Financing Health Care: Spending, Jobs, and Government Roles in the U.S.

1. Component 1:Introduction to Health Careand Public Health in the U.S. Unit 4: Financing Health Care Lecture 1 This material was developed by Oregon Health & Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015.

2. Lectures in This Unit • Lecture 1: Distinction between Publically Funded and Privately Funded Health Care • Lecture 2: Single-Payer Systems versus Multiple-Payer Systems • Lecture 3: Insurance and Third-Party Payers • Lecture 4: Government Payment Programs Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

3. Topics in This Lecture • Health care spending • Economic impact and gross domestic product • Health care jobs • Publically funded health care • Privately funded health care • 3 roles of government in health care • Important federal laws Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

4. Health Care Spending and the U.S. GDP • Gross domestic product (GDP) reflects value of goods and services we produce • GDP was $14.1 trillion in 2009 • Health care spending was 17.6% of GDP • One of the highest amounts in the world • The U.S. spent $8,086/person on health care • Health care spending expected to be one fifth of GDP by 2019 Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

5. Major Areas ofHealth Care Spending • 31% hospital care • 21% physicians and medical laboratories • 10% prescription drugs • Health care spending grows faster than most other sectors of the economy • Spending on government programs has increased at slower rate than private spending • Since 1999, family premiums for employer-sponsored health insurance have increased by 131% Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

6. Health Care Jobs • 10 of the 20 fastest-growing occupations are related to health care • 14.3 million jobs in 2008 • 40% of jobs in hospitals • 21% in nursing and residential care • 16% in physician offices • 3.2 million new jobs between 2008–2018, due to growth of elderly population Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

7. Privately Funded Health Care • 2 categories: • State-licensed health insurance organizations • Commercial insurers • Blue Cross/Blue Shield • Managed care organizations • Self-funded employer-sponsored insurance plans • 1,200 not-for-profit and for-profit insurance companies • 36% of all health care spending • 55% of Americans have insurance through jobs Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

8. State-LicensedInsurance 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 Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

9. State-LicensedInsurance Organizations (cont’d) • 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 Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

10. 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 Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

11. 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 Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

12. Examples of Government Health Care Programs • Medicare • Medicaid • Children’s Health Insurance Program • Veterans Health Administration • TRICARE • Indian Health Service Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

13. Roles of U.S. Government • 3 key roles: provider, funder, lawmaker • Provider of health care services • Veterans Health Administration and TRICARE • Indian Health System • Supports research into new models of health care • Funder of third-party services • Outsourcing of health care services • Outsourcing of claims paperwork • Outsourcing of grants Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

14. Roles of Government (cont’d) • 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, 1990 Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

15. 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 Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

16. 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 • Imposes anti-discrimination rules • Requires participation in Medicare and Medicaid Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

17. Stark Laws • Named for Congressman Pete Stark • Govern ability of physicians to refer patients to facilities in which they have a financial interest(“self-referral”) • Bans self-referrals to clinical laboratories and certain other services under Medicare and Medicaid • Major exception: a physician within a group practice may refer a patient for certain imaging services provided by that practice, as long as the patient receives written notice of other imaging clinics Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1

18. Summary • The U.S. spends nearly one fifth of GDP on health care • The health care job market is growing • 2 main types of health insurance: • Privately funded health care insurance • State-licensed insurers • Self-funded employer-sponsored plans • Publically funded (government) programs • The federal government has 3 roles in health care: provide services, fund services, and pass laws that ensure fair competition and protect the public Health IT Workforce Curriculum Version 2.0/Spring 2011 Component 1/Unit 4-1