US Healthcare system and health insurance

Components of perfectly competitive markets

-many buyers and sellers

-freedom of entry and exit

-standardized products

-full and free information

-no collusion

Uniqueness of the health care market: number of buyers and sellers

-geographic Mal-distribution of health care services

-consolidation by buyers and sellers

uniqueness of the health care market: entry and exit from the market

high barriers to entry, and exit

uniqueness of the health care market: variation and products, services, and quality

quality is hard to measure

uniqueness of the health care market: information and knowledge

specialized knowledge and incomplete information

other unique aspects of the health care market

-inelastic demand -universal demand -unpredictability of illness -supplier induced demand -third party insurance and patient-induced demand

uniqueness of the health care market: health care as a "right"

price not the sole determining factor in deciding who will receive health care products and services

list some approaches to improving the economic performance of the health care system

-make patients aware of and sensitive to health care costs

-performance reports and academic detailing- feedback to providers

-design reimbursement to create incentives for red

Incentives to improve economic performance of healthcare systems must include

-population effects, preventive care, education

-duration of treatment, prospective payment

-intensity of services, case management

capitation role in improving economic performance of healthcare system

one system that addresses all three aspects that incentives must address, can be used for hospital and outpatient providers

What is health insurance?

Insurance against expenses incurred through illness of the insured.

purpose of health insurance

-to manage unanticipated risk and help cover health care costs

-to preserve financial security and improve access to health care

Two types of risk involved with health insurance

pure risk (fire, storms) -speculative

what kind of risk does insurance help reduce?

pure risk

Private programs: setting premiums.: community rating

setting premiums or rates based on health services utilization and cost projections for an entire community

private programs: setting premiums: experience rating

rates based on anticipated use and costs for specified groups, rather than entire community

who lost out with experience rating

elderly lost out compared to younger healthier people

paradoxes of health insurance

-ensures payment yet restricts provide reimbursement

-creates patient access yet restricts utilizations

-providers supply services, yet they create a demand for these services, which can drive up costs

-increases access yet can encourage unnecessary use

-the uninsurable (poor/disabled/elderly) are now covered, yet millions of working poor are uninsured

-those with chronic or expensive health problems have the greatest need, yet they have the most difficulty obtaining it

issues with risk management

-catastrophic hazard -adverse selection: buying insurance just before loss -moral hazard -coordination of benefits

What is adverse section addressed by?

group policies, elimination periods, coverage limitations

what is moral hazard addressed by?

cost sharing (deductibles, coinsurance, copays)

define coordination of benefits

clarifies which insurance will pay first in situations of overlapping coverage

define indemnity insurance

-subscribers (patients) reimbursed for a portion of medical expenses

define service benefit insurance

health care providers are paid directly by the insurance plan

Risk spreading

concentration of health care spending the USA, most of spending is on elderly

employer sponsored coverage

Often comprehensive, but not always; Variation in benefits covered as well as premium and deductible costs

individually-purchased policies

-typically less comprehensive -less coverage of maternity, mental health, and prescription drugs -can have high deductibles as well

types of health insurance plans in the market place

-bronze plans: split expenses 60-40

-silver plans: split expenses 70-30-is marketplace standard

-gold plans: split expenses 80-20

-platinum plans: split expenses 90-10

-catastrophic coverage

Is health insurance coverage static?

no

health insurance coverage options can change with....

-loss or change of job

-change in family status

-birthday

-move

-change in health status

key players in health insurance

-consumers/patients -providers -insurance companies -employers

two types of health insurance

-private health insurance

-government health insurance

types of private health insurance

-employment based

-direct purchase

types of government health insurance

-medicare

-medicaid

-state children's health insurance program

-state-specified plan

-indian health service

-military health care

types of military healthcare insurance

-TRICARE/CHAMPUS

-CHAMPVA

_care provided by department of VA

models of private health insurance

-indemnity

-managed care

-consumer directed health arrangements

Types of Managed Care Plans

Preferred provider organizations (PPOs)

Point-of-service (POS)

Health maintenance organization (HMOs)

What is CDHP/HDHP

health plan with a high deductible accompanied by a consumer-controlled savings account for health care

two primary types of health care savings accounts

-health savings accounts (HSAs)

-Health Reimbursement arrangements (HRAs)

Purpose of CDHP/HDHP

to increase consumer awareness about health care costs and provide incentives for consumers to consider costs when making health care decisions

How do CDHPs work

-preventative care covered at 100%

-healthcare FUND for out of pocket medical expenses

-you pay medical expenses until you meet the deductible

-underlying insurance plan provides coverage with COINSURANCE or COPAY

Health Savings Account (HSA)

-employee owned and funded

-contribute tax free

-eligible expenses include medical/vision/dental

-HDHP is required

-ability to invest funds

-HSA stays with account holder

Health Reimbursement Arrangement (HRA)

-employer owned and funded (employer-provided fund) to pay for eligible expenses

-eligible expenses include healthcare and sometimes insurance premium payments

-HDHP not required

-no investment options

-no portability

Pros of high deductible health plans

-greater consumer responsibility and cost conscious decision-making

-quality comparison information often available

-health management programs developed

-much lower premiums

cons of high deductible health plans

-more likely to delay or avoid needed care

-larger financial burdens encountered

-attract healthiest and wealthiest

When was the Patient Protection and Affordable Care Act passed?

March 2010

components of patient protection and affordable care act

individual mandate, expansion of public programs, American health and benefit exchanges, changes to private insurance, employer mandate

individual mandate in the PPACA

most individuals required to have health insurance by 2014 or pay a penalty

expansion of public programs (PPACA)

medicaid expanded, state health insurance exchanges created

American health benefit exchanges

states to create separate exchanges for individuals and small employers to purchase insurance

changes to private insurance (PPACA)

no coverage denial for preexisting conditions, cannot charge more based on health status and gender, cannot impose lifetime limits on coverage, dependent coverage up to age 26

employer mandate (PPACA)

employers assessed a fee of 2000 per employee if they do not offer coverage