Lecture 1 Flashcards
Why do we need health insurance?
to protect against large financial losses, reduce barrier to seeking care, increase the predictability of costs and utilization through pooling
What happens to people who don’t have insurance?
They’re much more likely to forego basic medical services
Which services are uninsured adults most likely to forego?
preventative medicine, doctor/health care professionals
What are uninsured people less likely to receive preventative care and services for?
Major health conditions and chronic diseases
What does more generous health insurance lead to?
People using some services more
What does it mean to discount the future?
Deal with what’s today and ignoring what tomorrow might bring, favoring the present over the future
What do we often discount the future when it come to health care?
Preventative services
Why is health care utilization lumpy bumpy (skewed)?
Healthy young people use very few services and a few people will use a lot of services
What is cross subsidization?
Those people don’t use a lot subsidize those people who do
Where and when did health insurance in the US start?
1929 at Baylor University Hospital in Texas, where they set up a pre payment plan with a group of Dallas teachers
Why 1929 (Baylor University Hospital stating health insurance)?
The Great Depression; high unemployment rate (people can’t afford to go to the doctor)
Why Dallas teachers?
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
What is Blue Cross?
Hospital based and community based pre-payment plans organized into this
Why did expansion of Blue Cross happen?
Most states passed laws exempting hospital service plans from reserve requirements
What’s a reserve requirement?
Minimum amount of cash or securities that an insurance company must have on hand to pay claims
Why no reserve requirements (Blue Cross)?
Because the hospitals providing the service
Why didn’t the doctors like the arrangement of Blue Cross?
They were worried about someone stepping in between the doctor and the patient (insurance = control); didn’t want to be told what to do
Why was Blue Shield created and when?
1939; Worried that the hospitals would take their money pay them and make them employees, weren’t making enough money because of the depression
What was happening in 1939?
The Great Depression is still happening
When did the Great Depression end?
1941 (Word War 2)
What happened December of 1941?
Pearl Harbor
What is Blue Shield?
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
Why was being it non-profit a requirement for Blue Shield?
So a for profit insurance company couldn’t take their money and make money off them
Why no reserve requirements (Blue Shield)?
same reason as Blue Cross
What problems does World War 2 create?
Labor shortage because everyone was on front line
What percent of the American Population served in the armed forces in WWII?
around 10% (17 million)
How many people lived in the US in the 1940s?
140 million
Prices went up because of the labor shortage. What did they do to fix that?
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
What was the most valuable fringe benefit?
Health insurance (because of the coal workers demand it because they were in a risky business)
What is the McCarran-Ferguson Act 1945?
exempts insurance from federal regulation (coverage standards, premiums, policy language and implementation, financial reserves, accounting standards, marketing)
What part of commerce can the federal government regulate?
interstate commerce (there is
What was the consequence of the McCarran-Ferguson Act 1945?
lots of inconsistencies (chaos); different in each state
When did the revision to the internal revenue code occur and what did it do?
1954; employer contributions for health insurance were excluded from taxable income (cheaper way of compensating workers)
Why is employer-sponsored insurance regressive?
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
What does regressive mean?
the more you make, doesn’t mean you pay more
Why doesn’t McDonalds have health insurance?
it’s franchise owned
Why in the early 20th century, did for profit insurers decide not to go into health insurance?
They were losing money because it was a voluntary system (only people who needed it bought it so higher risk)
What were some advantages that rise for profit, commercial health insurance had over Blue Cross/Blue Shield (non profit plans)?
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
What is ERISA?
exempts self-insured employee health coverage from state regulation
