Paying for Health Care - Lecture Notes

Ch 2: Paying for Health Care HP 353 Kelly Pesanelli PT, MS  Please come prepared to contribute… What did you find interesting/surprising/problematic in Chapter 2? Today’s Class Health Care Financing How money is obtained to pay for the health car...

Ch 2: Paying for Health Care HP 353 Kelly Pesanelli PT, MS  Please come prepared to contribute… What did you find interesting/surprising/problematic in Chapter 2? Today’s Class Health Care Financing How money is obtained to pay for the health care system. Reimbursement (next week) How money is paid out to the people/entities that supply the services.  Test question The US health care system began as a comprehensive, well-thought out, master-planned program. True or False? Substantiate your answer based on your reading.  US Heath Care System “Health care financing in the United States evolved to its current state through a series of social interventions. Each intervention solved a problem but in turn created its own problems requiring further intervention.” (Bodenheimer et. al, 2024, p.7) Is health care a basic human right …or a privilege?  1900 1950 2000 Evolution: US Health Care Players/People (Who) Place (Where) Payment (How) (for services) Power Position (impact usage & reimbursement)  Evolution: US Health Care 2030 Players ? Place/ ? Process ? Payment What will (Reimbursemen it be t) Power ? Position Consumer Identify Stakeholders  Patients  Providers  Insurers  Hospitals  Government  Vendors – Equipment, Devices  Pharmaceutical Companies  Researchers/Academicians Modes of paying for Health Care 1. Out of Pocket Payment 2. Individual Private Insurance 3. Employment-Based Private Insurance 4. Government Financing and subsidies  Health Care Financing - 2023 Type of Payment % of National Health Expenditures Out of pocket 10% Individual private insurance 30% Employment-based private insurance 31% Government financing 39% Principle Source of Coverage % Population Uninsured 8% Individual private insurance 10.2% Employment-based private insurance 53.7% Government financing 37.8% Retrieved from https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html Retrieved from https://www.census.gov/library/publications/2024/demo/p60-284.html#:~:text=Of%20the%20subtypes%20of%20health,percent)%2C%20and%20VA%20and %20CHAMPVA6 1. Out of Pocket Unpredictability  Frequency - need  Cost Patients rely on Physician recommendations In the first half of the 20th century, out of pocket payment was the most common form of payment (Bodenheimer, et. al., 2024) 2. Individual Private Insurance Very Expensive  More expensive than group rates https://finder.healthcare.gov/#plansearch&U2Fsd GVkX183uMDj2EsdXxTnZ2NBFbFnBfrj9fIX8b3Yo28 sHlw2l4nZbH2U9x6f 3. Employment-Based Private Insurance The development of “private health insurance in the US was impelled by the increasing effectiveness and rising costs of hospital care” (Bodenheimer et. al.., 2024 p. 11)  Hospital was no longer just a place to die. Employment-Based Private Insurance - cont “In contrast to the consumer-driven development of health insurance in the European nations, coverage in the United States was initiated by health care providers seeking a steady source of income. Hospital and physician control over the “Blues”…. guaranteed that reimbursement would be generous and that cost control would remain on the back burner” (Bodenheimer et. al., 2024, p. 11) Growth of Employment-Based Private Insurance… WWII Wage and Price Controls prevented wage increases – Allowed growth of fringe benefits Unions began negotiating for benefits Employer premiums were a tax deductible business expense Employee “benefit plan” was not taxable income Government subsidy of private health insurance = $280 Billion/yr in 2018 (Bodenheimer et. al., 2024, p. 11) Private Hospital Insurance Baylor Hospital (1929) Offered $6/yr for 1500 teachers for up to 21 days of hospital care Great Depression (1931) Hospital occupancy = only 62% Drove an initiative for more hospital specific insurance plans to be developed American Hospital Association (late 30’s) Blue Cross = consolidation of plans, expanding prepayment plans across other states, allowing choice of hospitals Employment-Based Private Insurance Commercial Insurance Entry Competed with the Blues (Blue Cross/Blue Shield) Introduced “Experience Rating”  Setting of insurance rates on the basis of a group’s actual health care expenses in a prior period. Allows healthier groups to pay less. Overtook the Blues in private health insurance market Private Physician Insurance California Medical Association in 1939 developed Blue Shield, an insurance plan to cover physician services. Was in response to Great Depression where patients were not able to pay physicians as much for care The American Medical Association supported expansion of Blue Shield to other states What does insurance cost? https://www.youtube.com/w atch?v=DBTmNm8D-84 - Experience vs. Community Rating Community rating – same insurance rate for everyone in the area. Experience Rating - Setting insurance rates on the basis of a group’s actual health care expenses in a prior period. Allows healthier groups to pay less. “The most positive aspect of health insurance – that it assists people with serious illness to pay for their care – has also become one of its main drawbacks – the difficulty of controlling costs in an insurance environment. With direct purchase, the “invisible hand” of each individual’s ability to pay holds down the price and quantity of health care. However, if a patient is well insured and the cost of care causes no immediate fiscal pain, the patient will use more services than someone who must pay for care out of pocket.” (Bodenheimer et. al., 2024, p. 13) Cost Control Problems in Insurance Environment “Moral hazard”  Increased usage  windshields Increase in provider (hospital, doctor, pharmacy, etc) fees charged to insurance companies  Due to third-party payment  Initially no direct impact on patient  4. Government Financing Prior to 1960s was involved in municipal hospitals and dispensaries giving care to the poor Medicare A (1965) Medicare B Medicaid (1965) Medicare Advantage Program Part C & Medicare D (2003) Med A, Med B and Medicaid = “public insurance programs for privately operated Medicare – Part A  Title XVIII to the Social Security Act  Hospital Insurance for over 65 who are eligible for Social Security plus have been a US citizen for more than 5 years and have (or have a spouse who has) paid Medicare taxes for at least 10 years.  Disabled  Chronic Renal Disease  ALS  Developed a health condition following an environmental health exposure in an emergency declaration area after June 17, 2009  Funding: Social security taxes Government collects from employers and employees  There is cost sharing for Medicare Part A. Refer to Table 2-3 in Bodemheimer et. al., 2024 Medicare – Part B Physician (and other out patient) services insurance for people over 65 Funded: Federal revenues and Monthly premiums paid by the beneficiaries $164.90/month (2023), higher if income > $97,,000 individual/$194,000/family $226 Part B deductible each year then beneficiary pays 20% and Medicare pays 80%  Medicare – Part C (Medicare Advantage) Private insurance alternative to Medicare A and B  They must cover all regular Medicare benefits  In 2022 – ½ of Medicare beneficiaries were enrolled  Most enrollees only pay their Medicare part B premium  Medicare pays the private insurance companies a fixed monthly premium per beneficiary Strength – allows members to have fixed co-payments for their care instead of co-insurance Bodenheimer & Grumbach, 2024, p. 15-16) Medicare Modernization Act (2003) Medicare Advantage, Part C (Managed Care Plan or private plans)  Medicare subsidizes the premium for the health plan  Care only by providers connected with plan  Expansion of role of private insurance plans = Larger role of privatization  “The 2010 health care reform law passed by the Obama administration (the Accountable Care Act) reduced payment to Medicare advantage plans with the goal of saving Medicare programs $136 billion over ten years (Kaiser Family Foundation, 2010c).” Medicare Part D = Prescription drug coverage (partial) (Bodenheimer et. al., 2024 p 14-15) Medicare Part D Prescription drug coverage (partial) Pluses: 1. In 2021 – 77% of Medicare beneficiaries were enrolled in Part D 2. Allows Medicare beneficiaries assistance with paying for prescription drugs Challenges/Confusion: 1. Major gaps in coverage 2. Administered by many different private insurance companies 3. Government is not allowed to negotiate for lower prices until 2026 when they will be able to negotiate the price for 10 drugs (Bodenheimer et. al., 2024, p. 15) Medicare Part D Prescription drug coverage (partial) In the inflation Reduction Act of 2022 There will be a $2,000 per year cap on out-of-pocket costs for Medicare beneficiaries in 2025 (Bodenheimer et. al., 2024, p. 15) Medicare A and B vs. Medicare C Medicare Part D: 2023  Deductible $505  Co-insurance or co-payment up to $4660  Between $4660 and $7400 you pay 25% for generic and 37% for brand name drugs  If out of pocket expenses reach $7400 you pay the higher of the costs 5% co-insurance, $4.15 for generic or $10.35 for all other drugs Prescription Drug Pricing https://www.youtube.com/watch?v=aeG2lWxYO_Y Inflation Reduction Act - Medicare https://www.nbcnews.com/health/health-care/med icare-names-first-10-drugs-price-negotiation-gover nment-rcna101166  Medicaid Jointly funded by State and Federal taxes and run by the states Variability of benefits by state Low-income requirement Increased use of waivers to states to control spending: Focus on increasing enrollment in Managed Care Plans Issues: Medicaid in 2022 covered 82 million people – largest health insurance program in the nation Low provider reimbursement rate Physicians limit the number of Medicaid patients they will see (Bodenheimer et. al., 2024, p. 16)  Medicaid To be eligible for Medicaid you must belong to one of the following categories Children Parents with dependent children Pregnant woman People with severe diabilities Seniors (can be dually enrolled in Medicare and Medicaid) (Askin & Moore , 2024, p. 48) Medicaid Affordable Care Act improved accessibility beginning in 2014 Trump administration approved restricted Medicaid waivers including an imposition of premiums and co- payments which families cannot afford All citizens and legal residents with family income below 138% of federal poverty line eligible (in states that expaned Medicaid) RESULTS: More individuals covered – under Obama Billions $$$$ new Medicaid costs (Bodenheimer et. al., 2024, p. 16)  Medicaid Retrieved from https://www.kff.org/medicaid/issue-brief/status-of-state-medicaid-expansion-decisions-interactive-map/ Subsidies for people under the ACA that qualify due to income, age, # in family, where you live https://www.youtube.com/watch?v =W--leU1yz0Q Current News Story - Medicaid  State Children’s Health Insurance Program Medicaid companion program (1997) Low income requirement GOAL: increased coverage for children 2022: 7 million children CHIP is funded through 2026 (Bodenheimer et. al., 2024, p. 16) Impact of Government Programs Increased taxpayer (healthy middle-income employees) involvement in health insurance picture Medicare (social insurance) for eligible beneficiaries Medicaid (public assistance) for other beneficiaries Good News/Bad News: ”..improved financial access to care for  Rising Costs “US households in the lowest income quintile spend 10x more in out-of-pocket payments than households in the highest” (regressive financing) (Bodenheimer et. al., 2024, p. 18)  Summary Our multiple methods of financing health care has resulted in lack of access for some people and high costs for all Americans. (Bodenheimer et. al., 2024))