RMI3011 Chapter 11 Health Insurance Health Care Problems in the US o Rising health care expenditures Health care expenditures in the US have increased substantially over time and are growing faster than the national economy Estimated national health expenditures totaled just over 2 8 trillion in 2012 or 17 6 percent of the nation s GDP More than 1 in 6 dollars of the nation s income is spent on health care Reasons for the increase in spending include Increase in consumer demand Advances in technology Cost insulation because of third party payers Employment based health insurance State mandated benefits Increased spending on prescription drugs Cost shifting by Medicare and Medicaid Higher administrative costs Defensive medicine Rising prices in the health care sector Aging of the population is NOT a major factor o Large number of uninsured in the population 49 9 million people or 16 3 of the US population had no health insurance coverage in 2010 Groups with large number of uninsured include Foreign born Hispanics Blacks and Asians Young adults Low income households Many people are uninsured because the coverage is not affordable Many low income people who are eligible for Medicaid are not aware they are eligible What happens when you re uninsured The uninsured often delay or skip needed medical care because of high costs When the uninsured receive medical care they frequently pay more for that care Uninsured adults are less likely to have a regular source of medical care The uninsured often do not have access to regular screenings and preventive care The uninsured are sicker and die earlier than people with insurance o Uneven quality of medical care The quality of care has improved over time The quality of medical care varies widely depending on geographic location type of health insurance plan and disease being treated o Considerable waste and inefficiency Experts estimate that the present system wastes more than 800 billion each year Sources of wasteful spending include Duplication of tests Medical errors that are largely preventable Unnecessary tests due to fear of lawsuits High administrative costs and excessive and redundant paperwork Readmissions into hospitals because of inadequate or ineffective initial treatment Hospitalizations for preventable conditions Overuse of expensive medical technology o Defects in financing health care Critics argue that the financing of the present system aggravates many of the problems Defects of the current system include It is based on the ability to pay not health needs The fee for service method encourages unnecessary tests and treatments Distortions in medical care which result from a limited supply of physicians in general practice and in rural areas Some insurer practices are harmful to both policyholders and applicants for insurance Examples include Exclusions for preexisting conditions Rescission of insurance contracts to limit benefits Lifetime or annual limits on benefits o Abusive insurer practices o March 23 2010 President Obama signed into law the Patient Protection and Affordable The Act was challenged on the basis that it was unconstitutional The supreme court ruled that the Affordable Care Act is constitutional o The Affordable Care Act Extends health care coverage to 30 million uninsured Americans Provides substantial subsidies to uninsured individuals and small businesses to make insurance more affordable Contains provisions to lower health care costs in the long run Prohibits insurers from engaging in certain abusive practices Basic Provisions of the Affordable Care Act that apply to health insurers include Health Care Reform Care Act Retention of coverage until age 26 Lifetime limits and annual limits prohibited Preexisting conditions prohibited Rescission of insurance policies prohibited Guaranteed access to health insurance Grandfathered plans Minimum medical loss ratio Limited waiting periods Essential Health Benefits o Ambulatory patient services o Emergency services o Hospitalization o Maternity and newborn care o Mental health and substance use disorder services o Prescription drugs o Rehabilitative services and devices o Laboratory services o Preventive and wellness services and chronic disease management o Pediatric services including oral and vision care Applicants will have a choice of four benefit categories The bronze plan covers 60 percent of the benefit costs The silver plan covers 70 percent of the benefit costs The gold plan covers 80 percent of the benefit costs The platinum plan covers 90 percent of the benefit costs Each plan has annual out of pocket limits that limit the amount insureds must pay in the form of deductibles coinsurance copayments etc o The new law creates an Affordable Insurance Exchange in each state The exchange is a new transparent and competitive insurance marketplace where individuals and small firms can purchase affordable and qualified health insurance plans o Eligible small employers can receive significant tax credits under the new law Beginning in 2014 the tax credit for eligible small employers that purchase health insurance through a state exchange will be increased up to 50 percent of the employer s contribution if the employee contributes at least 50 percent of the total premium costs o The new law creates a temporary reinsurance program to help employers provide health insurance to early retirees over age 55 who are ineligible for Medicare This provision applies until January 2014 when the state exchanges become fully operational Funds for this provision ran out after 14 months new applications are not being accepted Beginning in 2014 the Act expands Medicaid to include adults with incomes up to 138 percent of the federal poverty level Millions of uninsured persons will be eligible for Medicaid coverage The Supreme Court ruled that a state cannot be coerced into expanding its Medicaid program under the Act Many state governors have indicated they will not expand their Medicaid programs because of funding concerns The new law created a temporary high risk program the Preexisting Condition Insurance Plan PCIP which provides affordable health insurance to individuals with preexisting conditions until the Affordable Insurance Exchanges begin operating in 2014 Most states had high risk pools before the new law was enacted Participation by states is optional The new law contains many provisions that will improve the quality of health care and lower costs including New
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