U.S. Health Insurance and Financing PDF

U.S. Health Insurance and Financing Dooyoung Lim, Ph.D. Assistant Professor, Public Health [email protected] Outline  Overview of U.S. Health Expenditure  History of U.S. Health Insurance  Theory of Health Insurance  Types of Health Insurance...

U.S. Health Insurance and Financing Dooyoung Lim, Ph.D. Assistant Professor, Public Health [email protected] Outline  Overview of U.S. Health Expenditure  History of U.S. Health Insurance  Theory of Health Insurance  Types of Health Insurance 2 Overview of U.S. Health Expenditure How much do we pay for healthcare? How do we pay for it? Where does the money go? 3 Total U.S. National Health Expenditures (NHE), 1970-2018 $3.6 trillion in 2018 Source: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/NHE-Fact-Sheet https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed- time/#item-nhe-trends_total-national-health-expenditures-us-billions-1970-2018 4 Forecasted U.S. NHE, 2021 - 2028 (in billion U.S. dollars) Source: https://www.statista.com/statistics/934283/total-us-national-health-expenditure-projection/ 5 U.S. NHE as Share of GDP, 1970-2018 Source: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/NHE-Fact-Sheet https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed- time/#item-nhe-trends_total-national-health-expenditures-us-billions-1970-2018 6 Forecasted U.S. NHE as Share of GDP, 2021-2028 (in billion U.S. dollars) Source: https://www.statista.com/statistics/934320/us-health-expenditure-as-percent-of-gdp-forecast/ 7 U.S. NHE as Share of GDP of Selected Goods and Services 20% 18% Health 16% 14% 12% Housing 10% 8% 6% Transport 4% Food 2% Education 0% 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 Source: Organization for Economic Co-operation and Development (OECD) Statistics 8 U.S. NHE as Share of GDP Compared to Other Countries Note: * Expenditure excludes investments Source: https://desdemonadespair.net/2020/02/new-international-report-on-health-care-u-s-suicide-rate-highest-among-wealthy-nations-u-s-outspends-other-high-income-countries-on-health-care-but-has-lowest-life-expectancy.html 9 U.S. NHE per Capita, 1970-2018 Source: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/NHE-Fact-Sheet https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed- time/#item-nhe-trends_total-national-health-expenditures-us-billions-1970-2018 10 U.S. NHE per Capita Compared to Other Countries, 2018 Note: Expenditure excludes investments Source: https://www.oecd-ilibrary.org/docserver/4dd50c09- en.pdf?expires=1597678108&id=id&accname=guest&checks um=66A71E5DEC5F63748761032ED0E4FB92 11 Average Annual Growth of GDP and NHE per Capita Source: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and- Reports/NationalHealthExpendData/NHE-Fact-Sheet https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed- time/#item-nhe-trends_total-national-health-expenditures-us-billions-1970-2018 12 How Healthcare Is Paid For by Payer Sources? OOP: 10% Private: 34% Medicare: 21% Medicaid: 16% CHIP, DOD, VA: 4% Other: 15% Source: Hartman, M., Martin, A.B., Benson, J., & Catlin, A. (2020). National Health Care Spending In 2018: Growth Driven By Accelerations In Medicare And Private Insurance Spending. Health Affairs, 39(1): 8-17. https://www-healthaffairs- org.dmu.idm.oclc.org/doi/pdf/10.1377/hlthaff.2019.01451 13 How Healthcare Is Paid For by Payer Sources? Source: https://www.healthsystemtracker.org/chart-collection/u-s-spending-healthcare-changed-time/#item-nhe-trends_total-national-health-expenditures-us-billions-1970-2018 14 Public and Private Sector Spending as a Share of GDP Source: https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/#item-u-s-similar-public-spending-private-sector-spending-triple-comparable-countries 15 Public and Private Sector Spending as a Share of GDP 3.9% → 8.8% 1.4% → 8.5% 3.8% → 8.0% 1.4% → 2.7% Source: https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/#item-u-s-similar-public-spending-private-sector-spending-triple-comparable-countries 16 Percentage of Population by Type of Coverage Source: https://www.census.gov/content/dam/Census/library/publications/2019/demo/p60-267.pdf 17 Categories of Americans and Their Health Coverage Simplified Schematic Dual-eligible QMB, People Age 65 and Over for Medicare and Medicaid SLMB, QI, Medicare (18%) QDWI Medicaid (17%) Uninsured (ACA) Private (54%) Working-Age People (9%) The Young CHIP The Poor The Near-Poor The Broad Middle Class The Rich 18 History of U.S. Health Insurance How was the U.S. health insurance system born? The advent of Blue Cross The advent of Blue Shield The evolution of Medicare and Medicaid 19 How Was the U.S. Health Insurance System Born? Source: Special Series Planet money, National Public Radio (NPR), Click! available at https://www.npr.org/templates/story/story.php?storyId=114045132 20 It Is NOT Rocket Science!! 21  The Great Depression and the Advent of Commercial Health Insurance – Blue Cross Baylor University Hospital, Dallas, TX 1929 1930 Receipts $236 per patient $59 per patient Occupancy 71.3% 64.1% Donations 100% 33% Charity Care 100% 400% 22 The Great Depression and the Advent of Commercial Health Insurance – Blue Cross (Cont.) 23 The Great Depression and the Advent of Commercial Health Insurance – Blue Cross (Cont.)  1932 – Sacramento initiates plan to cover any hospital in the community  1933 – American Hospital Association (AHA) offers service to approve of the hospital service plans being sold to hospitals o Non-profit o Designed to improve public welfare o Dignified promotion o Covered hospital charges only o Allowed free choice of physician o 1937 – no competition within a market area 24 The Great Depression and the Advent of Commercial Health Insurance – Blue Shield  Prepaid Group Practice services – 1929 o Resisted by organized medicine o Those that survived early resistance built their own hospitals o 1933 Kaiser Foundation Health Plan o 1937 Group Health Association in Washington DC California Physicians Service – 1939 o Free choice of physician o Indemnity plan – payment to patient for covered event; patient pays physician American Medical Association (AMA) offers services to approve plans 25 Blue Cross and Blue Shield  1929 – Blue Cross was founded  1939 – Blue Shield was founded  1982 – The Blue Cross Association and National Association of Blue Shield merged  BCBS is the oldest and largest payer group in the U.S., consisting of 36 independent, locally operated health insurance companies  One in three Americans (106 million) are BCBS beneficiaries  Wellmark of Iowa is an independent licensee of the BCBS 26 The Great Depression and the Advent of Social Security  With the Great Depression, poverty rates among seniors exceeded 50%  1933 – Roosevelt administration recommends state-run national health insurance system with compulsory insurance  1935 – Roosevelt drops health insurance plan to pass Social Security Act 27 The Evolution of Medicare and Medicaid  1948 – Truman pitched national health insurance system with subsidies to pay for the poor – strong opposition  1950s – Proposals for national insurance plan, especially for the elderly; but never passed with fears of “socialized medicine” 28 The Evolution of Medicare and Medicaid  1960s o Retiree health bills triple those of younger Americans o Half of those over age 65 had no health insurance o Many of the policies were inadequate in coverage o 1962 – President Kennedy calls for health program for the aged  1965 – President Lyndon Johnson signs Medicare and Medicaid into law The Aug. 6, 1965, cover of TIME Cover Credit: BORIS CHALIAPIN 29 Health Maintenance Organization (HMO) Act of 1973  Healthcare iron triangle  What are HMOs? o Defined as “an organization that combines the provision of health insurance and the delivery of health care services.” (Given 1994) o Medical insurance groups that provide health services for a fixed annual fee determined in advance. 30 Expansion of Medicare and Medicaid, 1980s – 2000s  Children’s Health Insurance Plans (CHIP) o Passed as part of the Balanced Budget Act of 1997. o Provides coverage for uninsured children in families with incomes that are modest but too high to qualify for Medicaid. o Federal-state partnership; run by the state and matching funds from the federal.  Medicare Part D o Enacted in 2003 as part of Medicare Prescription Drug, Improvement, and Modernization Act. o Provides outpatient prescription drug coverage for Medicare beneficiaries. 31 Healthcare Reform in 2010s  The Patient Protection and Affordable Care Act (PPACA) o Enacted in 2010, also known as ACA or Obamacare  Three primary goals of the ACA: o Make affordable health insurance available to more people – Health Insurance Exchange o Expand the Medicaid program o Support innovative medical care delivery methods designed to lower the costs of health care 32 Repeal the ACA  Individual mandate of health insurance eliminated.  States allowed to add “work requirements” to Medicaid  Cost-sharing reduction subsidies to insurers have ended  Access to short-term "skinny" plans has been expanded  Funds to facilitate HealthCare.gov sign-ups slashed 33 History of Health Insurance Medicare Insurance?? Blue Cross Blue Shield World War II & Medicaid HMO Source: No Excuses: Not to talk about healthcare. theSkimm. Retrieved from https://www.theskimm.com/noexcuses/healthcare/healthcare-timeline Repeal ACA MMA 34 Theory of Health Insurance What is health insurance? Expected value of loss How to determine insurance premium Indemnity vs. social insurance 35 Gamble vs. Insurance  Why do people gamble? o Can earn $$$$$$ if you are lucky. o Involves a relatively small amount of loss ($$) at a time. o Probability game.  Why do people buy insurance? o You pay $$$$$$ of medical costs if you get sick. o You pay a relatively small amount of loss (i.e., premium, $$) each month. o Probability game. 36 Expected Value  Let’s flip a coin (game involves loss) o Rule: you have to pay $100 if you have ‘head’; you pay $0 if ‘tail’ comes up.  Expected Value (EV) of loss o -$100, -$100, $0, -$100, $0, $0, …… -$100, -$100, $0 o The average value of loss over all possible uncertain outcomes, with each outcome weighted by its probability of occurring. o EV of loss of this coin game:  How much are you willing to pay to avoid this game? (i.e., Risk adverse/taking propensity) o > $50  risk averse o 88% of the Hospital Insurance trust fund revenue  Part B o General revenue (73%) o Premiums (25%)  Part D o At least 75% from general revenue (79% in 2009) o Up to 25% from premiums 70 Medicare Financing Sources of Medicare Revenue, 2015 100%