Chapter 6 And 9 Study Guide Flashcards
What is the description/characteristics of a not-for-profit health agency?
-Health agencies and hospitals may be for-profit or not-for-profit
-Not-for-profit agencies make money, but profits are used to offset the cost of other services that do not generate income or to improve the infrastructure of the agency’s facilities, as they must “serve the health care needs of the community”
-Maintain prices at an affordable level to keep tax their exempt status
-They do not pay federal, state, or county taxes
-Both for-profit and not-for-profit health agencies receive payments from Medicare, Medicaid, private insurance companies, and out-of-pocket payments from clients
-The top 10 hospitals earned over $163 million in total profits from patient care, and only 3 were for-profit
1. Nonprofits used their money to expand services, fund research, or build capital projects
2. Hospitals with the highest prices generally earned greater profits, making the case for a need to curb excessive fees
What are examples of nonprofit and voluntary agencies that provide services for vulnerable populations?
-There are 2,968 nonprofit and 1,322 for-profit hospitals in the United States
-The American Red Cross
-And, a recent study of hospital profitability found that 7 out of 10 of the most profitable U.S. hospitals were nonprofits, including Gundersen Lutheran Medical Center, Stanford Hospital and Clinics, and Louisville’s Norton Hospital
What is a public health care agency/sector?
-Public health agencies perform a wide variety of activities, some requiring legal authority to ensure enforcement (e.g., environmental pollution, communicable disease control, food handling)
-These agencies provide important data, including the collection and monitoring of vital statistics and communicable diseases
-They also conduct research, provide consultation, and sometimes financially support other community/public health efforts
-These activities can be grouped under one of the three core public health functions: assessment, policy development, and assurance
-Examples includes federal, state, and local agencies
What are the core pubic health functions?
-Public health agencies perform a wide variety of activities, organized around the three core public health functions of assessment, policy development, and assurance
-States retain the primary responsibility for their citizens’ health and are responsible for implementing federal policies
-At the local level, a city government health agency, a county agency, or a combination of both assess, plan, and serve the health needs of their community
-Protect the environment, workplaces, food
What is the federal public health agency?
-The federal public health responsibilities include the following:
1. Policymaking and implementing legislation
2. Financing public health through health care services, grants, contracts, and reimbursements to states and local public health agencies
3. Protection of public health and prevention activities through surveillance, research, and regulation
4. Collecting and disseminating data (national data, health statistics, surveys, research)
5. Acting to assist states in mounting effective responses during public health emergencies (e.g., natural disaster, bioterrorism, emerging diseases)
6. Developing public health goals in collaboration with state and local governments and other relevant stakeholders (e.g., Healthy People 2030
7. Building capacity for population health at federal, state, and local levels by providing resources and infrastructure
8. Directly managing health care delivery through categorical grant programs (maternal–child health programs, Medicaid, Medicare, community health centers) and services (public health laboratories, Indian health clinics)
At the national level, public health organizations are clustered into what four groups of government agencies?
-U.S. Public Health Service (USPHS) is staffed by the Commissioned Corps, which consists of over 6,700 uniformed health professionals
1. Employees of the USPHS work in many different federal agencies
-The U.S. Department of Health and Human Services (USDHHS), including the Centers for Disease Control and Prevention (CDC)
-Federal departments that oversee areas impacting health, such as the Departments of Labor, Education, Environmental Health, Agriculture, and Transportation, among others
-Federal agencies that focus on international health concerns, such as the U.S. Agency for International Development (USAID) and the Office of International Health Affairs, are under the auspices of the U. S. Department of State
What is the state public health agency?
-The state health department (SHD) is responsible for providing leadership in and monitoring of comprehensive public health needs and services in the state
-SHDs promote population health, focusing on prevention and protection
-They also administer federally funded programs
-General functions of SHDs include the following:
1. Statewide health planning
2. Intergovernmental and other agency relations
3. Intrastate agency relations
4. Certain statewide policy determinations
5. Standards setting
6. Health regulatory functions
7. State laboratory services
8. Surveillance and epidemiology
9. Training and technical support
-The Association of State and Territory Health Officials (ASTHO) surveys SHDs; the latest published data were collected in 2019 and 2016
-The person in charge of the SHD is generally appointed by the governor and is, most often, a physician
1. In fact, 64% of state health officials have a medical degree
What is the local pubic health department?
-The primary responsibilities of LHDs are to assess the local population’s health status and needs, determine how well those needs are being met, and take action toward satisfying unmet needs
-Specifically, they should fulfill these core functions as follows:
1. Monitor local health needs and the resources for addressing them
2. Develop policy and provide leadership in advocating equitable distribution of resources and services, both public and private
3. Evaluate availability, accessibility, and quality of health services for all members of the community
4. Keep the community informed about how to access public health services
-LHDs provide public health clinical programs to help people lead healthy lives and specific population-based health services within their jurisdictions
-The most commonly provided clinical services were as follows:
1. Adult and childhood immunizations
2. TB screening and services
3. Women, Infants, and Children (WIC) services
4. Screening for HIV and other STDs
5. Blood lead screening
6. Home visits
-The most common population-based programs provided include the following:
1. Adult and childhood immunizations
2. Communicable/infectious disease
3. Environmental health
4. Family planning and WIC program
5. Syndromic surveillance
6. Primary preventive programs for nutrition, tobacco, and physical activity
-Where a board of health exists, it holds the legal responsibility for the health of its citizens
1. More than three quarters of LHDs report to a local board of health; this is more common for small health departments compared to medium and large departments
How is the public health funded?
-Federal public health agencies are largely funded by the federal government, but about 75% of that funding ends up at the state and local levels, along with other private and public organizations
-At the state level, federal grants and monetary support, along with state tax dollars, fund programs
-The majority of federal grant money is provided by the Prevention and Public Health Fund created by the ACA. From its 2018 budget, $586 million of the total $800 million budget went to state and LHDs
-The money that makes its way to LHDs often comes through competitive grants and block grants; it is supplemented by local taxes
-The lack of consistency and transparency limits public health officials’ ability to defend public health programs when budget cuts are threatened
1.Given that public health agencies are vital safety net services, the decreases in budgets and staffing are very challenging
-About 80% of state health agencies derive 40% of their funding from federal sources. As of 2016, 56% of state health agencies were accredited
-LHDs also receive federal funding, a portion of which are “pass through dollars,” meaning the state receives the funding from the federal government but sends the money on to LHDs who provide the services
What is a private health sector organization?
-Private groups include professional associations and nongovernmental organizations (NGOs) focusing on health-related issues
-Health-related professional associations influence the quality and type of community/public health services available in the United States through the promotion of standards, research, information, and programs
1. Many also lobby legislators
2. These organizations are funded primarily through membership dues, bequests, and contributions
What are examples of private health sector organizations?
-Health issues focused nongovernmental organizations (NGOs)
1. e.g., American Cancer Society, American Diabetes Association
2. Supply funds for research, to lobby legislators, and to educate the public
*Funding is through private contributions
-Health related professional associations
1. American Public Health Association (APHA)
2. Association for Community Health Nursing Educators (ACHNE)
-Others, such as the National Society for Autistic Children, Planned Parenthood Federation of America, and the National Council on Aging
1. Focus on the needs of special populations
-Some NGOs provide services and health care
1. These include Habitat for Humanity, the American Red Cross, and the Public Health Institute
-A few agencies focus on disease prevention, such as the Trust for America’s Health and the Prevention Institute
1. Many foundations provide grant support for health programs, research, and professional education as part of their mission (e.g., Robert Wood Johnson Foundation, Bill and Melinda Gates Foundation, National Philanthropic Trust)
What is the Social Security Act?
-During the Great Depression, the U.S. government enacted the first significant legislation that affected the health and well-being of a wide range of citizens, the Social Security Act of 1935
-This law ensured greater public health programs and provided retirement income to participating workers aged 65 years and older
-The act included aid to dependent children, unemployment insurance, and supported educational programs similar to those in the Sheppard–Towner Act
What is managed care?
-Became popular in the late 1980s
-It refers to systems that contract to coordinate medical care for specific groups in order to promote provider efficiency and control costs
-Managed care is a cost-control strategy used in both public and private sectors of health care
-Care is managed by regulating the use of services and levels of provider payment
1. This approach is utilized in HMOs, ACOs, EPOs, and PPOs
2. Roughly 70 million Americans are enrolled in HMOs, compared to 90 million enrolled in PPOs
-Managed care plans operate on a prospective payment basis and control costs by managing utilization and provider payments
1. Because costs are tight, preventive services are generally encouraged, so that more expensive tertiary care costs can be avoided if possible
Types:
1. Health maintenance organizations (HMOs)
2. Preferred provider organizations
3. Point-of-service (POS) plans
4. High-deductible health plans (HDHPs)
5. Exclusive provider organizations (EPOs)
6. Competition and regulation
7. Drivers of costs
What are health maintenance organizations?
-Systems in which participants prepay a fixed monthly premium to receive comprehensive health services delivered by a defined network of providers
-Insurance premiums have continued to rise more than wage increases
-HMOs are the oldest model of managed care. Several HMOs have existed for decades (e.g., Kaiser Permanente), but others have developed more recently
-The unique set of properties of HMOs includes the following:
1. A contract between the HMO and the beneficiaries (or their representative), the enrolled population
2. Absorption of prospective risk by the HMO
3. A regular (usually monthly) premium to cover specified (typically comprehensive) benefits paid by each enrollee of the HMO
4. An integrated delivery system with provider incentives for efficiency
*The HMO contracts with professional providers to deliver the services due the enrollees, and the basis for reimbursing those providers varies among HMOs
-Some HMOs follow the traditional model, employing health professionals (e.g., physicians, nurses), building their own hospital and clinic facilities, and serving only their own enrollees
-Other HMOs provide some services while contracting for the rest
1. HMOs have a 20% higher rate of consumer complaints than customers with PPO plans
2. In response to concerns from managed care clients, a patient bill of rights stipulating the patient’s right to timely emergency services, respect and nondiscrimination, as well as participation in treatment decisions and a more consumer-friendly appeals process was developed
What are preferred provider organizations?
-A network of physicians, hospitals, and other health-related services that contract with a third-party payer organization (health insurer) to provide health services to subscribers at a reduced rate
-Employers with these plans offer medical services to their employees at discounted rates
1. In PPOs, consumer choice exists
*Enrollees have a choice among providers within the plan and contracted providers out of the plan
*PPOs practice utilization review and often use formal standards for selecting providers
2. In 2016, PPOs were the most common form of health insurance offered by employers—with 48% of workers able to choose this type of policy; companies with over 200 employees have the highest rate of PPO usage at 52%
3. However, enrollment in PPOs began to decline, and increases were noted in HDHP/SO policies
*In 2019, 44% of workers had PPOs, and 30% had HDHP/SOs
*About 19% were enrolled in an HMO
What are point-of-service plans?
-A variation on the plans
-Permits more freedom of choice than a standard HMO or PPO
-Enrollees choose a primary physician from within the POS plan who monitors their care and makes outside referrals when necessary
-At an extra cost, enrollees can go outside the HMO or PPO network of contracted providers unless their primary physician has made a specific referral
-POS is a type of hybrid or combination of an HMO and PPO
-In 2016, about 10% of employees were enrolled in POS plans and only 7% were in a POS plan in 2019
What are high-deductible health plans?
-Growing in popularity
-Among employees in small and large size companies a high-deductible health plan with a saving option (HDHP/SO) is often favored over HMOs
1. The plan has higher deductibles and out-of-pocket maximum limits
2. However, once these deductibles are met, the plan pays 100% of in-network health care
-In addition, the HDHP plan is the only health plan that allows for money to be put aside pretaxed to be used to pay for deductibles and out-of-pocket expenses
1. The average annual out-of-pocket cost in 2018 for high-deductible, high-premium HDHP-HSA plans were not to exceed $6,650 for single and $13,300 for family coverage
*Similar saving plans tied to HDHP plans vary in maximum costs
2. Deductibles have risen 212% between 2008 and 2018, and over a quarter of covered employees have plans with $2,000 deductibles (or more)
*For employers with <200 employees, 42% of covered employees have at least $2,000 deductibles
3. In 2018, 29% of employers offering HDHPs also included a savings plan option, either HSA or HRA
*HDHPs are more often available with large firms than with small ones, 58% versus 27%
What are exclusive provider organizations?
-Other than for medical emergencies, an exclusive provider organization (EPO) plan only covers services and providers within the network
1. Benefits of this type of plan are lower prices than an HMO and not needing a referral from a primary health care provider
-However, if an individual goes out of network, 100% of the medical bill is owed by that person
1. A provider that was covered when you bought your policy may no longer be part of the plan the following year, and you will not necessarily know this until you are billed for the visit
-In 2016, there were projected to be about “60% more EPOs being sold through the federal insurance exchange” than the previous year
What is competition and regulation?
-Often, competition and regulation in health economics have been viewed as antagonistic and incompatible concepts
1. Competition describes a contest between rival health care organizations for resources and clients
2. Regulation refers to mandated procedures and practices affecting health services delivery that are enforced by law
-In a society in which there are long-held values of freedom of choice and individualism, competition provides opportunities for entrepreneurial endeavor, free enterprise, and scientific advancement
1. Yet, regulation also serves an important role in promoting the public good, overseeing equitable distribution of health services, and fostering community-wide participation
-Health care incorporates four major types of regulation—laws, regulations, programs, and policies
-Leaders in the field have concluded that both competition and regulation are needed
How do laws work in relation to regulation?
-Laws that regulate health care include any legislation that governs financing or delivery of health services (e.g., Medicare reimbursement to hospitals)
-Regulations guide and clarify implementation; they are issued under the authority of law and are part of most federal health care programs (e.g., CHIP eligibility requirements)
-Regulatory policies have a broader focus and involve decisions that shape the health care system by channeling the flow of resources into it and setting limits on key players’ actions (e.g., state nurse practice acts, health manpower training, ACA rules on preexisting conditions)
-Programs and policies are often developed in order to control costs and improve quality (e.g., HRRP, HIPAA)
-In the early 1980s, government cost-control measures were greatly diminished as the Reagan era ushered in deregulation
1. The passage of the Omnibus Budget Reconciliation Act caused dramatic changes affecting health care
2. The federal government, having failed to contain rising health care costs, shifted responsibility for the public’s health and welfare back to state and local governments
3. From all this grew the competition-versus-regulation debate
-The 1990s were characterized by numerous hospital mergers and movement from nonprofit to for-profit status
1. More than 86% of the population in 1991 was covered by some form of prepaid health insurance, largely due to the effects of Medicare and Medicaid
*The Clinton health plan failed to gain support and many hospitals downsized and reduced the number of nurses on staff
*Managed care became more popular, but by the late 1990s, fears were raised about MCOs withholding necessary care and a consumer “backlash” resulted
-Many states and the federal government enacted benefit laws between 1990 and 2008, in response to these concerns
1. The ACA was passed into law in 2010
2. However, we still feel the results of decades of disjointed policies, and one of the most obvious consequences deals with competition in health care
-Competition, its proponents say, offers wider consumer choice and positive incentives for cost containment and enhanced efficiency; that is, consumers are free to select among various health plans on the basis of cost, quality, and range of services
-One downside is fragmentation of services, lack of coordination, and subsequent waste
1. Integrated delivery systems, such as Kaiser Permanente’s fully integrated system, or more loosely organized public–private partnerships, could lead to improved quality, outcomes, and reduced costs
What are the problems with regulations?
-Regulation advocates for almost 20 years have argued that there are at least four problems associated with the competition model:
1. Consumers often do not make proper health care choices because they have limited knowledge of health services
2. Competition may discriminate against enrolling certain consumers, especially high-risk, high-cost patients, thus excluding those who may need services the most
3. The competition model may not encourage enough teaching and research—expensive elements of our present system
4. Quality may be sacrificed to keep costs down
-The following tenets often guide discussions on health care reform efforts:
1. Reduction in health care prices occurs when there is more competition among hospitals and among insurers
2. Reducing government regulations will lead to lower health care prices
3. Higher prices can reflect higher-quality care
4. Higher provider costs are reflected in higher prices
What are drivers of costs?
-Drug spending is a “primary driver of higher cost” in the present U.S. health care system, and a continuing trend, with $1,011 per person spent on prescription drugs annually compared to $422 for other developed countries
1. While the U.S. Veterans Administration has a 30% discounted rate for prescription medications, the federal government is not allowed to negotiate drug prices for Medicare or Medicaid programs
-Other drivers of health care costs include the following:
1. An aging population, new technologies, and biologics (e.g., biosimilars like synthetic insulin and monoclonal antibodies)
2. Lifestyle/behavioral choices (about 70% of health care costs may be related to smoking, abuse of alcohol, and obesity), inefficient systems (e.g., duplication of services/procedures, preventable medical errors, unwarranted prescriptions/visits/treatments, spotty quality improvement)
3. Medical malpractice costs, cost shifting, increased demand for health care, government regulations, and other market changes, like consolidations/monopolies
-We will need to decide how to move forward, either building on the ACA by offering a more meaningful public option and expanding markets while continuing to promote employer health insurance or making a significant shift to a single-payer system provided to all citizens
-With the lack of quality health outcomes in the United States, as described above, even if everyone received health insurance, how could quality be assured?
1. Some believe that the overall performance of the health care system should improve as everyone gains access to care
2. However, some early evaluation of value-based incentive and penalty programs (e.g., Hospital Value-Based Purchasing Program, Hospital Readmission Reduction Program [HRRP]) reveal that they have not been “effectively calibrated” to achieve their expected results and need more fine tuning to produce better outcomes
-A system that provides incentives to both providers and patients to use services efficiently and effectively may produce better results
-Another factor that may also improve outcomes is a means of providing health care consumers with pertinent, timely information so that they can be more active participants in their care
What is managed competition?
-Market-based effort to provide wide access to health care while keeping costs down
-Have been part of the discussion around health care reform
-Two plans that are worth further review are managed competition and universal coverage, with and without a single-payer system
-Pros:
1. Acceptance of all
2. Tax incentives
3. Tight regulation
4. Outcome management standards board
5. Improved access
-Cons:
1. Untested
2. Limited consumers’ choices
3. Failure to provide equitable and universal coverage
What is the economics of health care
-Economics is defined as the science of making decisions regarding scarce resources. It is concerned with the “production, distribution, and consumption of services”
-Economics permeates our social structure—it affects and is affected by policies
-Consequently, health is closely tied to economic growth and development, in that a healthy population is necessary for adequate national productivity
-A nation with a healthy population has better worker productivity; longer life expectancies provide an incentive for investment in education and innovation
1. These factors encourage income growth and higher GDP
-Ample evidence exists for a health–income gradient, as personal income (specifically poverty) is linked to health status; people with lower incomes report poorer health and greater prevalence of diseases than those with higher incomes
1. They also live shorter lives
-Public health policies and programs that promote health and wellness can impact economic development by improving health outcomes, often on a more cost-effective basis than other interventions
-Economic methods commonly employed by public health include analysis of:
1. Regulatory impact (How will this new law effect costs and behaviors?)
2. Budget impact (How cost-effective is a new program or intervention?)
3. Cost–benefit analysis (How much will a disease outbreak investigation cost, and how many lives will it benefit?)
4. Decision modeling (How can mathematical models help determine cost-effectiveness of vaccine programs, pandemic spread, disease management, and injury prevention programs?)
-Health economics can be better understood by examining the two basic theories underlying the science of economics: microeconomics and macroeconomics
1. In addition, concepts of health care payment must be understood
-Issues such as cost containment, competition between providers, accessibility of services, quality, and need for accountability continue as areas of major concern
-Several ACA provisions address these issues as well:
1. The law established the Centers for Medicare & Medicaid Innovation, which tests ways to improve quality and efficiency of care
2. Payments to hospitals and physicians increase or decrease based on the quality of care provided, and all hospitals must publicly report several indicators of quality.
-Evaluation of how these provisions affect the supply and demand for health services is ongoing
What is microeconomics?
-Microeconomic theory is concerned with supply and demand
1. Supply is the quantity of goods or services that providers are willing to sell at a particular price
2. Demand denotes the consumer’s willingness to purchase goods or services at a specified price
-In our free-market–driven economy, supply and demand is a key concept
-Economists use microeconomic theory to study the supply of goods and services: how we, as consumers, allocate and distribute our resources, and how those marketing goods and services compete
1. They also examine how allocation and distribution affect consumer demand for these goods and services.
-The concepts of supply and demand are influenced by each other and, in turn, affect prices
-In health care economics, demand-side policies are enacted to reduce the demand for health care (e.g., raising insurance deductibles and copayments), and supply-side policies restrict the supply of resources (e.g., denial of coverage for specific services, utilization of preferred providers who practice within boundaries set by insurance companies, information overload for consumers)
-Microeconomic theory is useful for understanding how prices are set and resources allocated
1. It comes into play when health care competition increases, because the success of the supply-and-demand concept depends upon a competitive market
-Under the ACA, some traditional demand-side policies were removed to improve access to care
1. For example, preventive services must now be offered without deductibles or copayments, and insurance companies are limited in their ability to deny coverage for preexisting conditions
What is macroeconomics?
-Macroeconomic theory is concerned with the broad variables that affect the status of the economy as a whole, such as production, consumption, investment, international trade, inflation, recession, and unemployment on an aggregate level
-The focus is on the big picture, or larger view of economic stability and growth, and it is useful for providing a global or aggregate perspective of the variables affecting the total economic picture and subsequent economic policy development
-The economics of health care encompasses both microeconomics and macroeconomics and an intricate and complex set of interacting variables
-Health care economics is concerned with supply and demand, as well as the big picture: 1. Are available resources sufficient to meet the demand by consumers and are the resources expended achieving the desired outcomes?
What is the supply and demand in health care economics?
-How does a patient determine what services are needed, where to buy them, and how to evaluate the quality of the goods and services? 1. With health care, this is seldom the case; health care is typically unpredictable and often difficult to research
2. Even choosing a health insurance plan can be overwhelming considering the types of plans, the choices, the complexity, and one’s level of health literacy
-With health insurance companies and managed care, different prices are often paid for the same service, and consumers have little information as to the costs
1. Hence, health care purchases are not easily understood
-In a free-market system, competition is an important factor, but is competition truly possible with employer-based or government health insurance that limits the choice of plans and providers?
-Health care is an “opaque market” that keeps consumers in the dark about actual costs of services and medications due to confidential negotiations, discounts, and rebates
1. Market consolidation (e.g., hospitals that monopolize a geographic area, buy up competitors) allows them to bargain for higher compensation from health insurance companies
2. Consumers with health insurance are shielded from a typical business relationship with a provider or hospital
*Costs have been the driver, not excess use of the health care system, and costs have risen faster than inflation since the mid-1960s
3. The multiple types of health insurance (variety of private companies and government plans like Medicare and Medicaid) in the United States lead to higher costs
-Waste is another factor in our high cost of health care
-Cutler estimated that as much as “one third of medical spending is wasteful,” and 25% to 50% of our health care dollar “is not associated with improved health” outcomes
1. When interventions are not clinically sound, that wasteful spending makes it more difficult to sustain preventive measures
-Because traditional market forces of supply and demand work differently in health care, consumers are not solely responsible, as “government, insurers, employers, and providers themselves have a major role to play in controlling costs and ensuring access to care”
1. Some governments and employers have taken action to control costs
-Consumers seek value and convenience in health care
-There are, however, rare areas of health care where supply and demand works without any interference
1. These health care services are generally paid out-of-pocket, with direct interaction between the patient/consumer and the provider, as insurance does not cover them (cosmetic procedures are a good example)
-Elective cosmetic procedures are an area where prices are more transparent because costs are paid by the consumer and not usually by insurers
1. Therefore, consumers are cost conscious and providers operate in a competitive marketplace with more transparent pricing
2. While elective procedures (e.g., cosmetic or LASIK surgery) demonstrate market influences, they are not typical of most health care expenditures
*They also represent a select portion of the population—individuals who can afford them
-Include health insurance concepts and employer-sponsored health insurance
What did Kenneth Arrow write in 1963 about health care economics?
-In 1963, economist Kenneth Arrow wrote an influential article about health care economics detailing the lack of information in the medical marketplace
-The main points of the article still apply; Arrow noted that risk and uncertainty prohibit a true market economy in health care because consumers:
1. Do not know when or if they will become ill, but they know they will need and want medical treatment—thus the demand for health insurance
2. Do not know what services will be needed and what works best for their condition—thus the need for health care providers
3. Do not know about the quality of health care good and services—thus the need for government regulation (e.g., licensing, certification) and malpractice lawsuits
4. Are subject to an asymmetric level of information, compared to the insurer, about the likely demand for health care services
*This can result in adverse selection (e.g., high-risk patients are denied insurance or care, smokers have higher health insurance premiums) and market failure (e.g., inefficiencies, lack of appropriate competition)—although this is less severe in large group insurance plans that spread out the risk
What factors did Indresano say are at play with supply and demand?
-Higher demand due to an aging population
1. The number of people over 65 is roughly 52 million (with 85.6% having one or more chronic health conditions) and is projected to almost double by 2060
-More people now have health insurance thanks to the ACA, estimated at about 20 million, and they have added to the demand
-There is a projected physician shortage (about 90,000 doctors by 2025), just as demand for health care services skyrockets
-Supply could be increased by hiring more nurse practitioners and increasing the number of medical residency slots available
-Fully utilizing telemedicine would help extend care, especially into rural areas experiencing provider shortages
What are health insurance concepts?
-People are generally risk averse, meaning that they do not like uncertainty, and this is seen often in relation to health care
-Conventional economic theories hold that people will pay small premiums monthly to offset the risk of large medical bills should they become seriously ill
1. This represents an indemnity policy (much like car or homeowners’ insurance), and this was the type of health insurance first offered in the United States
2. In the past, patients could choose any doctor or hospital and submit the providers’ bills to the insurance company for payment
-Moral hazard is the term used by economists to explain how health insurance changes the behavior of people, resulting in more risk-taking and wasteful actions
1. They liken it to fire insurance without a deductible, noting that a person may be less careful about clearing brush from a house or may even resort to arson if it costs the owner nothing to have the home replaced
-If a person has health insurance, many economists hypothesize, they are less likely to take good care of themselves, and if they do not pay for their health care (through premiums, copayments, and deductibles), they are more likely to overuse it, although empirical evidence of this is sparse
1. In other words, economists theorize that insurance has a paradoxical effect and may lead to wasteful or risk-taking behaviors
2. In this scenario, patients will demand expensive health care, even if it provides only the smallest benefit
3. The concept of moral hazard is a driver for larger deductibles and copayments; these are used to control waste and overuse
-A more recent viewpoint notes that consumers purchase health insurance not to avoid risk but to earn a claim for additional income (i.e., insurance paying for medical care) when they become ill and that copayments and managed care actually work against the system by reducing the amount of income transferred to ill persons or limiting their access to needed services
-Moral hazard alone doesn’t easily apply to health insurance because its effects may not be as predictable as in other instances of indemnity
-Individuals who gain access to health insurance will use it, but there are still constraints (e.g., high deductibles, high copays) that moderate use and can be harmful to families who may have to choose between care for a sick child and rent or food
1. The case can surely be made that even those with unlimited insurance coverage don’t just “check into the hospital because it’s free”
-Adverse selection, however, is a concern for health insurance companies when sick individuals seek insurance because they have an urgent need for health care, while healthy people do not want to buy it because they have no pressing health concerns
1. This imbalance is not cost-effective, yet a key feature of the ACA is for insurers to provide coverage for people with preexisting conditions (without charging them outrageous prices), which was formerly a common practice
2. This was initially balanced out by requiring that everyone get insurance
-Cost sharing, which includes copayments and deductibles, divides the cost of health care services between insurance companies and patients
1. Insurance companies use cost sharing to prevent overuse of health services
2. The amount of a copayment or deductible may change for some types of care, such as a visit to the ED
-Found that newer high-deductible health plans (HDHPs) not only reduced costs but also led to a reduction in office visits and preventive care
-Balancing the cost reduction against the lack of preventive care (that could eventually lead to more cost savings) is an important consideration
-Also, the effect of cost sharing on use of services is not equal
1. Individuals with low incomes decrease their use of medications and services more than those with higher incomes
-The ACA limited cost sharing for people with low or moderate incomes, in plans offered by employers and plans purchased through the marketplace
1. For some people, the cost-sharing component of their health insurance is so high that they are considered underinsured
2. To be underinsured, one must have a deductible that is 5% of income or out-of-pocket costs in excess of 10% of income (not including premium costs)
3. Individuals and families often exhaust their savings, run up credit card debt, or else delay necessary medical care to avoid going into debt
What is employer-sponsored health insurance?
-Employer-sponsored health insurance is the leading source of coverage for nonelderly U.S. citizens
-A total of 49% of Americans had this type of insurance in 2017
-Medicare, Medicaid, and other government plans provided coverage to 36%, while 7% purchased policies directly from insurers
-The flaws in this system were blatantly exposed during the COVID-19 pandemic, as millions of Americans filed for unemployment when businesses shutdown, causing them to lose access to health care
1. One example of the trickle-down effects of unemployment is the loss of reproductive health care for millions of women
2. Loss of access to contraceptive and preventive women’s health care will place greater demands on publicly funded clinics that are continually underfunded and result in unplanned pregnancies or late diagnoses of cervical cancers and other health conditions
-Historically, employers became the leading source of coverage because of three policy decisions in the 1940s and 1950s
1. During World War II, wage controls did not apply to health insurance, so employers used health insurance to lure workers from their competitors during wage freezes
2. The U.S. government determined that health insurance could be part of collective bargaining
3. In 1954, the IRS exempted health insurance premiums paid by employers from federal income tax
-A 2019 annual survey revealed that 57% of all U.S. employers offered health insurance to their workers and 99% of large companies offered coverage
1. Small businesses may not offer employee health insurance because of the high cost and fewer employees
-The percent of employers offering health insurance decreased somewhat after the ACA went into effect but increased in 2017; the first time an increase was noted since 2008
1. However, employers are continuing to pass along some of the higher costs of health insurance to employees in the form of higher employee premiums, deductibles, copayments, and stricter enrollment requirements
-Those people whose employers do not offer health insurance coverage or who are self-employed can purchase nongroup health insurance
1. However, premiums are greater than the worker’s share of employer group coverage
2. The ACA has made purchasing a nongroup policy easier and subsidizes the premiums for eligible people
3. Even in states that did not expand Medicaid, a greater number of people with lower incomes purchased insurance on the federal marketplace
4. Problematic changes in affordability and availability of ACA health plans, resulting in “churning and switching among enrollees,” have been noted
5. Variation in costs has not been eliminated with the ACA’s community rating, but the variation is geographical; specifically, costs vary by location, not within one location
-For persons earning incomes “at or below 400% of the federal poverty level” ($103,000 per year for a family of four), premium subsidies are provided for those purchasing on the insurance “marketplaces”
1. This keeps buyers from spending more than a “fixed percentage” of income (2.06% at the lowest level and 9.78% at the highest level) on health care premiums
2. Some “cost-sharing assistance” is available to subsidize private insurers, although it is only for those at lower income levels (100% to 250% of the federal poverty level, or $25,750 to $64,375)
3. It is expected that about 94% of potential costs for a “moderately generous” plan will be covered for those receiving this benefit
-The cost of health insurance is a deterrent for many people. “In 2018, 45% of uninsured adults” stated that insurance costs were too high and that this was the reason they remained without it
1. Prior to the ACA, only 4% to 11% of those at the lower-income levels purchased nongroup health coverage
2. Although coverage levels generally increase as income rises, only 25% of those earning 10 times the poverty level purchased health insurance
What is Medicare?
-Known as Title XVIII of the Social Security Act Amendments of 1965, has provided mandatory federal health insurance since July 1, 1966, for adults aged 65 years and older who have paid into the Social Security system
-It also covers certain people with disabilities (regardless of age)
-Medicare is administered by the Centers for Medicare & Medicaid Services (CMS) of the USDHHS
-In July 2019, Medicare covered more than 60.8 million people, the majority being aged 65 years or older (52.2 million), and paid health care costs of $618.7 billion
-In 2018, 21% of total federal spending was for Medicare ($750.2 billion), and it is expected to increase 7.6% per year between 2019 and 2028
-Financing of Medicare is through general tax revenues (43%), payroll taxes (36%), premiums from beneficiaries (15%), and other sources
-Out-of-pocket spending for Medicare beneficiaries was $5,460 in 2016, almost equally divided between medical/long-term care and premiums
-Individuals with multiple chronic diseases and poor health spent more than their healthier counterparts
-About 85% of beneficiaries were over the age of 65; the remaining beneficiaries qualified for Medicare 24 months after they became eligible for Social Security Disability Insurance (SSDI)
1. These recipients are younger than age 65 and permanently disabled or chronically ill, including those with end-stage renal disease
-Although there are financial challenges facing Medicare and Social Security, both program trust funds have sufficient resources to pay full costs and benefits, without any adjustments, through 2035
1. The disability insurance trust fund will be intact till 2052
2. Reforms enacted with the ACA, and other actions, extended the life of these trust funds
3. Even after those funds have been spent, both programs can continue to pay 75% to about 90% of benefits using only their yearly tax revenues
-There are four parts to Medicare: A, B, C, D
What is part A of Medicare?
-Part A of Medicare, the hospital insurance program, covers inpatient hospitals, limited-skilled nursing facilities, home health, and hospice services to participants eligible for Social Security Disability Incom
-The 2020 deductible per benefit period for inpatient hospitalization, including inpatient mental health, is $1,408
-Patients in a skilled nursing facility pay $176 per day after day 20 and assume all costs if care is needed longer than 100 days
What is part B of Medicare?
-Part B of Medicare, the supplementary and voluntary medical insurance program, primarily covers necessary services to diagnosis or treat health issues and preventive services such as influenza vaccines
-The 2020 annual deductible is $197, and recipients pay 20% of services once the deductible is met
-No out-of-pocket charges are applied for annual wellness visits or preventive services that are rated “A” or “B” by the U.S. Preventive Services Task Force (USPSTF)
-Monthly premiums vary depending on yearly income ranging from $144.60 to $491.60
What is part C of Medicare?
-Part C Medicare plans, also called Medicare Advantage, are private plans subsidized by the federal government
-Medicare Advantage plans are not supplemental to Part A and Part B—they take the place of Part A and Part B
1. Some may also cover vision, dental, and prescriptions
-Unlike traditional Medicare, Part C plans use provider networks, which limit the choice of physicians or hospitals
1. They are regional, which may be problematic for seniors who want to spend winters in Florida and summers in Montana, for instance
-Seniors can change their Part C plan during open enrollment periods or revert to traditional Medicare Part A and Part B
1. Other types of Medicare plans include Medicare Medical Savings Account (MSA) plans, Medicare cost plans, Programs of All-Inclusive Care for the Elderly (PACE), and Medication Therapy Management (MTM) program; these are not available in all areas
-In 2018, over 14 million Medicare beneficiaries had supplemental coverage through a private company or employer retiree health insurance plans—known as Medigap coverage—added to Medicare Part A and Part B
-Changes in Medigap coverage for new enrollees began at the start of 2020
-Part B deductibles are no longer covered under Medigap and Plans C and F are not allowed
1. However, these changes do not affect those enrolled prior to January 1, 2020
-People with Medigap coverage through their employers’ retiree health plan generally pay lower premiums than people with coverage through a private company
-With rising costs of health care coverage, companies are increasing premium costs for retirees, offering new options, such as Medicare Advantage to replace traditional health plans, or paying only a set amount for health coverage and leaving retirees to purchase their own insurance
What is part D of Medicare?
-Part D is a volunteer prescription drug plan for those on Medicare or Medicare Advantage
-The member can sign up for a Medicare Part D plan or an Advantage plan with medication coverage
-Costs vary based on state of residence
-Plans differ in coverage, so clients should be encouraged to research the plans to determine if their medications are included in the plan’s formulary
What is Medicaid?
-Known as Title XIX of the Social Security Amendments Act of 1965, provides medical assistance for children, pregnant women, parents with dependent children, seniors, and people with severe disabilities
-Medicaid is an optional program for states, but all states currently participate
-Over time, the scope of Medicaid increased, and states opting to provide Medicaid were required to implement each increase—or lose their federal Medicaid funding
-As the importance of social determinants of health gains wider acceptance, more states are requiring Medicaid managed care organizations (MCOs) to screen for determinants and provide social services, such as housing and nutrition assistance
-Because Medicaid covers so many people, many of whom have complex health needs, it represents a significant proportion of health care spending in the United States
-Prior to the ACA, childless adults without disabilities were not eligible for Medicaid
1. Under the ACA, Medicaid was expanded to all nonelderly adults with incomes up to 138% of the FPL, or $17,236 for an individual in 2019
-Other changes made through the ACA were to extend Medicaid coverage for children in foster care until age 26—equal to the requirement that private plans allow dependent children to remain on a parent’s plan until that age
1. States also needed to make the Medicaid application process easier
-Medicaid is jointly funded between federal and state governments to assist the states in providing adequate medical care to eligible persons
-The federal government matches state Medicaid spending, and this is the largest source of federal funding for states
1. The federal government pays a portion of the costs, called the Federal Medical Assistance Percentage (FMAP), at 50% to 76%
-The funding model for Medicaid has both benefits and problems
1. There isn’t a limit on federal spending, so as states expand their Medicaid programs, more federal funding flows to states
2. This allows Medicaid to expand during epidemics or pandemics (e.g., COVID-19), natural or man-made disasters, or short economic downturns
3. At the same time, when the economy contracts, as in the 2008 recession, many more people become eligible for Medicaid at a time when state and federal funds were decreasing
-The states have some discretion in determining which population groups their Medicaid programs cover and the financial criteria for Medicaid eligibility, as well as the scope of services, rate of payment, and how the program will be administered, so long as they meet the minimum requirements set by the federal government
-Medicaid is also a source of innovation in health care
1. States implemented medical homes, care coordination, integration of physical and mental health care, and other “new” services earlier than private health plans
2. The flexibility built into the federal requirements for Medicaid, Medicaid rule waivers to test ideas, and the new Innovation Center in CMS (part of the ACA) allow states to develop new models of health care delivery
-Patient advocates (e.g., physicians, nurses, community leaders) often express concerns that many Medicaid managed care plans (or state administrators) are more focused on keeping their costs down than on improving patient care
1. The system has wide variability in cost-effectiveness and quality
2. Ensuring access and quality of care in a managed care environment will require fiscally solvent plans, established provider networks, and awareness of the unique needs of the Medicaid population
3. Also, both providers and beneficiaries need more education about managed care
-Although there are access and quality problems with Medicaid, one large study examining differences between an uninsured population and those with Medicaid found that patients with Medicaid were more likely to see a physician at least once annually
1. Among low-income populations with high blood pressure, those with Medicaid had greater awareness and control of hypertension, although this was not the case for those with high cholesterol or diabetes
What was the National Federation of Independent Business v. Sebelius?
-The ACA initially required all states to expand Medicaid
-This was legally challenged by several states, leading to a Supreme Court case—National Federation of Independent Business v. Sebelius
-The Medicaid expansion was ruled to be unconstitutional because it was highly coercive and the Medicaid expansion became optional for states
-Currently, 37 states have expanded Medicaid coverage
1. However, a gap in coverage exists in states choosing not to expand Medicaid coverage; Medicaid eligibility is 40% of the federal poverty level ($8,532 for a family of three in 2019)
-According to the Center on Budget and Policy Priorities (CPPB), since expanded Medicaid coverage was implemented, over 19,00 lives have been saved
1. Whereas, in states that have not expanded Medicaid, roughly 15,500 lives have been lost
-The largest portion of Medicaid spending goes toward people with disabilities (40%) and older adults (21%), but these two groups comprise only 23% of Medicaid enrollees
What are the mandatory services under Medicaid ?
-Outpatient and inpatient hospital services
-Early childhood screenings and well-child checkups (to age 21)
-Physician and nurse practitioner/certified nurse midwife services
-Lab and x-ray services
-Family planning services
-Tobacco cessation counseling for pregnant women
-Home health care and nursing home services for those over age 21 (including rehabilitation centers)
-Federally qualified health center and rural health clinic services
-Transportation to medical care
