1. Session 6 February 10, 2011 Health System Economics and Financing Concepts and Consequences of Insurance 1

2. 1. What is meant by the term "health services financing"? What are the key concepts? What influence does financing have on the health services delivery system? [p. 198-201] 2. What are the key concepts of insurance? [p. 201-206] 3. What are the key financing and cost-sharing characteristics of Medicare Part A and B? What are the similarities and differences? [p. 207-218] 4. Describe the other (non-Medicare) publicly funded health financing programs. Illustrate the differences and similarities of financing and delivery in the private and public sectors. [p. 219-212] 5. What is the difference between national health expenditures and personal health expenditures? What do we know about trends for both? [p. 229-233] 6. What are some of the main problems and issues pertaining to the financing of health services in the US? [p. 233-237] 2

3. Medicare Medicaid/SCHIP Centers for Disease Control (CDC) Indian Health Service (IHS) Veterans Administration Health Resources & Services Administration Other Government Workers’ Compensation Commercial Insurance  Large Group  Small Group  Individual Commercial Plans Out-of Pocket Costs Plan Types  Indemnity  PPO/POS  HMO  HDHP 3

4. Source: OECD Health Data 2009, OECD(http://www.oecd.org/health/healthdata). 4

5. Department of Health and Human Services  Centers for Disease Control (CDC)  $8.8 billion budget (FY 2009)  National Institutes for Health (NIH)  $30.5 billion budget (FY 2009)  Center for Medicare and Medicaid Services (CMS)  $803.1 billion budget (FY 2010 request)  Health Resources and Services Administration (HRSA)  $7.13 billion (FY 2010 request)  Agency for Health Research and Quality (AHRQ)  $372 million (FY 2009)  Food and Drug Administration  $1.77 billion general fund; $628 million industry fees (FY 2009)  Indian Health Service  $3. 64 billion (FY 2010 request)  Substance Abuse & Mental Health Services Administration  $3.5 billion (FY 2010 request) 5

6. . Source: OECD Health Data 2009, OECD(http://www.oecd.org/health/healthdata). 6

7. Uninsured 16.6% 7

8.  Established in 1965, subsequent expansions in population/benefits  Accounts for 13% of total federal outlays  Covers 46 million people nationally  Four Parts Part A Part B Part C Part D 8

9. Total Benefit Payments = $484 billion NOTE: Does not include administrative expenses such as spending for implementation of the Medicare drug benefit and the Medicare Advantage program. Total is net of $9.4 billion in recoveries for 2009. SOURCE: Congressional Budget Office, Medicare Baseline, March 2009. Part A Part B Part D Part A and B 19% 4% 23% 5% 28% 4% 6% 4% 5%

10. SOURCE: 2009 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. PART A $237 Billion PART D $66 Billion PART B $196 Billion TOTAL $499 Billion

11. Total Number of Beneficiaries, 2005: 37.5 million Total Medicare Spending, 2005: $265 billion Average per capita Medicare spending among bottom 90%: $2,934 Average per capita Medicare spending among top 10%: $44,220 NOTE: Analysis excludes Medicare Advantage enrollees. SOURCE: Kaiser Family Foundation analysis of the CMS Medicare Current Beneficiary Survey Cost & Use file, 2005.

12.  Enacted in 1965 as a federal-state partnership to provide health coverage for welfare recipients; subsequently expanded and modified: Disproportionate Share (DSH) 1915/1115 Waivers TEFRA/DRA/OBRA/etc.  State Children’s Health Insurance Program Established by Balanced Budget Act of 1997 Allowed coverage of children in families <200%FPL Higher federal matching rate 12

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14. $1,708 $2,142 $12,874 $10,691 Long-Term Care Acute Care SOURCE: Urban Institute and Kaiser Commission on Medicaid and the Uninsured estimates based on 2006 MSIS data. $4,575

15. “If you had to say, which do you think is a more serious problem right now: keeping health care costs down for average Americans, or providing health insurance for Americans who do not have any insurance?” All VotersRepublicansDemocratsIndependents Keeping Costs Down 41%60%22%42% Covering Uninsured 53%33%71%53% Unsure7% 5% Source: Quinnipiac University Poll. October 23-29, 2007. Critical Differences in Perspective 15

16. 200020042008 All Firms55.3%52.7%52.6% < 1035.1%35.7%31.4% 10-2475.3%70.1%66.3% 25-9991.7%66.3%82.2% 100-99996.9%88.3%98.0% > 1000100.0% Source: Agency for Healthcare Research and Quality, 2000, 2004 & 2008 Medical Expenditure Panel Survey-Insurance Component; Table II.A.2. 16

17. Source: AHRQ, MEPS – Insurance Component, 2000, 2002,2004, 2006 & 2008; Tables II.D.1 & II.D.2. 17

18.  Fee-for-Service  Bundled Charges & RVRBS  Managed Care, Capitation, PPS & DRGs  Pay-for-Performance  High Deductible Health Plans  Concierge Medicine & the Convenience Care Industry 18

19. Plan Type Worker Contribution Firm Contribution Total Premium Worker Deductible Worker Total Cost Total Premium + Deductible HMO$3,311$8,568$11,879$750$4,070$12,638 PPO$3,236$9,207$12,443$ 1,040$4,276$13,483 POS$3,659$7,929$11,588$1,359$5,018$12,947 HDHP w/SO $2,856$7,837$10,693$3,596$6,452$14,289 Source: KFF/HRET, 2007. 19

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21.  Demand for care  Information asymmetry  Coverage risk and cost risk  Shift from private to public financing  Trust, self-interest and moral hazard  Transaction/information costs 21

22. “Major changes in health policy, like major policy changes in any area, are political acts, undertaken for political purposes.” Victor Fuchs Who Shall Live? 22

23.  Group 3 Presentation Jennifer Tschirpke Jill Arkind Ann Ngo Paneen Petersen 23