Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture a This material (Comp1_Unit4a) was developed by Oregon Health and Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number [IU24OC000015)].

Financing Healthcare (Part 1) Learning Objectives Understand the importance of the healthcare industry in the US economy and the role of financial management in healthcare. (Lecture b) Describe models of health care financing in the US and in selected other countries. (Lecture c) Describe the history and role of the health insurance industry in financing healthcare in the United States, and Federal laws that have influenced the development of the industry. (Lecture a) Understand the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs. (Lecture d) Understand the various roles played by government as policy maker, payer, provider, and regulator of healthcare. (Lecture d) Describe the organization and function of Medicare and Medicaid. (Lecture e) 2 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

The US Multipayer System US Healthcare Financing –History of US health insurance –Role of Government –Private payers vs. Government (Public) payers 3 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

History of US Healthcare Financing Late 19 th and early 20 th century –Care provided at patient’s or doctor’s home –Self-pay/charity payment for services –Increasing advancement of medicine as a science especially in surgery and infectious disease –AMA standardizes medical education and quality of care improves –Medical care for illness moves out of the home to doctor’s office, surgical care at hospitals –Commercial health insurance not available due to unpredictability of health and “moral hazard” 4 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Early Hospital & Physician Health Plans In 1929, 1300 Dallas school teachers contract with Baylor Hospital for 21 days hospitalization for 50¢ per month each –Hospital service plans - steady stream of income –Exempt from most state insurance regulations –Later becomes Blue Cross Physicians fearing loss of control form own associations –In 1939, California physicians form pre-paid healthcare services plan –Blue Shield Association 5 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Employer Pre-paid Plans Ross-Loos Medical Group provided pre-paid care to Los Angeles County employees –Believed to be first HMO in US –Focus on quality of care including preventive care Surgeon Dr. Sidney Garfield starts pre-paid medical practice –1930s – Organizes employer pre-paid plan for construction workers on the Los Angeles Aqueduct and Grand Coulee Dam and Kaiser Shipyards during WWII –Fixed payment per employee per month –Subsequently, formed Permanente Health Plan Open to the public Union support boosts growth 6 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Social Security Act Passed in 1935, part of the New Deal Established a system of old-age benefits for workers Also created: –Benefits for victims of industrial accidents –Unemployment insurance –Aid for dependent mothers and children, the blind, and the physically handicapped –Vocational training –Funds for family health programs 7 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Early Commercial Health Insurance Commercial insurance carriers offer group health insurance –Compete against the Blues –Employer (group) enrollment spreads risk and addresses “moral hazard” –Experience rating vs. community rating – lower rates for young healthy individuals 8 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Factors Influencing Development of Commercial Health Insurance WWII wage controls –Employers offer health insurance as a benefit to attract skilled employees IRS favorable tax treatment –Employer – free of payroll tax –Employee -- no income tax Employer sponsored health contracts non-cancellable 1949 – Unions may negotiate health insurance benefits as part of wages 9 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Hill-Burton Act Hospital Survey and Construction Act, passed in 1946 Stimulated construction of facilities Foundation of today’s infrastructure for hospitals and other health care organizations Continues to authorize funding for hospitals, nursing homes, health centers, rehabilitation facilities Requires participation in Medicare and Medicaid Imposes anti-discrimination rules 10 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Medicare and Medicaid Laws: SSA Amendments 1965 Medicare –1965 Amendment to SSA Title XVIII –Social Insurance addresses care for elderly –Funded through FICA Medicaid –Title XIX SSA –Social welfare or social protection –Joint funded through Federal and state tax revenues –Administered through the states –Funded through general tax revenues 11 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Health Maintenance Organization Act of 1973 –Federal grants and loans to encourage HMOs Required employers offering traditional health plans to offer HMO option –HMO offers comprehensive, prepaid health coverage for hospital and physician services through specific health care providers –Gave pre-paid health plans access to the employer based insurance market 12 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Employee Retirement Income Security Act of 1974 (ERISA) Regulates employer self-insured health plans –Does not require employers to establish a plan Requires employer plans to meet certain minimum standards –Establishes standards of conduct for plan administrators –Requires a grievance and appeals process –Allows employees the right to sue for benefits Pre-empts state insurance laws 13 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Healthcare Plans Today 83% of the population have health care insurance Two categories of health plans –Private Funded State licensed insurance organizations Federal regulated self-insured employer plans –Publicly Funded 14 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

State-Licensed Insurance Organizations Commercial health insurers –Most are owned by stockholders or stock companies –Mutual insurance companies are owned by their policyholders BlueCross BlueShield –Association of 39 different companies in 50 states –Locally operated; some are for-profit –Largest insurer, covering 1 in 3 Americans 15 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

State-Licensed Insurance Organizations (continued) Managed care organizations –Combine health insurance and health care services –Cost control and utilization control –Some hire their own doctors and have their own facilities –3 main types: Health maintenance organizations (HMOs) Preferred provider organizations (PPOs) Point-of-service (POS) plans 16 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Self-Funded Employer Plans Health benefit plans regulated by federal law Created by employers, employee organizations, or a combination Employer assumes risk for workers and pays for care directly Employer may choose to have a third-party administrator administer the plan 17 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Publically Funded Health Care Government programs, some of them funded through income taxes and payroll taxes Begin in federal legislation Voted into law by Congress Help specific population groups Run by federal government and federal-state partnerships 18 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Examples of Government Health Care Programs Medicare Medicaid Children’s Health Insurance Program Veterans Health Administration TRICARE Indian Health Service 19 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Roles of U.S. Government 3 key roles:, provider, payer, and lawmaker Provider of health care services –Veterans Health Administration and TRICARE –Indian Health System –Supports research into new models of health care Payer of third-party services –Outsources health care services, claims paperwork, grants for research 20 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Roles of Government (continued) Lawmaker role 1: Ensure fair competition –Sherman Anti-Trust Act, 1890 Prohibits monopolies and restraint of trade –Clayton Act, 1914 Prohibits price-fixing and exclusive dealings Lawmaker role 2: Protect the public –Food, Drug, and Cosmetic Act created FDA, 1938 –Hatch-Waxman Act, 1984 –American with Disabilities Act, Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Financing Healthcare (Part 1) Summary – Lecture a US healthcare payers –Historical and governmental influences for the unique US system –Federal and state laws have influenced the development of different type plans Privately funded plans Publically or government programs 22 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Financing Healthcare (Part 1) Summary – Lecture a (continued) Government Role in Healthcare –Enact laws Regulate Protect –Provide services –Payer 23 Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

Financing Healthcare (Part 1) References – Lecture a References BlueCross Blue Shield Association. Accessed December 10, California Office of the Patient Advocate. What is an HMO? Accessed April 4, Centers for Medicare and Medicaid Services. Medicaid program: general Information—overview. Updated February 23, Accessed April 6, Illinois Department of Human Services. Health insurance carriers and managed care. Accessed April 4, Indian Health Service. Indian Health Service fact sheet. Accessed April 5, OurDocuments.gov. Social Security Act (1935). Accessed April 12, U.S. Department of Health and Human Services. Medical treatment in Hill-Burton funded healthcare facilities. edical%20Facilities/index.html. Accessed April 4, edical%20Facilities/index.html U.S. Department of Health and Human Services. Understanding health information privacy. Accessed April 4, U.S. Department of Health and Human Services, Office of the General Counsel. Drug Price Competition and Patent Term Restoration Act Accessed April 13, U.S. Department of Justice, Civil Rights Division. Americans with Disabilities Act: questions and answers. Updated November 14, Accessed April 13, U.S. Department of Labor, Bureau of Labor Statistics. Career Guide to Industries. 2010–11 ed. Accessed April 4, Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a