History of Healthcare Finance Flashcards
How much did the US spend on healthcare in 2023?
$4.9 trillion or 17.6% of GDP
What is the healthcare spending in the US projected to be by 2028?
$6.2 trillion
What is GDP?
Gross domestic product
The sum of the value of all the goods and services produced in a country in a year’s time
What is insurance?
A risk transfer mechanism that facilitate shifting the of cost of a risk away from the insured towards the external party (insurer) in exchange for payment of a premium
How is risk transferred?
Transferred from the one person to many people by pooling the risk across a large number of members
Cost of any covered losses are shared by the group
What are the concerns about access to care as a social issue?
Financial accessibility (ability to pay for care or obtain and pay for insurance)
The cost of healthcare itself
Did the development of a means to pay for medical care evolved in parallel with advances in medical care?
Yes
What was the original function of health insurance?
Primarily income stabilization
Referred to as sickness insurance (is disability insurance today)
What was sickness insurance?
Did not emphasize provision of medical services because medicine was limited in what it could offer
Was often ineffective or even made things worse
When did medical science begin to come into its own?
By the mid 1800s
Medical care became more desired as it became more effective
1844 Anesthetics
1853 Aspirin
1861 Germ Theory
1867 Antiseptics
1870’s Vaccines: cholera, rabies, and anthrax
1895 X-Ray
What is the great divide?
A point in time between 1910 and 1912 when, for the first time, a random patient with a random disease consulting a doctor chosen at a random time stood better than a 50-50 chance of benefiting from the encounter
After 1912, patients had an ever increasing expectation that they would not only survive the encounter, but enjoy improved health as a result of the care they received
What did Europe do in the late 1800’s?
They went down the path of government sponsored insurance
Germany and England both instituted compulsory sickness insurance (as a part of a general program of social insurance)
What did the US do in the late 1800’s?
It went down the path of private insurance
1870’s – Grainite Cutters Union establishes sickness insurance for its members
1890’s - Mining, railroad and lumber industries provide medical care to employees
1900 – Aetna Life Insurance Co. and Travelers Insurance Co. offer a new type of health plan providing coverage for temporary total disability caused by all diseases
What were the beginnings of private insurance in the US?
1910 – 1st prepaid plan formed in the lumber industry of Tacoma WA
1929 – 1st hospital prepayment plan at Baylor University Hospital.
1930’s – Blues form as fee for service indemnity plans
1937 - Kaiser-Permanente
What were some obstacles for insurance in the US?
Commercial insurers shunned setting healthcare insurance as it “could not be safely transacted so as to be profitable”
Adverse selection - those who were sick would seek coverage, and those who were health would not (only getting the people who needed it)
Moral hazard - an increase in the hazards presented by a risk arising from the insured’s indifference to loss because of the existence of insurance (if I’m covered I’m going to go as often as I want)
Where did the idea of group coverage (employer groups) come from?
To reduce the adverse selection and moral hazard
It reduced administrative cost and it insured that the risk pool were predominantly a healthy population (the working population)
Don’t need to chase down people to buy insurance anymore
What is a capitated plan?
Paid a set amount of money for a set period of time for all of the individuals they see
What is the fee for service model?
The more they do, the more money they make
Up until WWII, were the individuals usually responsible for the blue cross blue shield (BCBS) premium payment?
Yes
During the war, to counter a freeze on wages, employers began to offer health plan premium payments as an alternative to increased wages
By 1950 almost 150,000,000 Americans had employer provided health insurance
Then it just stayed that way after the war
What is the hill-burton act?
Passed by congress in 1946
Made direct government grants for communities to build hospitals (prior to this, philanthropy played a major role)
Over time this led to a significant increase in access to care and hospital beds
What happened as a result of private insurance?
It left the poor and older adults without coverage
What is an indemnity plan?
An agreement where the insurance company pays a percentage for the care that the insured receive
Many times it was 100%
They can go wherever they want to receive care
The insurer will contractually pay for it
Insurer has no control over cost and quality
What was the social security act of 1965?
Created the medicare program
Arguably the most significant piece of healthcare legislation ever
Reimbursement was based on reasonable cost
BCBS and other large insurers became the administrative agents or fiscal intermediaries (contracted with them to oversee how this is running)
In the mid 1970s, were employers and the government (taxpayers) bearing the cost of healthcare?
Yes
With new technology and new treatments available the healthcare industry expands and consumer utilization expands – Cost rise
