HC Systems and Finance

Key terms

• health care financing

• health care spending

• payment models

• bundled payments model

• capitation model

• fee for service model

• pay for performance model

• Medicare

• Medicaid

• CHIP (Children's Health Insurance Program)

• EMTALA (Emergency Medical Treatment and Labor Act)

• Affordable Care Act (ACA)

• Health Insurance Marketplace

• Single Payer Healthcare

• Market Based Reforms

• Financing: how health care is paid for (taxes, premiums, employers, etc.)

• Spending: how much we spend on health care and how it is distributed

• Payment Models: how providers are paid for their services

Payment models and how they affect Care

Fee for Service (FFS) or Volume Based

• How: Providers paid per service /visit /procedure

• Effects: Incentivizes volume and intensity → more procedures, potential overuse; May weaken preventative care

Capitation/ Per-member-per-month (PmPM)

• How: A fixed payment per patient by a health plan, regardless of how much care they need

• Effects: Incentivizes cost control and prevention; can promote primary care, but risks under- providing care if not well monitore

Bundled payments/ Episode-based payments

• How: Single payment for a defined episode (e.g., joint replacement)

• Effects: Encourages coordination across providers, reduces unnecessary variation, and can shift resources to effective peri-operative care and rehab

Value-based/ Pay-for-Performance (P4P)

• How: Rewards tied to measured outcomes or quality metrics.

• Effects: Directly aligns money with quality goals but depends on good metrics and risk-adjustment to avoid penalizing providers who serve lower income patients

How do the different payment models affect…

How do the different payment models affect resource allocation?

• The model determines where the provider is going to spend their time

• The money source determines what is prioritized

• Public dollars → underserved areas

• Private dollars → profit opportunities (move it to what makes most money)

How do the different payment models affect access to care?

• Models that promote universal coverage will increase access and health equity

• Models that reward procedure-based care concentrate access around events (hip replacement)

• A fragmented health care system creates delays (authorization) and gaps

How do the different payment models affect health care quality?

• When payments reward volume, quality suffers due to overuse, poor coordination

• When payments reward outcomes, quality and equity of ten improve if metrics are done well

• dashboard

• Improving SDOH requires money to be spent on non-medical services

Evolution of US Healthcare Funding

Pre-20th Century

• Pay for doctor out of pocket

• Public hospitals, almshouses, charity clinics

• State hospitals

• Minimal federal role

1900s-1930s (pre-WW2)

• Great Depression strain

• Lack of local funding -> state programs

• SSA (1935)

• Employers start health insurance 1940s

1950s-1970s

• Post War Expansion

• Medicare, Medicaid (1965)

• Federal funding for hospitals

1980s-1990s

• Cost-Containment and Managed Care

• Rising costs shift toward managed care

• EMTALA (1986) must provide emergency Tx

• CHIP (1997) coverage for children

2000s

• Growing Uninsured Crisis

• Expand Medicaid

• Employer Mandate

• Health Insurance Marketplaces

2010s: Affordable Care Act (ACA)

Goal: expand coverage, reduce cost, improve quality

Key National-Level Changes:

• medicaid Expansion

• health Insurance Marketplaces

• Individual Mandate (later repealed in 2017)

• Employer Mandate

• Insurance Reforms: No denial for preexisting conditions, no lifetime caps, coverage for young adults under 26

State-Level Role:

• states could run own insurance exchange

• Can decide whether to expand medicaid

• oversight and regulation of private insurers

Local-level impact:

• hospitals saw reduced uncompensate care in states that expanded Medicaid

• Local health departments did enrollment outreach and ACA education

Post ACA (2017 to present)

• 2017 Individual Mandate Repealed

• Continued debate over “Medicaid for all” vs. market-based reforms

• State: Some expanded Medicaid af ter initial resistance (via ballot initiatives or legislation).

• Local: health departments increasingly tasked with SDOH, health equity, and community health improvement planning.

Examining the current US Healthcare Delivery System

Where we are now

• "not only is the US the only country we studied taht does not have universal health coverage, but its health system can seem designed to discourage people from using services”

• “Affordability remains the top reason why some Americans do not sign up for health coverage, while high out-of-pocket costs lead nearly half of working-age adults to skip or delay getting needed care”

• The US government spends a higher percentage of its annual GDP on public health cafe than any other country in the world

“Medicaid for all” vs market-based reforms

Market Based Reforms

• Improve private insurance by enhancing competition, consumer choice and market efficiency

Key points

• Change and deregulate private insurance

• Price transparency and market competition to lower prices

• Expand HSAs and Medicare Advantage

Arguments For

• Competition will reduce costs

• More consumer choice/freedom

• Keeps employee sponsored insurance

• Less govt. control

Arguments Against:

• Risks leaving millions uninsured

• Health inequities

• “Profit over patients”

• Hard to navigate for patients

Medicaid for All” (Single-Payer Healthcare)

• Government-run health care system

Key points

• Everyone gets healthcare

• Comprehensive

Arguments For

• Universal coverage for all

• May cut costs by reducing private insurers

• Increases equity

• Likely lowers national healthcare spending in long term

Arguments Against

• Massive tax increases

• Disrupts insurance for 150m

• “Government control”

• Wait times

• Political and logistical hurdles

Healthcare financing and drug costs

• U.S. prescription drug prices were 2.56 times those in 32 comparable countries (Bosworth et al., 2022).

• In 2022, the list prices of several drugs increased by more than $20,000 or 500 percent

Why are costs so high?

• cost of R&D

• No competition (monopolies)

• Life or Death diseases

• Pharmaceutical lobbies

How do drug costs affect patient access, affordability, and population health outcomes?

Patient Access

• Skip prescriptions

• Stuck formularies

• Geographic disparities

Affordability

• Out of pocket burden

• Lack of price transparency

Population Health

• Worsening chronic disease

• Higher cost burden to Medicare and Medicaid, CHIP

Prevention Types and Costs

Current policy reforms on drug costs

• Government-run drug portal based on Most Favored Nation (MFN) Pricing

• Inflation Reduction Act (IRA)

• Congressional Budget Office (CBO) recommendations

• Stanford Medicine White Paper

Prevention Types and Cost

Primary

• cost: low to moderate

• Effectiveness: high

• Population reach: broad

• Lifespan focus: all ages especially children

Secondary

• cost: moderate

• Effectiveness: moderate to high

• Population reach: targeted

• Lifespan focus: adults middle and older

Tertiary

• cost: high

• Effectiveness: moderate

• Population reach: individual

• Lifespan focus: older adults and chronic patients