Medical Insurance, Health Insurance, Private Medical Insurance - Understanding Healthcare Funding in the USA

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Understanding Healthcare Funding in the USA

BACKGROUND BRIEFING ON US HEALTHCARE

The health sector in the United States is diverse and is characterised by a mix of public and private funding and provision, as such, it is not governed by a single philosophy. In both the private and public sectors, medical services generally are regarded as high quality.

First we will look at the various ways of healthcare funding in the USA:

Public sector health programmes

The US spends 5.7 per cent GDP of taxpayer income on health care, representing 44.5 per cent of total expenditure on healthcare (OECD Health Data, 2001). Two public healthcare programmes are dominant in the United States, Medicare and Medicaid, and both were created in 1965. Medicare is the federal government’s health programme primarily serving Americans who are over age 65. Medicaid is a joint federal-state programme designed primarily to finance health care for the poor. Both provide care for the disabled. Together, Medicare and Medicaid cover more than 80 million Americans. Medicare beneficiaries and Medicaid recipients are entitled to outpatient medical care from physicians and hospital care from the same medical professionals who provide health care to individuals with private health insurance.

Medicare

In 2001, there were 39 million Medicare beneficiaries, including 34 million senior citizens and five million disabled.

Medicaid

Medicaid, was designed to provide health care to the poor. In 2001, 40 million persons received Medicaid benefits, with projected costs of $124 billion in federal payments and $95 billion in state

Community Health Programmes

Community-based health centres, are private, not-for-profit facilities that provide high quality, cost-effective and comprehensive primary and preventative care to the uninsured and medically underserved. More than 11 million patients utilise these programmes.

Private sector health programmes

Seventy-two per cent of Americans, or 200 million people, were covered by private health insurance in the year 2000.6 Until the 1990s, most private health insurance coverage was provided through a fee-for-service model that allowed patients to visit the doctor or hospital of their choice. As health insurance costs began to rise in the 1990s, many employers hired health plans to “manage” their employees’ health care by controlling access to care and lowering costs.

Managed Care

Managed care puts administrators and designated “gatekeepers” in charge of guiding patients through a health care network, with a goal of managing costs. Patients are often required to check with their health plan for approval before visiting a specialist or receiving a medical procedure.
Today, nearly nine of out ten American workers or their dependents are in some type of managed health care plan.7 Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs) are examples of such managed care arrangements.

Employer-Provided Health Insurance with Tax Benefits

Originally offered as a non-wage benefit to attract workers, employment-based health insurance is by far the dominant vehicle through which the majority of Americans receive health care; today, 64 per cent, or 177 million, receive their coverage through the workplace.

Healthcare Purchasing Co-operatives: The Federal Employees Health Benefits Program

Envisioned by Alain Enthoven, health care purchasing co-operatives (also known as purchasing pools and alliances) are public or private organisations which secure health insurance coverage for the workers of all member employers. The goal of these organisations is to consolidate purchasing responsibilities to obtain greater bargaining clout with health insurers, plans and providers, to reduce the administrative costs of buying, selling and managing insurance policies.

Individual Health Insurance – with no tax benefits

There is also an individual insurance market for those who do not participate in or are not offered employer-sponsored group plans. However, individuals face adverse tax consequences if they want to buy health insurance on their own outside the workplace; if they purchase health insurance on their own, most must use after-tax dollars to pay for the policy. The individual market is highly regulated by the states with onerous benefit mandates and restrictions that drive up the cost of premiums.

The Uninsured and the Unofficial Safety Net

In 2000, an estimated 38 million Americans did not have health insurance.
Being uninsured by no means indicates that people are barred from receiving medical care. Any hospital in the United States that accepts Medicare or Medicaid patients is legally bound to provide medical treatment and stabilize any patient who presents a medical problem, whether or not that patient can pay the bill. Hospitals that treat a substantial number of poor patients, including those on Medicaid, Medicare, or without health insurance, receive a Disproportionate Share payment from the federal government to help compensate them

Credit: By Ben Irvine (2002)