them. Patients are evaluated as to whether they are a danger to themselves or others. Those meeting this criterion are admitted to a mental healthWWW.BSSVE.IN facility to be further evaluated by a psychiatrist. Typically, mentally ill patients can be held for up to 72 hours, after which a court order is required.

2. Price of prescription drugs

During the 1990s, the price of prescription drugs became a major issue in American politics as the prices of many new drugs increased exponentially, and many citizens discovered that neither the government nor their insurer would cover the cost of such drugs. In absolute currency, the U.S.spends the most on pharmaceuticals per capita in the world. However, national expenditures on pharmaceuticals accounted for only 12.9% of total healthcare costs, compared to an OECD average of 17.7% (2003 figures). Some 25% of out-of-pocket spending by individuals is for prescription drugs. The U.S. government has taken the position

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(through the Office of the United States Trade Representative) that U.S. drug prices are rising because U.S. consumers are effectively subsidizing costs which drug companies cannot recover from consumers in other countries (because many other countries use their bulk- purchasing power to aggressively negotiate drug prices). The U.S. position is that the governments of such countries should either deregulate their markets or directly remit the difference (between what the companies would earn in an open market versus what they are earning now) to drug companies or to the U.S. government. In turn, those companies would be able to lower prices for U.S. consumers. Currently, the U.S., as a purchaser of pharmaceuticals, negotiates some drug prices but is forbidden by law from negotiating drug prices for the Medicare program.

3. Health care regulation and oversight

There are government institutes such as the Centers for Disease Control and Prevention that identify threats to public health. In addition there are regulatory bodies such as the FDA that identify and approve drugs for medical use and sale. Many health care organizations also voluntarily submit to inspection and certification by the Joint Commission on Accreditation of Hospital Organizations, JCAHO.

A report issued by Public Citizen in April of 2008 found that the number of serious disciplinary actions against physicians by state medical boards declined from 2006 to 2007. This was the third yearly decline in a row. The authors concluded that additional action is needed to improve the oversight provided by state medical boards. The Centers for Medicare and Medicaid ServicesWWW.BSSVE.IN (CMS) publishes an on-line searchable database of performance data on nursing homes. CMS also publishes a list of Special Focus Facilities - nursing homes with "a history of serious quality issues." The Government Accountability Office (GAO), however, has found that state nursing home inspections understate the number of serious nursing home problems that present a danger to residents. The GAO concluded that while CMS oversight has improved, there are still weaknesses in its oversight of nursing homes. The UShas a joint federal/state system for regulating insurance, with the federal government ceding primary responsibility to the states under the McCarran-Ferguson Act. States regulate the content of health insurance policies and often require coverage of specific types of medical services or health care providers. State mandates generally do not apply to the health plans offered by large employers, due to the preemption clause of the Employee Retirement Income Security Act.

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4. Overall system effectiveness

The debate about U.S. health care concerns questions of access, efficiency, and quality purchased by the high sums spent. The World Health Organization (WHO) in 2000 ranked the U.S. health care system first in both responsiveness and expenditure, but 37th in overall performance and 72nd by overall level of health (among 191 member nations included in the study). The WHO study has been criticized by free market advocates because "fairness in financial contribution" was used as an assessment factor, marking down countries with high per-capita private or fee-paying health treatment. One study found that there was little correlation between the WHO rankings for health systems and the satisfaction of citizens using those systems. Some countries given the highest ratings by WHO were ranked poorly by their citizens. Others note that the WHO analysis does reflect system "responsiveness", and argue that this is a superior measure to consumer satisfaction, which is influenced by expectations.

The CIA World Factbook ranked the United States41st in the world for lowest infant mortality rate and 45th for highest total life expectancy. A recent study found that between 1997 and 2003, preventable deaths declined more slowly in the United States than in 18 other industrialized nations. On the other hand, the National Health Interview Survey, released annually by the Centers for Disease Control's National Center for Health Statistics reported that approximately 66% of survey respondents said they were in "excellent" or "very good" health in 2006. According to a 2006 study published by The Lancet, survival rates in the US for certain types of rare cancer are the highest in the world. Recent studies find growing gaps in life expectancyWWW.BSSVE.IN based on income and geography. Life expectancy declined from 1983 to 1999 for women in 180 counties, and for men in 11 counties. Most of the declines occurred in the Deep South, Appalachia, along the Mississippi River, in the Southern Plains and in Texas. The life expectancy gap between counties with the highest and lowest life expectancies grew by 2 years for men and 10 months for women. The gap is growing between rich and poor and by educational level, but narrowing between men and women and by race. A study published in May of 2008 found that the mortality gap between the well-educated and the poorly educated widened significantly between 1993 and 2001 for adults ages 25 through 64. Premature death is increasing for people who drop out of high-school, while death rates are dropping among college graduates. Mortality increased most rapidly for white, female drop- outs, and declined the most for African-American college graduates. While the study did not

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directly examine the underlying causes, the authors speculate that risk factors such as smoking, obesity and high blood pressure may lie behind these disparities. A report released in April of 2008 by the Foundation for Child Development, which studied the period from 1994 through 2006, found mixed results for the health of children in the US. Mortality rates for children ages 1 through 4 dropped by a third, and the percentage of children with elevated blood lead levels dropped by 84 percent. The percentage of mothers who smoked during pregnancy also declined. On the other hand, both obesity and the percentage of low-birth weight babies increased. The authors note that the increase in babies born with low birth weights can be attributed to women delaying childbearing and the increased use of fertility drugs. A poll released in March 2008 by the Harvard School of Public Health and Harris Interactive found that Americans are divided in their views of the US health system, and that there are significant differences by political affiliation. When asked whether the UShas the best health care system or if other countries have better systems, 45% said that the USsystem was best and 39% said that other countries' systems are better. Belief that the USsystem is best was highest among Republicans (68%), lower among independents (40%), and lowest among Democrats (32%). Over half of Democrats (56%) said they would be more likely to support a presidential candidate who advocates making the US system more like those of other countries; 37% of independents and 19% of Republicans said they would be more likely to support such a candidate. 45% of Republicans said that they would be less likely to support such a candidate, compared to 17% of independents and 7% of Democrats.

5. Inefficiencies

Delays in seekingWWW.BSSVE.IN care and increased use of emergency care. Uninsured Americans are less likely to have regular health care and use preventive services. They are more likely to delay seeking care, resulting in more medical crises, which are more expensive than ongoing treatment for such conditions as diabetes and high blood pressure. A 2007 study published in JAMA concluded that uninsured people were less likely than the insured to receive any medical care after an accidental injury or the onset of a new chronic condition. The uninsured with an injury were also twice as likely as those with insurance to have received none of the recommended follow-up care, and a similar pattern held for those with a new chronic condition. Uninsured patients are twice as likely to visit hospital emergency rooms as those with insurance; burdening a system meant for true emergencies with less-urgent care needs. Another recent study by researchers with the American Cancer Society found that individuals

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who lacked private insurance were more likely to be diagnosed with late-stage cancer than those who had such insurance. This was true of both the uninsured as well as those covered by Medicaid. Individuals without private insurance are not receiving optimum care in terms of cancer screening or timely diagnosis and follow-up with health care providers," study authors concluded.

6. Shared costs of the uninsured

The costs of treating the uninsured must often be absorbed by providers as charity care, passed on to the insured via cost shifting and higher health insurance premiums, or paid by taxpayers through higher taxes. A report published by the Kaiser Family Foundation in April of 2008 found that economic downturns place a significant strain on state Medicaid and SCHIP programs. The authors estimated that a 1% increase in the unemployment rate would increase Medicaid and SCHIP enrollment by 1 million, and increase the number uninsured by 1.1 million. State spending on Medicaid and SCHIP would increase by $1.4 billion (total spending on these programs would increase by $3.4 billion). This increased spending would occur at the same time state government revenues were declining. During the last downturn, the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) included federal assistance to states, which helped states avoid tightening their Medicaid and SCHIP eligibility rules. The authors conclude that Congress should consider similar relief for the current economic downturn. 7. Variations inWWW.BSSVE.IN provider practices The treatment given to a patient can vary significantly depending on which health care providers they use. Research suggests that some cost-effective treatments are not used as often as they should be, while other health care services are over-used. Unnecessary treatments increase costs and can cause patients unnecessary anxiety. The use of prescription drugs varies significantly by geographic region. One study has found significant geographic variations in Medicare spending for patients in the last two years of life. These spending levels are associated with the amount of hospital capacity available in each area. Higher spending did not result in patients living longer.

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8. Poorly coordinated care

Primary care doctors are often the point of entry for most patients needing care, but in the fragmented health care system of the U.S., many patients and their providers experience problems with care coordination. For example, a Harris Interactive survey of California physicians found that:

 Four of every ten physicians report that their patients have had problems with coordination of their care in the last 12 months.  More than 60 percent of doctors report that their patients "sometimes" or "often" experience long wait times for diagnostic tests.  Some 20 percent of doctors report having their patients repeats tests because of an inability to locate the results during a scheduled visit.

9. Administrative costs

The health care system in the U.S. has a vast number of players there are hundreds, if not thousands, of insurance companies in the U.S. This system has considerable administrative overhead, far greater than in nationalized, single-payer systems, such as Canada's. An oft- cited study by Harvard MedicalSchool and the Canadian Institute for Health Information determined that some 31% of U.S.health care dollars, or more than $1,000 per person per year, went to health care administrative costs, nearly double the administrative overhead in Canada, on a percentage basis. According to the insurance industry group America's Health Insurance Plans,WWW.BSSVE.IN administrative costs for private health insurance plans have averaged approximately 12 percent of premiums over the last 40 years. There has been a shift in the type and distribution of administrative expenses over that period. The cost of adjudicating claims has fallen, while insurers are spending more on other administrative activities, such as medical management, nurse help lines, and negotiating discounted fees with health care providers. A 2003 study published by the Blue Cross Blue Shield Association also found that health insurer administrative costs were approximately 11% to 12% of premiums, with Blue Cross and Blue Shield plans reporting slightly lower administrative costs, on average, than commercial insurers. For the period 1998 through 2003, average insurer administrative costs declined from 12.9% to 11.6% of premiums. The largest increases in administrative costs were in customer service and information technology, and the largest decreases were in provider services and contracting and in general administration. However, broader studies

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also factor in billing and insurance-related (BIR) costs borne not only by insurers but by physicians and hospitals. One study of these costs in Californiafound that BIR among insurers, physicians, and hospitals represented 20-22% of privately insured spending in Californiaacute care settings.

10. Coverage gaps

Enrollment rules in private and governmental programs result in millions of Americans going without health care coverage, including children. The most recent data available from the U.S. Census Bureau indicates that 47 million Americans (about 15.8% of the total population) had no health insurance coverage at some point during 2006. Most uninsured Americans are working-class persons whose employers do not provide health insurance, and who earn too much money to qualify for one of the local or state insurance programs for the poor, but do not earn enough to cover the cost of enrollment in a health insurance plan designed for individuals. Some states (like California) do offer limited insurance coverage for working-class children, but not for adults; other states do not offer such coverage at all, and so, both parent and child are caught in the notorious coverage "gap." Although EMTALA certainly keeps alive many working-class people who are badly injured, the 1986 law neither requires the provision of preventive or rehabilitative care, nor subsidizes such care, and it does nothing about the difficulties in the American mental health system. Coverage gaps also occur among the insured population one study by the Commonwealth Fund published in Health Affairs estimated that 16 million U.S.adults were underinsured in 2003. The study defined underinsurance as characterized by at least one of the following conditions: annual out-of-pocket medicalWWW.BSSVE.IN expenses totaling 10% or more of income, or 5 percent or more among adults with incomes below 200% of the federal poverty level; or health plan deductibles equaling or exceeding 5% of income. The underinsured were significantly more likely than those with adequate insurance to forgo health care, report financial stress because of medical bills, and experience coverage gaps for such items as prescription drugs. The study found that underinsurance disproportionately affects those with lower incomes 73% of the underinsured in the study population had annual incomes below 200% of the federal poverty level. Another study focusing on the effect of being uninsured found, however, that individuals with private insurance were less likely to be diagnosed with late-stage cancer than either the uninsured or Medicaid beneficiaries. A study examining the effects of health insurance cost-sharing more generally found that chronically ill patients with higher co-payments sought less care for both

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minor and serious symptoms. However, no effect on self-reported health status was observed. The authors concluded that the effect of cost sharing should be carefully monitored. Coverage gaps and affordability also surfaced in a 2007 international comparison by the Commonwealth Fund. Among adults surveyed in theU.S., 37% reported that they had foregone needed medical care in the previous year because of cost; either skipping medications, avoiding seeing a doctor when sick, or avoiding other recommended care. The rate was even higher 42% among those with chronic conditions. The study reported that these rates were well above those found in the other six countries surveyed: Australia, Canada,Germany, the Netherlands, New Zealand, and the UK. The study also found that 19% of U.S.adults surveyed reported serious problems paying medical bills, more than double the rate in the next highest country.

11. Medical underwriting and the uninsurable

In most states in the U.S., people seeking to purchase health insurance directly must undergo medical underwriting. Insurance companies seeking to mitigate the problem of adverse selection and manage their risk pools screen applicants for pre-existing conditions. Insurers may reject some applicants or quote increased rates for those with pre-existing conditions. Diseases that can make an individual uninsurable include serious conditions, such as arthritis, cancer, and heart disease, but also such common ailments as acne, being 20 pounds over or under weight, and old sports injuries. An estimated 5 million of those without health insurance are considered "uninsurable" because of pre-existing conditions. Proponents of medical underwriting argue that it ensures that individual health insurance premiums are kept as low as possible.WWW.BSSVE.IN Critics of medical underwriting believe that it unfairly prevents people with relatively minor and treatable pre-existing conditions from obtaining health insurance.

One large industry survey found that 13 percent of applicants for individual health insurance who went through medical underwriting were denied coverage in 2004. Declination rates increased significantly with age, rising from 5 percent for those under 18 to just under one- third for those aged 60 to 64. Among those who were offered coverage, the study found that 76% received offers at standard premium rates, and 22% were offered higher rates. The frequency of increased premiums also increased with age, so for applicants over 40, roughly half were affected by medical underwriting, either in the form of denial or increased premiums. In contrast, almost 90% of applicants in their 20s were offered coverage, and three-quarters of those were offered standard rates. Seventy percent of applicants age 60-64

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were offered coverage, but almost half the time (40%) it was at an increased premium. The study did not address how many applicants who were offered coverage at increased rates chose to decline the policy. A study conducted by the Commonwealth Fund in 2001 found that, among those aged 19 to 64 who sought individual health insurance during the previous three years, the majority found it unaffordable, and less than a third ended up purchasing insurance. However, this study did not distinguish between consumers who were quoted increased rates due to medical underwriting and those who qualified for standard or preferred premiums. Some states have outlawed medical underwriting as a prerequisite for individually purchased health coverage. These states tend to have the highest premiums for individual health insurance.

12. Health disparities among minorities

In the United States, health disparities are well documented in minority populations such as African Americans, Native Americans, Asian Americans, and Hispanics. When compared to whites, these minority groups have higher incidence of chronic diseases, higher mortality, and poorer health outcomes. Among the disease-specific examples of racial and ethnic disparities in the United States is the cancer incidence rate among African Americans, which is 25% higher than among whites. In addition, adult African Americans and Hispanics have approximately twice the risk as whites of developing diabetes. Minorities also have higher rates of cardiovascular disease, HIV/AIDS, and infant mortality than whites. 13. Racism andWWW.BSSVE.IN health Individual and institutional racism, along with the stigma of inferiority, can adversely affect health for minorities. Racism can also directly affect health in multiple ways. Residence in poor neighborhoods, racial bias in medical care, the stress of experiences of discrimination and the acceptance of the societal stigma of inferiority can have deleterious consequences for health. There is a great deal of research into inequalities in health care. In some cases these inequalities are caused by income disparities that result in lack of health insurance and other barriers to receiving services. In other cases, inequalities in health care reflect a systemic bias in the way medical procedures and treatments are prescribed for different ethnic groups. Raj Bhopal writes that the history of racism in science and medicine shows that people and institutions behave according to the ethos of their times. Nancy Krieger wrote that racism underlies unexplained inequities in health care, including treatment for heart disease, renal

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failure, bladder cancer, and pneumonia. Raj Bhopal writes that these inequalities have been documented in numerous studies. The consistent and repeated findings were that black Americans received less health care than white Americans particularly when the care involved expensive new technology. However, one recent study has found that when minority and white patients use the same hospital, they are given the same standard of care.

Topic : Social Insurance

Topic Objective:

At the end of this topic student would be able to:

 Programs  Differences

Definition/Overview:

Social Insurance: Social insurance is any government-sponsored program with the following four characteristWWW.BSSVE.INics:  the benefits, eligibility requirements and other aspects of the program are defined by statute;  explicit provision is made to account for the income and expenses (often through a trust fund);  it is funded by taxes or premiums paid by (or on behalf of) participants (although additional sources of funding may be provided as well); and  the program serves a defined population, and participation is either compulsory or the program is heavily enough subsidized that most eligible individuals choose to participate.  Social insurance has also been defined as a program where risks are transferred to and pooled by an organization, often governmental, that is legally required to provide certain benefits.



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Key Points:

1. Programs

In the U.S., programs that meet these definitions include Social Security, Medicare, the PBGC program, the railroad retirement program and state-sponsored unemployment insurance programs. The Canada Pension Plan (CCP) is also a social insurance program.

Typical similarities between social insurance programs and private insurance programs include:

 Wide pooling of risks;  Specific definitions of the benefits provided;  Specific definitions of eligibility rules and the amount of coverage provided;  Specific premium, contribution or tax rates required to meet the expected costs of the system.

2. Differences

Typical differences between private insurance programs and social insurance programs include:

2.1 Equity versus Adequacy

Private insurance programs are generally designed with greater emphasis on equity between individualWWW.BSSVE.IN purchasers of coverage, while social insurance programs generally place a greater emphasis on the social adequacy of benefits for all participants.

2.2 Voluntary versus Mandatory Participation

Participation in private insurance programs is often voluntary, and where the purchase of insurance is mandatory, individuals usually have a choice of insurers. Participation in social insurance programs is generally mandatory, and where participation is voluntary, the cost is heavily enough subsidized to ensure essentially universal participation.

2.3 Contractual versus Statutory Rights

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The right to benefits in a private insurance program is contractual, based on an insurance contract. The insurer generally does not have a unilateral right to change or terminate coverage before the end of the contract period (except in such cases as non-payment of premiums). Social insurance programs are not generally based on a contract, but rather on a statute, and the right to benefits is thus statutory rather than contractual. The provisions of the program can be changed if the statute is modified.

2.4 Funding

Individually purchased private insurance generally must be fully funded. Full funding is a desirable goal for private pension plans as well, but is often not achieved. Social insurance programs are often not fully funded, and some argue that full funding is not economically desirable.

In Section 5 of this course you will cover these topics: Comparative Health Care Systems And Health System Reform The Health Economics Of Bads Epidemiology And Economics: Aids In Africa The Tools Of Economic Evaluation WWW.BSSVE.IN

Topic : Comparative Health Care Systems And Health System Reform

Topic Objective:

At the end of this topic student would be able to:

 Financing health care system  Health care has the following characteristics:

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 Health care systems models  Examples in different countries:  Health care has the following characteristics:  Health care systems models  Examples in different countries

Definition/Overview:

Health Care Systems: A health care system is an organization to deliver health care. There are many variations of health care systems around the world.

Goals of Health Care Systems:The goals for health systems, according to the World Health Report 2000 - Health systems: improving performance (WHO, 2000), are good health, responsiveness to the expectations of the population, and fair financial contribution. Duckett (2004) proposed a two dimensional approach to evaluation of health care systems: quality, efficiency and acceptability on one dimension and equity on another.

Key Points:

1. Financing health care system

There are generally five primary methods of funding health care systems: Direct orWWW.BSSVE.IN out-of-pocket payments, General taxation,

Social health insurance,

Voluntary or private health insurance, and

Donations or community health insurance.

One recent study published by the National Bureau of Economic Research found no systematic relationship between the cost efficiency of health care systems and the type of financing used. The author concluded "that almost all financing choices are compatible with efficiency in the delivery of health care.

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2. Health care has the following characteristics:

 The provision of critical health care treatment is often regarded as a basic human right, regardless of whether the individual has the means to paysome treatments cost more than a typical family's life savings.  Health care professionals are bound by law and their oaths of service to provide lifesaving treatment.  Asymmetric information  High risk level

There is a debate (especially strong in the United Statesat present) as to whether these characteristics necessitate public ownership or increased government regulation of the health care industry.

3. Health care systems models

3.1 Models

 Purely private enterprise health care systems are comparatively rare. Where they exist, it is usually for a comparatively well-off subpopulation in a poorer country with a poorer standard of health carefor instance, private clinics for a small, wealthy expatriate population in an otherwise poor country. But there are countries with a majority-private health care system with residual public service (see Medicare, Medicaid).  The other majorWWW.BSSVE.IN models are public insurance systems: o Social security health care model, where workers and their families are insured by the state. o Publicly funded health care model, where the residents of the country are insured by the state and health care workers are employed by the state. (see Italy) o Publicly funded health care model, where the residents of the country are insured by the state and those who provide health care work in private enterprises. (see Canada) o Social health insurance, where the whole population or most of the population is a member of a sickness insurance company.

In almost every country with a government health care system, a parallel private system is allowed to operate. This is sometimes referred to as two-tier health care. The scale, extent, and funding of these private systems is very variable.

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For the application of health care systems in schools see school health services.

4. Examples in different countries:

4.1 Australia

In Australiathe current system, known as Medicare, was instituted in 1984. It coexists with a private health system. Medicare is funded partly by a 1.5% income tax levy (with exceptions for low-income earners), but mostly out of general revenue. An additional levy of 1% is imposed on high-income earners without private health insurance. As well as Medicare, there is a separate Pharmaceutical Benefits Scheme that heavily subsidises prescription medications.

4.2 Canada

Canada has a federally sponsored, publicly funded Medicare system, with most services provided by the private sector. Each province may opt out, though none currently do. Canada's system is known as a single payer system, where basic services are provided by private doctors, (since 2002 they have been allowed to incorporate), with the entire fee paid for by the government at the same rate. Most all family doctors receive a fee per visit. These rates are negotiated between the provincial governments and the province's medical associations, usually on an annual basis. A physician cannot charge a fee for a service that is higher than the negotiated rate - even to patients who are not covered by the publicly WWW.BSSVE.INfunded system - unless he opts out of billing the publicly funded system altogether. Pharmaceutical costs are set at a global median by government price controls. Other areas of health care, such as dentistry and optometry, are wholly private.

4.3 Cuba

Healthcare in Cuba consists of a government-coordinated system that guarantees universal coverage and consumes a lower proportion of the nation's GDP (7.3%) than some highly privatised systems (e.g. USA: 10.2%) (UNDP 2006: Table 6). The system does charge fees in treating elective treatment for patients from abroad, but tourists who fall ill are treated freely in Cuban hospitals. Cubaattracts patients mostly from Latin America and Europeby offering care of comparable quality to a developed nation but at much lower prices. Cuba's own health indicators are the best in Latin America and

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surpass those of the US in some respects (infant mortality rates, underweight babies, HIV infection, immunisation rates, and doctor per population rates).

4.4 Finland

In Finland, public medical services at clinics and hospitals are run by the municipalities (local government) and are funded 76% by taxation, 20% by patients through access charges, and by others 4%. Patient access charges are subject to annual caps. For example GP visits are (11 per visit with annual 33 cap), hospital outpatient treatment (22 per visit), a hospital stay, including food, medical care and medicines (26 per 24 hours, or 12 if in a psychiatric hospital). After a patient has spent 590 per year on public medical services, all treatment and medications thereafter are free. Taxation funding is partly local and partly nationally based. Patients can claim re-imbursement of part of their prescription costs from KELA. Finlandalso has a much smaller private medical sector which accounts for about 14 percent of total health care spending. Only 8% of doctors choose to work in private practice, and some of these also choose to do some work in the public sector. Private sector patients can claim a contribution from KELA towards their private medical costs (including dentistry) if they choose to be treated in the more expensive private sector, or they can join private insurance funds. However, private sector health care is mainly in the primary care sector. There are virtually no private hospitals, the main hospitals being either municipally owned (funded from local taxes) or run by the teaching universities (funded jointly by the municipalities and the national government).

4.5 France WWW.BSSVE.IN

In France, most doctors remain in private practice; there are both private and public hospitals. Social Security consists of several public organizations, distinct from the state government, with separate budgets that refunds patients for care in both private and public facilities. It generally refunds patients 70% of most health care costs, and 100% in case of costly or long-term ailments. Supplemental coverage may be bought from private insurers, most of them nonprofit, mutual insurers. Until recently, social security coverage was restricted to those who contributed to social security (generally, workers or retirees), excluding some poor segments of the population; the government of Lionel Jospin put into place the "universal health coverage". In some systems, patients can also take private

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health insurance, but choose to receive care at public hospitals, if allowed by the private insurer.

France is largely known for providing one of the leading health care systems in the world. In the film Sicko, which portrays the flaws with American health care and emphasizes the success of Canadian, British, Cuban, and French health care, the successes of the French system are noted. Health care, including dentistry and other forms of medicine are completely free at the point of need. In fact, the French hospitals pay their patients back the amount they paid to get to the hospital, such as the cost of fuel or taxis. If a woman has a newborn baby, a government nurse will come to the house daily to do the laundry and cook - for free. Also for a minimal price, the nurse will clean the whole house, so that the mother simply has more time to bond with her baby.

4.6 Germany

Germany has a universal multi-payer system with two main types of health insurance: "State health insurance" (Gesetzliche Krankenversicherung) known as sickness funds and "Private" (Private Krankenversicherung). Compulsory insurance applies to those below a set income level is provided through private non-profit "sickness funds" at common rates for all members, and is paid for with joint employer-employee contributions. Provider compensation rates are negotiated in complex corporatist social bargaining among specified autonomously organized interest groups (e.g. physicians' associations) at the level of federal states (Lnder). The sickness funds are mandated to provide a wide range of coveragesWWW.BSSVE.IN and cannot refuse membership or otherwise discriminate on an actuarial basis. Small numbers of persons are covered by tax-funded government employee insurance or social welfare insurance. Persons with incomes above the prescribed compulsory insurance level may opt into the sickness fund system, which a majority do, or purchase private insurance. Private supplementary insurance to the sickness funds of various sorts is available.

4.7 Ghana

In Ghana, most health care is provided by the government, but hospitals and clinics run by religious groups also play an important role. Some for profit clinics exist, but they provide less than 2% of health services. Health care is very variable through the country.

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The major urban centres are well served, but rural areas often have no modern health care. Patients in these areas either rely on traditional medicine or travel great distances for care.

4.8 Hong Kong

In Hong Kong, both private and public clinics are common, while public hospitals account for the majority of the market.

4.9 India

In India, the hospitals are run by government, charitable trusts and by private organizations. The government hospitals in rural areas are called the primary health centre (PHC)s. Major hospitals are located in district head quarters or major cities. Apart from the modern system of medicine, traditional and indigenous medicinal systems like Ayurvedic and Unani systems are in practice throughout the country. PHC's are existent in most places, due to poor pay and scarcity of resources. Patients generally prefer private health clinics. These days some of the major corporate hospitals are attracting patients from neighboring countries like Pakistan, Middle East and some European countries by providing quality treatment at low cost.

4.10 Israel

In Israel, the publicly funded medical system is universal and compulsory. Payments for the services WWW.BSSVE.INare shared by labor unions and the government.

8.11 Italy

In Italy the public system has the unique feature of paying its doctors a fee per capita per year, a salary system that does not reward repeat visits, testing, and referrals. Italyhas one of the highest doctor per capita ratios at 3.9 doctors per 1,000 patients.

4.12 Japan

In Japan, services are provided either through regional/national public hospitals or through private hospitals/clinics, and patients have universal access to any facility, though hospitals tend to charge higher for those without a referral. Public health insurance covers

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most citizens/residents and pays 70% or more cost for each care and each prescribed drug. Patients are responsible for the remaining 30% (upper limits apply). The insurance system is funded by tax (40%), insurance premiums from each household (35%), and from employers (25%). The monthly insurance premium is 0-50,000 JPY per household (scaled to annual income). Supplementary private health insurance is available only to cover the co-payments or non-covered costs, and usually makes a fixed payment per days in hospital or per surgery performed, rather than per actual expenditure.

4.14 Netherlands

Health care in the Netherlandshas since January 2006 been provided by a system of compulsory insurance backed by a risk equalization program so that the insured are not penalized for their age or health status. This is meant to encourage competition between healthcare providers and insurers. Children under 18 are insured by the government and special assistance is available to those with limited incomes.

4.15 New Zealand

In New Zealand hospitals are public and treat citizens or permanent residents free of charge and are managed by District Health Boards. Under the current Labor coalition governments, 1999 - present, there are plans to make primary health care available free of charge. At present government subsidies exist in health care. This system is funded by taxes. The New Zealand government agency PHARMAC subsides certain pharmaceuticalsWWW.BSSVE.IN depending upon their category. Co-payments exist however these are ignored if the user has a community health services card or high user health card.

8.16 South Africa

In South Africa, parallel private and public systems exist. The public system serves the vast majority of the population, but is chronically under funded and understaffed. The wealthiest 20% of the population uses the private system and are far better served. This division in substantial ways perpetuates racial inequalities created in the pre-apartheid segregation era and apartheid era of the 20th century.

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4.17 Sweden

In Sweden, the publicly funded medical system is comprehensive and compulsory. Physician and hospital services take a small patient fee, but their services are funded through the taxation scheme of the County Councils of Sweden.

4.18 Taiwan

The current health care system in Taiwan, known as National Health Insurance (NHI), was instituted in 1995. NHI is a single-payer compulsory social insurance plan which centralizes the disbursement of health care dollars. The system promises equal access to health care for all citizens, and the population coverage had reached 99% by the end of 2004. NHI is mainly financed through premiums, which are based on the payroll tax, and is supplemented with out-of-pocket payments and direct government funding. In the initial stage, fee-for-service predominated for both public and private providers. Most health providers operate in the private sector and form a competitive market on the health delivery side. However, many health care providers took advantage of the system by offering unnecessary services to a larger number of patients and then billing the government. In the face of increasing loss and the need for cost containment, NHI changed the payment system from fee-for-service to a global budget, a kind of prospective payment system, in 2002. 4.19 United WWW.BSSVE.INKingdom In the United Kingdom there are three separate but co-operating National Health Services of Scotland, Northern Ireland and England& Wales. They provide free physician and hospital services to all permanent residents of the United Kingdom. Hospital staff are salaried employees according to nationally agreed contracts, whilst primary care is largely provided by independent practices, which are paid, again via a nationally agreed contract, according to the number of patients registered with them and the range of additional services offered. Around 86% of prescriptions are provided free across the UK, with free prescriptions covering those who are not of working age (the young and the elderly), or those who satisfy certain criteria such as low income or permanent disabilities. People that pay for prescriptions do not pay the full cost. For example, in 2007, most people will pay a flat fee of 6.85 (10.16, US$13.76) for a single drug prescription regardless of the

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cost (average cost to the health service was 11.10--about 16.70, US$20.40--in 2002). All residents of Wales however, receive free prescriptions as a matter of government policy. Funding for public health care comes from general taxation. Private health services are also available. Private health care continues parallel to the NHS, paid for largely by private insurance. There are no private hospitals providing accident and emergency services. Most ambulance services are publicly run but some private and charity run ambulance services also exist.

4.20 United States

The United Statesis alone among developed nations with the absence of a universal health care system. Healthcare in the U.S.does, however, have significant publicly funded components. Medicare covers some of the health care costs for the elderly and disabled with a historical work record, Medicaid is available for some, but not all of the poor and the State Children's Health Insurance Program cover children of low-income families. The Veterans Health Administration directly provides health care to U.S. military veterans through a nationwide network of government hospitals; while active duty service members, retired service members and their dependents are eligible for benefits through TRICARE. Together, these tax-financed programs cover about 27% of the population and make the government the largest health insurer in the nation. In 2001, only the governments of Icelandand Norwayspent more per capita on healthcare. This care is generally provided by privately owned hospitals or physicians in private practice, but public hospitals are common in older cities. Just fewer than 60% of Americans receive health insuranceWWW.BSSVE.IN through an employer, although this number is declining and the employee's expected contribution to these plans varies widely and is increasing as costs escalate. A significant and growing number of people cannot obtain health insurance through their employer or are unable to afford individual coverage. Currently, the U.S. Census Bureau estimates that 16% of the U.S.population, or 47 million people, are uninsured. More than a third of the uninsured are in households earning $50,000 or more per year. Some uninsured are people under age 30 who don't believe they need to purchase health care; others are eligible for Medicaid but have not applied. The cost of medicines is frequently not covered by insurance, and some U.S.citizens travel to Canadaand Mexicofor drug purchases at prices far below those in their home areas. A few states have taken serious steps toward universal health care coverage, most notably

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Minnesota and Massachusetts, with a recent example being the Massachusetts 2006 Health Reform Statute. Other states, while not attempting to insure all of their residents, cover large numbers of people by reimbursing hospitals and other health-care providers using what is generally characterized as a charity care scheme; New Jersey is perhaps the best example of a state that employs the latter strategy. It is typical for most forms of general liability insurance sold in the U.S., such as home, automobile, or business insurance to have a significant premium allocation for medical damages. The U.S. legal system, which has the highest number of attorneys per capita of any country in the world, is available to assist in proving liability and collecting the money for medical bills from such insurances. The Indian Health Service provides public funded care for indigenous peoples. Employer benefit based health insurance remains quite common with larger employers. Workers injured on the job are covered by government mandated worker compensation insurance and wage replacementbenefits. These benefits vary considerably state-to-state and employers bear the cost of this insurance. Businesses with considerable risks, such as bridge-building, mining, or meat processing face far higher worker compensation insurance costs than do office based clerical businesses. Although the Medical colleges and research institutes form a backbone structure for providing healthcare, the private hospitals and nursing homes also are becoming an increasingly necessary part of the healthcare structure in the country.

WWW.BSSVE.IN Topic : The Health Economics Of Bads

Topic Objective:

At the end of this topic student would be able to:

 Varied forms of addiction  Physical dependency  Psychological dependency  Addiction and drug control legislation

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 Methods of care  Diverse explanations

Definition/Overview:

In medical terminology, addictionis a state in which the body relies on a substance for normal functioning and develops physical dependence. When this substance is suddenly removed, it will cause withdrawal, a characteristic set of signs and symptoms. Addiction is generally associated with increased drug tolerance. In medical terms, addiction is not necessarily associated with substance abuse since addiction can result from using medicine as prescribed by a doctor. However, common usuage of the term addiction has spread to include a wider range of meanings, including ones associated with psychological dependence. It is used to describe a recurring compulsion by an individual to engage in some specific activity, despite harmful consequences to the individual's health, mental state or social life. The term is often reserved for substance abuse problems or drug addictions but it is sometimes applied to other compulsions, such as problem gambling, and computer addiction. Factors that have been suggested as causes of addiction include genetic, biological/pharmacological, spiritual and social factors.

Key Points:

1. Varied forms of addiction In the United States,WWW.BSSVE.IN physical dependence, abuse of, and withdrawal from drugs and other substances is outlined in the Diagnostic and Statistical Manual of Mental Disorders (DSM-IV TR). It doesnt use the word 'addiction' at all. It has instead a section about Substance dependence:

 "Substance dependence When an individual persists in use of alcohol or other drugs despite problems related to use of the substance, substance dependence may be diagnosed. Compulsive and repetitive use may result in tolerance to the effect of the drug and withdrawal symptoms when use is reduced or stopped. This, along with Substance Abuse are considered Substance Use Disorders..."

Terminology has become quite complicated in the field. {{Pharmacologist]]s continue to speak of addiction from a physiologic standpoint (some call this a physical dependence);

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psychiatrists refer to the disease state as psychological dependence; most other physicians refer to the disease as addiction. The field of psychiatry is now considering, as they move from DSM-IV to DSM-V, transitioning from "substance dependence" to "addiction" as terminology for the disease state. The medical community now makes a careful theoretical distinction between physical dependence (characterized by symptoms of withdrawal) and psychological dependence (or simply addiction). Addiction is now narrowly defined as "uncontrolled, compulsive use"; if there is no harm being suffered by, or damage done to, the patient or another party, then clinically it may be considered compulsive, but to the definition of some it is not categorized as 'addiction'. In practice, the two kinds of addiction are not always easy to distinguish. Addictions often have both physical and psychological components. There is also a lesser known situation called pseudo-addiction. (Weissman and Haddox, 1989) A patient will exhibit drug-seeking behavior reminiscent of psychological addiction, but they tend to have genuine pain or other symptoms that have been undertreated. Unlike true psychological addiction, these behaviors tend to stop when the pain is adequately treated. The obsolete term physical addictionis deprecated, because of its connotations. In modern pain management with opioids physical dependence is nearly universal. While opiates are essential in the treatment of acute pain, the benefit of this class of medication in chronic pain is not well proven. Clearly, there are those who would not function well without opiate treatment; on the other hand, many states are noting significant increases in non- intentional deaths related to opiate use. High-quality, long-term studies are needed to better delineate the risks and benefits of chronic opiate use. 2. Physical dependencyWWW.BSSVE.IN Physical dependence on a substance is defined by the appearance of characteristic withdrawal symptoms when the substance is suddenly discontinued. Opiates, benzodiazepines, barbiturates, alcohol and nicotine induce physical dependence. On the other hand, some categories of substances share this property and are still not considered addictive: cortisone, beta-blockers and most antidepressants are examples. So, while physical dependency can be a major factor in the psychology of addiction and most often becomes a primary motivator in the continuation of an addiction, the initial primary attribution of an addictive substance is usually its ability to induce pleasure, although with continued use the goal is not so much to induce pleasure as it is to relieve the anxiety caused by the absence of a given addictive substance, causing it to become used compulsively. An example of this is nicotine; A

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cigarette can be described as pleasurable, but is in fact fulfilling the physical addiction of the user, and therefore, is achieving pleasurable feelings relative to his/her previous state of physical withdrawal. Further, the physical dependency of the nicotine addict on the substance itself becomes an overwhelming factor in the continuation of use.

Some substances induce physical dependence or physiological tolerance - but not addiction - for example many laxatives, which are not psychoactive; nasal decongestants, which can cause rebound congestion if used for more than a few days in a row; and some antidepressants, most notably venlafaxine, paroxetine and sertraline, as they have quite short half-lives, so stopping them abruptly causes a more rapid change in the neurotransmitter balance in the brain than many other antidepressants. Many non-addictive prescription drugs should not be suddenly stopped, so a doctor should be consulted before abruptly discontinuing them. The speed with which a given individual becomes addicted to various substances varies with the substance, the frequency of use, the means of ingestion, the intensity of pleasure or euphoria, and the individual's genetic and psychological susceptibility. Some people may exhibit alcoholic tendencies from the moment of first intoxication, while most people can drink socially without ever becoming addicted. Opioid dependent individuals have different responses to even low doses of opioids than the majority of people, although this may be due to a variety of other factors, as opioid use heavily stimulates pleasure-inducing neurotransmitters in the brain. Nonetheless, because of these variations, in addition to the adoption and twin studies that have been well replicated, much of the medical community is satisfied that addiction is in part genetically moderated. That is, one's genetic makeupWWW.BSSVE.IN may regulate how susceptible one is to a substance and how easily one may become psychologically attached to a pleasurable routine. Eating disorders are complicated pathological mental illnesses and thus are not the same as addictions described in this article. Eating disorders, which some argue are not addictions at all, are driven by a multitude of factors, most of which are highly different than the factors behind addictions described in this article.

3. Psychological dependency

Psychological dependency is a dependency of the mind, and leads to psychological withdrawal symptoms (such as cravings, irritability, insomnia, depression, anorexia, etc). Addiction can in theory be derived from any rewarding behaviour, and is believed to be strongly associated with the dopaminergic system of the brain's reward system (as in the case

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of cocaine and amphetamines). Some claim that it is a habitual means to avoid undesired activity, but typically it is only so to a clinical level in individuals who have emotional, social, or psychological dysfunctions (psychological addiction is defined as such), replacing normal positive stimuli not otherwise attained. It is considered possible to be both psychologically and physically dependent at the same time. Some doctors, and especially scientists in related fields, make little or no distinction between the two types of addiction, since the result, substance abuse, is the same, and in terms of scientific as opposed to magical thinking, the "psychological" dependence is entirely due to physical effects of the drug on the brain. Psychological dependence does not have to be limited only to substances; even activities and behavioural patterns can be considered addictions, if they become uncontrollable, e.g. gambling, Internet addiction, computer addiction, sexual addiction / pornography addiction, reading, eating, self-harm, vandalism, drug addiction or work addiction.

4. Addiction and drug control legislation

Most countries have legislation which brings various drugs and drug-like substances under the control of licensing systems. Typically this legislation covers any or all of the opiates, amphetamines, cannabinoids, cocaine, barbiturates, hallucinogens (tryptamines, LSD, phencyclidine(PCP), psilocybin) and a variety of more modern synthetic drugs, and unlicensed production, supply or possession may be a criminal offense. Usually, however, drug classification under such legislation is not related simply to addictiveness. The substances covered often have very different addictive properties. Some are highly prone to cause physical dependWWW.BSSVE.INency, whilst others rarely cause any form of compulsive need whatsoever. Typically nicotine (in the form of tobacco) is regulated extremely loosely, if at all, although it is well-known as one of the most addictive substances ever discovered. Also, although the legislation may be justifiable on moral grounds to some, it can make addiction or dependency a much more serious issue for the individual. Reliable supplies of a drug become difficult to secure as illegally produced substances may have contaminants. Withdrawal from the substances or associated contaminants can cause additional health issues and the individual becomes vulnerable to both criminal abuse and legal punishment. Criminal elements that can be involved in the profitable trade of such substances can also cause physical harm to users.

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5. Methods of care

Early editions of the American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders (DSM) described addiction as a physical dependency to a substance that resulted in withdrawal symptoms in its absence. Recent editions, including DSM-IV, have moved toward a diagnostic instrument that classifies such conditions as dependency, rather than addiction. The American Society of Addiction Medicine recommends treatment for people with chemical dependency based on patient placement criteria (currently listed in PPC-2), which attempt to match levels of care according to clinical assessments in six areas, including:

Acute intoxication and/or withdrawal potential

Biomedical conditions or complications

Emotional/behavioral conditions or complications

Treatment acceptance/resistance

Relapse potential

Recovery environment

Some medical systems,WWW.BSSVE.IN including those of at least 15 states of the United States, refer to an Addiction Severity Index to assess the severity of problems related to substance use. The index assesses problems in six areas: medical, employment/support, alcohol and other drug use, legal, family/social, and psychiatric.

While addiction or dependency is related to seemingly uncontrollable urges, and arguably could have roots in genetic predispositions, treatment of dependency is conducted by a wide range of medical and allied professionals, including Addiction Medicine specialists, psychiatrists, and appropriately trained nurses, social workers, and counselors. Early treatment of acute withdrawal often includes medical detoxification, which can include doses of anxiolytics or narcotics to reduce symptoms of withdrawal. An experimental drug, ibogaine, is also proposed to treat withdrawal and craving. Alternatives to medical

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detoxification include acupuncture detoxification. In chronic opiate addiction, a surrogate drug such as methadone is sometimes offered as a form of opiate replacement therapy. But treatment approaches universal focus on the individual's ultimate choice to pursue an alternate course of action. Therapists often classify patients with chemical dependencies as either interested or not interested in changing. Treatments usually involve planning for specific ways to avoid the addictive stimulus, and therapeutic interventions intended to help a client learn healthier ways to find satisfaction. Clinical leaders in recent years have attempted to tailor intervention approaches to specific influences that affect addictive behavior, using therapeutic interviews in an effort to discover factors that led a person to embrace unhealthy, addictive sources of pleasure or relief from pain.

Treatment Modality Matrix Behavioral Intervention Goals Pattern Low self- Relationship Increase self esteem, therapy, client esteem, reduce anxiety, centered hostility and verbal approach anxiety hostility Defective Cognitive personal restructuring constructs, including Insight ignorance of directive and WWW.BSSVE.INinterpersonal group therapies means Focal anxiety Change such as fear Desensitization response to of crowds same cue Aversive Undesirable conditioning, behaviors, Eliminate or operant lacking replace conditioning, appropriate behavior counter behaviors conditioning

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Lack of Provide Have client act information information on information Organizational intervention, Difficult Remove cause environmental social of social manipulation, circumstances difficulty family counseling Increase Poor social Sensitivity interpersonal performance, training, repertoire, rigid communication desensitization interpersonal training, group to group behavior therapy functioning Protect from Grossly society, Medical bizarre prepare for referral behavior further treatment Adapted from: Essentials of Clinical Dependency Counseling, Aspen Publishers WWW.BSSVE.IN[Table 1: Treatment modality matrix] From the applied behavior analysis literature and the behavioral psychology literature several evidenced based intervention programs have emerged (1) behavioral maritial therapy (2) community reinforcement approach (3) cue exposure therapy and (4) contingency management strategies. In addition, the same author suggest that Social skills training adjunctive to inpatient treatment of alcohol dependence is probably efficacious.

6. Diverse explanations

Several explanations (or "models") have been presented to explain addiction. These divide, more or less, into the models which stress biological or genetic causes for addiction, and those which stress social or purely psychological causes. Of course there are also many

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models which attempt to see addiction as both a physiological and a psycho-social phenomenon.

The disease model of addiction holds that addiction is a disease, coming about as a result of either the impairment of neurochemical or behavioral processes, or of some combination of the two. Within this model, addictive disease is treated by specialists in Addiction Medicine. Within the field of medicine, the American Medical Association, National Association of Social Workers, and American Psychological Association all have policies which are predicated on the theory that addictive processes represent a disease state. Most treatment approaches, as well, are based on the idea that dependencies are behavioral dysfunctions, and, therefore, contain, at least to some extent, elements of physical or mental disease. Organizations such as the American Society of Addiction Medicine believe the research-based evidence for addiction's status as a disease is overwhelming.

The pleasure model proposed by Professor Nils Bejerot. Addiction "is an emotional fixation (sentiment) acquired through learning, which intermittently or continually expresses itself in purposeful, stereotyped behavior with the character and force of a natural drive, aiming at a specific pleasure or the avoidance of a specific discomfort." "The pleasure mechanism may be stimulated in a number of ways and give rise to a strong fixation on repetitive behavior. Stimulation with drugs is only one of many ways, but one of the simplest, strongest,and often also the most destructive" "If the pleasure stimulation becomes so strong that it captivates an individualWWW.BSSVE.IN with the compulsion and force characteristic of natural drives, then there exists...an addiction" The pleasure model is used as one of the reason for zero tolerance for use of illicit drugs

The genetic model posits a genetic predisposition to certain behaviors. It is frequently noted that certain addictions "run in the family," and while researchers continue to explore the extent of genetic influence, many researchers argue that there is strong evidence that genetic predisposition is often a factor in dependency.

The experiential model devised by Stanton Peele argues that addictions occur with regard to experiences generated by various involvements, whether drug-induced or not. This model is in opposition to the disease, genetic, and neurobiological

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approaches. Among other things, it proposes that addiction is both more temporary orsituational than the disease model claims, and is often outgrown through natural processes.

The opponent-process model generated by Richard Soloman states that for every psychological event A will be followed by its opposite psychological event B. For example, the pleasure one experiences from heroin is followed by an opponent process of withdrawal, or the terror of jumping out of an airplane is rewarded with intense pleasure when the parachute opens. This model is related to the opponent process color theory. If you look at the color red then quickly look at a gray area you will see green. There are many examples of opponent processes in the nervous system including taste, motor movement, touch, vision, and hearing. Opponent-processes occurring at the sensory level may translate "down-stream" into addictive or habit-forming behavior.

The allostatic (stability through change) model generated by George Koob and Michel LeMoal is a modification of the opponent process theory where continued use of a drug leads to a spiralling of uncontrolled use, negative emotional states and withdrawal and a shift into use to new allostatic set point which is lower than that maintained before use of the drug.

The cultural model recognizes that the influence of culture is a strong determinant of whether or not individuals fall prey to certain addictions. For example, alcoholism is rareWWW.BSSVE.IN among Saudi Arabians, where obtaining alcohol is difficult and using alcohol is prohibited. In North America, on the other hand, the incidence of gambling addictions soared in the last two decades of the 20th century, mirroring the growth of the gaming industry. Half of all patients diagnosed as alcoholic are born into families where alcohol is used heavily, suggesting that familiar influence, genetic factors, or more likely both, play a role in the development of addiction. What also needs to be noted is that when people don't gain a sense of moderation through their development they can be just as likely, if not more, to abuse substances than people born into alcoholic families.

The moral model states that addictions are the result of human weakness, and are defects of character. Those who advance this model do not accept that there is any

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biological basis for addiction. They often have scant sympathy for people with serious addictions, believing either that a person with greater moral strength could have the force of will to break an addiction, or that the addict demonstrated a great moral failure in the first place by starting the addiction. The moral model is widely applied to dependency on illegal substances, perhaps purely for social or political reasons, but is no longer widely considered to have any therapeutic value. Elements of the moral model, especially a focus on individual choices, have found enduring roles in other approaches to the treatment of dependencies.

The habit model proposed by Thomas Szasz questions the very concept of "addiction." He argues that addiction is a metaphor, and that the only reason to make the distinction between habit and addiction "is to persecute somebody." Cf also the life-process model of addiction.

Finally, the blended model attempts to consider elements of all other models in developing a therapeutic approach to dependency. It holds that the mechanism of dependency is different for different individuals, and that each case must be considered on its own merits.

The development of addiction is thought to involve a simultaneous process of 1) increased focus on and engagement in a particular behavior and 2) the attenuation or "shutting down" of other behaviors. For example, under certain experimental circumstances such as social deprivation and boredom, animals allowed the unlimited ability to self-administer certain psychoactive drugsWWW.BSSVE.IN will show such a strong preference that they will forgo food, sleep, and sex for continued access. The neuro-anatomical correlate of this is that the brain regions involved in driving goal-directed behavior grow increasingly selective for particular motivating stimuli and rewards, to the point that the brain regions involved in the inhibition of behavior can no longer effectively send "stop" signals. A good analogy is to imagine flooring the gas pedal in a car with very bad brakes. In this case, the limbic system is thought to be the major "driving force" and the orbitofrontal cortex is the substrate of the top-down inhibition.

A specific portion of the limbic circuit known as the mesolimbic dopaminergic system is hypothesized to play an important role in translation of motivation to motor behavior- and reward-related learning in particular. It is typically defined as the ventral tegmental area

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(VTA), the nucleus accumbens, and the bundle of dopamine-containing fibers that are connecting them. This system is commonly implicated in the seeking out and consumption of rewarding stimuli or events, such as sweet-tasting foods or sexual interaction. However, its importance to addiction research goes beyond its role in "natural" motivation: while the specific site or mechanism of action may differ, all known drugs of abuse have the common effect in that they elevate the level of dopamine in the nucleus accumbens. This may happen directly, such as through blockade of the dopamine re-uptake mechanism. It may also happen indirectly, such as through stimulation of the dopamine-containing neurons of the VTA that synapse onto neurons in the accumbens. The euphoric effects of drugs of abuse are thought to be a direct result of the acute increase in accumbal dopamine.

The human body has a natural tendency to maintain homeostasis, and the central nervous system is no exception. Chronic elevation of dopamine will result in a decrease in the number of dopamine receptors available in a process known as downregulation. The decreased number of receptors changes the permeability of the cell membrane located post-synaptically, such that the post-synaptic neuron is less excitable- i.e.: less able to respond to chemical signaling with an electrical impulse, or action potential. It is hypothesized that this dulling of the responsiveness of the brain's reward pathways contributes to the inability to feel pleasure, known as anhedonia, often observed in addicts. The increased requirement for dopamine to maintain the same electrical activity is the basis of both physiological tolerance and withdrawal associated with addiction. Downregulation can be classically conditioned. If a behavior consistently occurs in the same environment or contingently with a particular cue, the brain will adjustWWW.BSSVE.IN to the presence of the conditioned cues by decreasing the number of available receptors in the absence of the behavior. It is thought that many drug overdoses are not the result of a user taking a higher dose than is typical, but rather that the user is administering the same dose in a new environment.

In cases of physical dependency on depressants of the central nervous system such as opioids, barbiturates, or alcohol, the absence of the substance can lead to symptoms of severe physical discomfort. Withdrawal from alcohol or sedatives such as barbiturates or benzodiazepines (valium-family) can result in seizures and even death. By contrast, withdrawal from opioids, which can be extremely uncomfortable, is rarely if ever life-threatening. In cases of dependence and withdrawal, the body has become so dependent on high concentrations of the particular chemical that it has stopped producing its own natural versions (endogenous

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ligands) and instead produces opposing chemicals. When the addictive substance is withdrawn, the effects of the opposing chemicals can become overwhelming. For example, chronic use of sedatives (alcohol, barbiturates, or benzodiazepines) results in higher chronic levels of stimulating neurotransmitters such as glutamate. Very high levels of glutamate kill nerve cells, a phenomenon called excitatory neurotoxicity.

Topic : Epidemiology And Economics: Aids In Africa

Topic Objective:

At the end of this topic student would be able to:

 Measuring the epidemic  Access to treatment  East-central Africa  West Africa  Southern Africa  Impacts of the AIDS Epidemic  Spawning new epidemicsWWW.BSSVE.IN in Africa and Abroad

Definition/Overview:

The HIV/AIDS: The HIV/AIDS epidemics spreading through the countries of Sub-saharan Africa are highly varied. Although it is not correct to speak of a single African epidemic, Africa is without doubt the region most affected by the virus. Inhabited by just over 12% of the world's population, Africais estimated to have 100% of the AIDS-infected population. Much of the deadliness of the epidemic in Sub-Saharan Africa has to do with a deadly synergy between HIV and Tuberculosis. In fact, Tuberculosis is the world's greatest infectious killer of women of reproductive age and the leading cause of death among people with HIV/AIDS.

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In Southern Africa, several factors contribute to the spread of the HIV virus. For one, a stigma is attached to admitting to HIV infection and to using condoms. For another, many deny that the HIV virus causes AIDS: Thabo Mbeki and Robert Mugabe have both suggested AIDS stems from poverty rather than HIV infection. And finally, many myths are attached to the use of condoms, such as the ideas that a conspiracy wants to limit the growth of the African population and that condoms stifle the traditional power of the man in his community.

In the 35 African nations with the highest prevalence, average life expectancy is 48.3 years6.5 years less than it would be without the disease. For the eleven countries in Africawith prevalence rates above 13%, life expectancy is 47.7 years11.0 years less than would be expected without HIV/AIDS. Although many governments in sub-Saharan Africa denied that there was a problem for years, they have now begun to work toward solutions.

Health spending in Africa has never been adequate, either before or after independence. The health care systems inherited from colonial powers were oriented toward curative treatment rather than preventative programs. Strong prevention programs are the cornerstone of effective national responses to AIDS, and the required changes in the health sector have presented huge challenges. Lack of money is an obvious challenge, although a great deal of aid is distributed throughout developing countries with high HIV/AIDS rates. Response to the epidemic is also hampered by lack of infrastructure, corruption within both donor agencies and government agencies, foreign donors not coordinating with local government and misguided resources.WWW.BSSVE.IN Key Points:

1. Measuring the epidemic

Prevalence measures include everyone living with HIV and AIDS, and present a delayed representation of the epidemic by aggregating the HIV infections of many years. Incidence, in contrast, measures the number of new infections, usually over the previous year. There is no practical, reliable way to assess incidence in sub-Saharan Africa. Prevalence in 1524 year old pregnant women attending antenatal clinics is sometimes used as an approximation; these measurements are called serosurveys.

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Health units that conduct serosurveys rarely operate in remote rural communities and the data collected also does not measure people who seek alternate healthcare. And extrapolating national data from antenatal surveys relies on assumptions which may not hold across all regions and at different stages in an epidemic.

Recent national population or household-based surveys, collecting data from both sexes, pregnant and non-pregnant women and rural and urban areas, have adjusted the recorded national prevalence levels for several countries in Africaand elsewhere. These too, are not perfect: People may not participate in household surveys because they fear they may be HIV positive and do not want to know their test results. Household surveys also exclude migrant labourers, who are a high risk group. Thus, there may be significant disparities between official figures and actual HIV prevalence in some countries.

2. Access to treatment

"Treatment is technically feasible in every part of the world. Even the lack of infrastructure is not an excuseI don't know a single place in the world where the real reason AIDS treatment is unavailable is that the health infrastructure has exhausted its capacity to deliver it. It's not knowledge that's the barrier. It's political will." Peter Piot, Executive Director of UNAIDS. New anti-retroviral drugs (ARVs) can slow down and even reverse the progression of HIV infection, delaying the onset of AIDS by twenty years or more. Because of their high cost ($10,000 to $15,000 USD per person per year (pppy) in the West for patent drugs and approximately $800 USD pppy in some African countries for generic drugs), only a few of the 6 million peopleWWW.BSSVE.IN in developing countries whoneed ARV treatment have access to medication. Nevertheless, access to ARV therapy has increased more than eightfold since the end of 2003, with about 810,000 people (13.5 per cent of the 6 million in need) on the treatment.

ARVs play a central role in prevention as well. When treatments are known to be available, people are more likely to come forward for testing and well as more likely to adopt lower risk behaviours. ARVs also reduce the amount of the HIV virus in the blood, thus reducing the risk of further transmission. Patients who start HIV treatment generally have to continue taking medications for the rest of their lives. In areas where drug therapy is expensive, some people must interrupt their treatment when they were unable to afford medication. Drug- resistant strains of HIV have been observed in such areas. The key factor in the expense of

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ARVs is their patent status, which allows drug companies to recoup research costs and turn a profit, enabling the development of new drugs. International aid organisations such as VSO, Oxfam and Mdecins Sans Frontires have questioned whether the revenues generated by ARVs really tally with research costs. Generic copies of patented ARV drugs are supplied by drug manufacturers in India, South Africa, Brazil,Thailand, and the People's Republic of China. Because fees are not paid to the patent holders, the drugs can be distributed at low prices in developing countries. Generic production competition and 'price offers' (voluntary donations by companies) have forced patent holders to reduce their prices.

ARV patients need regular testing of viral load and CD4 cell count. This requires expensive laboratory equipment and good healthcare logistics. These costs drive the price of generic ARV therapy in African countries up from under $140 USD pppy for the drugs alone to approximately $800 USD pppy when done according to Western standards. For many Africans, living below the poverty threshold of a $2 USD / day, free (government or NGO- funded) treatment remains the only option. The World Health Organisation's 3 by 5 initiative aimed to provide three million people with ARV treatment by the end of 2005. International aid organisations have lobbied for an expansion of generic production in developing countries, for immediate short term and stable, predictable long term financing of the 3 by 5 initiative. The United States AIDS initiative, PEPFAR, is focusing two thirds of its resources on AIDS in Africa. Starting in 2004, expenditures rose from $2.3B world-wide to $3.3B in 2006. A funding level of $4B was requested for 2007.

The DREAM ("Drug Resources Enhancement against AIDS and Malnutrition", formerly "Drug ResourceWWW.BSSVE.IN Enhancement against AIDS in Mozambique") initiative promoted by the Community of Sant'Egidio has given access to free ARV treatment with generic HAART drugs to the poor on a large scale. So far, 5,000 people are receiving ARV treatment, especially in Mozambique, but the program is also being built up in Malawi,Guinea, Tanzania and other countries. The program includes regular blood testing according to European standards. It is linked with nutrition and sanitation programs run by volunteers. The compliance rate is 94 per cent.

3. East-central Africa

In this article, East and central Africa consists of Uganda, Kenya, Tanzania, Democratic Republic of Congo, the CongoRepublic, Gabon,Equatorial Guinea, the Central African

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Republic, Rwanda, Burundiand Ethiopia and Eritrea on the Horn of Africa. In 1982, Ugandawas the first state in the region to declare HIV cases. This was followed by Kenya in 1984 and Tanzania in 1985.

Country Adult prevalence Total HIV Deaths 2003 Tanzania 8.8% 1,500,000 160,000 Kenya 6.7% 1,100,000 150,000 Congo 4.9% 80,000 9,700 Ethiopia 4.4%* 1,400,000 120,000 Congo DR 4.2% 1,000,000 100,000 Uganda 4.1% 450,000 78,000 Eritrea 2.7% 55,000 6,300

[Table 1: HIV in East-central Africa (Source: UNAIDS)]

Some areas of East Africa are beginning to show substantial declines in the prevalence of HIV infection. In the early 1990s, 13% of Ugandan residents were HIV positive; This has now fallen to 4.1% by the end of 2003. Evidence may suggest that the tide may also be turning in Kenya: prevalence fell from 13.6% in 19971998 to 9.4% in 2002. Data from Ethiopia and Burundi are also hopeful. HIV prevalence levels still remain high, however, and it is too early to claim that these are permanent reversals in these countries' epidemics. Most governmentsWWW.BSSVE.IN in the region established AIDS education programmes in the mid-1980s in partnership with the World Health Organization and international NGOs. These programmes commonly taught the 'ABC' of HIV prevention: a combination of abstinence (A), fidelity to your partner (Be faithful) and condom use (C). The efforts of these educational campaigns appear now to be bearing fruit. In Uganda, awareness of AIDS is demonstrated to be over 99% and more than three in five Ugandans can cite two or more preventative practices. Youths are also delaying the age at which sexual intercourse first occurs.

There are no non-human vectors of HIV infection. The spread of the epidemic across this region is closely linked to the migration of labour from rural areas to urban centres, which generally have a higher prevalence of HIV. Labourers commonly picked up HIV in the towns and cities, spreading it to the countryside when they visited their home. Empirical evidence

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brings into sharp relief the connection between road and rail networks and the spread of HIV. Long distance truck drivers have been identified as a group with the high-risk behaviour of sleeping with prostitutes and a tendency to spread the infection along trade routes in the region. Infection rates of up to 33% were observed in this group in the late 1980s in Uganda, Kenyaand Tanzania.

4. West Africa

For the purposes of this discussion, Western Africa shall include the coastal countries of Mauritania, Senegal, The Gambia, Cape Verde,Guinea-Bissau, Guinea, Sierra Leone, Liberia,Cte d'Ivoire, Ghana, Togo,Benin, Nigeria and the landlocked states of Mali, Burkina Fasoand Niger.

Country Adult prevalence Total HIV Deaths 2005

Cote D'Ivoire 7.1% 750,000 65,000

Liberia 5.9% 100,000 72,000

Nigeria 5.4% 3,600,000 310,000

Guinea-Bissau 3.8% 32,000 2,700

Togo 3.2% 110,000 9,100

Gambia 2.4% 20,000 1,300 WWW.BSSVE.INGhana 2.3% 320,000 29,000 Burkina Faso 2.0% 150,000 12,000

Benin 1.8% 87,000 9,600

Mali 1.7% 130,000 11,000

Sierra Leone 1.6% 48,000 4,600

Guinea 1.5% 85,000 7,100

Niger 1.1% 79,000 7,600

Senegal 0.8% 44,000 35,00

Mauritania 0.7% 12,000 <1,000

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[Table 2: Death percentage]

The region has generally high levels of infection of both HIV-1 and HIV-2. The onset of the HIV epidemic in West Africa began in 1985 with reported cases in Cote d'Ivoire, Beninand Mali.Nigeria, Burkina Faso, Ghana,Cameroon, Senegal and Liberia followed in 1986. Sierra Leone, Togo and Niger in 1987; Mauritiana in 1988; The Gambia, Guinea-Bissau, and Guineain 1989; and finally Cape Verde in 1990. HIV prevalence in West Africa is lowest in Chad,Niger, Mali, Mauritania and highest in Burkina Faso, Cte d'Ivoire, and Nigeria. Nigeria has the second largest HIV prevalence in Africa after South Africa, although the infection rate (number of patients relative to the entire population) based upon Nigeria's estimated population is much lower, generally believed to be well under 7%, as opposed to South Africa's which is well into the double-digits (nearer 30%). The main driver of infection in the region is commercial sex. In the Ghanaian capital Accra, for example, 80% of HIV infections in young men had been acquired from women who sell sex. In Niger, the adult national HIV prevalence was 1% in 2003, yet surveys of sex workers in different regions found a HIV infection rate of between 9 and 38%.

5. Southern Africa

In the mid-1980s, HIV and AIDS were virtually unheard of in Southern Africa - it is now the worst-affected region in the world. There has been no sign of overall national decline in HIV/AIDS in any of the eleven countries: Angola, Namibia,Zambia, Zimbabwe, Botswana,Malawi, Mozambique, South Africa, the two small states of Lesotho and Swazilandand theWWW.BSSVE.IN island of Madagascar. In its December 2005 report, UNAIDS reports that Zimbabwe has experienced a drop in infections; however, most independent observers find the confidence of UNAIDS in the Mugabe government's HIV figures to be misplaced, especially since infections have continued to increase in all other southern African countries (with the exception of a possible small drop in Botswana). Almost 30% of the global number of people living with HIV lives in an area where only 2% of the world's population resides. Nearly every country in the region has a national HIV prevalence level of at least 10%. The only exception to this rule is Angola, with a rate of less than 5%. This is not the result of a successful national response to the threat of AIDS but of the long-running Angolan Civil War (1975-2002). Most HIV infections found in Southern Africa are HIV-1, the world's most common HIV infection, which predominates everywhere except West Africa, home to HIV- 2. The first cases of HIV in the region were reported in Zimbabwein 1985.

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6. Impacts of the AIDS Epidemic

Africa's HIV/AIDS epidemic has had important effects on society, economics and politics in the continent. (Source: Tony Barnett and Alan Whiteside, AIDS in the 21st Century: Disease and Globalization. The economic impact of AIDS is noticed in slower economic growth, a distortion in spending, increased inflows of international assistance, and changing demographic structure of the population. There are also fears that a major long-term drop in adult life-expectancy will change the rationale for economic decision-making, contributing to lower savings and investment rates. However, most of these impacts remain theoretically possible rather than empirically observed. Economists in South Africa have developed the most sophisticated models for the impacts of the epidemic, and Nicoli Nattrass in "The Moral Economy of AIDS in South Africa" estimates that it is possible for the South African government to provide universal access to anti-retroviral therapy without overstretching the national budget. AIDS has intersected with drought, unemployment and other sources of stress to create what Alan Whiteside and Alex de Waal have called "new variant famine," characterized by the inability of poor, AIDS-affected households to cope with the demands of securing sufficient food during a time of food crisis.

The social impact of HIV/AIDS is most evident in the continent's orphans crisis. Approximately 12 million children in sub-Saharan Africaare estimated to be orphaned by AIDS. These children are overwhelmingly cared for by relatives including especially grandmothers, but the capacity of the extended family to cope with this burden is stretched very thin and is, in places, collapsing. UNICEF and other international agencies consider a scaled-up responseWWW.BSSVE.IN to Africa's orphan crisis a humanitarian priority. Practitioners and welfare specialists are sensitive to the need not to identify and isolate children orphaned by AIDS from other needy and vulnerable children, in part because of fear of stigmatizing them. Therefore, there is a search for effective social policies and programs that will provide necessary assistance and protection for all orphans and vulnerable children. The political impact of the epidemic has been little studied. There has been much concern that high levels of HIV among soldiers and political leaders could lead to a "hollowing out" or even collapse of essential state structures, and an escalation of conflict. Laurie Garrett of the Council on Foreign Affairs is most publicly associated with this position. However, it is also clear that the epidemic has coincided with the entrenchment of democracy in much of Africa, and that governments and armies have learned to cope with the effects of the epidemic.

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7. Spawning new epidemics in Africa and Abroad

Because HIV has destroyed the immune systems of at least a quarter of the population in some areas, far more people are not only developing Tuberculosis but spreading it to otherwise healthy neighbours.

Topic : The Tools Of Economic Evaluation

Topic Objective:

At the end of this topic student would be able to:

 The earliest drugstores date back to the middle Ages  Research and development  The cost of innovation  Controversy about drug development and testing  Product approval in the US  Orphan drugs  Legal issues WWW.BSSVE.IN  Industry revenues

Definition/Overview:

Pharmaceutical Industry: A pharmaceutical company, or drug company, is a commercial business whose focus is to research, develop, market and/or distribute drugs, mostly in the context of healthcare. They can deal in generic and/or brand medications. They are subject to a variety of laws and regulations regarding the patenting, testing and marketing of drugs.

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Key Points:

1. The earliest drugstores date back to the middle Ages

The first known drugstore was opened by Arabian pharmacists in Baghdad in 754, and many more soon began operating throughout the medieval Islamic world and eventually medieval Europe. By the 19th century, many of the drug stores in Europe and North America had eventually developed into larger pharmaceutical companies. Most of today's major pharmaceutical companies were founded in the late 19th and early 20th centuries. Key discoveries of the 1920s and 1930s, such as insulin and penicillin, became mass- manufactured and distributed. Switzerland, Germanyand Italy had particularly strong industries, with the UK, US, Belgium and the Netherlandsfollowing suit. Legislation was enacted to test and approve drugs and to require appropriate labeling. Prescription and nonprescription drugs became legally distinguished from one another as the pharmaceutical industry matured. The industry got underway in earnest from the 1950s, due to the development of systematic scientific approaches, understanding of human biology (including DNA) and sophisticated manufacturing techniques.

Attempts were made to increase regulation and to limit financial links companies and prescribing physicians, including by the relatively new US FDA. Such calls increased in the 1960s after the thalidomide tragedy came to light, in which the use of a new tranquilizer in pregnant women caused severe birth defects. In 1964, the World Medical Association issued its Declaration of Helsinki, which set standards for clinical research and demanded that subjects give their informed consent before enrolling in an experiment. Phamaceutical companies became required to prove efficacy in clinical trials before marketing drugs. Cancer drugs were a feature of the 1970s. From 1978, Indiatook over as the primary center of pharmaceutical production without patent protection. The industry remained relatively small scale until the 1970s when it began to expand at a greater rate. Legislation allowing for strong

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patents, to cover both the process of manufacture and the specific products,came in to force in most countries. By the mid-1980s, small biotechnology firms were struggling for survival, which led to the formation of mutually beneficial partnerships with large pharmaceutical companies and a host of corporate buyouts of the smaller firms. Pharmaceutical manufacturing became concentrated, with a few large companies holding a dominant position throughout the world and with a few companies producing medicines within each country. The pharmaceutical industry entered the 1980s pressured by economics and a host of new regulations, both safety and environmental, but also transformed by new DNA chemistries and new technologies for analysis and computation. Drugs for heart disease and for AIDS were a feature of the 1980s, involving challenges to regulatory bodies and a faster approval process.

Managed care and Health maintenance organizations (HMOs) spread during the 1980s as part of an effort to contain rising medical costs, and the development of preventative and maintenance medications became more important. A new business atmosphere became institutionalized in the 1990s, characterized by mergers and takeovers, and by a dramatic increase in the use of contract research organizations for clinical development and even for basic R&D. The pharmaceutical industry confronted a new business climate and new regulations, born in part from dealing with world market forces and protests by activists in developing countries. Animal Rights activism was also a problem. Marketing changed dramatically in the 1990s, partly because of a new consumerism. The Internet made possible the direct purchase of medicines by drug consumers and of raw materials by drug producers, transforming theWWW.BSSVE.IN nature of business. In the US, Direct-to-consumer advertising proliferated on radio and TV because of new FDA regulations in 1997 that liberalized requirements for the presentation of risks. The new antidepressants, the SSRIs, notably Fluoxetine (Prozac), rapidly became bestsellers and marketed for additional disorders. Drug development progressed from a hit-and-miss approach to rational drug discovery in both laboratory design and natural-product surveys. Demand for nutritional supplements and so-called alternative medicines created new opportunities and increased competition in the industry. Controversies emerged around adverse effects, notably regarding Vioxx in the US, and marketing tactics. Pharmaceutical companies became increasingly accused of disease mongering or over- medicalizing personal or social problems. There are now more than 200 major pharmaceutical companies, jointly said to be more profitable than almost any other industry, and employing more political lobbyists than any other industry. Advances in biotechnology

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and the human genome project promise ever more sophisticated, and possibly more individualized, medications.

2. Research and development

Drug discovery is the process by which potential drugs are discovered or designed. In the past most drugs have been discovered either by isolating the active ingredient from traditional remedies or by serendipitous discovery. Modern biotechnology often focuses on understanding the metabolic pathways related to a disease state or pathogen, and manipulating these pathways using molecular biology or Biochemistry. A great deal of early- stage drug discovery has traditionally been carried out by universities and research institutions. Drug development refers to activities undertaken after a compound is identified as a potential drug in order to establish its suitability as a medication. Objectives of drug development are to determine appropriate Formulation and Dosing, as well as to establish safety. Research in these areas generally includes a combination of in vitro studies, in vivo studies, and clinical trials. The amount of capital required for late stage development has made it a historical strength of the larger pharmaceutical companies. Often, large multinational corporations exhibit vertical integration, participating in a broad range of drug discovery and development, manufacturing and quality control, marketing, sales, and distribution. Smaller organizations, on the other hand, often focus on a specific aspect such as discovering drug candidates or developing formulations. Often, collaborative agreements between research organizations and large pharmaceutical companies are formed to explore the potential of newWWW.BSSVE.IN drug substances. 3. The cost of innovation

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about 1 billion USD(not including marketing expenses). A study by the consulting firm Bain & Company reported that the cost for discovering, developing and launching (which factored in marketing and other business expenses) a new drug (along with the prospective drugs that fail) rose over a five year period to nearly $1.7 billion in 2003.

These estimates also take into account the opportunity cost of investing capital many years before revenues are realized. Because of the very long time needed for discovery, development, and approval of pharmaceuticals, these costs can accumulate to nearly half the total expense. Some approved drugs, such as those based on re-formulation of an existing active ingredient (also referred to as Line-extensions) are much less expensive to develop. The consumer advocacy group Public Citizen suggests on its web site that the actual cost is under $200 million, about 29% of which is spent on FDA-required clinical trials. For me-too- drugs and for generics, the cost are even less. Calculations and claims in this area are controversial because of the implications for regulation and subsidization of the industry through federally funded research grants.

4. Controversy about drug development and testing

Drug researchers not directly employed by pharmaceutical companies often look to companies for grants, and companies often look to researchers for studies that will make their products look favorable. Sponsored researchers are rewarded by drug companies, for example with support for their conference/symposium costs. Lecture scripts and even journal articles presented by academic researchers may actually be 'ghost-written' by pharmaceutical companies. Some researchers who have tried to reveal ethical issues with clinical trials or

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who tried to publish papers that show harmful effects of new drugs or cheaper alternatives have been threatened by drug companies with lawsuits.

5. Product approval in the US

In the United States, new pharmaceutical products must be approved by the FDA as being both safe and effective. This process generally involves submission of an Investigational new drug filing with sufficient pre-clinical data to support proceeding with human trials. Following INDapproval, three phases of progressively larger human clinical trials may be conducted. Phase I generally studies toxicity using healthy volunteers. Phase II can include Pharmacokinetics and Dosing in patients, and Phase III is a very large study of efficacy in the intended patient population.

A fourth phase of post-approval surveillance is also often required due to the fact that even the largest clinical trials cannot effectively predict the prevalence of rare side-effects. Post- marketing surveillance ensures that after marketing the safety of a drug is monitored closely. In certain instances, its indication may need to be limited to particular patient groups, and in others the substance is withdrawn from the market completely. Questions continue to be raised regarding the standard of both the initial approval process, and subsequent changes to product labeling (it may take many months for a change identified in post-approval surveillance to be reflected in product labeling) and this is an area where congress is active. The FDA provides information about approved drugs at the Orange Book site. In the UK, the British NationalWWW.BSSVE.IN Formulary is the core guide for pharmacists and clinicians. 6. Orphan drugs

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7. Legal issues

8. Industry revenues

For the first time ever, in 2006, global spending on prescription drugs topped $643 billion, even as growth slowed somewhat in Europe and North America. The United States accounts for almost half of the global pharmaceutical market, with $289 billion in annual sales followed by the EU and Japan.(pdf) Emerging markets such as China,Russia, South Korea and Mexico outpaced that market, growing a huge 81 percent.

Pfizer's cholesterol pill Lipitor remains the best-selling drug in the world for the fifth year in a row. Its annual sales were $12.9 billion, more than twice as much as its closest competitors: Plavix, the blood thinner from Bristol-Myers Squibb and Sanofi-Aventis; Nexium, the heartburn pill fromWWW.BSSVE.IN AstraZeneca; and Advair, the asthma inhaler from GlaxoSmithKline. IMS Health publishes an analysis of trends expected in the pharmaceutical industry in 2007, including increasing profits in most sectors despite loss of some patents, and new 'blockbuster' drugs on the horizon. Teradata Magazine predicted that by 2007, $40 billion in U.S.sales could be lost at the top 10 pharma companies as a result of slowdown in R&D innovation and the expiry of patents on major products, with 19 blockbuster drugs losing patent.

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WWW.BSSVE.IN

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