Health Insurance

Objectives for today

Explain the origins of insurance

Differentiate among types of insurance

Explain reimbursement mechanisms

Explain service use incentives

Identify provider incentives

What is insurance?

A method of distributing risk

Traditional insurance for expensive potential losses car accidents, hospitalization

Today’ health insurance covers fairly non-risky events routine physician care

Origins of health insurance

European industries Germany’s sickness fund, 1840

United States Blue Cross: Baylor teachers in Dallas, 1929 American Medical Association opposed Blue Cross: expanded during depression Blue Shield: California Medical Society,

1939

Health insurance types

Voluntary Individuals, employers purchases

Social health insurance Government sponsored (e.g. Medicare in

the U.S.; health insurance in Canada)

Public welfare For low income persons (e.g. Medicaid)

Health insurance coverage in U.S.

41.7 million Americans (15.6 % of population) uninsured in 1996 (Carrasquillo et al. 1999; from Current Population Survey)

Texas has the higher proportion of uninsured of all of the states 4,680,000 Texans (24.3 %) uninsured a significant increase from 1989

Health insurance coverage in U.S.

187.9 million (70.4%) covered

by private insurance 31.9 million (11.8%) covered

by Medicaid 34.7 million (13.2%) covered

by Medicare (13.2%)

Health insurance coverage in U.S.by Age Category

14.8

22.7

14.4

1.1

0

5

10

15

20

25

<18 18-39 40-64 >64

% uninsured

Health insurance coverage in U.S.by Gender

17.1

14.2

0

2

4

6

8

10

12

14

16

18

Male Female

% uninsured

Health insurance coverage in U.S.by Race/Ethnicity

11.5

21.6

33.6

0

5

10

15

20

25

30

35

40

Non-HispanicWhites

Blacks Hispanics

% uninsured

Voluntary health insurance

Most people in U.S. covered by private insurance

Employer purchased

Self-employed

Medigap

Social health insurance programs in the U.S.

Worker’s compensation Medicare

Medicaid

Department of Defense

VA health system (not simply an insurance system, but a health system)

Source of expenditures

31%

4%

19%14%

13%

19% Private healthinsuranceOther private

Medicare

Medicaid

Other gov't.

Out of pocket

Where the $1 trillion is spentfrom Levit et al. (1996)

11%

36%

8%

20%

25% Other spending

Hospital care

Nursing home

Physician services

Other personalhealth care

Worker’s compensation

Covers employed persons

Pays cash replacement of a portion of wages

Pays for medical care resulting from work-related injury or sickness

Medicare

An entitlement program passed in 1965

The major social health insurance program in the U.S.

Covers individuals 65 and older Also covers disabled individuals and

those with end-stage renal disease

Medicare Part A

Compulsory

Covers hospital costs

Paid for by Social Health Insurance Trust Fund

Indirect payment Gov’t. does not own provider

organizations and does not hire providers

Medicare Part A Benefits

90 inpatient days in a benefit period Deductibles for days 1-60

Coinsurance for days 61-90

100 days in Skilled Nursing Facility Coinsurance

Medigap

70 % of Medicare enrollees have supplemental insurance Covers deductibles, coinsurance

Medicare Part B

Not compulsory

Covers physician services

Most $ from general treasury

Some $ from Social Security check deductions for Part B

Medicare Part B Benefits

Physician services Yearly deductible Monthly premium

Outpatient hospital care

No pharmaceuticals

No eye examinations

Medicaid (Title XIX)

A welfare or charity program

Most $ comes from U.S. General Treasury

State treasuries pick up rest of tab

Medicaid (Title XIX)

Eligibility requirements

Receiving Aid to Families with Dependent Children (AFDC)

Pregnant and postpartum women with children < 6 yrs. and income < 133% of poverty level

Aged, blind, and disabled receiving supplemental security income

Medicaid Benefits

Hospital inpatient care

Home health care

Physician services

Family planning

Other services as shown in text

Department of Defense

Military health care system for uniformed military personnel

CHAMPUS - Civilian Health and Medical Program of the Uniformed Services for families and dependents of active

military personnel

VA Health Care System

For retired, disabled, and other “deserving” veterans approximately 170 hospitals in

U.S. provide mostly acute hospital care some specialized outpatient care mental health care long term care

Moral hazard

When have insurance, want to reap the benefits of it

Can lead to excess use of health services

To control effects of moral hazard, multiple techniques used

TEFRA

Tax Equity and Fiscal Responsibility Act (1982)

Encouraged Medicare HMOs

Prospective payment for Medicare (DRGs)

RBRVS

Resource-based relative-value scale (1992)

for Medicare Part B

Based on physician work, practice expense, and malpractice insurance

Controlling excess use

In the U.S., we tend to rely on risk distribution and market incentives

Patient incentives (cost sharing)

Provider incentives (reimbursement)

Utilization review

Health plan competition

Patient incentives: Deductibles

Money that must be paid by the individual before insurance benefits kick in

e.g. the patient must pay for $500 of medical charges before insurance begins to pay

Criticized for contributing to delays in treatment

Patient incentives

Copayment Fixed amount paid for each service consumed e.g. a patient has to pay $15 every time

he/she visits a physician

Coinsurance A percentage of money paid by individual for

each service e.g. the insurer pays 80% of surgery charges;

the patient pays 20%

Physician reimbursement

Fee-for-service (FFS)

Prepayment

Salary

Utilization review

Prospective

Retrospective

Concurrent