Transcript The United States Social Security System

Health Insurance in the
U.S. An Overview
Lecture 12
By the end of this lecture, you
should be able to:
Explain level of health care costs in US
relative to other developed countries
Discuss whether HC expenditures are
“worth it”
Explain sources of health care cost growth
Discuss sources of payment for HC in US,
and the “problem of the uninsured”
Health Care in Global Perspective
Health insurance is common to all
developed countries
Mechanism differs
England and Italy finance health care
through general taxation and provide
services publicly (at least historically)
Canada and Germany finance insurance
publicly but contract for services through
private providers
US Health Care System
United States distinctive in several ways:
We spend much larger fraction of GDP on
health care than other nations
Most global health care innovation is due to
R&D done in the United States
Formal insurance coverage is not universal in
the US
• The elderly and the poor rely on government
• Others depend on employers
How much do we spend?
The United States in 2007 spent
approximately $7,900 per capita
Switzerland, the second highest per capita
spending in the OECD, spent $4,500 appr.
Median OECD country spent $3,000 appr.
This was 17%+ of U.S. GDP in 2007
Only two other countries – Switzerland and
Germany – exceeded 10% of GDP
Is this a Problem?
Individual perspective
Employer perspective
Federal budget perspective
Economy wide perspective
Do we get what we pay for?
Inputs
Numbers of beds, physicians, etc. per capita
Outcomes
Infant mortality
Life expectancy
Inputs
For number of hospital beds per capita,
U.S. is in bottom quartile of OECD
Number of physicians per capita is
below OECD median
Number of nurses per capita is below
OECD median
But … we might be using our resources
more efficiently
Outputs: Life expectancy at Birth
Country
Female
Male
Japan
85.6
78.7
Canada
83.9
77.0
Germany
82.1
76.0
U.K.
81.3
76.2
U.S.
81.0
75.1
These are 2006 numbers
Outputs: Infant Mortality Rates
Country
Rate/1,000
Japan
3.2
Canada
4.8
Germany
4.3
U.K.
4.8
U.S.
6.3
These are 2006 numbers
Limits of International Comparisons?
Not necessarily “fair” to compare US
costs to other countries
Not necessarily due to waste or inefficiency
Financial incentives for innovation exist
here
We spend on R&D, and other countries
benefit  does not necessarily mean we
spend too much – if we value the output
So the level is high, but what
about growth rates?
Health care is growing faster than GDP in
most countries
In U.S., health spending rose from 13% of
GDP in 1992 to 17%+ of GDP in 2007
This 4% increase relative to GDP is 2.5
times the 1.5% increase of the OECD
median
This was even during a time when managed
care and increased cost sharing were
credited for holding down spending in U.S.!
Escalating Costs of Health Care
Year
% GDP
1960
5.3
1970
7.3
1980
9.2
1990
12.6
2007
17.0
Discussion: What is the Cause?
Why do you think HC costs are rising?
What causes health care cost growth?
Many potential candidates
Technological progress  new procedures
Rising income  greater demand
Increased 3rd party payments
Aging population
More doctors  physician induced demand
More expensive conditions (HIV, drug treatment)
Increasing malpractice awards
“Easy access” – no waiting lists, etc.
Other?
What does the evidence say?
It’s the Prices …
The United States pays much higher prices
than other countries for pharmaceuticals,
hospital stays, and physician visits.
Ex: Average cost of a hospital day in the U.S.
in 2007 varied $3,180-$7,648
But it just shifts the puzzle – why are prices
so high?
A Leading Cause - Technology
Over half of the rise in U.S. health care
spending is due to new technology
MRIs, CAT scans, organ transplants, new
prescription drugs
• Most of these did not exist 40 years ago!
As our national income rises, we use more
of these products
Costs may rise quickly, but so might the
benefits?
A Leading Cause - The Role of
Third Party Payers …
Finkelstein (BusinessWeek article)
Consumers opt for more care if someone else pays
for it
Insurance provides guaranteed source of revenue
for hospitals and other health providers (e.g., to
build new facility)
Evidence
Introduction of Medicare – in areas where there
was little pre-existing insurance (e.g., South),
health spending soared, while it had little effect in
areas where insurance was already common (e.g.
New England)
Other Reasons - Aging Population
The elderly consume much more health
care per capita than younger cohorts
Leading edge of baby boom generation
is turning 60 …
Access to Care
Many OECD countries imposed “supply
constraints” over the past 3 decades.
Limiting the number of hospital beds
Controls on diffusion of technology
Limits on numbers of physicians
U.S. has fewer of these, but presumably
use them more intensively
Lack of “Waiting Lists”
Unlikely to help reduce costs by much
Procedures for which there are wait lists
constitute a small fraction of overall
spending
While countries with wait lists have lower
costs than U.S., so do countries without
waiting lists
Malpractice Litigation
Dept of Health and Human Services reports
that “Americans spend far more per person
on the costs of litigation than any other
country in the world.”
U.S. had 50 percent more malpractice claims filed
per capita than U.S. or Australia and 350 percent
more than Canada
Malpractice payments per ruled or settled case
about $265k in U.S. in 2007, slightly lower than in
Canada and the UK
While it raises average cost, it is not clear it
can really explain the trend
Costs of Medical Malpractice
Legal costs
Direct cost of awards
Legal costs of defending malpractice claims
Underwriting insurance against claims
All these only account for 0.5% of HC spending
Defensive medicine
Test or procedures ordered to protect physician
against risk of lawsuit
Cost estimates vary widely – perhaps as high as 1-4%
percent of total HC spending
Indirect Costs
Specialist shortages in some areas due to high
malpractice insurance premiums
Who Pays for Care?
Source
Groups Covered
Medicare
Elderly, disabled
Medicaid
Elderly, blind,
disabled, poor
women/children
Other
Military
Employer
Workers &
dependents
Nongroup
Uninsured
Families
Share of
population
Share of
payments
13%
10
22%
15
1
56
8
6
16
53
2
The Uninsured
Approximately 15% of individuals in US are
not covered by insurance – 46 million people
Implications are controversial
Some choose to go without
Some Medicaid eligible but have not taken up
(though likely will if need care)
Many uninsured receive free care from emergency
rooms, etc.
One could argue that we have universal (if
inefficient) catastrophic coverage delivered
through complex patchwork of vehicles
Characteristics of Uninsured
Most have jobs
More like to be in service sector
Majority are low income
But some have high income
Young adults more likely to be uninsured
Minorities more likely to be uninsured
Unmarried more likely to be uninsured
Less educated more likely to be uninsured
Insurance as a Policy Issue
46 million uninsured
But ¼ are short spells (< 4 months)
Many more underinsured
Still more at risk of being uninsured
Children at risk
Federal deficit
Cost of health insurance to business
Our HC Journey
U.S. Medicare System
Part A
Part B
Part D – Rx Drug bill
Medigap
Medicaid
Employer provided health insurance
Traditional
Managed care: HMO’S & PPO’S
Reforming the system