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The U.S. National Health Care System

PH 150

November 2005

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Outline

(1) Overview of U.S. system compared to other developed countries

(2) Private insurance

(3) Current policy issues

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Overview

• Characteristics of U.S. System:– Big– Patchwork of insurance coverage– Relies on marketplace

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Per Capita Per Capita Expenditures in U.S. Expenditures in U.S.

DollarsDollars

Ratio of Expenditures Ratio of Expenditures to the United States’ to the United States’

LevelLevel

Percentage of Gross Percentage of Gross Domestic Product Domestic Product Spent on HealthSpent on Health

Australia $2,504 2.10 9.1%

Canada 2,931 1.80 9.6

France 2,726 1.93 9.7

Germany 2,817 1.87 10.9

Japan 2,077 2.54 7.8

Netherlands 2,643 1.99 9.1

Sweden 2,517 2.09 9.2

Switzerland 3,446 1.53 11.2

United Kingdom 2,160 2.44 6.6

United States 5,267 1.00 14.6

Total Health Care Expenditures, 2002

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RELATIONSHIP BETWEEN NATIONAL WEALTH AND HEALTH EXPENDITURES

Source: Huber, M. 1999. “Health Expenditure Trends in OECD Countries, 1970-1997.” Health Care Financing Review 21(2): 99-117.

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Acute Care Bed Days per

Capita*

Physician Consultations per Capita**

Coronary Artery Bypass Operations per

100,000+

Coronary Angioplasty

Operations per 100,000++

Australia 1.0 6.3 83 91

Canada 1.0 6.4 65 70

France 1.1 6.5 35 73

Germany 1.9 6.5 38 86

Japan NA 16.0 NA NA

Netherlands 0.9 5.8 60 72

Sweden 0.8 2.8 54 NA

Switzerland 1.7 11.0 60 65

United Kingdom 1.0 5.4 41 35

United States 0.7 5.8 203 339

Utilization of Select Services

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AustraliaAustralia CanadaCanada United United KingdomKingdom

United United StatesStates

Waiting times for non-emergency surgery for themselves or a family member:  None 5 16 7 10

Less than one month 46 28 23 60

1-3.9 months 32 43 36 28

4 months or more 17 12 33 1

Source: Donelan, K., et al. 1999. “The Cost of Health System Change: Public Discontent in Five Nations.” Health Affairs 18(3): 206-216.

Self-Reporting Waiting Times, 1998

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Life Expectancy at Birth Life Expectancy at Birth (years)(years)

Infant Deaths per Infant Deaths per 1,000 Live Births1,000 Live Births

Australia 78.7 5.0

CanadaCanada 78.6 5.5

FranceFrance 78.4 4.6

GermanyGermany 77.5 4.7

JapanJapan 80.6 3.6

NetherlandsNetherlands 78.0 5.2

SwedenSweden 79.4 3.5

SwitzerlandSwitzerland 79.5 4.6

United KingdomUnited Kingdom 77.3 5.8

United StatesUnited States 76.7 7.2

Life Expectancy and Infant Mortality Rates, 1998*

 

* Data for Canada are for 1997.

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Patchwork of Coverage

• Medicare: over 65 or disabled• Medicaid: some (about ½) of poor• Employer-sponsored private insurance (if offered,

if you are eligible, & if you by it)• Individual private insurance• Military or veterans coverage• Indian health services• Uninsured (safety net providers)

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Percentage of Population CoveredPercentage of Population Covered

Australia 100

Canada 100

France 99.5

Germany 92.2

Japan 100

Netherlands 74.2

Sweden 100

Switzerland 100

United Kingdom

100

United States 45.0

Eligibility for Health Care Benefits UnderPublic Programs* (percentage of population)

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Private Insurance

(1) Development

(2) Current statistics

(3) Issues in private insurance

- underwriting

- adverse selection

- moral hazard

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Development of Private Insurance

• Story begins around 1930 in U.S., although earlier in countries such as Germany

• First example: 21-day hospital benefit for $6/year (Baylor University, Dallas, 1929)– Hospitals then banded together to give choice

of facility; gave them $$ in Great Depression even if beds were empty, which led to the formation of “Blue Cross”

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Development (continued)

• A.M.A. was worried that insurance could lead to “socialized medicine,” so “Blue Shield” plans didn’t form till 1940s– 10 tenets of coverage (MDs have complete

control over care, free choice of MD, etc.)

• WWII stimulated development; with labor shortage and wage controls, health insurance became attractive fringe benefit, and courts later ruled it not taxable income

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Development (concluded)

• Medicare & Medicaid in mid-1960s

– Compromise between liberals who wanted social insurance, and providers who didn’t want excess government interference

• Compromise: 3-pronged approach put together by Congressman Wilbur Mills:

– Part A of Medicare, hospital insurance, is like social insurance, financed from payroll taxes

– Part B, physician coverage, voluntary and partly paid by beneficiaries and partly from general revenues – but with generous reimbursement rules

– Medicaid was not made an entitlement program, but a rather welfare-like program for poor people.

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Statistics: The Uninsured

Percentage of population under age 65:

- total population: 17% (39 million people)

- age 18-24: 29%

- Black: 21%

- Hispanic: 34%

- Below poverty: 35%

- 100-149% FPL: 37%

- 150-199% FPL: 27%

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Issues in Private Insurance

• Medical underwriting

• Adverse selection

• Moral hazard

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Medical Underwriting

• The methods used by insurance companies to decide whether or not to insure an individual or group, and how much to charge in premiums (done by actuaries)

• In U.S., private insurance is “experience rated” (in contrast to “community rating”) – the more you or your group will cost, the more it will be charged. As a result, many find it hard to get affordable coverage

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Adverse Selection

• When an insurer gets sicker people than anticipated (when it set premiums); the opposite is “favorable selection”

• Adverse selection is a big problem for insurance markets, as insurers are reluctant to enter risky markets for fear that they will get lots of sick people, raising premiums and making coverage unaffordable

• Up till now, FFS has experienced adverse selection, and HMOs, favorable selection

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Moral Hazard

• When possession of insurance makes it more likely that you will file a claim (as well as more expensive claims)

• In medical care, this is a “downward sloping” demand curve

• Various ways to deal with it. On demand side, higher copayments. On supply side, utilization review, practice guidelines, limiting supply of medical resources available

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Current Policy Issues

(1) Access/equity- About 40 million uninsured- Getting access to care in HMOs

(2) Rising costs - Higher premiums, higher cost sharing - Especially pharmaceuticals - Movement away from tightly managed care(3) Quality - Does competition improve or deter quality? - Do HMOs provide as good quality of care?

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Legislation

• California Bill SB-2’s repeal

• California’s rejection of two drug pricing ballot initiatives

• Tax credits to reduce number of uninsured

• Medicare new prescription drug benefit