Introduction to Healthcare and Public Health in the US

1. Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1) Lecture a This material (Comp1_Unit4a) was developed by Oregon Health and 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. Financing Healthcare (Part 1)Learning Objectives • Understand the importance of the healthcare industry in the US economy and the role of financial management in healthcare.  (Lecture b) • Describe models of health care financing in the US and in selected other countries. (Lecture c) • Describe the history and role of the health insurance industry in financing healthcare in the United States, and Federal laws that have influenced the development of the industry. (Lecture a) • Understand the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs. (Lecture d) • Understand the various roles played by government as policy maker, payer, provider, and regulator of healthcare. (Lecture d) • Describe the organization and function of Medicare and Medicaid. (Lecture e) Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

3. The US Multipayer System • US Healthcare Financing • History of US health insurance • Role of Government • Private payers vs. Government (Public) payers Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

4. History of US Healthcare Financing • Late 19th and early 20th century • Care provided at patient’s or doctor’s home • Self-pay/charity payment for services • Increasing advancement of medicine as a science especially in surgery and infectious disease • AMA standardizes medical education and quality of care improves • Medical care for illness moves out of the home to doctor’s office, surgical care at hospitals • Commercial health insurance not available due to unpredictability of health and “moral hazard” Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

5. Early Hospital & Physician Health Plans • In 1929, 1300 Dallas school teachers contract with Baylor Hospital for 21 days hospitalization for 50¢ per month each • Hospital service plans - steady stream of income • Exempt from most state insurance regulations • Later becomes Blue Cross • Physicians fearing loss of control form own associations • In 1939, California physicians form pre-paid healthcare services plan • Blue Shield Association Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

6. Employer Pre-paid Plans • Ross-Loos Medical Group provided pre-paid care to Los Angeles County employees • Believed to be first HMO in US • Focus on quality of care including preventive care • Surgeon Dr. Sidney Garfield starts pre-paid medical practice • 1930s – Organizes employer pre-paid plan for construction workers on the Los Angeles Aqueduct and Grand Coulee Dam and Kaiser Shipyards during WWII • Fixed payment per employee per month • Subsequently, formed Permanente Health Plan • Open to the public • Union support boosts growth Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

7. 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 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

8. Early Commercial Health Insurance • Commercial insurance carriers offer group health insurance • Compete against the Blues • Employer (group) enrollment spreads risk and addresses “moral hazard” • Experience rating vs. community rating – lower rates for young healthy individuals Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

9. Factors Influencing Development of Commercial Health Insurance • WWII wage controls • Employers offer health insurance as a benefit to attract skilled employees • IRS favorable tax treatment • Employer – free of payroll tax • Employee -- no income tax • Employer sponsored health contracts non-cancellable • 1949 – Unions may negotiate health insurance benefits as part of wages Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

10. 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 • Requires participation in Medicare and Medicaid • Imposes anti-discrimination rules Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

11. Medicare and Medicaid Laws: SSA Amendments 1965 • Medicare • 1965 Amendment to SSA Title XVIII • Social Insurance addresses care for elderly • Funded through FICA • Medicaid • Title XIX SSA • Social welfare or social protection • Joint funded through Federal and state tax revenues • Administered through the states • Funded through general tax revenues Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

12. Health Maintenance Organization Act of 1973 • Health Maintenance Organization Act of 1973 • Federal grants and loans to encourage HMOs • Required employers offering traditional health plans to offer HMO option • HMO offers comprehensive, prepaid health coverage for hospital and physician services through specific health care providers • Gave pre-paid health plans access to the employer based insurance market Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

13. Employee Retirement Income Security Act of 1974 (ERISA) • Regulates employer self-insured health plans • Does not require employers to establish a plan • Requires employer plans to meet certain minimum standards • Establishes standards of conduct for plan administrators • Requires a grievance and appeals process • Allows employees the right to sue for benefits • Pre-empts state insurance laws Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

14. Healthcare Plans Today • 83% of the population have health care insurance • Two categories of health plans • Private Funded • State licensed insurance organizations • Federal regulated self-insured employer plans • Publicly Funded Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

15. 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 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

16. State-LicensedInsurance Organizations (continued) • 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 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

17. 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 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

18. 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 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

19. Examples of Government Health Care Programs • Medicare • Medicaid • Children’s Health Insurance Program • Veterans Health Administration • TRICARE • Indian Health Service Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

20. Roles of U.S. Government • 3 key roles:, provider, payer, and lawmaker • Provider of health care services • Veterans Health Administration and TRICARE • Indian Health System • Supports research into new models of health care • Payer of third-party services • Outsources health care services, claims paperwork, grants for research Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

21. Roles of Government (continued) • 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 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

22. Financing Healthcare (Part 1) Summary – Lecture a • US healthcare payers • Historical and governmental influences for the unique US system • Federal and state laws have influenced the development of different type plans • Privately funded plans • Publically or government programs Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

23. Financing Healthcare (Part 1) Summary – Lecture a (continued) • Government Role in Healthcare • Enact laws • Regulate • Protect • Provide services • Payer Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a

24. Financing Healthcare (Part 1)References – Lecture a References BlueCross Blue Shield Association. http://en.wikipedia.org/wiki/Blue_Cross_Blue_Shield_Association. Accessed December 10, 2011. California Office of the Patient Advocate. What is an HMO? 2011. http://www.opa.ca.gov/report_card/hmowhatis.aspx. Accessed April 4, 2011. Centers for Medicare and Medicaid Services. Medicaid program: general Information—overview. http://www.cms.gov/medicaidgeninfo. Updated February 23, 2011. Accessed April 6, 2011. Illinois Department of Human Services. Health insurance carriers and managed care. http://www.dhs.state.il.us/page.aspx?item=31583. Accessed April 4, 2011. Indian Health Service. Indian Health Service fact sheet. http://www.ihs.gov/aboutihs/thisfacts.asp. Accessed April 5, 2011. OurDocuments.gov. Social Security Act (1935). http://www.ourdocuments.gov/doc.php?flash=true&doc=68. Accessed April 12, 2011. U.S. Department of Health and Human Services. Medical treatment in Hill-Burton funded healthcare facilities. http://www.hhs.gov/ocr/civilrights/understanding/Medical%20Treatment%20at%20Hill%20Burton%20Funded%20Medical%20Facilities/index.html. Accessed April 4, 2011. U.S. Department of Health and Human Services. Understanding health information privacy. http://www.hhs.gov/ocr/privacy/hipaa/understanding/index.html. Accessed April 4, 2011. U.S. Department of Health and Human Services, Office of the General Counsel. Drug Price Competition and Patent Term Restoration Act. http://library.findlaw.com/1999/Mar/10/130703.html. 1999. Accessed April 13, 2011. U.S. Department of Justice, Civil Rights Division. Americans with Disabilities Act: questions and answers. http://www.ada.gov/q%26aeng02.htm. Updated November 14, 2008. Accessed April 13, 2011. U.S. Department of Labor, Bureau of Labor Statistics. Career Guide to Industries. 2010–11 ed. http://www.bls.gov/oco/cg. Accessed April 4, 2011. Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture a