Health Systems Organization

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

2. Small Group Discussion • 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] • What are the key concepts of insurance? [p. 201-206] • What are the key financing and cost-sharing characteristics of Medicare Part A and B? What are the similarities and differences? [p. 207-218] • 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] • What is the difference between national health expenditures and personal health expenditures? What do we know about trends for both? [p. 229-233] • What are some of the main problems and issues pertaining to the financing of health services in the US? [p. 233-237]

3. A Mix of Public and Private Financing • 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

4. Public Sector Financing of Health Care Source: OECD Health Data 2009, OECD (http://www.oecd.org/health/healthdata).

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)

6. Total Health Expenditures Per Capita, 2007 . Source: OECD Health Data 2009, OECD (http://www.oecd.org/health/healthdata).

7. Distribution by Insurance Status, OR 2007-08 Uninsured 16.6%

8. Medicare • 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

9. Medicare Benefit Payments, by Type of Service, 2009 Part A Part B Part D Part A and B 4% 6% 4% 28% 5% 19% 5% 4% 23% 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.

10. Estimated Sources of Medicare Revenue, 2010 TOTAL $499 Billion PART A $237 Billion PART B $196 Billion PART D $66 Billion SOURCE: 2009 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

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

12. Medicaid Basics • 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

13. Enrollment & Spending by Group, Oregon, 2006

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

15. Cost or Coverage? Critical Differences in Perspective Source: Quinnipiac University Poll. October 23-29, 2007.

16. Trends in Coverage among Oregon Firms that Offer Employer-Sponsored Insurance Source: Agency for Healthcare Research and Quality, 2000, 2004 & 2008 Medical Expenditure Panel Survey-Insurance Component; Table II.A.2.

17. Average Annual Family Premium by Worker and Firm Contribution and Firm Size (OR, 2000 – 2008) Source: AHRQ, MEPS – Insurance Component, 2000, 2002,2004, 2006 & 2008; Tables II.D.1 & II.D.2.

18. Payment Mechanisms:Aligning Incentives or Barriers to Care? Fee-for-Service Bundled Charges & RVRBS Managed Care, Capitation, PPS & DRGs Pay-for-Performance High Deductible Health Plans Concierge Medicine & the Convenience Care Industry

19. Employer and Employee Average Annual Cost by Plan Type for Family Coverage, 2007. Source: KFF/HRET, 2007.

21. Is Healthcare a Market Commodity? • 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

22. Facts are necessary… but they are not sufficient. “Major changes in health policy, like major policy changes in any area, are political acts, undertaken for political purposes.” Victor Fuchs Who Shall Live?

23. Race Against Time • Group 3 Presentation • Jennifer Tschirpke • Jill Arkind • Ann Ngo • Paneen Petersen