Health Care Finance in the U.S., Term Paper Example

Today’s healthcare costs are rising at a significantly higher rate than that of the average national income. The National Health Expenditure Accounts are responsible for estimating and calculating the total health care spending in the United States. This organization has been measuring the annual expenditures for the United States dating back to the early 60’s. They calculate health care products and services, public health activities, government administration, the net cost of health insurance, and investments related to health care. In 2011, healthcare costs reached 2.7 trillion dollars or 8,680 dollars per person in the United States. This equates to a 3.9 percent increase from the previous fiscal year. Healthcare spending accounted for 17.9 percent of the total spending in the United States. Data suggests that the increase in consumers’ use of health spiked in 2011 and has been on a constant increase since then. If this prediction is accurate, healthcare spending is expected to spike even more by 2014. According to NHEA, between 2011 and 2014 the national health spending is expected to grow at an annual rate of 5.7 percent. The United States healthcare expenditures can be divided into several sub-groups- individual out-of –pocket costs, private health insurances, Medicare, Medicaid, Veterans, third party programs, public health programs, and investments. Medicare and Medicaid costs have increased 35 percent collectively since 1976. Private insurance has increased 33 percent in that time; as a result, out-of-pockets costs have decreased over 15 percent since 1976. Today, 52 percent of the healthcare expenditures in the United States are publicly funded by tax payers. The remaining cost is paid by the government.

A small proportion Americans of the United States accounts for half of all the medical spending. The elderly makes up about 13 percent of the U.S. population, but they were responsible for nearly 37 percent of the total healthcare expenses. In 2011, the average healthcare expense was nearly $11, 100 dollars; in contrast the average healthcare costs for people ages 19-64 was about $3, 350 dollars. This age group only accounts for about 3 percent of the overall medical spending in the United States. It is believed that this disproportionate number is due to the fact that a higher proportion of the elderly have expensive chronic conditions such as mood disorders, diabetes, heart disease, asthma, and hypertension. (Foundation THJKF)

Adequate medical insurance coverage is important to the health of all Americans. New mandated insurance coverage is expected to extend coverage to low and middle-income uninsured persons by expanding Medicaid and providing premium subsidies for private insurance. The provisions will create affordable public and private coverage opportunities for all legal residents in the U.S. The ACA prevents insurance companies from considering pre-existing conditions in coverage decisions. They ACA has also insisted that the Secretary of the Department of Health and Human Services establish a temporary high risk insurance plan to provide affordable health insurance to individuals with existing conditions until the mandate goes into effect in 2014 (Source Book of Health Insurance Data). Also, small businesses that offer insurance to their employees will be eligible to a tax credit for a portion of the premiums. For businesses that have fewer than 25 full time workers and provide at least half of the insurance premium, they will receive a tax credit as well. As a result of this plan, it is believed that children and non-elderly adults between the ages of 26-64 years old will have the greatest increase in coverage. Low and middle income individuals will be the primary beneficiaries of ACA coverage.

The development of employer based insurance dates back to 1798 when Congress established the U.S. Marine Hospital services for seamen. Deductions were made to the salaries of the seamen to operate the facilities. Early insurance policies protected against income lost due to death or accidents, but did not cover health services. Mining, lumber, and railroad companies developed plans that covered medical services in the 1870s and 1880s. Doctors at their clinic were paid a fixed monthly rate to provide services to their workers. Orszag says,

“Group health insurance initially developed in the United States in the early part of the twentieth century as a response to the growing industrialization in the Nation, the increasing degree to which people worked together in large groups, and to the employers’ and labor unions’ realization that employed persons needed economic protection against the unforeseeable losses, which result from premature death and disability.”

The Aetna Life Insurance Company was the first to offer a health plan with coverage against loss due to temporary and total disability caused by diseases. They excluded tuberculosis, venereal disease, insanity, and drug or alcohol induced ailments. Their premium rate started with $8 dollars per year for individuals aged 20-29 and $50 dollars per year after the individual turned 50 years of age. Over the years, policies have changed into what is being dealt with in today’s society. (Source Book of Health Insurance Data)

With a fully insured plan, the employer or client pay monthly premiums to the insurance company. In exchange, the company pays for any medical treatment covered under the policy. The amount to be paid by the client is determined prior to enrolment and does not change. In contrast, a self-insured health plan is one in which the person or employer assumes the financial burden of providing his/her or the employees’ healthcare benefits (National Health Spending Projections Through 2020). Self-insured pay for each claim out-of-pocket to the fully insured company as they are incurred. This type of insurance is usually chosen by young, healthy, self-employed individuals who believe that their lack of medical needs outweighs the benefits of a fully insured plan. Nonetheless, some individuals who have this type of plan are doing so because they are unable to purchase a fully insured plan because of preexisting conditions.

References

Foundation THJKF. Summary of Health Reform Law. In: Kaier Family Foundation; 2011. [On-line] Available: http://www.kff.org/healthreform/upload/8061.pdf [Accessed: Spring 2013]

National Health Spending Projections Through 2020: Economic Recovery and Reform Drive Faster Spending

Orszag, Peter R., How Health Care Can Save or Sink America. Foreign Affairs Vol. 90, No. 4, July/August

Source Book of Health Insurance Data, 1981-1982 (Washington Health Insurance Institute, 1982) p. 13.