National Health Insurance
National Health Insurance in U.S
The development of a national system of HEALTH CARE in the United States has remained a major topic of debate throughout the United States, especially since the 1980s. Healthcare costs in the United States have risen dramatically during the past 40 years, due in part to longer average life spans, which give rise to greater costs because older citizens require greater care, and the employment of technologies that extend the life of patients, which generally results in greater spending. Insurance costs have likewise increased dramatically, and a relatively large percentage of U.S. citizens and other residents are uninsured or underinsured. According to information from the CENSUS BUREAU in 2001, 41.2 million Americans, constituting 14.2 percent of the population, did not have HEALTH INSURANCE. (Jeffrey Lehman and Shirelle Phelps. pp. 2)
The healthcare system is largely controlled by the free market, which is believed to provide limitations on how much physicians and other specialists can charge to their patients. However, many critics of the current system, including organizations composed of physicians, note that the system has become largely bureaucratic and that cost-cutting measures and pressures caused by competition and the need for profit have reduced the effectiveness of medical practice. (Jeffrey Lehman and Shirelle Phelps. pp. 2)Despite these problems, many commentators have not been able to agree as to the proper level of control that state or federal governments should have over health care.
A comprehensive study published in January 2004 estimated that national health insurance could save the United States at least $286 billion annually. High administrative spending in American health care is due to the excessive paperwork doctors and hospitals must deal with when working with hundreds of different insurance plans. By contrast, in Canada, where every patient has the same insurance, doctors fill out the same simple billing form for each patient, which is sent to one agency, saving Canadians massive amounts of money. (("National Health Insurance Could Save Billions of Dollars.", 2006) Bureaucracy accounts for at least 31 percent of the total U.S. health spending whereas in Canada it is almost half that amount. The financial savings possible with a national health insurance plan such as Canada's could cover health care for all of America's uninsured, provide full prescription drug coverage for everyone in the country, and improve coverage and quality of care for those who already have insurance.
A study by researchers at Harvard Medical School and Public Citizen [a nonprofit consumer advocacy organization] finds that health care bureaucracy [in 2003] cost the United States $399.4 billion. ("National Health Insurance Could Save Billions of Dollars.", 2006)The study estimates that national health insurance (NHI) could save at least $286 billion yearly on paperwork, enough to cover all of the uninsured and to give full prescription drug coverage for everybody in the U S.
The potential managerial savings of $286 billion annually under national health insurance could:
- Cover all out-of-pocket prescription drugs costs for seniors as well as those under 65 (est. at $53 billion in 2003)
- Make substantial improvements in quality and coverage of care for U.S. consumers who already have insurance (("National Health Insurance Could Save Billions of Dollars.", 2006)
- Offset the cost of covering the uninsured (est. at $80 billion)
- Job placement and fund retraining programs for insurance workers and others who would lose their jobs under NHI (estimated at $20 billion)
Looked at another way, the potential administrative savings are equivalent to $6,940 for each of the 41.2 million people uninsured in 2001 (the most recent figure available for the uninsured at the time study was carried out), more than enough to pay for health coverage. The study found wide variation among states in the potential administrative savings available per uninsured resident. Texas, with 4.96 million uninsured (nearly one in four Texans), could save a total of $19.5 billion a year on administration under NHI, which would make available $3,925 per uninsured resident per year. Massachusetts, which has very high per capita health administrative spending and a relatively low rate of un-insurance, could save a total of $8.6 billion a year, making available $16,453 per uninsured person. (("National Health Insurance Could Save Billions of Dollars.", 2006)California, with 6.7 million uninsured, could save a total of $33.7 billion a year, which would make available $5,016 per uninsured person.
[In early January 2004], the government reported that health spending accounts for a record 15 percent of the nation's economy and that health care spending shot up by 9.3 percent in 2002. Insurance overhead (one component of administrative costs) rose by a whopping 16.8 percent in 2002, after a 12.5 percent increase in 2001, making it the fastest growing component of health expenditure over the past three years. (("National Health Insurance Could Save Billions of Dollars.", 2006) Hence the figures in the Harvard/Public Citizen Report (which was completed before release of these latest government figures) may understate true administrative costs.
It is conventional wisdom that the 47 million uninsured Americans cannot afford health insurance. However, when pundits use the word “afford”, there is no clear definition of affordability; it is at best a subjective notion. Bundorf and Pauly (2006)) help correct this by establishing alternative definitions of affordability, and then by estimating the fraction of the uninsured who can afford coverage. They “find that, depending on the definition, health insurance was affordable to between one-quarter and three-quarters of the uninsured.” This range seems quite large and indeed violates conventional wisdom.
In the United States, young adults are twice as likely to be uninsured as children or older adults. At any given time, one-third of the young adults in this country are uninsured, and the majority (approximately 60%) will experience gaps in health insurance coverage sometime during young adulthood (Collins SR et al. pp. 1-14, Callahan ST, Cooper WO, pp. 1175- 80). Although a national strategy to expand health insurance coverage for young adults has yet to be realized, several state and local agencies are developing and enacting programs to provide coverage for segments of the young adult population. The strategies employed by these programs include extending public funding plans such as the State Children's Health Insurance Program (SCHIP), subsidizing private health insurance premiums, requiring commercial insurers to extend coverage to young adult dependents, and establishing individual and employer mandates (Burton A et al., 2007). In addition, some private insurers are independently developing health care plans to capture the young adult market (Berry E, 2007)
Young adults (19-24 years of age) have the highest proportion of un insurance of any age group, up to 35% in some surveys (Collins S et al. pp. 24). Without health insurance, young adults face barriers in accessing needed care and finding a medical home. Although young adults generally have excellent health, they are prone to risk-taking behaviors—both illicit drug use and mortality from unintentional injuries and homicides peak in early adulthood. In addition, young adults have some of the worst health habits (smoking, poor eating, and limited exercise) of any age group. Young adults have an ongoing need for preventive health services and may experience acute and chronic health problems such as asthma, obesity, reproductive health issues, and mental health problems. One study found that almost 5% of young adults have a disabling chronic medical condition.
A number of health leaders have stressed the importance of providing health insurance to young adults (Collins S et al. pp. 24, The Network on Transitions to Adulthood). Although there has been some progress on insuring children using federal and state funds, insurance expansions have not typically targeted young adults.
Health insurance is insurance that pays for all or part of a person's health care bills. The types of health insurance are group health plans, individual plans, workers' compensation, and government health plans such as Medicare and Medicaid. Health insurance can be further classified into fee for-service (traditional insurance) and managed care. Both group and individual insurance plans can be either fee-for-service or managed care plans. (Rhonda Cloos, pp. 4)
The following are types of managed care plans:
- Health Maintenance Organization (HMO)
- Preferred Provider Organization (PPO)
The purpose of health insurance is to help people cover their health care costs. Health care costs include doctor visits, hospital stays, surgery, procedures, tests, home care, and other treatments and services. Health insurance is available to groups as well as individuals. Government plans, such as Medicare, are offered to people who meet certain criteria. Group and individual plans can be further classified as either fee-for-service or managed care. Cancer patients may have specific concerns, such as the freedom to select specialists that play a factor in choosing a health care plan. (Rhonda Cloos, pp. 4)Fee-for-service plans traditionally offer greater freedom when choosing a health care professional. Managed care often limits a patient to health care professionals listed by the managed care insurance company.
There are two basic types of health insurance plans in the U S: managed care and indemnity plans. Under an indemnity plan (also called fee-for-service plan), the insurance company pays a proportion of the cost of medical services provided (mostly 70 to 80 percent). The insured person is accountable for the remaining 20 to 30 percent. Most indemnity plans charge a deductible, a certain amount the insured must pay out of pocket every year before the insurer starts covering the cost of medical services. Indemnity plans do not limit patients in their option of doctors or hospitals. (Health Insurance, 2003)
Managed care plans manage the use of medical services in an effort to keep costs small. The health plans that fall into this group include preferred provider organizations (PPOs), point of service (POS) plans, and health maintenance organizations (HMOs). The most preventive form of managed care is the HMO. Plan participants must receive medical services at HMO-operated facilities or visit physicians and hospitals that are allied with the plan. In adding to a monthly premium, the insured is usually responsible for a small co-payment for visits to a doctor or hospital emergency room.
A health maintenance organization may offer a POS plan. Such a plan allows participants to receive some coverage if they visit a provider that is not under contract with the HMO. However, even if the medical service is covered by the plan, the insured will have to pay a certain percentage of the cost of care as well as a deductible.
PPOs combine aspects of fee-for-service plans and health maintenance organizations. The PPO contracts with a group of doctors and hospitals to accept lower fees from the insurance company for their services. (Health Insurance, 2003) Plan members are given the choice of selecting a health care provider from this "network" or a doctor or facility that does not participate in the plan. However, this flexibility comes with a higher price; plan members who decide to go out of the network usually pay a deductible and higher co-payment as well as any difference between what the provider charges and what the plan will pay.
Each type of plan has advantages and drawbacks. Indemnity plans are more expensive than managed care plans but they offer great flexibility. Managed care plans may require individuals to choose primary care physicians, doctors who monitor their health care. Plan participants must consult their primary care physicians to get a referral to a specialist. (Health Insurance, 2003) Managed care plans emphasize preventive care such as office visits and immunizations, but they may limit coverage for medical tests, surgery, mental health care, and other support. By contrast, indemnity plans may not pay for some types of preventive care, such as checkups and immunizations.
The greatest challenges to the present system of health insurance in the U S are the increasing cost of health care and the number of Americans without coverage. Managed care companies have not been able to fulfill their job of providing low-cost, quality medical services. Instead, operating expense has climbed steadily as companies try to meet customer demand for greater liberty in their selection of health care providers. Furthermore, many hospitals have merged in current years, decreasing the number of players in the marketplace and allowing hospitals to lift prices for services. Lastly, the American population is aging, resulting in more medical bills.
Soaring medical costs are affecting employer-sponsored health insurance. Many businesses are requiring employees to share the burden of increases in the form of higher premiums, co-payments, and deductibles. (Health Insurance, 2003) Higher costs are also a serious problem for people who lose their jobs—and consequently lose their health insurance—and for individuals who are self-employed.
Many individuals cannot afford to pay for health coverage on their own, which causes them to join the ranks of the uninsured. In 2000, 38.7 million Americans were without health insurance. Although the problem of being uninsured affects people of many different backgrounds, the working poor and middle class have been hardest hit. Many Hispanics lack health insurance, because they are non citizen immigrants and do not have access to Medicaid or employer-sponsored insurance.
Problems with the current system of health insurance in the United States have led to calls for a universal system of health care. Under this type of system, state governments or the federal government would provide insurance coverage, financed by taxes, for everyone. Those who support government-run health care believe that it has many benefits, including universal coverage, lower costs, and greater efficiency. Opponents contend that such a system would require budget controls, forcing the government to decide whether and when a person can receive certain health services. They believe universal health care would lead to lower quality care, long delays, greater government bureaucracy, and significant tax increases. (Health Insurance, 2003) In 2001 proposals to introduce universal health care coverage were being debated in Maine, Maryland, and Oregon. HMOs and providers of other private health insurance plans have responded to the rise in medical costs by taking steps to control expenses. This often means reviewing individual cases and refusing to cover the cost of procedures they feel are unnecessary.
We examine these concepts in the context of health insurance. The special ness of health insurance presumably stems from both a social concern about the level of insurance affecting consumption of medical care and in turn affecting health, and a concern about the level of insurance per se due to the protection it provides against stochastic shocks to other consumption. Both the normative and behavioral definitions require a normative choice of the minimum acceptable quantity of insurance.( M.K. Bundorf, M.V. Pauly, pp. 655-656) Defining this quantity is conceptually difficult because insurance products vary along many dimensions, such as the level of cost sharing associated with the utilization of covered services or the use of supply side mechanisms to control utilization, which may affect the amount of care an enrollee receives from a given plan as well as the amount of financial risk to which the enrollee is exposed. For the purpose of our analysis, we will define the target level of “coverage” as the insurance policy that corresponds to the minimum acceptable, or benchmark, level of insured medical care for a given set of potential realized health states. .( M.K. Bundorf, M.V. Pauly, pp. 655-656) We will therefore use the concept of insured medical care as the analog of the special good, but will need to modify our empirical treatment to deal with features of the good and of the data.
People with insurance coverage for single diseases, or those with insurance that pays cash indemnities, will not be counted as being insured; we will assume that their use of insured medical care falls below the benchmark. Those with such low levels of insured use and those with no insurance (and therefore no insured medical care) will be labeled as “uninsured.” Even in unsubsidized insurance markets, the great bulk of people who have insurance obtain more than a small amount of coverage, while all other consumers have zero or near-zero coverage. We also define affordability in terms of the relative prices prevailing for insured medical care and for other goods.
In an interview with Dr. lingareddy vasuda readiation oncology director Edward cancer center, naperville IL he gave his opinion about HMOs is, They are part of an evolution of health care. There are two aspects of HMOs that people get confused. One is the taking on of risk, the insurance capacity -- the capitated payments (one rate per head). Whether that person costs more or less, they still get that dollar amount. The other side of the coin is actually the managed health care. On that side, HMOs have moved us to a much better place. In terms of the concept of looking at a patient as a whole and determining what mix of things is going to help improve the health of that patient. The problem is when they begin to look at that role as also related to the financial world. With Rite Care we have pushed them on the issue of managing care. We have an advantage though, because we have 80,000 people. But each individual employer in the state has far fewer people -- and no power to negotiate with an HMO about how all this gets done.
The price of health insurance is the loading, the difference between the premium and the expected benefits. For both the normative and the behavioral definitions, higher loading makes coverage less affordable. Not only will the person's income spend ble on other things be reduced if the premium is higher for this reason, but the likelihood that the person would buy insurance is also reduced. For this measure of price, the definitions coincide. ( M.K. Bundorf, M.V. Pauly, pp. 655-656)The premium for health insurance includes the loading as well as the expected benefits of coverage. The expected benefits of coverage will vary across consumers based on their health status, and the effect of premium variation due to variation in health risk may differ between the two types of definitions. In the normative case, higher premiums for high risks make health insurance less affordable by reducing income spend able on other goods. Using the behavioral definition, in contrast, higher premiums for higher risks may not make health insurance less affordable. This is because high premiums do not necessarily reduce demand for health insurance if the level of expected expense also changes. ( M.K. Bundorf, M.V. Pauly, pp. 655-656)In fact, individuals at high risk (e.g., due to poor health or the existence of dependents), facing higher premiums than low risk people, may effectively face a lower price if their premiums do not fully reflect their greater expected health expenditures.
The reason, of course, is that, without insurance, the unsubsidized high-risk household faces high out-of-pocket medical expenses, which also can take a larger (expected) bite out of other consumption. Individuals facing higher premiums for such reasons may be more likely to purchase coverage if it has lower loading; for them, health insurance is more affordable if the behavioral definition is used. If premiums are actuarially fair, higher risks are not necessarily less likely than lower risks to purchase coverage, all else equal.( M.K. Bundorf, M.V. Pauly, pp. 655-656). Thus, the treatment of the level of the premium, particularly with respect to its relationship to risk, represents an important conceptual distinction between the normative and behavioral definitions of affordability.
A final factor affecting the analysis of the affordability of health insurance is the fact that some persons may have available free care, in the form of charity or bad debt care, which furnishes an alternative to private insurance coverage. The uninsured may also be eligible or believe they are eligible for publicly funded coverage from state Medicaid programs in the event of an illness even if they currently are not enrolled. Such free care, to varying degrees, affects the utility a person will experience without insurance and, thus, the likelihood of voluntary insurance purchase. By raising the relative price of private health insurance, access to uncompensated care reduces the likelihood of purchase, making health insurance less affordable in the behavioral definition. Using the normative definition, such access does not affect the cost of the benchmark package of insured medical care, and therefore does not directly affect the affordability of coverage.( M.K. Bundorf, M.V. Pauly, pp. 655-656)
Health policy in the United States is a complex mosaic of particular policies enacted to resolve what are perceived to be specific deficiencies in the exchange between providers and consumers. Government is involved directly in that exchange when the consumers are insured under public programs such as Medicare and Medicaid. When there is no direct involvement, there remains a public interest to protect because, as argued in the first chapter, adequate health care is necessary to enable citizens to pursue their inherent rights. Pursuant to that public interest, government will act to protect consumers from fraud and poor quality care. (Keith J. Mueller, pp. 151) Government intervention can also be expected when access to care is denied, keeping some citizens from a full range of opportunities. Finally, government can be expected to act in its own behalf to lower the costs of health care. All actions will be in response to specific problems and are most likely to be based on previous government efforts. Such is the nature of incremental policymaking.
We might be disappointed that the United States faces severe problems, including the millions of uninsured who have less than adequate access to health care, but we should also be pleased that in our incremental way we have gained a greater appreciation of the costs and quality of medical decisions. Policy makers in the United States may be avoiding the future problems of cost containment by addressing that issue before adopting a national system. The best public policy will emerge from an understanding of the interactions of public actions and private sector responses in health care delivery. By focusing attention narrowly on specific problems, members of the issue network have gained an appreciation for and understanding of that interaction. During the next twenty years, U. S. policymakers face the even greater challenge of integrating the set of policies enacted to address specific objectives into a single approach that satisfies the goal of access to quality care at reasonable costs. (Keith J. Mueller, pp. 151)
In conclusion, ideally everyone should have health insurance and access to care. Despite the lack of progress in this area at the national or state level, the CCSF created a program that was innovative in many respects: in the targeting of young adults, and its use of prior enrollment in public insurance to provide insurance to the most needy and to minimize adverse selection and pent-up demand. Although further data are needed to demonstrate the effectiveness of the program, all or part of the CCSF's Healthy Young Adults program could be replicated in other jurisdictions to decrease the number of uninsured young adults.
Work Cited
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Cloos, Rhonda, R.N. "Health Insurance." Gale Encyclopedia of Cancer. Ed. Ellen Thackery. Vol. 1. Detroit: Gale, 2002. 4 pp. 2 vols.
Collins S, Schoen C, Tenney K, et al. Rite of Passage? Why Young Adults Become Uninsured and How New Policies Can Help. The Commonwealth Fund; May 2005.
Collins SR, Schoen C, Kriss JL, et al. Rite of passage? Why young adults become uninsured and how new policies can help. Issue Brief (Commonw Fund) 2006;20:1-14.
Keith J. Mueller; Health Care Policy in the United States, University of Nebraska Press, 1993. 216 pgs.
M.K. Bundorf, M.V. Pauly, Is health insurance affordable for the uninsured? Journal of Health Economics 25 (2006) 650-673
"National Health Insurance Could Save Billions of Dollars." At Issue: Does the United States Need a National Health Insurance Policy? Nancy Harris. San Diego: Greenhaven Press, 2006
The Network on Transitions to Adulthood, MacArthur Foundation. Available from: http://www.transad.pop.upenn.edu.
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