The U.S. National Health Care System

1
The U.S. National Health Care System

• PH 150
• November 2005

2
Outline

• Overview of U.S. system compared to other
  developed countries
  
• Private insurance
• Current policy issues

3
Overview

• Characteristics of U.S. System
• Big
• Patchwork of insurance coverage
• Relies on marketplace

4
Total Health Care Expenditures, 2002
5
RELATIONSHIP BETWEEN NATIONAL WEALTH AND HEALTH
EXPENDITURES
Source Huber, M. 1999. Health Expenditure
Trends in OECD Countries, 1970-1997. Health
Care Financing
Review 21(2) 99-117.
6
Utilization of Select Services
7
Self-Reporting Waiting Times, 1998
 
Source Donelan, K., et al. 1999. The Cost of
Health System Change Public Discontent in Five
Nations. Health Affairs 18(3) 206-216.
8
Life Expectancy and Infant Mortality Rates, 1998
  Data for Canada are for 1997.
9
Patchwork of Coverage

• Medicare over 65 or disabled
• Medicaid some (about ½) of poor
• Employer-sponsored private insurance (if offered,
  if you are eligible, if you by it)
  
• Individual private insurance
• Military or veterans coverage
• Indian health services
• Uninsured (safety net providers)

10
Eligibility for Health Care Benefits Under
Public Programs (percentage of population)

11
Private Insurance

• Development
• Current statistics
• Issues in private insurance
• - underwriting
• - adverse selection
• - moral hazard

12
Development of Private Insurance

• Story begins around 1930 in U.S., although
  earlier in countries such as Germany
  
• First example 21-day hospital benefit for
  6/year (Baylor University, Dallas, 1929)
  
• Hospitals then banded together to give choice of
  facility gave them in Great Depression even
  if beds were empty, which led to the formation of
  Blue Cross

13
Development (continued)

• A.M.A. was worried that insurance could lead to
  socialized medicine, so Blue Shield plans
  didnt form till 1940s
  
• 10 tenets of coverage (MDs have complete control
  over care, free choice of MD, etc.)
  
• WWII stimulated development with labor shortage
  and wage controls, health insurance became
  attractive fringe benefit, and courts later ruled
  it not taxable income

14
Development (concluded)

• Medicare Medicaid in mid-1960s
• Compromise between liberals who wanted social
  insurance, and providers who didnt want excess
  government interference
  
• Compromise 3-pronged approach put together by
  Congressman Wilbur Mills
  
• Part A of Medicare, hospital insurance, is like
  social insurance, financed from payroll taxes
  
• Part B, physician coverage, voluntary and partly
  paid by beneficiaries and partly from general
  revenues but with generous reimbursement rules
  
• Medicaid was not made an entitlement program, but
  a rather welfare-like program for poor people.
  

15
Statistics The Uninsured

• Percentage of population under age 65
• - total population 17 (39 million people)
• - age 18-24 29
• - Black 21
• - Hispanic 34
• - Below poverty 35
• - 100-149 FPL 37
• - 150-199 FPL 27

16
Issues in Private Insurance

• Medical underwriting
• Adverse selection
• Moral hazard

17
Medical Underwriting

• The methods used by insurance companies to decide
  whether or not to insure an individual or group,
  and how much to charge in premiums (done by
  actuaries)
• In U.S., private insurance is experience rated
  (in contrast to community rating) the more
  you or your group will cost, the more it will be
  charged. As a result, many find it hard to get
  affordable coverage

18
Adverse Selection

• When an insurer gets sicker people than
  anticipated (when it set premiums) the opposite
  is favorable selection
  
• Adverse selection is a big problem for insurance
  markets, as insurers are reluctant to enter risky
  markets for fear that they will get lots of sick
  people, raising premiums and making coverage
  unaffordable
• Up till now, FFS has experienced adverse
  selection, and HMOs, favorable selection

19
Moral Hazard

• When possession of insurance makes it more likely
  that you will file a claim (as well as more
  expensive claims)
  
• In medical care, this is a downward sloping
  demand curve
  
• Various ways to deal with it. On demand side,
  higher copayments. On supply side, utilization
  review, practice guidelines, limiting supply of
  medical resources available

20
Current Policy Issues

• Access/equity
• About 40 million uninsured
• Getting access to care in HMOs
• (2) Rising costs
• - Higher premiums, higher cost sharing
• - Especially pharmaceuticals
• - Movement away from tightly managed
  care
  
• (3) Quality
• - Does competition improve or deter
  quality?
  
• - Do HMOs provide as good quality of care?

21
Legislation

• California Bill SB-2s repeal
• Californias rejection of two drug pricing ballot
  initiatives
  
• Tax credits to reduce number of uninsured
• Medicare new prescription drug benefit