HSC 6636: Financing Health Care 1 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Topics How we pay for health care Private insurance Medicare and Medicaid Other Federal programs Managed care Consumer driven health care The uninsured and underinsured Paying the bills Concluding thoughts “Healthcare is a complex set of services, and thus it is not surprising that the way we pay for health care is so complicated.” Text, p. 58

HSC 6636: Financing Health Care 2 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida How We Pay for Health Care

HSC 6636: Financing Health Care 3 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida How We Pay for Health Care (cont.) How did we get to this distribution, including –46 million uninsured –16 million underinsured How did we end up differing from most other developed countries? What keeps us stuck here?

HSC 6636: Financing Health Care 4 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida How We Pay for Health Care (cont.) What sequence were payment options added to the financing mix?

HSC 6636: Financing Health Care 5 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Private Insurance What is the fundamental reason for insurance? –Buyer –Seller –Reinsurer What is the fundamental information problem or “moral hazard”* associated with individuals purchasing health insurance? How does employer-provided health insurance avoid this problem? –Why is employer-sponsored insurance generally less expensive than individual insurance? *

HSC 6636: Financing Health Care 6 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Private Insurance (cont.) Who were the initial sponsors of private health insurance What were their motivations? How have these motivations changed over time? What changes have we seen to private insurance as a consequence? What government mandated changes have we seen to private health insurance over time?

HSC 6636: Financing Health Care 7 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Private Insurance (cont.) What happens to private insurance plans as health care costs go up? –Follow the money What Market Power do private insurance plans have with respect to health care providers? What are each of these programs and how do they affect the participants? –Preferred Provider Organizations (PPO)? –Health Maintenance Organizations (HMO)? –Managed Care?

HSC 6636: Financing Health Care 8 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Medicare and Medicaid Part of Social Security Reform—Added 1965 Who are the covered populations? Who pays? –Medicare –Medicaid –What are the effects on Medicaid as states experience budget difficulties?

HSC 6636: Financing Health Care 9 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Medicare and Medicaid (cont.) How do M & M pay providers? –What responses have we seen –What has happened as M & M have attempted to shift to managed care approaches? SCHIP –Who benefits? –Who pays? –Why is there a separate program?

HSC 6636: Financing Health Care 10 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Other Federal Programs Public Health –Preventative programs –Other agencies Environmental Protection Agency OSHA Water quality & waste management –Argue why public health expenditures are underfunded in the U.S.

HSC 6636: Financing Health Care 11 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Other Federal Programs (cont.) Major programs –Military medical programs –CHAMPUS/TRICARE for military –Veterans’ Administration –Indian Health Service –Workers Comp What is motivation?

HSC 6636: Financing Health Care 12 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Managed Care What is it? –PPO –HMO What is “capitation”? What are motivations? What are consequences?

HSC 6636: Financing Health Care 13 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Consumer-Driven Health Care What is it? What are the motivations? What are the consequences?

HSC 6636: Financing Health Care 14 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida The Uninsured How has the history of healthcare financing steered us away from single-payer/government financing for universal care? Who are the 46 million uninsured and 16 million underinsured Americans? What provisions of the Patient Protection and Affordable Care Act addressed the un/underinsured and how? –Why are there such objections to these provisions?

HSC 6636: Financing Health Care 15 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida Paying the Bills How are providers and hospitals traditionally compensated? –(How is the bill calculated?) What imperfections arise from this approach? –“no one had an incentive to keep fees down” (p. 74) What have been the responses by a number of payers? –Medicare, Medicaid, Private Insurers –Are health care providers making money?

HSC 6636: Financing Health Care 16 Dr. Lawrence West, Health Management and Informatics Department, University of Central Florida In Conclusion “But there are growing signs that the many shortcomings in our health care financing system may fracture the entire edifice” (p 79) –Health care expenditures continue to rise –The current financing system leaves 45 million Americans uninsured (less after health reform) –Providers at the edge with respect to reimbursement rates –Meeting the administrative burden