01-04A - Introduction To Healthcare and Public Health in The US - Unit 04 - Financing Healthcare Part 1 - Lecture A

Introduction to Healthcare and
Public Health in the US

Financing Healthcare (Part 1)
Lecture a
This material (Comp1_Unit4a) was developed by Oregon Health and Science University, funded by the Department of Health
and Human Services, Office of the National Coordinator for Health Information Technology under Award Number
[IU24OC000015)].
Learning Objectives
Understand the importance of the healthcare industry in the US economy
and the role of financial management in healthcare. (Lecture b)
Describe models of health care financing in the US and in selected other
countries. (Lecture c)
Describe the history and role of the health insurance industry in financing
healthcare in the United States, and Federal laws that have influenced the
development of the industry. (Lecture a)
Understand the differences among various types of private health insurance
and describe the organization and structure of network-based managed
care health insurance programs. (Lecture d)
Understand the various roles played by government as policy maker, payer,
provider, and regulator of healthcare. (Lecture d)
Describe the organization and function of Medicare and Medicaid. (Lecture
e)
2
Health IT Workforce Curriculum
Version 3.0/Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare
Lecture a
The US Multipayer System
US Healthcare Financing
History of US health insurance
Role of Government
Private payers vs. Government (Public)
payers
3
Lecture a
History of US Healthcare Financing
Late 19
th
and early 20
th
century
Care provided at patients or doctors home
Self-pay/charity payment for services
Increasing advancement of medicine as a science
especially in surgery and infectious disease
AMA standardizes medical education and quality of
care improves
Medical care for illness moves out of the home to
doctors office, surgical care at hospitals
Commercial health insurance not available due to
unpredictability of health and moral hazard
4
Lecture a
Early Hospital & Physician Health Plans
In 1929, 1300 Dallas school teachers contract with
Baylor Hospital for 21 days hospitalization for 50
per month each
Hospital service plans - steady stream of income
Exempt from most state insurance regulations
Later becomes Blue Cross
Physicians fearing loss of control form own
associations
In 1939, California physicians form pre-paid healthcare
services plan
Blue Shield Association
5
Lecture a
Employer Pre-paid Plans
Ross-Loos Medical Group provided pre-paid care to Los
Angeles County employees
Believed to be first HMO in US
Focus on quality of care including preventive care
Surgeon Dr. Sidney Garfield starts pre-paid medical
practice
1930s Organizes employer pre-paid plan for construction
workers on the Los Angeles Aqueduct and Grand Coulee Dam
and Kaiser Shipyards during WWII
Fixed payment per employee per month
Subsequently, formed Permanente Health Plan
Open to the public
Union support boosts growth
6
Lecture a
Social Security Act
Passed in 1935, part of the New Deal
Established a system of old-age benefits for workers
Also created:
Benefits for victims of industrial accidents
Unemployment insurance
Aid for dependent mothers and children, the blind, and the
physically handicapped
Vocational training
Funds for family health programs
7
Lecture a
Early Commercial Health
Insurance
Commercial insurance carriers offer group
health insurance
Compete against the Blues
Employer (group) enrollment spreads risk and
addresses moral hazard
Experience rating vs. community rating
lower rates for young healthy individuals
8
Lecture a
Factors Influencing Development
of Commercial Health Insurance
WWII wage controls
Employers offer health insurance as a benefit to attract skilled
employees
IRS favorable tax treatment
Employer free of payroll tax
Employee -- no income tax
Employer sponsored health contracts non-cancellable
1949 Unions may negotiate health insurance benefits
as part of wages

9
Lecture a
Hill-Burton Act
Hospital Survey and Construction Act, passed in
1946
Stimulated construction of facilities
Foundation of todays infrastructure for hospitals and
other health care organizations
Continues to authorize funding for hospitals, nursing
homes, health centers, rehabilitation facilities
Requires participation in Medicare and Medicaid
Imposes anti-discrimination rules

10
Lecture a
Medicare and Medicaid Laws: SSA
Amendments 1965
Medicare
1965 Amendment to SSA Title XVIII
Social Insurance addresses care for elderly
Funded through FICA
Medicaid
Title XIX SSA
Social welfare or social protection
Joint funded through Federal and state tax revenues
Administered through the states
Funded through general tax revenues

11
Lecture a
Health Maintenance Organization Act
of 1973
Health Maintenance Organization Act of 1973
Federal grants and loans to encourage HMOs
Required employers offering traditional health plans to
offer HMO option
HMO offers comprehensive, prepaid health coverage
for hospital and physician services through specific
health care providers
Gave pre-paid health plans access to the employer
based insurance market
12
Lecture a
Employee Retirement Income
Security Act of 1974 (ERISA)
Regulates employer self-insured health plans
Does not require employers to establish a plan
Requires employer plans to meet certain minimum
standards
Establishes standards of conduct for plan administrators
Requires a grievance and appeals process
Allows employees the right to sue for benefits
Pre-empts state insurance laws
13
Lecture a
Healthcare Plans Today
83% of the population have health care
insurance
Two categories of health plans
Private Funded
State licensed insurance organizations
Federal regulated self-insured employer
plans
Publicly Funded
14
Lecture a
State-Licensed
Insurance Organizations
Commercial health insurers
Most are owned by stockholders or stock companies
Mutual insurance companies are owned by their
policyholders
BlueCross BlueShield
Association of 39 different companies in 50 states
Locally operated; some are for-profit
Largest insurer, covering 1 in 3 Americans
15
Lecture a
State-Licensed
Insurance Organizations (continued)
Managed care organizations
Combine health insurance and health care services
Cost control and utilization control
Some hire their own doctors and have their own
facilities
3 main types:
Health maintenance organizations (HMOs)
Preferred provider organizations (PPOs)
Point-of-service (POS) plans
16
Lecture a
Self-Funded Employer Plans
Health benefit plans regulated by federal law
Created by employers, employee organizations,
or a combination
Employer assumes risk for workers and pays for
care directly
Employer may choose to have a third-party
administrator administer the plan
17
Lecture a
Publically Funded Health Care
Government programs, some of them funded
through income taxes and payroll taxes
Begin in federal legislation
Voted into law by Congress
Help specific population groups
Run by federal government and federal-state
partnerships
18
Lecture a
Examples of Government Health
Care Programs
Medicare
Medicaid
Childrens Health Insurance Program
Veterans Health Administration
TRICARE
Indian Health Service
19
Lecture a
Roles of U.S. Government
3 key roles:, provider, payer, and lawmaker
Provider of health care services
Veterans Health Administration and TRICARE
Indian Health System
Supports research into new models of health care
Payer of third-party services
Outsources health care services, claims
paperwork, grants for research
20
Lecture a
Roles of Government
(continued)
Lawmaker role 1: Ensure fair competition
Sherman Anti-Trust Act, 1890
Prohibits monopolies and restraint of trade
Clayton Act, 1914
Prohibits price-fixing and exclusive dealings
Lawmaker role 2: Protect the public
Food, Drug, and Cosmetic Act created FDA, 1938
Hatch-Waxman Act, 1984
American with Disabilities Act, 1990
21
Lecture a
Summary Lecture a
US healthcare payers
Historical and governmental influences for the
unique US system
Federal and state laws have influenced the
development of different type plans
Privately funded plans
Publically or government programs
22
Lecture a
Summary Lecture a (continued)
Government Role in Healthcare
Enact laws
Regulate
Protect
Provide services
Payer
23
Lecture a
References Lecture a
References
BlueCross Blue Shield Association. http://en.wikipedia.org/wiki/Blue_Cross_Blue_Shield_Association. Accessed
December 10, 2011.
California Office of the Patient Advocate. What is an HMO? 2011.
http://www.opa.ca.gov/report_card/hmowhatis.aspx. Accessed April 4, 2011.
Centers for Medicare and Medicaid Services. Medicaid program: general Informationoverview.
http://www.cms.gov/medicaidgeninfo. Updated February 23, 2011. Accessed April 6, 2011.
Illinois Department of Human Services. Health insurance carriers and managed care.
http://www.dhs.state.il.us/page.aspx?item=31583. Accessed April 4, 2011.
Indian Health Service. Indian Health Service fact sheet. http://www.ihs.gov/aboutihs/thisfacts.asp. Accessed April
5, 2011.
OurDocuments.gov. Social Security Act (1935). http://www.ourdocuments.gov/doc.php?flash=true&doc=68.
Accessed April 12, 2011.
U.S. Department of Health and Human Services. Medical treatment in Hill-Burton funded healthcare facilities.
http://www.hhs.gov/ocr/civilrights/understanding/Medical%20Treatment%20at%20Hill%20Burton%20Funded%20M
edical%20Facilities/index.html. Accessed April 4, 2011.
U.S. Department of Health and Human Services. Understanding health information privacy.
http://www.hhs.gov/ocr/privacy/hipaa/understanding/index.html. Accessed April 4, 2011.
U.S. Department of Health and Human Services, Office of the General Counsel. Drug Price Competition and
Patent Term Restoration Act. http://library.findlaw.com/1999/Mar/10/130703.html. 1999. Accessed April 13, 2011.
U.S. Department of Justice, Civil Rights Division. Americans with Disabilities Act: questions and answers.
http://www.ada.gov/q%26aeng02.htm. Updated November 14, 2008. Accessed April 13, 2011.
U.S. Department of Labor, Bureau of Labor Statistics. Career Guide to Industries. 201011 ed.
http://www.bls.gov/oco/cg. Accessed April 4, 2011.

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Lecture a

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