GBAM/501 Read Me First

Read Me First
HCS/235 Version 5 / 1

Read Me FirstHCS/235

Week Two

Introduction

The financing of health care in the United States has evolved since the second half of the 20th century and has done so concurrently with the health insurance industry. The United States relies on employer-offered health insurance, Medicare, Medicaid, the military health system, and other government programs to finance its health care delivery system. How health care is financed influences access to health care, how health care is delivered, the quality of health care provided, and its cost.

National Health Care Expenditures

Despite all the approaches to financing health care in the United States, national health care expenditures continue to rise and increasing numbers of Americans are under- or uninsured. Since the passage of Medicare and Medicaid, national health expenditures have increased from 6.3% of the gross domestic product in 1960 to 16% in 2004. Health care spending in 2004 was $6,289 per person. While the rate of growth was declining, the Centers for Medicare and Medicaid Services’ (CMS,2006) projectionwas that health care spending would increase from $1.9 trillion in 2004 to $2 trillion in 2006.The actual expenditure in 2006 was $2.11 trillion, or $7,071 per person. In 2009, National HealthExpenditures (NHE) reached $2.47trillion, or $8,046 per person. Those same projections place NHE at $3.02 trillion, $9,505 per person, as early as 2013 (CMS, 2009).

Health Status

The United States health care system is the most expensive in the world. This system spends more on health care than any other industrialized country. Yet, its citizens do not have the best health status in the world for many reasons. One is that there is an imbalance in the distribution, access, and quality of health care services among populations; for example, physicians cluster in urban areas, leaving rural areas markedly underserved (MacDowell, Glasser, Fitts, Nielsen, & Hunsaker, 2010).In comparison of 13 countries, the United States ranked second from the bottom on several health indicators. Countries in order of their average ranking—with the first being the best—are Japan, Sweden, Canada, France, Australia, Spain, Finland, the Netherlands, the United Kingdom, Denmark, Belgium, the United States, and Germany (Starfield, 1998).

Increasing Costs

There are many reasons for the increasing costs of health care. Prescription drugs, hospital costs, Medicare, and Medicaid contribute significantly to rising costs. Together, Medicare and Medicaid pay for one third of all health care in the country. The largest payers of health care services in the United States are federal and state governments. The largest federal programs are Medicare and Medicaid (Manning, 1998). Medicare is said to be the second largest segment of the federal budget, second only to Social Security payments. Many states have initiated changes in Medicaid to control spending—changes such as reducing the amount of provider reimbursements, cutting discretionary benefits, and imposing copayments.

Other factors influencing health care spending now and in the future include the following:

Medical technology
New drugs
Aging of the population
Medical malpractice lawsuits

Types of Health Insurance

The rising cost of health care has also facilitated the shift away from traditional indemnity or fee-for-service health plans toward managed care. In 2006, only 3% of health plan enrollees used an unrestricted fee-for-service plan (Barsukiewicz, Raffel, & Raffel, 2010). Managed care is a broad term that includes applying cost containment strategies, preventive screenings and care, and evidence-based medicine in delivering health care. The intent is to ensure patients receive only necessary care, particularly reducing costly specialty services that can be handled by primary care physicians. While there are many different types of managed care plans, the three largest categories are health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS) plans.

Many of the firstHMOs included capitated prospective payment plans in which physician groups are paid a fixed pre-payment per-member-per-month for enrollment with their primary care physicians whether patients used services or not. In turn, physicians were expected to provide all care and services. While the intent was to achieve optimal, not maximal care, often the message and incentive for physicians was to be frugal in providing services to patients so the practice could be more profitable. Some companies offered bonus incentives to physicians if they were able to deliver services and remain under a certain percentage of their capitation arrangement. Today, many provider practices will not accept a capitated contract because it causes the practice to assume the insurance risk for their patient population, which means incurring a loss if patients happen to be sicker or need more care than average (Barsukiewicz, Raffel, & Raffel, 2010).

Because of the restrictive “gatekeeper” model of HMOs, in which all care must be routed through a primary care physician, many beneficiaries have turned to more flexible PPOs, where a network of providers agrees contractually to provide services to a patient population at a negotiated lower fee-for-service rate. According to the Kaiser Family Foundation (2006), 60% of health plan enrollees chose PPO plans in 2006.

POS plans, a hybrid of HMOs and PPOs, have also become a popular option, as they allow patients to save on health care costs if they elect to receive services within the approved network of physicians and facilities. If patients choose to receive services outside the network, they must pay a percentage of the fees until a deductible had been met and higher copays.

Some newer health insurance models have emerged that have attempted to reduce health care costs by giving consumers a greater financial stake in care decisions. Specifically, these high-deductible health plans (HDHPs) include a health savings account (HSA), to which enrollees contribute monthly. Using the funds saved in their HSAs, enrollees must pay for medical expenses until they reach their deductible. Proponents of these newer models believe managed care plans insulate people from the true costs of care, which leads to overuse, while HDHPs and HSAs promote more judicious health care choices by consumers. Opponents argue that HDHPs and HSAs cause people to delay needed care; moreover, low-income people may not be able to contribute sufficiently to HSAs and would have to pay out-of-pocket for services until they reach their deductible (Barsukiewicz, Raffel, & Raffel, 2010).

National Health Insurance

Many groups concerned about the rising cost of health care and the increasing number of Americans without health insurance have proposed a single-payer system or a national heath insurance plan. One group is the Physicians for a National Health Program, a not-for-profit organization of physicians, medical students, and other health care professionals that support a national health insurance program. While promoting a single-payer system, the organization advocates for keeping the actual delivery of health care in the private sector. More information is on its website: .

Stakeholders in the Health Care Industry

A stakeholder in the health care system is a facility, organization, or an individual who has a personal, professional, or financial investment in the outcome of a health plan, program, policy, or change that affects that investment (American Heritage Dictionary of the English Language, 2010).Thus, with respect to health care, stakeholders could be recipients of care or the loved ones of patients receiving care, the payers of health care, including health insurance companies, employers, federal and state governments, provider organizations, and taxpayers. While changes in cost, quality, or access to health care may positively affect one group, another group may be negatively affected. Finding the optimal balance between the three key elements is important.

This week in relationship to the course and the program

Your readings and discussions elaborate on the overall health care delivery system in the United States and itssubsystems. This week, youfocus on the increasing costs of health care delivery, how it is financed, and which entities have a stake in health care costs and outcomes.

Hints for a reading strategy of the assigned materials

As you read, think about the implications and consequences of the complexity of the financial mechanisms that pay for health care services. Consider your personal and professional experiences with health care billing and reimbursement. Reflect upon the larger health care delivery structure in the United States and many stakeholders in the industry. Keep in mind that financial resources are finite.

To gain a broader understanding of the Medicare, Medicaid, and State Children’s Health Insurance Program, visit the center for Medicare and Medicaid Services at (.Add this website to your Favorites as it is one you will refer to throughout your program. In addition, find your state’s health and human services websites to learn how SCHIP is implemented in your area.

Some questions to ask as you hone your critical thinking

Consider the following questions to guide your thinking:

What role should the government play in financing health care services?
What role should the private sector play in financing health care services?
How do health insurers, employers, patients, provider organizations, health care workers,federal and state governments, and taxpayers affecthealth care delivery and its costs?

Summary

Health care costs continue to rise. Managing health care resources is a priority in the United States as Congress continues to pass legislation attempting to reduce or slow down rising costs. The implementation of new legislation or regulation has resulted in limited success to reduce health care costs. As a consequence of efforts to reduce costs, the delivery of health care services and the roles of health care workers change. As a health care manager or administrator, you will be in a position to experience firsthand the effect of rising health care costs and resulting efforts to contain them.

References

The American heritage dictionary of the English language (4th ed.). (2010) Boston, MA: Houghton Mifflin.

Barsukiewicz, C. K., Raffel, M. W., & Raffel, N. W. (2010). The U.S. health system: Origins and functions.(6th ed.). Mason, OH: Cengage.

CentersforMedicareMedicaidServices. (2006). Healthcare spending growth rate continues to decline in 2004. Retrieved from

Centers for MedicareMedicaidServices. (2009). National health expenditure projections 2009–2019. Retrieved from

Kaiser Family Foundation and Health Research and Educational Trust. (2006). Employer health benefits annual survey, 2006. Retrieved from

MacDowell, M., Glasser, M., Fitts, M., Nielsen, K., & Hunsaker, M. (2010, July–September) A national view of rural health workforce issues in the USA. Rural & Remote Health, (10)3, 1-12.

Manning, W.L. (1998). Medicare & Medicaid. Retrieved from

Starfield, B. (1998). Primary care: Balancing health needs, services, and technology. New York, NY: Oxford University Press.