Lecture 1

Question 1

Why do we need health insurance?

Answer 1

to protect against large financial losses, reduce barrier to seeking care, increase the predictability of costs and utilization through pooling

Question 2

What happens to people who don’t have insurance?

Answer 2

They’re much more likely to forego basic medical services

Question 3

Which services are uninsured adults most likely to forego?

Answer 3

preventative medicine, doctor/health care professionals

Question 4

What are uninsured people less likely to receive preventative care and services for?

Answer 4

Major health conditions and chronic diseases

Question 5

What does more generous health insurance lead to?

Answer 5

People using some services more

Question 6

What does it mean to discount the future?

Answer 6

Deal with what’s today and ignoring what tomorrow might bring, favoring the present over the future

Question 7

What do we often discount the future when it come to health care?

Answer 7

Preventative services

Question 8

Why is health care utilization lumpy bumpy (skewed)?

Answer 8

Healthy young people use very few services and a few people will use a lot of services

Question 9

What is cross subsidization?

Answer 9

Those people don’t use a lot subsidize those people who do

Question 10

Where and when did health insurance in the US start?

Answer 10

1929 at Baylor University Hospital in Texas, where they set up a pre payment plan with a group of Dallas teachers

Question 11

Why 1929 (Baylor University Hospital stating health insurance)?

Answer 11

The Great Depression; high unemployment rate (people can’t afford to go to the doctor)

Question 12

Why Dallas teachers?

Answer 12

One job people weren’t going to lose because education is needed (teachers are employed) and most of them are women (women give birth; pregnancy is expensive); Teachers have reason to use healthcare

Question 13

What is Blue Cross?

Answer 13

Hospital based and community based pre-payment plans organized into this

Question 14

Why did expansion of Blue Cross happen?

Answer 14

Most states passed laws exempting hospital service plans from reserve requirements

Question 15

What’s a reserve requirement?

Answer 15

Minimum amount of cash or securities that an insurance company must have on hand to pay claims

Question 16

Why no reserve requirements (Blue Cross)?

Answer 16

Because the hospitals providing the service

Question 17

Why didn’t the doctors like the arrangement of Blue Cross?

Answer 17

They were worried about someone stepping in between the doctor and the patient (insurance = control); didn’t want to be told what to do

Question 18

Why was Blue Shield created and when?

Answer 18

1939; Worried that the hospitals would take their money pay them and make them employees, weren’t making enough money because of the depression

Question 19

What was happening in 1939?

Answer 19

The Great Depression is still happening

Question 20

When did the Great Depression end?

Answer 20

1941 (Word War 2)

Question 21

What happened December of 1941?

Answer 21

Pearl Harbor

Question 22

What is Blue Shield?

Answer 22

A physicians service that provided service benefits for home and office visits (as well as doctor services in the hospital); had to be doctor-controlled

Question 23

Why was being it non-profit a requirement for Blue Shield?

Answer 23

So a for profit insurance company couldn’t take their money and make money off them

Question 24

Why no reserve requirements (Blue Shield)?

Answer 24

same reason as Blue Cross

Question 25

What problems does World War 2 create?

Answer 25

Labor shortage because everyone was on front line

Question 26

What percent of the American Population served in the armed forces in WWII?

Answer 26

around 10% (17 million)

Question 27

How many people lived in the US in the 1940s?

Answer 27

140 million

Question 28

Prices went up because of the labor shortage. What did they do to fix that?

Answer 28

wage and price controls to precent employers from raising wages to compete for workers but they can fringe benefits by up to 5% of the wages

Question 29

What was the most valuable fringe benefit?

Answer 29

Health insurance (because of the coal workers demand it because they were in a risky business)

Question 30

What is the McCarran-Ferguson Act 1945?

Answer 30

exempts insurance from federal regulation (coverage standards, premiums, policy language and implementation, financial reserves, accounting standards, marketing)

Question 31

What part of commerce can the federal government regulate?

Answer 31

interstate commerce (there is

Question 32

What was the consequence of the McCarran-Ferguson Act 1945?

Answer 32

lots of inconsistencies (chaos); different in each state

Question 33

When did the revision to the internal revenue code occur and what did it do?

Answer 33

1954; employer contributions for health insurance were excluded from taxable income (cheaper way of compensating workers)

Question 34

Why is employer-sponsored insurance regressive?

Answer 34

1) when you’re making more, you get a bigger tax shield (not income linked) lower income earners get less dollar benefit
2) lower income earners are less likely to have jobs that offer health coverage
3) lower income earners pay a higher share of wages in premiums

Question 35

What does regressive mean?

Answer 35

the more you make, doesn’t mean you pay more

Question 36

Why doesn’t McDonalds have health insurance?

Answer 36

it’s franchise owned

Question 37

Why in the early 20th century, did for profit insurers decide not to go into health insurance?

Answer 37

They were losing money because it was a voluntary system (only people who needed it bought it so higher risk)

Question 38

What were some advantages that rise for profit, commercial health insurance had over Blue Cross/Blue Shield (non profit plans)?

Answer 38

1) could offer multiple forms of insurance
2) could offer national coverage for large corporations
3) offered lower prices on plans for healthy low risk workers
4) offered indemnity plans (covers part of the cost of a service); there’s no restrictions, no network

Question 39

What is ERISA?

Answer 39

exempts self-insured employee health coverage from state regulation