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What are the 4 basic modes of paying for health care?
- individual private insurance
- employment-based group private insurance
- government financing
If health care is a basic human right, then what? (pg. 5)
There must be a payment mechanism available to assist people who are unable to afford care out-of-pocket.
What are three problems that arise in the out-of-pocket mechanism of payment? (pg. 6)
- Health care is a need rather than a luxury
- Need and cost of care are unpredictable
- Patients must rely on physicians' recommendations
Describe Individual Private Insurance. (pg. 7)
- Third party in the health care transaction
- Patients' premiums and providers' reimbursements
- Large administrative costs, so not main method in US
How is the government involved in employment-based private insurance? (pg. 8)
Because employee/employer financing of health plans are tax-free, the government indirectly subsidizes employer-based health insurance benefits.
What is a Health Maintenance Organization?
A hospital-centered prepayment plan where patients must receive care at a member organization to utilize their health care benefits.
In terms of driving force, how does the development of health insurance in Europe differ from that of the United States?
- Europe--consumers seeking way to pay for care
- US--providers seeking steady source of income
Describe early insurance entities: (pg. 8)
•19th Century Europe
•20th Century European immigrants to US
•Metropolitan Life and Prudential
•Baylor University Hospital
•American Hospital Association Blue Cross
•California Medical Association Blue Shield
- 19th C Europe--voluntary benefit funds set up by guilds, industries, and mutual societies to assist monthly sum-payers' in case of illness
- 20th C immigrants--sickness benefits for members
- ML and P--Individual Private Insurance, Commercial life insurance, policies for funeral and final illness expenses
- 1929, Baylor U--yearly fee would cover 21 days of hospital care for schoolteachers. Similar hospital-restricted care plans emerged during the Great Depression
- AHA Blue Cross--Hospital-controlled prepayment plans with free choice of hospital for hospital services
- 1939 CMA Blue Shield--Physician-controlled prepayment plans to cover physician services
- 1965 Medicare A--hospital insurance plan for elderly, financed by Soc. Sec. taxes
- Medicare B--physician service insurance plan for elderly, paid for by taxes and monthy premiums
- Medicaid--care of low-income groups, funded by state and federal taxes.
Describe the role of fringe benefits on group insurance enrollment.
Because of the WWII restrictions on wage and price, employers offered fringe benefits, including health benefits to attract employees during a period of employee shortage. Enrollment in group insurance plans grew from 12 million in 1940 to 142 million in 1988.
How did commercial insurers change the dynamics of health insurance?
Distribution changed when commercial insurers set premiums by experience rating rather than community rating, and community rating (which the concept of group insurance is based on) could no longer exist. Younger payers who require little care would prefer to be billed premiums by experience rating, and older payers who require lots of care would prefer to pay premiums based on community rating. Companies with community rating plans would no longer be competitive or viable against companies with experience rating plans.
What is experience rating?
- Experience rating--premiums required of age groups is based on their use of services
- Older, illness-prone individuals pay more in premiums than younger, healthier members
What is community rating?
Community rating--premiums same across age groups regardless of use.
Which is more distributive between experience and community rating and why?
Community rating is more distributive because it more adequately achieves the goal of providing care based on human need rather than ability to pay. In experience rating, healthier groups do not subsidize the cost of sicker groups' health care, and thus the principle of health insurance is when it is employed.
How did the switch from community rating to experience rating in health insurance plans affect high-risk older and sicker group coverage?
These groups found it harder to receive coverage.
Why can't community rating survive in a market-driven competitive private insurance system?
People are only willing to risk paying for health insurance even though they may not use it within their own group (bankers with other bankers). They have no incentive to subsidize the care of people outside their groups (bankers with coal miners).
How does insurance circumvent the "invisible hand"?
If a patient is well-insured the cost of care causes no fiscal pain directly, and they will use more services than if they were paying directly out of pocket. The invisible hand holds down the price and quantity of healthcare only when the patient painfully pays for personal care.
What are two ways insurance has soured as a method of paying for health care?
- Insurance is market-driven, premiums based on experience rating, distribution of funds from healthy to sick is weakened, must be this way for companies to compete
- Insurance is a third-party payer system, so more services are used and cost of care continues to increase
What is Medicare Part D and why is it controversial?
- Voluntary program for partial prescription drug coverage, but confusion and very high cost because of:
- Major coverage gaps
- Coverage not administered by federal medicare program, but by private insurance companies
- Government not allowed to negotiate with pharmaceutical companies for lower drug prices
What's the Medicare Part D "donut hole"?
Out-of-pocket expenses patients incur after using up their initial [$2400] in prescription benefits and before coverage resumes.
What reason related to provider reimbursement are Medicaid patients increasingly filling academic and community health centers?
Most providers do not accept Medicaid coverage since reimbursement by Medicaid does not cover costs to provider (Medicaid pays 70% of what Medicare pays).