Insurance Modalities: Managed Care,
Medicare, Medicaid
Sections:
Section 1: Managed Care Foreword In a recent study of the number of
people covered by some form of health insurance, private health insurance was
estimated to cover approximately 61 percent of the American population, where
as federal government health insurance programs such as Medicaid covered 10
percent and Medicare covered 13 percent (See Chart 1). Although it represents 61 percent of the
American population, the private health insurance sector covers 32 percent of
the national health expenditure.[1] Additionally, the study found that
currently, 42.6 million American people remain uninsured.[2] This chapter will discuss the history of
private health insurance/managed care, pertinent legislation, the problems with
this type of health insurance, and the current health care crisis of the United
States: the fact that spending is on the increase, coverage is on the decrease,
and the problems are only getting worse.
While the topic of health insurance coverage is a very broad one, this
chapter will provide a broad overview of many of the issues. For more specific information about these
issues, many URLs are provided at the end of this chapter in the references
section. Additionally, the following
site provides links to numerous links on topics related to health insurance:
http://www.nih.gov/sigs/bioethics/healthcare.html#insurance Chart 1: Health Insurance Coverage,
1999 Source: U.S. Census Bureau, March
2000 Current Population Survey Chart 2. Breakdown of National Health Expenditure Source: U.S. Department of Health
and Human Services, Health Care Financing Administration, March 2001[3] A. Employment-based
private insurance Currently,
there are two major problems with employer-based private insurance. The first is that during times of
unemployment, many Americans do not have needed health insurance coverage. In fact, according to a study done by the
Commonwealth Fund, 37 percent of workers who lose their job also lose their
health coverage.[4]
The second problem with
employer-based private insurance is that health coverage and the number of
health benefits are some of the first cuts that employers make during an
economic slowdown. Similarly, workers have to pay more
of the health insurance premiums during such periods. In fact, according to a recent study by the Kaiser Family
Foundation and Health Research and Education Trust, 44 percent of employers
report that they are "very likely" or "somewhat likely" to
increase what employees pay out of pocket for health premiums in the next year.[5]
This is especially true as the technology of health care continues to advance
and become more expensive, providing less incentive to employers to insure
their workers. Thus, this decline in
employer-based private insurance has become the greatest source of the growth
of the uninsured in the United States. The
problems of employer-based insurance may become more widespread in the current
economic climate. This is because the
number of employees who have access to health insurance is likely to fall as
the recession continues and unemployment rises, according to a new RAND study
that was published in the February issue of International Journal of Health
Care Finance and Economics. The study,
which was written by RAND economists M.
Susan Marquis and Stephen H.
Long, found that employers are more likely to offer insurance, and to
contribute a larger share of its cost, in communities where labor markets are
tight. That is, where local
unemployment rates are higher, employer health insurance offer rates are
lower. In fact, a two percentage point
increase in the unemployment rate is associated with a two percentage point
decline in the number of small employers offering insurance, said the
report. "I wouldn't go so far as to
say that the employment-based health insurance system will unravel as a result
of the recession," Marquis said.
"But these findings indicate that we ought to be concerned."[6] Some of the key findings of the report
include: B. Health
Maintenance Organization The term
“health maintenance organization” was coined by Paul Ellwood in 1970. According to Health Services
Administration of the Department of Health, Education, and Welfare or Rockville,
Maryland, a health maintenance organization has four characteristics: A) an
organized system of health care that is in a geographical area B) a
specified set of basic and supplemental health maintenance and treatment services C) a
voluntarily enrolled group of persons D) a fixed and predetermined payment
that is made by or for the person covered by the HMO and which is regardless of
the amount of actual services that that person is provided with.[8] C. The Health
Maintenance Organization Act of 1973 This act
was established in 1973 to spur the growth of the prepaid group practice by
stimulating interest in investing in HMOs.
To do so, it provides grants, loans and demonstration projects, and
prevented local medical societies from trying to enact state legislation
against such prepaid group practices, given the amount of initial backlash that
such plans brought about. From 1974 to
1980, the federal government granted $190 million in grants and loans to HMOs and
private investment had reached $784 million by 1974. In fact, by 1975, almost six million people were enrolled in the
approximately one hundred and seventy-five HMOs that existed in the United
States. Additionally,
the act also required that employers who had more than twenty-five employees to
whom they provided health insurance benefits must offer federally qualified HMO
coverage if it was available in that area.
Federal qualification of HMOs included a set of requirements: certain
mandatory benefits were required, community rating, a restriction was placed on
how much patients could be charged for out-of-pocket expenses, a thirty-day
open enrollment period each year had to be offered, quality assurance programs
had to be offered, and there had to be a provision for consumer participation and
health education opportunities.
Amendments to the act in 1976 made these requirements even less
stringent, increasing the number of plans that federally qualified from
fourty-two in 1977 to seventy-nine in 1978.
From 1978 through the early 1980s, enrollment in HMOs increased with
some stunted growth in 1982, which is most likely due to a high national
unemployment level of greater than 8.5 percent. By 1987, however, enrollment growth slowed and the number of HMOs
began to decrease. Reasons sited for
this include increased competition from other health care products, employers’
increasing dissatisfaction with the inability of HMOs to use experience-based
premiums, and the employers increasing frustrations with the inability of HMOs
to provide group-specific data on costs, use, and quality. D. 1988 Amendments
to HMO Act The HMO
Act amendments that took place in 1988 addressed many of the concerns that
employers had. Because of the
amendments, federally qualified HMOs were now required to provide experienced-based,
prospective rate setting, which looked at the actual health of the employees to
determine what ratings would be set.
This was unlike the traditional method of charging a set rate for a
total population, regardless of healthier employers that worked for a certain
employer. These amendments also created
more flexibility in determining what amount of money employers had to
contribute to HMOs for their employees, as previously, they resisted because
they were suspicious of HMOs attracting their healthier employees, and believed
that their employees were healthier than the average person who was attracted
to HMOs. Thus, they felt that they were
unjustly bearing the costs of others’ health care using the prior community
ratings, and were not as flexible as they were prior to this amendment. E. Additional
Applicable Law for Private Health Insurance States
have traditionally been the regulators of private health insurance within their
borders. As seen with the passage of
the McCarran-Ferguson Act of 1945, Congress intended for the states to regulate
private health insurance without any government interference.[9] Specifically, the McCarran-Ferguson Act,
among other things, gave the states the authority to support existing and
future state systems for regulating and taxing the business of insurance.[10] Regulations
within states attempt to guarantee the solvency of health insurers by
prescribing capital and financial reserve requirements.[11] The protection of consumers is attempted by
requiring disclosure of contract information, standardized printing of terms of
coverage, and insurance company bonding and auditing.[12] A few states evaluate and approve the rates
charged by some insurers to some insureds.[13] Commercial insurer’s premiums are taxed in
all states and more than half also tax Blue Cross and Blue Shield premiums.[14] Lastly, to make insurance available to
persons who are otherwise uninsurable, about a third of the sates now tax
insurance plans to finance these risk pools.[15] Although
the regulation of the business of insurance and the delivery of health care has
traditionally been within the purview of the states,[16]
the federal government[17]
began to reassert its influence with the passage of the Employee Retirement
Income Security Act of 1974 (“ERISA”).[18] Congress originally enacted ERISA as a
protective measure for American workers, safeguarding benefit plans offered by
employers from corporate and union misappropriation.[19] Intending to establish uniform standards for
the regulation of benefit plans and federally protecting the plans from
inappropriate remedies, Congress also included a broad preemption clause so
that ERISA would supersede conflicting or inconsistent state regulations.[20] Courts
have scrutinized over the language of ERISA’s preemption clause for more than
two decades.[21] Key to the issue of preemption is whether or
not a state law “relates to” an employee benefit plan.[22] The language of the statute specifically
states that ERISA will “supersede any and all State laws insofar as they may
now or hereafter relate to any employee benefit plan …”[23] Until
1995, judicial precedent supported the view held by many ERISA experts that the
reach of ERISA’s preemption clause was virtually limitless and that state
statutes that even indirectly impacted ERISA plans would be invalidated.[24] Since 1995, however, Supreme Court
preemption decisions have signaled a potential change in the Court’s thinking,[25]
with most legal experts concluding that ERISA's preemptive language is not as
broad as was once thought.[26] Not
absolute, ERISA has an exception to the rule within the statutory
language. Although the legislation was
enacted to protect all employee benefit plans from state interference, the
“savings” clause[27]
of the statute explicitly saves from preemption any state law regulating
insurance, banking, or securities.[28] Furthermore, the “savings” clause also
provides statutory exemption for pre-ERISA acts.[29] In order
to frustrate states’ efforts to statutorily circumvent ERISA’s preemption of
state laws relating to employee benefit plans, Congress included within the
legislation a “deemer” clause.[30] It is designed to prevent states from
regulating employee benefit plans under the guise of regulating insurance.[31] The provision provides that: Neither an employee benefit plan …
nor any trust established under such a plan, shall be deemed to be an insurance
company or other insurer, bank, trust, company, or investment company or to be
engaged in the business of insurance or banking for purposes of any law of any
State purporting to regulate insurance companies, insurance contracts, banks,
trust companies, or investment companies.[32] In essence, this ERISA provision
prohibits a state law from deeming an employee benefit plan to be an insurance
company by claming to regulate the business of insurance.[33] Another area of federal law that has
usurped traditional areas of state law regulation of health insurance is the
Consolidated Omnibus Budget Reconciliation Act (“COBRA”).[34] COBRA amended, among other statutes, ERISA
in 1985.[35] The amendments require an employer, with
more than 20 employees,[36]
who sponsors a group health plan to give the plan’s “qualified beneficiaries”
the opportunity to elect “continuation coverage” under the plan when the
beneficiaries might otherwise lose coverage upon the occurrence of certain
“qualifying events,” including the death of the covered employee, the
termination of the covered employee’s employment (excluding cases of gross
misconduct), and divorce or legal separation from the covered employee.[37] Therefore, a “qualified beneficiary”
entitled to make a COBRA election may be someone covered by the employer’s plan
because of his own employment, or a covered employee’s spouse or dependent
children who were covered by the plan prior to the occurrence of the
“qualifying event.”[38] Furthermore, the statute states that
the continuation coverage offered to qualified beneficiaries are to be equal to
what the plan provides to plan beneficiaries who have not suffered a qualifying
event.[39] COBRA requires plans to advise beneficiaries
of their rights under the statute at both the commencement of coverage and
within 14 days of learning of a qualifying event,[40]
after which qualified beneficiaries have 60 days to determine if they will
continue coverage.[41] If a qualified beneficiary makes the
election to continue coverage, continuation coverage dates from the qualifying
event, and when the event is the result of termination or reduced hours, the
maximum period of coverage is generally 18 to 36 months.[42] Benefits may cease if the qualified
beneficiary fails to pay the premiums as required by the statute.[43] In addition, COBRA coverage may also cease
on: “the date on which
the qualified beneficiary first becomes, after the date of the election, “(i) covered under any other group
health plan (as an employee or otherwise), which does not contain any exclusion
or limitation with respect to any preexisting condition of such beneficiary, or “(ii)
entitled to benefits under title XVIII of the Social Security Act.”[44] Another piece of legislation that
has expressly preempted state laws in regards to health care is the federal
Health Maintenance Organization Act of 1973 (“HMO Act”).[45] This Act was a result of a push within
Congress and the Nixon administration to promote alternatives to the
ever-increasing expense of Fee For Service health care.[46] Specifically, the HMO Act provided HMO’s
meeting federal standards to demand that area employers of twenty-five or more
provide their employees a “dual choice option”[47]
in which the HMO could be offered to the employee along with whatever health
plan the employer had already arranged.[48] This statute gave states the power to
regulate where state laws had previously blocked the establishment of such
corporations providing health care and where federal laws had in the past
preempted state regulation of HMOs.[49] In addition, the HMO Act provided
detailed operational regulations for HMOs to comply with before they could
become “federally qualified” and receive federal grants or loans.[50] To qualify for this federal support, HMOs
were required to offer comprehensive benefits and meet onerous requirements,
such as consumer representation on governing boards, community rating (all
insureds must be charged the same rate regardless of usage), open enrollment,
and mandatory inclusion of low-income and elderly patients.[51] Upon becoming qualified, the HMO would be
continuously subject to Secretarial supervision.[52] Between the years 1973 and 1983, a total of
$145 million in grants and $219 million in loans were made available to 115
HMOs because of the program, setting up what health care has become today.[53] The last federal impact on private
health insurance that will be addressed, and maybe the most significant, is the
area of tax laws.[54] Under the federal income tax laws, employer
contribution for the purchase of employee health insurance is exempt from
taxation.[55] This exemption results in a substantial
subsidy for the purchase of employment related health insurance.[56] F. History of
Managed Care The
Ross-Loos Clinic formed to provide the employees of the Los Angeles water
department with a group of physicians who were paid on a prepaid basis for
their services. Similarly, the Elk
City Cooperative developed to provide low-cost health care to the rural
communities of Oklahoma who needed health care in the time of the
depression. This prepayment plan was
met with a lot of opposition from the general public, and between 1924 and
19854, the county and state medical societies made numerous attempts to disband
the program: many of the plan’s physicians were removed from the local medical
society, hospitals revoked staffing privileges, and some even attempted to revoke
medical licenses. Thus, these
prepayment plans replaced the traditional fee-for-service payment method,
particularly because of the need for a less uncertain cash flow, given the
depression. The 1932 American Hospital Association’s
prepayment plan marks the definitive transition from fee-for-service payment to
prepayment plans. This plan evolved
from a plan used my Baylor Hospital and resulted with the first Blue Cross
Plan. This plan collected fixed
premiums for specified hospital benefits and reimbursed providers on the basis
of the costs that they incurred.
Hence, if costs increased, the consumers had to bear them as a higher
premium, deductible or co-payment. Similarly,
the Group Health Association was initiated by employees of the Homeowners Loan
Corporation in 1937 to reduce the number of mortgage defaults that they
experienced. This was because a large
majority of the foreclosures were due to catastrophic illnesses. One of the
largest groups that emerged during World War II was Kaiser Industries, who merged with Grand Coulee plan (a plan
that provided for employees of a dam project) to form the Kaiser-Permanente
Foundation. This plan was opened to the
general public after the war was over, and spread along the West Coast quite
rapidly. Similar prepaid plans were
also developed, including the Health Insurance Plan of New York in 1944, the
Group Health Cooperative of Puget Sound in 1947, and the Community Health
Association of Detroit by the United
Auto Workers in 1956. Also, the Group Health
Mutual Insurance Company began offering prepaid health services in 1956. Thus, as physicians obtained more experience
with such plans, these “health maintenance organizations” began to spread more
rapidly. G. Growth of the
Individual Practice Association Model (IPA) During the
1980s, the Individual Practice Association (IPA) model became the predominant
type of HMOs in existence. This type
of model involves groups of physicians across the United States who contract
with insurers or HMOs and collect a fixed fee from insurance carriers from each
patient that they enroll. This fee is
allotted to them regardless of how much care the patient eventually needs
during the given enrollment period. The
physicians all take a collective responsibility for each patient‘s care and
stay within a fixed budget. These
groups can be very large and range from a few hundred physicians to
thousands. Nearly 400
IPAs existed in 1989 and had approximately 13.5 million people enrolled in
them. This growth marked a growth of
300 percent for the number of IPA plans increased and an enrollment increase of
700 percent from the years 1980 to 1989.
There were multiple reasons for this tremendous amount of growth, namely
the appeal to physicians, who liked the fact that they could join an IPA and
still maintain the fee-for-service arrangement that they used in the past. Additionally, IPAs required lower start-up
costs and thus, were more easily finance.
Finally, consumers also seemed to like IPAs more because they were
allowed a greater choice in physicians and many could retain the physician that
they had before they enrolled in the IPA.
While in the 1970s, most HMOs were nonprofit, most IPAs operate on a
for-profit basis, and help to maintain the current trend of HMOs operating on a
for-profit basis. H. Problems Facing
Managed Care A large problem that also has
ethical aspects to it is the fact that many managed care organizations provide
their physicians with an “illegal kickback arrangement”[57]
that provides monetary rewards to physicians who decide against administering
costly tests for patients who could benefit from these services. They do so simply because the managed care
organizations have told them that if they keep such costs down, they will
receive these monetary rewards for their compliance. While in the past, doctors could potentially abuse the
fee-for-service arrangement by ordering extraneous tests that were not deemed
medically necessary, these tests at least safeguarded the patient and was not
potentially damaging like the withholding of tests can be.[58] Denial of
care is another important problem that managed care creates. Currently, more than 70 percent of health
dollars go toward caring for the ill.
Hence, for-profit managed care organizations wish to attract healthy
patients and screen out the high-risk groups.
These for-profit organizations also limit the services that attract the
sick and disabled so that they can select for healthier patients without being
accused of discriminating against sick people.[59] Another problem with managed care is their
use of report cards. Health plans are
creating such report cards and acquiring information from members of their
plans who are typically less sick and thus, have little contact with the
system. Thus, the quality reports of
health plans are much higher than they actually are overall, as the
administrators of these health plans are manipulating the selection of
participants. According to recent
reports from the Medical Outcomes Study as well as the Robert Wood Johnson Foundation,
people actually showed “significantly worse access, satisfaction, and outcomes
for the poor, sick and elderly in managed care.”[60] The final
and perhaps one of the most important problems that managed care creates is the
fact that it diverts revenue away from hospitals and clinics (to go toward
paying administrative costs and hefty salaries to managed care CEOs’
salaries). In fact, such administrative
burdens also create patient and physician satisfaction because it takes time
away from the physician-patient relationship.
Rather than having the time to spend time with their patients explaining
procedures or their diagnosis, physicians are dealing with “armies of corporate
utilization managers spend[ing] millions of hours chasing approvals, correcting
inappropriate denials and dealing with conflicting formularies, all of which
leads to skyrocketing administrative costs.”[61] Thus, this waste exacerbates the problem of
accessing health care, and is a burdensome problem for the millions of people
who are uninsured and cannot attain access to voluntary care that could be
given to such patients instead. This
problem and the current health care crisis of the United States will be
discussed in the remainder of this chapter.[62] I. Current Health
Care Crisis of the United States Please
note: there are more detailed chapters in this online text that discuss the
fact that health care spending is increasing in the United States and the fact
that many people lack health care insurance in the United States. However, for the purposes of this chapter,
these topics will be merely touched upon in an effort to provide a framework
for the present situation of health care and thus, to show how the proposed
solution might address some of these problems better than the current health
care insurance systems that are in place both privately and federally. Currently,
the United States spends more than $1.3 trillion each year on health care. The current population size of the United
States is 281 million[63]
and the infant mortality rate is 6.82 per 1,000 live births.[64]
Life expectancy is 74.24 years for men and 79.9 years for women[65]
and the per capita gross domestic product (GDP) is $33,900[66] with
$4,373 per person per year spent on health care (or, 12.9 percent of GDP).[67] Despite this phenomenal spending trends of
the United States, almost 39 million Americans, including 8.4 million children,
lack basic health coverage. Currently, the total number of people without
health insurance makes up 14 percent of the total population of the United
States,[68]
but this percentage has historically risen and fallen depending upon the state
of the economy. The ethnic background
of the millions of Americans without insurance include: 1) Ethnic
Background of Uninsured Americans Table I-1 Source: Department of Commerce, Health
Insurance Coverage 2000. (Washington,
DC: Department of Commerce, September 28, 2001). 2)
Ramifications of lack of health coverage for all The
ramifications of not being insured are drastic. Often, many people forgo health care, even when they are in the
early stages of a chronic condition, so as to avoid treatment costs. This results in their needing even more
expensive care later on, as well as a deterioration of their conditions that
might have otherwise been avoided.
According to the Universal Health Care 2000 Campaign, the uninsured are
four times more likely to forego needed medical care, to postpone care due to
costs and to not fill a prescription.
They are also hospitalized at least 50 more often than the insured for
avoidable hospital conditions such as pneumonia and uncontrolled diabetes.[72] 3) U.S.
Spending on Health Care is on the Increase Despite the fact that the United
States already spends more on health care than any other industrialized
democratic nation but does not achieve comparably better results, health care
spending is increasing in the United States.
In fact, by 2011, health care spending in the United States is expected
to reach $2.8 trillion - a 115 percent increase from the $1.3 trillion spent on
health care in 2000 - according to a new report by the Centers for Medicare and
Medicaid Services. The report,
published in the March/April issue of Health Affairs, projected that national
health spending will grow at an average annual rate of 7.3 percent from 2001 to
2011. By 2011, health care spending is
expected to comprise 17 percent of the U.S.
gross domestic product - up from 13.2 percent in 2000 - with the
increase largely attributed to legislative-driven increases in public spending
and a weaker economic outlook. "From
2003 to 2011, real health spending is expected to outpace real economic growth,
resulting in a continually growing share of the nation's resources being
allocated to health care," wrote the report authors. The report
contains a number of spending projections including private spending, public
health spending, Medicare, Medicaid, out-of-pocket costs, hospitals, government
public health, prescription drugs and nursing homes. Among the report's predictions and findings: Chart 3. Past and Projected U.S. Health Expenditure Source: U.S. Department of Health
and Human Services, Health Care Financing Administration, March 2001. 4) Why the
United States Spends More on Health than other Nations Currently, the United States spends
more on health care than other industrialized nation. In fact, this has been the case since World War II. For example, the United States spent
approximately 5.2 percent of its gross domestic product on health care in 1960,
compared to the 3.8 percent of GDP that the Organization of Economic
Cooperation and Development, made up of 29 industrialized nations, spent on
average in 1960. These numbers jumped
from 12.6 percent in the United States in 1990 compared to the 7.2 percent OECD
mean, and 13.5 percent in the United States in 1997 compared to the 7.5 percent
OECD mean.[74]
There are several reasons why the United States spends more on health care than
in other countries. Among the
reasons cited for the difference in health care costs is that the United States
uses much more technology in its practice of medicine than do other
countries. An illustration of this
statement is the fact that the United States has three times the number of
computerized tomography scanners and five times the number of magnetic
resonance imaging units per million population than the average of other
industrialized nations. Also, in 1996,
the average cost per day for hospital care in the United States was $1,128,
compared to $632 in Denmark, $489 in Canada, and less than $350 per day in 20
other industrialized nations.[75] Another
problem with the United States in terms of costs of health care is that there
is a higher price placed on goods and services provided, especially for
pharmaceuticals. In fact, U.S. consumers pay about 25 percent to 100
percent more than customers who are in other parts of the world, even when the
medications are being produced by the same pharmaceutical companies. One example of this is the fact that
coronary artery "stents," which are medical devices that prevent heart
attacks, cost $500 more in the United States than they do in Canada. If a national health system existed that
bought all drugs from all the manufacturers, the system would be able to
negotiate prices that are far more reasonable than what one person or one insurance
company (or even a handful of insurance companies or individuals) can
negotiate. Hence, some Americans are
now going to Canada to purchase needed pharmaceuticals."[76] The third
burden to health care costs in the United States is that of administrative
waste, as approximately 25 percent of the cost of health care is spent on
non-clinical administration. These
administrative costs include determination of eligibility for insurance,
billing procedures, and marketing expenses.
The United States spends double the amount of what other industrialized
nations spend on such activities.[77]
The U.S. Medicare program has overhead
administrative costs of less than 5 percent, where as private insurance
companies have overhead costs in the 20 percent to 25 percent range.[78]
The discrepancy lies in the fact that private insurance companies review every
procedure that a doctor proposes and usually contests each one, even if it is
deemed necessary. Such practices result
in a delay of health care provision and cause doctors to waste both their time
and money taking care of paperwork for the justification of procedures and
billing for the provision of delivery, rather than being able to spend time on
their patients. J. Potential
Solution to Lack of Health Insurance for Americans Given that
being sick is more costly to the Canadian economy than treating health care and
having productive members of society, the Canadian government implemented a
universal access to health care system in the 20th century. As a result of this, life expectancy has
increased dramatically from 59 ears in the early 1920s to 69 years in the 1950s
and 79 years by 1997. Furthermore,
older adults enjoy a better quality of life because of the extension of the
number of years that they are living.
In fact, the Canadian life expectancy is one of the longest in the
world, second with Iceland and behind Japan.
Health care also costs much less in Canada than it does in the United
States. In fact, the per capita health
care cost in 1994 in the United States was $3,510 as opposed to $1,982 in
Canada.[80] Similarly, administrative costs as a percentage of
the total cost of health care in the United States are 26 percent, whereas it
comprises only 9 percent of total costs in Canada.[81] Another difference is that the cost
for a typical family of four with a gross income of $35,000 per year with
average coverage in the United States is $5,780. The total is paid by the individual in premium contributions,
out-of-pocket expenses, co-payments and uncovered services and falling wages as
employer health care costs rise. On the
other hand, for full coverage in Canada, the cost is only $3,595, which is paid
through a public tax system that is shared fairly by all and based on a
national budget.[82]
Thus, the Canadian health care system is far better than the U.S. system in that for almost half the price, it
achieves far superior results. Section 2: MEDICARE The
Medicare program was first established in 1965 as Title XVIII of the Social
Security Act.[83] In passing this legislation, Congress
separated Medicare into one common definitional part, Part C, and two
substantive parts, Part A and Part B.[84]
The purpose of Medicare was to provide the same type of health care as could be
provided by a comprehensive insurance plan by a private entity.[85] Specifically, Medicare was to provide a
coordinated and comprehensive approach to federal health insurance and medical
care for the aged and disabled.[86] The
Medicare program went into effect July 1, 1966.[87] It entitles persons age 65 and over (and
their spouses who are at least age 65) who have paid into the Social Security
system or Railroad Retirement benefits to federal health insurance coverage.[88] In addition to those over the age of 65, the
program also covers two categories of person under age 65: those with end-stage
renal (kidney) disease and disabled persons who have been receiving Social
Security disability benefits for 24 months.[89] Medicare is an entitlement program and is
not a needs-based program like Medicaid,[90]
a federal-state program of medical assistance.[91] Today,
Medicare provides health care coverage for more than 40 million Americans.[92] Enrollment into Medicare is projected to
reach nearly 77 million by 2031 when the Baby Boom generation is projected to
be fully enrolled.[93] Such figures have generated concern with the
future viability of the Medicare system.
Faced with this concern, politicians have been calling for reform to
ensure Medicare’s survival for future generations (Please see President Bush’s
reform strategies below). The
administration of the Medicare program is delegated to the Department of Health
and Human Services (DHHS), which is a department in the executive branch of the
federal government.[94] The Social Security Administration (SSA), a
department within the DHHS, is responsible for Medicare eligibility and
enrollment, and the Health Care Financing Administration (HCFA) establishes all
the rules, regulations, and health-related policies governing the Medicare
program.[95] The HCFA contracts with private insurance
companies throughout the United States to process Medicare claims.[96] Each state has an intermediary, a private
insurance company that processes Part A claims, and a carrier, a private
insurance company that processes Part B claims.[97] Medicare
is funded from payroll taxes, general taxes, interest accumulated from the
Health Insurance Trust Funds, and monthly premiums paid by Medicare
beneficiaries.[98] Furthermore, beneficiaries are responsible
for paying deductibles and coinsurance amounts.[99] As
mentioned above, Medicare is divided into two parts: Part A, hospital insurance
(HI); and Part B, medical insurance (also called supplemental medical insurance
or SMI).[100] Medicare does not pay for all of a
beneficiary’s health care costs; it only pays a portion of it.[101] Because of this, many Medicare beneficiaries
supplement their coverage with private health insurance.[102] When a
person enrolls in Medicare, he or she will not have to pay a monthly premium
for Part A.[103]
There is no monthly premium to pay for Part A because coverage has been earned
through a person’s payroll taxes deducted during his or her working years.[104] Part B, on the other hand, is voluntary and
requires a monthly premium, most often deducted from a person’s Social Security
check each month.[105] Medicare
Part A covers areas such as inpatient hospital stays, skilled nursing facility
stays, home health care, and hospice care.
In regards to inpatient hospital coverage, a person eligible to receive
this coverage must first be admitted into a hospital.[106] A Utilization Review Committee, a Peer
Review Organization (PRO), and a Medicare intermediary determine eligibility by
determining whether inpatient hospital care is “reasonable and necessary” for a
specific disease or illness.[107] The basic
inpatient hospital benefits under Medicare Part A include a semiprivate room;
meals, including special diets; regular nursing care; special care units, such
as intensive care; laboratory tests; drugs given while in the hospital;
radiology services, such as X-rays; medical supplies, such as casts; equipment
use, such as wheelchairs; blood transfusions after the first three pints
administered; operating room and recovery room costs; rehabilitation services,
such as physical therapy; medical social services, such as discharge planning;
emergency admission to the nearest hospital without a physician’s orders in
life or death situations; 190 lifetime days in a participating psychiatric
hospital; and care in participating Christian Science Sanatoriums if operated
or listed and certified by the First Church of Christian Science, Boston.[108] Program
beneficiaries are covered for 90 inpatient days each benefit period.[109] A benefit period begins when the person
enters the hospital and ends when the individual is released.[110] For the first 60 days of inpatient care,
Medicare covers all but a specified deductible.[111] If the individual’s stay goes beyond 60 days
in a benefit period, the patient must pay daily coinsurance.[112] For stays exceeding 60 days, there are an
additional 60 lifetime reserve days available, however, these days can only be
used once.[113] Once these reserve days are used up, they
are no longer available to the patient if an extended hospital stay is needed.[114] Another
area covered under Medicare Part A is skilled nursing facility care. This type of care does not refer to the type
of long-term care most people associate with nursing homes. To be eligible, the skilled care must be a
level of care that is provided under the direction of a physician or other
licensed professional, such as a registered nurse, licensed practical nurse,
physical therapist or speech pathologist, and the facility must include
treatments for inpatients that have illnesses or injuries that seriously affect
their life or health.[115] To qualify
for skilled nursing facility care a physician must certify that the patient
needs, actually receives, and will benefit from skilled nursing care and/or
skilled rehabilitation services on a daily basis.[116] The services provided include technical
services, observation and assessment of medically unstable patients, patient
instruction in the self-care of devices, and physical and occupational therapy.[117] Finally, the basic skilled nursing facility
benefits provided under Medicare Part A are much the same as the benefits
provided for inpatient hospital care discussed earlier. A
beneficiary is entitled to a total of 100 days in a Medicare-certified skilled
nursing facility.[118] For the first 20 days of care, there is no
patient coinsurance requirement, however, for the remaining 80 days, the
patient is responsible for a specified daily coinsurance amount.[119] Many
people who fall ill prefer to remain at home, preferring home health care
instead of inpatient care. Medicare
Part A will pay for this type of care only if the care needed is skilled and is
required on a part-time or intermittent basis.
This type of care is intended to help people recover or improve from an
illness and is not there to provide unskilled services over an extended period
of time.[120] To be
eligible for home health care benefits, the person must be homebound and unable
to leave their residence without assistance from another person or special
equipment; the person must need the type of care provided by a registered or
licensed practical nurse or a physical or speech therapist; the care must be
diagnosed by a physician as reasonable and medically necessary; and the
services must be provided by a “participating” home health care agency.[121] A
beneficiary who requires skilled care at least once every 60 days is eligible
for home health services.[122] In this portion of Part A, there is no
patient coinsurance, annual deductible, or number of visit limitations.[123] In addition, Medicare will pay for the full
amount that has been approved for all covered home health visits.[124] The last
area to be discussed under Medicare Part A is the area of hospice care. This area of care was added to Medicare in
1982 and became effective in 1983.[125] The purpose of care for hospice patients
under Medicare is to provide in-home (non-hospital) care for symptom
management, pain relief, and support services to persons certified by a
physician to be terminally ill and to have a life expectancy of less than six
months.[126] The type
of hospice care provided under Medicare includes physician services; nursing;
certain types of drugs; physical, speech, and occupational therapy; home health
aides; homemaker services; medical social services; medical supplies and
appliances; short-term inpatient care, including respite stays; and counseling.[127] An individual is entitled to these benefits
for 210 lifetime days with a possibility of an extension if a physician
recertifies the person as terminally ill.[128] Another
area of Medicare available to those who are eligible and choose to obtain it is
Medicare part B. This part of Medicare
covers outpatient treatments as well as physicians’ services whether inpatient
or outpatient.[129] Unlike Part A, Medicare Part B requires the
individual to pay an annual deductible for enrollment.[130] To be
eligible to receive services under Medicare Part B the person must first be
enrolled in the program and the care received must be “reasonable and necessary
in the diagnosis and treatment of a specific illness or injury.”[131] A physician and a Medicare carrier determine
this standard.[132] One area
covered under Medicare Part B that is not covered under Part A is the services
provided by physicians. The specific
areas covered include approved surgical services, including anesthesia; medical
services; services provided by physician’s nurses and staff; physician charges
for the interpretation of diagnostic tests and procedures such as X-rays;
transfusion of blood and blood components; drugs and biologicals that cannot be
self-administered; therapies that are planned and reviewed by a physician;
medical supplies; second opinions regarding surgery; clinical laboratory
diagnostic services; limited mental illness services; limited chiropractic
services; limited podiatrist services; limited optometrist services; and
limited dental surgeon’s services.[133] In
addition to physician services, certain outpatient procedures are also covered
under Part B. These procedures include
diagnostic tests and clinical laboratory tests billed by the hospital; services
in the emergency room or an outpatient clinic; X-rays and other radiological
services; medical supplies; drugs and biologicals that cannot be
self-administered; blood transfusions; outpatient surgical services; and kidney
dialysis.[134] Application
for the benefits under Medicare Part A and Part B vary. In applying for benefits under Medicare A,
the best time to apply is in the initial enrollment period, which includes the
3 months prior to the person’s 65th birth month, the birth month
itself, and the 3 months following the individual’s 65th birth
month.[135] For those who fail to enroll during this
period of time, there is a general enrollment period offered each year.[136] For Part B
enrollment, there is a general enrollment period offered from January 1st
through March 31st of each year for those who are eligible.[137] For those over 65 it is advised that they
purchase this form of insurance because there are penalties for late enrollment
and also because obtaining health insurance coverage is difficult for
individuals of this age.[138] II. BUSH’S
FRAMEWORK TO MODERNIZE AND IMPROVE MEDICARE Although
the Medicare program has been successful through the years, it has not always
kept pace with the ever-increasing improvements in health care.[139] Because of this, Medicare beneficiaries
today are lacking many of the choices and benefits available to millions of
other Americans in different health plans.[140] In spite of all the benefits that Medicare
provides, it still does not offer an outpatient prescription drug benefit,
forcing many seniors to go without the medicines they need.[141] Furthermore, Medicare does not provide full
coverage for important preventive health care, such as diabetes or cancer
screenings, and it does not provide protection against uncapped medical costs
that can run a senior’s savings dry.[142] With
health care costs on the rise and the Baby Boom generation nearing retirement
age, Medicare is beginning to face serious financial challenges.[143] President Bush, acknowledging these
problems, believes the nation has a moral obligation to fulfill Medicare’s
promise of health care security for America’s seniors and people with
disabilities.[144] To meet this obligation and overcome the
problems with Medicare, the president believes that the nation must act now to
bring Medicare into the 21st Century by providing more choices and
better benefits to every senior in the United States.[145] In
addressing this problem, President Bush, in July of 2001, outlined the
following principles for Medicare reform: All seniors should have the option of
a subsidized prescription drug benefit as part of modernized Medicare;
modernized Medicare should provide better coverage for preventive care and
serious illness; beneficiaries should have the option of keeping the
traditional plan with no changes; Medicare should provide better health
insurance options, like those available to all federal employees; Medicare
legislation should strengthen the program’s long-term financial security; the
management of the government Medicare plan should be strengthened so that it
can provide better care for seniors; Medicare’s regulations and administrative
procedures should be updated and streamlined, while the instances of fraud and
abuse should be reduced; and Medicare should encourage high-quality health care
for seniors.[146] Recently
the President has proposed a framework to modernize and improve Medicare
building upon the principles mentioned above.
The President, in working with Congress to pass legislation to bring
more choices and better benefits, has committed up to $400 billion over the
next ten years in his FY 2004 budget to pay for modernizing and improving
Medicare.[147] The President’s plan will give all Medicare
beneficiaries access to: Prescription drug coverage that enables seniors to get
the medicines they need without the government dictating their drug choices;
choice of an individual health care plan that best fits their needs, just like
members of Congress and other federal employees enjoy today; choice of the
doctor, hospital, or place they want for the treatment and care they need; full
coverage for disease prevention such as screenings for cancer, diabetes, and
osteoporosis; and protection from high out-of-pocket costs that threaten to rob
seniors of their savings.[148] The
modernized Medicare plan will give seniors the option to decide what type of
Medicare program they would like to be enrolled in. Seniors who are satisfied with their current coverage in
traditional Medicare will be given the option to keep this kind of coverage and
receive help with the high costs of prescription drugs.[149] The beneficiaries who decide to stay in the
traditional Medicare program will gain access to discounted drugs through a
prescription drug discount card, estimated to achieve savings of 10 to 25
percent on the cost of prescription drugs, as well as coverage to protect them
against high out-of-pocket drug expenses[150] A
new form of Medicare that could be available if legislation is passed is
Enhanced Medicare. Enhanced Medicare
will give those seniors who choose to enroll into the program the same types of
choices that are available to members of Congress and other federal employees.[151] Those enrolled will have their choice of
multiple health plans from which to choose from.[152] The choice of plans will be available to all
seniors regardless of where they live, allowing them to choose any doctor or
any hospital for the treatment and care they need.[153] The
federal government will pay for most of the cost of coverage under Enhanced
Medicare, with participants paying a smaller share.[154] Beneficiaries who choose to enroll in an
average priced plan would pay a premium for the medical portion of their
coverage equal to the Medicare Part B premium.[155] Enhanced
Medicare will include many additional benefits that are not available under
today’s Medicare program. For example,
under Enhanced Medicare, plans will offer a subsidized prescription drug
benefit with a monthly premium, an annual deductible, coverage of prescription
drug costs and protections for those who have drug costs that are high.[156] Low-income individuals will receive this
drug coverage for no additional premium and will receive further subsidies to
limit their co-payments.[157] Full
coverage of preventive benefits will also be available to seniors under
Enhanced Medicare.[158] Under the current Medicare system, coverage
is only available for certain preventive services after the Medicare Part B
deductible is met.[159] In addition, a number of preventive services
under today’s Medicare system require co-insurance.[160] Enhanced Medicare plans will provide full
coverage of preventive services removing the financial barriers for low-income
seniors who are less likely to seek preventive treatment, such as prostate
cancer screenings and mammographies.[161] Currently,
today’s Medicare coverage does not protect individuals from high out-of-pocket
costs for health care.[162] Enhanced Medicare will reverse this
eliminating the lifetime limit for inpatient hospital care and protect against
high medical bills for hospitalizations.[163] Under the proposed plan, participants with
very high out-of-pocket costs will face no additional cost sharing.[164] Furthermore,
the current Medicare system penalizes its sickest participants by requiring
them to pay more when they need to stay longer in a hospital.[165] At the same time, Medicare requires cost
sharing for some specified services while some services are fully covered.[166] Patients pay 20 percent or more, for
example, when they visit their doctor or a hospital outpatient department, but
those needing home care pay nothing out-of-pocket.[167] If
the new legislation is passed, participants will have a single deductible for
medical services, just like what is done in most private insurance plans, to
provide more adequate protection from high expenses for all types of health
care.[168] This single deductible would replace the
separate Medicare Part A and Part B deductibles.[169] In addition, after a lower deductible,
participants would pay nothing for their first two-inpatient hospital
admissions in a year and a reasonable co-pay for any subsequent hospital stay.[170] Such changes will provide better protection
for those enrolled in the program that need the most medical care.[171] In
addition to Enhanced Medicare, the President’s plan also calls for the
implementation of a program called Medicare Advantage. Under Medicare Advantage, seniors will have
the option of enrolling in low-cost and high-coverage managed care plans, similar
to those that are available today under Medicare.[172] Plans in competitive markets under the newly
created Medicare Advantage program will bid to provide participants with
Medicare’s enhanced basic benefit package.[173] Those who select more efficient plans will
benefit from savings, and in some circumstances, participants in the most
efficient plans could pay no premium at all and potentially qualify for a
rebate on their premium.[174] Medicare
Advantage will be a good choice for participants willing to accept a more
selective provider panel in exchange for lower cost sharing and extra benefits.[175] The creation of a system in which different
types of delivery systems compete for business will result in a marketplace
where plans in each system will have strong incentives to provide the most
efficient and highest quality of care.[176] D. Time-Frame The hope
of the President’s plan for the reworking of Medicare is to provide more
choices and better benefits for all those who are eligible for Medicare today.[177] If legislation is passed in 2003, then in
the beginning of 2004, seniors will have the following benefits: All seniors
will receive access to discounted drugs (discounts ranging between 10 to 25
percent off) through Medicare endorsed prescription drug discount cards.[178] For low-income seniors, in addition to the
drug discount card, they will also receive $600 per year to assist in
purchasing prescription drugs.[179] By
the year 2006, if legislation is passed, seniors will have the option of
staying in traditional Medicare and receiving a prescription drug discount
card, coupled with coverage that will protect them against high out-of-pocket
costs for their prescription medicines.[180] Along with this type of coverage, as
described above, seniors will also be able to choose among new Medicare plans
including Enhanced Medicare and Medicare Advantage. As mentioned by President Bush in his state of the union address
in January of 2003, the passing of this legislation will reform and strengthen
the Medicare program to ensure its survival and effectiveness.[181] The History of Medicaid Medicaid
is today’s largest source of government funding designed to provide health care
for those American’s who are not able to afford it. These include two groups of
people such as the poor and the elderly living in nursing homes. Medicaid
became law in 1965 and was originally established to provide medical attention
to those considered, “needy”, citizens who could not afford coverage. In 1980
the law was further expanded to cover not only medically needy citizens, but
low income pregnant mothers and children, and as it will be discussed further,
larger numbers of American citizens. The program is a joint venture run by both
the United States Federal and State government and the number of persons
enrolled in the Medicaid program represents 15% of America’s population.4 How is Medicaid Run? As stated
previously, Medicaid is a Federal and State government run program. For
example, if Ohio can budget themselves and afford to pay 2,000,000 dollars for
Medicaid, then the Federal government is required to match that amount if the
State follows particular guidelines later discussed in this chapter. In
general, States are allowed to run their Medicaid programs by however they feel
fit. The Federal government will step in and mandates that each State follow
four initial guidelines. Each State must, establish its own standards for those
to be considered eligible to receive health care, determine the proper amount
of money, time, and amount of services allotted to those receiving Medicaid,
set the rate of payments for those health care organizations who treat Medicaid
patients, and lastly, administer its own program.1 For most States,
each regulation is different based on the amount of persons currently enrolled
in the Medicaid program, the size of the state, and how much money is available
for the state to provide. Also, when setting up a program a State has two
restrictions set by the Federal government under the category of hospital care
and number of physicians a patient may visit. First, limits must result in a
sufficient level of services to reasonably achieve the purpose of the benefits;
and second, limits on benefits may not discriminate among beneficiaries based
on medical diagnosis or condition.1 A good example of how a State
would run a program is to look at the State of Ohio. Currently,
Ohio’s Medicaid plan covers 1.7 million people, which includes 1 in 4 children
and 1 in 4 seniors over the age of 85.3 To be considered eligible to
receive Medicaid in Ohio, families with children must be below 200 percent the
Federal Poverty Guideline, pregnant women are to be 150 percent below the
guideline, and working parents with families must be below 100 percent the
guideline.3 Those who are
low-income seniors, and persons with disabilities requiring long-term care may
also apply for Medicaid in the state of Ohio. As far as budgeting is concerned,
Ohio has been known to place 2.3 billion dollars into nursing facilities, 1.5
billion dollars into hospitals, and 424 million dollars to managed care.3 This is just the state of Ohio, which is not
terribly small, but not terribly large as well. Imagine the amount of Medicaid
funds needed for those persons living in California? It is also important to
remember that based on the differences in each Medicaid program, just because
one may be eligible for care in Ohio does not necessarily mean that he may be
eligible for Medicaid in California. Medicaid Eligibility The
easiest way for one to understand Medicaid is to look at the program as a
pyramid. At the top of the pyramid is the Federal government. On the second
level are the States, and then underneath on the ground level are the
individuals of that state seeking Medicaid. Just like persons seeking eligibility
for Medicaid in a particular State, States must also meet eligibility
requirements mandated by the Federal government in order to receive Medicaid
funds. These requirements are set in stone in the fact that first each State
must follow the four guidelines presented above. States also have other
obligations in the fact that they are required to provide Medicaid coverage to
individuals who receive Federally assisted income payments, and those groups
not receiving cash payments from the Federal government.1 So in a
way, States must follow five guidelines rather than four in order to receive
Medicaid funds. Those lying at the bottom of the pyramid have a more difficult
qualifying for Medicaid, because eligibility requirements become more
complicated and detailed than State guidelines. One
of the most important ideals to remember when discussing Medicaid is that it is
not simply given to those who are poor or elderly. In many cases, most persons
are stuck in search of health care because they are not able to receive health
care simply because they can not afford insurance, and at the same time are not
poor enough to be considered for Medicaid.
Medicaid is only given to those who are considered needy and these
persons must fall into a needy category, such as in Ohio where for example
children living in a family that is below 200 percent according to the Federal
Poverty Guideline.3 These categories are mandated by the State and
are as follows. Persons who wish to be considered for Medicaid must: ·
Meet the needs specified by the program Aid to Families with
Dependent Children1 ·
Children under the age of six whose family income is below
133 percent the poverty line1 ·
Women who are pregnant must fall between below 33 percent
below the poverty line1 ·
Supplemental Security Income persons1 ·
Special protected groups1 ·
All children born after September 30, 1983 who are under the
age of 19 and whose family incomes fall below the poverty line1 Not only is it important that
persons meet these criteria to receive Medicaid, but if the State does not also
mandate these categories through out their Medicaid program then they will not
receive the matched funds given by the Federal government. Also, there is the
problem of again, finding a place for those who are not considered needy to
receive health care which can be found in the solution sections of the chapter.
It
was estimated in 2000 that close to 11.3 percent of the population in the
United States was considered poor.4 Of this population, only 4.4
percent were impoverished, meaning that these persons had a family income below
one-half of the official poverty threshold. 4 Does this mean that if
citizens are not considered poor enough then they should not receive health
care? Also how poor is poor then as defined by the American society? Services to the public As well as
setting up Medicaid programs including guidelines mandated by the Federal
government, States must also provide specific services to those receiving
Medicaid to receive their reimbursed Federal Funds. There are two specific
types of services which can be allocated to the Medicaid public known as basic
and special Medicaid program. Special services on the other hand, are those
that can be offered by services. Basic services are those services that must be
offered by every State Medicaid program. Special services, on the other hand,
can be offered by States only if their budget allows for it. Basic services are
known to include to the following1: Inpatient
and outpatient health care Prenatal
care Vaccinations Physician
services Nursing
home facilities for those 21 and over Rural
health clinic services Home
health care Special services will include1:
Clinic
services Transportation Diagnostic
Rehabilitation ntermediate
care for the mentally retarded Prescribed
drugs Special services are important
because many families are in need of transportation services and in today’s
medical world, prescription drugs are becoming more expensive every year. Ohio,
for example, spends 15.2 percent of its Medicaid budget simply on prescribed
drugs and close to 33 percent of its budget on nursing facilities. For those
wishing to learn more about the Medicaid program in Ohio, please click on www.ohanet.org. Looking at
both services, it would seem that some special services should be included into
that of the basic services. One of President Bush’s main concerns is to allow
Medicaid patients to receive prescribed drugs at lower prices. To learn more
about his topic, please refer to the section of this chapter explaining the new
health plan of President George W. Bush. It
is also important to note that with today’s technology it is extremely easy to
find information regarding each State Medicaid plan. Each state has close to 50
different web pages dedicated to informing the public on every known Medicaid
program available. The easiest way to gain information is to simply look at the
website www.hca.gov/medicaid/medicaid.html. Who does Medicaid Cover? As stated
previously, Medicaid covers those considered to be categorically needy ranging
from young children to the elderly living in nursing homes. In 1998 it was
estimated that Medicaid covered 20.6 million children alone. 1 These
children accounted for close to 51 percent of the total population receiving
Medicaid today and each was estimated to cost close to 1,150 dollars. 1 This
seems reasonably low seeing as children are known to be more accident prone and
susceptible to diseases. Medicaid
is also known to cover close to 8.6 million adults in the United States. This
category of recipients makes up 21 percent of the persons receiving Medicaid
with each adult costing around 1, 775 dollars.1 It is also important to note that as the age
of Medicaid recipients rises, so does the cost of payment for each person.
Lastly, and what would seem to be the most important group of individuals, are
the elderly. Medicaid
is known to cover close to 4 million elderly persons, which makes up around 1.1
percent of the total Medicaid population.1 Each elderly person is
estimated to cost around 9,900 dollars to cover.1 The change in
monetary unit is dramatic from children to the elderly. Today, Medicaid has
paid for almost 45 percent of the total cost of care for persons using nursing
facilities.1 There are two problems now occurring with the elderly
today. First, the population is growing dramatically, meaning larger amounts of
funds are needed to provide coverage. Second, are the methods in which some of
the elderly must go through to receive Medicaid. In
the United States, it is not uncommon for the elderly to live in Nursing Home
communities for various reasons such as the need of more medical assistance and
attention. The problem is that the cost of Nursing home living is rising
dramatically. As mentioned before, persons must be considered categorically
needy in order to receive any form of Medicaid. In many instances, the number
one factor is to lie significantly below the Federal Poverty Guideline. For
many elderly to receive Medicaid payments, they are being forced to sell many
assets such as their homes and values to qualify for Medicaid, and live in
these facilities. Not only is it important to note that Medicaid is important
in paying for these facilities, but in a recent study conducted by scientists
determining how physician care compares to the amount of Medicaid being
received, those persons receiving larger amounts of Medicaid were able to
receive better amounts of physician care.2 How does one pay for Medicaid Services? Medicaid
is operated by what is known as a vendor payment program,1 which
means that a health care provider will carry out a service, for example
vaccinating a child, and the State will in return pay for that service. In most
cases States are allowed to choose from two options by the Federal government
to pay for health care services. States can either pay the health care provider
directly, as described above, or the states may pay through various
arrangements made with health maintenance organizations, (HMO).1
With both State and Federal government programs involved with Medicaid
programs, how do both work together in covering medical expenditures? The
Federal government pays a share of the medical assistant expenditures under
each State’s Medicaid program which is known as the Federal Medical Assistance
Percentage.1 This percentage is determined by a formula which
compares the State’s average per capita income level with the national income
average.1 Those State’s having a larger income level are tended to
be reimbursed smaller amounts of money compared to those States having smaller
amounts of income. At this present time, there is no real limit spent on the
amount of money the Federal government is allowed to pay the State for medical
assistant. In general, if the State government is able to produce large amounts
of money for Medicaid, then the Federal Government is obligated to pay 100
percent of what the State has already produced for the program. Today’s Medicaid Program Medicaid
has come a long way from the law established in the year 1965. Not only is
there growing populations of persons who can not afford health care, but insurance companies are changing as well.
Toady, those who can afford to pay for health care can do so through private
insurance companies, HMO’s, or a program that is literally a combination of
both HMO and private insurance companies. State Medicaid programs are working
with many of these programs in helping to provide health care to those who can not afford it by creating new system different from the regular
fee-for-service system of the past. Under
today’s managed health care system, private insurance companies have agreed to
provide a specific set of services to Medicaid enrollees, usually in return for
a predetermined periodic payment for enrollee. 1 By Medicaid working
with new managed care programs, States are hoping to run a more cost-effective
health care program to those in the Medicaid program. Where does the American Health System go from here? One of the
biggest questions today is how can America, the largest economic superpower in
the world, have so many of its citizens living without health care coverage?
The answer is simple in the way that the managed health care system is run. Currently, the American system is
run by private insurance companies and HMOs. So where is the solution to
American’s health care problem? After talking with many physicians the answer
lies in universal health care. According to Dr. Arora, an OBGYN and Lakewood
Hospital in Lakewood, Ohio, one of the best reasons for universal health care
is so patients are not limited to their choices and in the end are happier
customers. For example, a patient belonging to a prominent health care provider
has a problem and is told that they have a choice of five different physicians
to choose from to seek treatment. The patient tries each physician and decides
that he does not prefer any of the competing physicians and decides that he
would rather seek a physician that is not involved with his insurance
organization. The patient is then either forced to pay for his own treatment or
not seek any treatment at all even though he has a well established insurance
provider. Is this really ethical and fair to the public? What if the patient does
not wish to pay for this treatment and in the end becomes worse off than he
began? With universal health care this would have never been an issue. The
patient would have been able to choose the physician he had wanted in the first
place, be a happier client, and in the end hopefully come back to that
provider. Another
question which would need to be answered is if every person was able to receive
health care then wouldn’t the costs of health care rise? The answer is honestly
no. When a patient enters an emergency room today they are subjected to more
tests than can be imagined, such as a CAT scan or MRI depending on the problem.
These tests are actually quite expensive, sometimes unnecessary, and at many
times do not provide the answer in which the physician was looking for. With
universal health care, patients would not have to undergo this grueling process
of a different physician performing a different test, but rather have the
attention they deserve. Along with having the choice of allowing patients to choose their own
physician comes the privilege of allowing physicians time to sit and speaking
with their patients about their medical problems. Walk into any hospital
setting, and one will notice the rushing of physicians in seeing as many
patients as possible throughout the day because the more patients a physician
sees, the more money is collected from insurance companies, and in the end more
money is being made by the health care provider. Universal health care would
allow for those physicians to still make the same amount of money without so
many vigorous tests, but at the same time spend time with their patients making
the patients a much happier client who can return for their next medical need. For
many physicians, today’s medical system is a harsh one in which to practice
medicine, because according to Dr. Arora, “ the largest problem being faced is
the number of medical malpractice suits being brought upon doctors”. It is now
a common incentive in our system to sue physicians for any problem a patient
may encounter. Insurance companies are faced with the problem of not only
providing coverage for its patients, but at the same time shelling out millions
of dollars each year to defend physicians. With so much money being paid by
hospitals to defend themselves in law suits, many hospitals are being forced to
shut down important parts of their organizations ward, such as the emergency,
because they simply can not afford to keep their organizations running as well
as pay the malpractice insurance. Dr. Arora explains, “Hippocratic Oath or not,
who honestly wants to work in such a medical environment with the fear of being
sued?” Again, universal health care coverage is a way to help lessen the
problem. Ask any patient, and the happiest they have been is when they are
treated in such a way that all their questions are answered and made to feel
that the physician is really listening. An unhappy patient is one who feels
they have been rushed and not listened to, which in the end may lead them to
sue a physician. Do not misunderstand there are situations where it is
appropriate for one to sue due to a horrific medical malpractice mistake. But
it has come to place in our society that suing is the norm and should be done
whenever possible leaving physicians caught in a battle to provide services
they have dedicated their lives to and yet live with the fear that of being
sued at any point in time. Again, it comes back to the point of universalizing
the health care system. By allowing the patient to come to feel that they have
not been rushed through a visit but allowed to have themselves listened to by
the physician of their choice the rate of malpractice would lessen
significantly. This
is a time in our society where a change needs to be made to the health care system
so that both physicians and patients are equally treated in a fair manner. The
only way to get to this place in time is to universalize the health care
system. III. OUT
OF POCKET/UNINSURED For
information on uninsured persons who pay for health care out-of-pocket, please
see Lloyd Runser’s chapter
located within this publication web site.
IV.
CONCLUSION This
chapter’s purpose is to introduce the reader to private and federally funded
health insurance and the laws and legislation that have shaped these two areas
of health coverage into what it is today.
Although these two areas of insurance cover the majority of American
citizens, they are by no means the only insurance available. In addition to the types of insurance
covered in this chapter, there are other forms of medical insurance available
to special groups within the United States population. Such special medical insurance programs
cover veterans of the U.S. military,[182]
those currently in the U.S. military,[183]
persons incarcerated in the prison system,[184]
and Native Americans.[185] To learn more of these additional health
plans, please view the web sites provided below. References ACP-ASIM,
Why for-profit managed care fails you and your patients, (ACP-ASIM,
accesses March 29, 2003); available from http://www.acponline.org/journals/news/nov96/forprofi.htm Barry R.
Furrow, Sandra H. Johnson, Timothy S. Jost, & Robert L. Schwartz, HEALTH
LAW: Cases, Materials, and Problems (West Publishing Company) Chapter
6. BLACK’S LAW
DICTIONARY (6th ed. 1990). Birnbaum,
Roger. Health Maintenance
Organizations. New York: Spectrum Publications, Inc., 1976. California
Division of Labor Standards Enforcement v. Dillingham Construction, N.A., Inc.,
519 U.S. 316 (1997). Central
Intelligence Agency, CIA World Factbook 2001, (Washington, DC: Central
Intelligence Agency, 2001, accesses 8 May 2002); available from
http://www.odci.gov/cia/publications/factbook/index.html; Internet. Consolidated
Omnibus Budget Reconciliation Act 29 USCA sections 1161. DeBuono v.
NYSA-ILA medical and Clinical Serv. Fund, 520 U.S. 806 (1997). Department
of Commerce, Health Insurance Coverage 2000. (Washington, DC: Department of Commerce, September 28, 2001). The
Employment Retirement Income Security Act 29 USCA section 1144. Geissal v.
Moore Medical Corporation et al., 524 U.S. 74 (1998). Health Care
Financing Administration, National Health Expenditure Projections, (Washington,
DC: Health Care Financing Administration, 2002, accessed 8 May 2002); available
from http://www.hcfa.gov/stats/NHE-Proj; Internet. Health
Maintenance Organization Act 42 USCA section 280. Kaiser
Family Foundation and Health Research and Educational Trust, Employer Health
Benefits; 2001 Annual Survey, (September, 2001, accessed 8 May 2002);
available from http://www.kff.org/content/2001/20010906a; Internet. Jack K.
Kilcullen, ERISA, HMO Malpractice, and Enterprise Liability, 22, AM. J.
L. and MED. 7 (1996). Lambrew,
Jeanne, How the Slowing U.S. Economy
Threatens Employer Based Health Insurance, (The Commonwealth Fund, November
2001, accessed 8 May 2002), available from
http://www.cmwf.org/programs/insurance/lambrew_slowingeconomy_511.pdf;
Internet. McCarran-Ferguson
Act 15 USCS section 1011. M. Susan Marquis and Stephen H. Long, (RAND, 2002, accessed 8 May 2002),
available from http://www.rand.org/hot/press.02/coverage.html; Internet. Art Myatt, In
Every Other Country Comparing Health Care Systems and Results (September
2001, accessed 8 May 2002); available from
http://michuhcan.tripod.com/every_other0.htm; Internet. New York
State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co.,
514 U.S. 645 (1995). Organization for Economic Cooperation and
Development, Organization for Economic Cooperation and Development (OECD)
Health Data 2001 (Organization for Economic Cooperation and Development,
2001, accessed 8 May 2002); available from www1.oecd.org/els/health/software;
Internet. Patricia
Mullen Ochmann, Managed Care Organizations Manage to Escape Liability: Why
Issues of Quantity v. Quality Lead to ERISA’s Inequitable Preemption of Claims,
34 Akron L. Rev. 571 (2001). Phyllis C.
Borzi, Distinguishing Between Coverage and Treatment Decision Under ERISA
Health Plans: What’s Left of ERISA Preemption? 49 Buffalo L. Rev. 1219 (2001). R.
Moore and others, Economic Burden of Illness in Canada, 1993,
(Ottawa: Health Canada, 1997). Universal
Health Care Access Network, American Health Care at the end of the Twentieth
Century: An Overview (Universal Health Care Access Network, accessed 8 May
2002); available from http://michuhcan.tripod.com/u2k-intro.htm; Internet. U.S. Census Bureau 2000, Census,
(Washington, DC: U.S. Census Bureau
2001). Wojtczak,
Andrzej: The Concept, evolution and Present Problems of Managed Care in the
United States, Internet Journal of Public Health education 2 (2000), B
70-81. Accepted: 28.1.2000 URL www.insure.com/health/lawtool.cfm www.harp.org/perez.html www.princeton.edu/hr/policies/appendex/a304.htm www.law.cornell.edu/topics/health.html www.senate.gov/~finance/031501kdchart.pdf
Employment-based private insurance
began in the early 1930s as a result of the Great Depression. At this time, Blue Cross was formed because
very few people had the money to pay for their hospital bills after they were
discharged. Thus, to ensure that
hospitals survived, hospital insurance was created so as to guarantee that
funds continued to flow into hospitals.
These insurance rates were "community rated," which meant that
all of the community had to pay equally for the costs of care. Because the wages in World War II were
controlled, however, employers decided to offer private health insurance as
fringe benefits used to attract workers to their place of employment as opposed
to any other. These private insurance
companies, which became the dominate source of funding during the 1950s, took
business away from Blue Cross by offering lower rates for companies that had
younger and healthier workers who were less likely to need coverage.
· An employer's decision about a compensation package is
likely to be influenced by what other employers in the market offer.
· When there is a greater concentration of purchasers of
labor, there is a lower quantity of health insurance benefits. In fact, offer rates are about 2 percent to
3 percent lower in areas with greater concentration, and employer contribution
rates are about 3 percent to 6 percent lower.
· In 1993, offer
rates were about 3 percent higher and employer contributions were about 6
percent to 7 percent higher in areas with a greater share of employment in large
businesses.
· In 1997, offer
rates and contributions were higher in areas with a greater share of large
businesses.
· A positive
correlation was found between unionization and employer health insurance
benefits, with offer rates being about 2 percent to 5 percent higher in areas
with a greater share of union workers.
· Offer rates in both 1993 and 1997 were 2 percent to 3
percent higher in areas in which the workforce is, on average, older.
· Offer rates were
about 5 percent higher in areas with a more educated workforce in 1997.[7]
Prepaid Group Practice (PGP) were
developed in the 1920s and 1930s. They
included groups of physicians who organized to provide comprehensive health
care to patients. While they were not
a serious alternative to solo practice, their emergence began to increase
rapidly in other large cities when the Mayo Clinic was established in
Rochester, Minnesota in 1883.
Generally, however, the turning point of the modern movement of PGPs is
considered to be in 1929, with the establishment of the Ross-Loos Clinic in Los Angeles, California
and the Elk City Cooperative in Elk City, Oklahoma.
One problem with health
maintenance organizations are that people's choice of hospital and physicians
are restricted to those that are listed on the plan. To address this issue, many HMOs have created what are termed
"Preferred Provider Organizations," which provide panel of health
providers for the person to choose from or give the option of choosing another
health care provider but having to pay an additional co-payment. (The other type of plan that is typically
created by HMOs is a "Point of Service Plan," which allows patients
to see anyone that they want who is willing to accept the plan's reimbursement
rate. In this plan, the patient usually
covers about 20 percent of the fee). 
The average person in the United
States spends approximately $1 out of every $6 on health care and pays for the
majority of primary care services that he or she receives out of his or her own
pocket.[69]
In fact, 60 percent of all U.S. health
expenditures come from private sources (i.e., personal income).[70]
Patients may pay a portion of health costs as a co-payment supplemented by
insurance, or the patient may bear the full cost of care. This full payment can be necessary because
the patient does not have insurance, as approximately 43 million people in the
United States do not have.
Occasionally, a patient does actually have insurance but does not have
coverage - often unknowingly - for the particular product or service that the
patient needs. According to data from
1996, the average American spends $470 per year on health care out of his or
her own pocket. Furthermore, the
sickest 10 percent of Americans spend $1,864 and the sickest 10 percent of
Americans who are lacking insurance pay $1,966.[71]
· Government public health spending will increase in 2001 and
2002, reaching 16 percent in 2002, due to funding increases to upgrade the
public health system to defend against the threat of bioterrorism.
· Private spending for health care grew 8.9 percent in 2001
and peaked at 9.4 percent for 2002, due to the effect of recent rising
household incomes, less restrictive forms of managed care and rising price
inflation.
· Private spending growth will decline to 5.9 percent by
2011, due to slower per capita real income growth, the revival of more
restrictive forms of managed care, an increase in the number of uninsured
people and an increase in consumer cost sharing.
· Public health spending will grow at an average annual rate
of 7.3 percent from 20022011.
· By 2003, annual Medicare spending growth will fall by 5.5
percentage points and annual Medicaid spending growth will fall by 3.5
percentage points.
· Out-of-pocket costs
will fall to 14.1 percent of total personal health care spending in 2011, down
almost 5 percent from 2001. However, because
employers are continuing to shift the costs of health care to their employees
and because the number of uninsured people continues to rise, the declines are
expected to be slower than in the 1990s.
· The growth in
prescription drug spending will decelerate from 17.3 percent in 2000 to 10.1
percent in 2011, because of weaker disposable income from the slowing economy,
a decreased impact of direct-to-consumer advertising and incentives to use
lower-cost drugs.
· Hospital spending
increased to 8.3 percent in 2001, due to increased Medicare spending in 2001
and in private spending through 2002.
· Nursing home
spending is expected to grow 5.5 percent per year from 20012011.[73]
The Canadian economy has found
that the burden of ill health is more costly than the amount to treat it, in
that there is time taken off from work or other regular activities by the
person who is sick, there is time taken away from work by the person who is
treating the sick and that potential productivity and output is lost when
someone dies young. According to a
study released by Health Canada in 1997, these type of costs are double the
costs of health care, when calculating the direct costs of illness (the amount
of money that was spent on treatment, care, and rehabilitation), as well as the
indirect costs (productivity that was lost due to premature death and short- or
long-term disability). However,
intangible values such as the value of the time that was spent taking care of a
loved one, were immeasurable. The
findings of the study for 1993 were that the total cost of illness was about
$157 billion, of which more than $85 billion came from indirect costs. The report also found that the leading
sources of costs included heart disease and stroke (about $20 billion),
musculoskeletal disease (about $18 billion), injuries (about $14 billion) and
cancer (about $13 billion). These
diseases combined accounted for slightly more than 50 percent of the costs that
could be classified by type of illness and each were characterized by much
higher indirect costs than direct costs.[79]A. Medicare Part A
B. Medicare Part
B
C. Enrollment
A. Traditional Medicare
B. Enhanced
Medicare
C. Medicare Advantage
Section 3: Medicaid