Facing Up: Health Care Reform in America President Obama and Healthcare Reform “Health care reform is no longer just a moral imperative, it’s a fiscal imperative. If we want to create jobs and rebuild our economy and get our federal budget under control, then we have to address the crushing cost of health care this year, in this administration.” ~ President Obama, White House Forum on Health Care Reform Healthcare Economics: Terms to Know $ Gross Domestic Product (GDP) - the total market value of all final goods and services produced in a country in a given year U.S. healthcare spending = 15.2% of the GDP $ Opportunity Cost - the cost of an alternative that must be foregone in order to pursue another action Ex. Affordable healthcare for all Americans will be expensive $ Scarcity - the tension between our limited resources and our unlimited wants and needs Healthcare Economics: More Terms to Know $ Fiscal Policy - the use of government spending, taxes and borrowing to influence the economy $ Mandatory Spending - budgetary spending on certain programs like Medicare that is required by law Constitutes 2/3 of the federal budget $ Discretionary Spending - annual appropriations levels made by decisions of Congress i.e. spending is optional Examples: defense spending, NASA Entitlement Programs • Social Programs like Medicare, Medicaid and Social Security are known as entitlement programs • Entitlements guarantee that Americans receive benefits by federal law. • Entitlement programs are part of the federal budget labeled mandatory spending that must be funded by law. The Healthcare Problem • The rising costs of health care and health insurance pose a serious threat to the future fiscal condition of the U.S. • Medicare and the federal share of Medicaid are projected to be: 4% of GDP in 2009 6% of GDP in 2019 12% of GDP by 2050 The Healthcare Policy Dilemma Policymakers will face difficult trade offs between two objectives: 1. Expanding insurance coverage WHILE 2. Controlling both total and federal costs for healthcare Who Pays for Health Care? Most Americans (85%) have some form of health insurance Health insurance - any program that helps pay for medical expenses Americans fall into three general health care payment categories: 1. private insurance 2. government programs 3. uninsured Private insurance • Most Americans (59.3%) receive their health insurance coverage through an employer under group coverage • Percentage of employer based health insurance is declining because of costs • Since 2001, family coverage premiums have increased by 28%, while wages have only increased by 16% Health Care Costs Government Programs • 27.8% of Americans (83 million) are covered by government health care programs • Federal law mandates public access to emergency services regardless of ability to pay • Public Programs: 1. Medicaid 2. Medicare 3. Other programs: State Children’s Health Insurance Program (SCHIP), military system, veterans affairs Medicare • Social health insurance administered by the government • Provides health insurance for U.S. citizens over the age of 65 • There is no means test (determination whether an individual can pay a portion of their debt) • Medicare is partially funded by payroll taxes a.k.a. F.I.C.A. tax Medicaid • Health insurance program for low income adults, children, and people with certain disabilities • Means test is required • Jointly funded by the states and the federal government, but administered by the states • About 60% of the poor are not covered by Medicaid The Uninsured There are millions of Americans who have insufficient or no health care insurance • 45.7 million (15.3% uninsured in America) • In 2007, nearly 70% of the uninsured lived in families headed by a full-time worker • 8.1 million uninsured children Source: http://www.hr-onesource.com/ppt/01-patton_healthcare.pdf Why Uninsured? • Rising healthcare costs force many employers to drop employee health insurance • Many working poor make too much to qualify for Medicaid, but can’t afford health insurance • Unemployment • Some healthy people choose to go without health insurance • Some rejected by insurance companies because they have pre-existing conditions • Results: Many don’t go to the doctor Increase in emergency room care Healthcare in the U.S. Today What do the statistics tell us? Graphical Analysis Medicare, Medicaid and Social Security Spending, % of GDP, 2000-2080 Federal Spending for Mandatory and Discretionary Programs 2007 Net Interest 9% Mandatory Discretionary 53% 38% Growth in Healthcare Spending: Health Care Spending as Percentage of GDP Sources of Financing of Personal Health Care1960 and 2003 1960 2003 Percent Funded By: Private Insurance 21 36 Out of Pocket 55 16 Medicare -- 19 Medicaid* -- 17 Other Private 2 4 Other Federal 9 4 Other State and Local 13 3 *Consists of both federal and state funding Source: National Health Expenditures, loc. Cit http://aspe.hhs.gov/health/MedicalExpenditures/index.shtml Average Percentage Increase in Health Insurance Premiums Compared to Other Indicators 1988-2007 World Health Report (2000) The World Health Organization ranked 191 countries regarding healthcare issues The United States ranks #1 in healthcare costs and #1 in responsiveness The United States ranks #1 in responsiveness U.S. #37 in overall performance U.S. #72 in overall level of health Source: http://www.who.int/whr/2000/en/annex01_en.pdf National Healthcare Quality Report (2008) The Commonwealth Fund ranked 19 developed countries regarding healthcare issues The United States ranks last in terms of quality of health care The United States #1 in medical innovation (producing new drugs medical devices, biotechnology) U.S. had higher survival rates than most countries for many diseases including several kinds of cancer U.S. had higher infant mortality rates than most other developed countries Source: http://www.commonwealthfund.org/ More Healthcare Facts from the Office of Management & Budget Less than 4 cents of every health care dollar is spent on prevention and public health i.e. more money is spent on acute rather than preventative care The U.S. spends over $2.2 trillion on health care each year–almost $8000 per person. Health insurance premiums have doubled in the last 8 years, rising 3.7 times faster than wages One fourth of all medical spending goes to administrative and overhead costs Source: http://www.whitehouse.gov/omb/fy2010_key_healthcare/ So....what do these stats mean? 1. Based on the data presented, what are the major strengths of healthcare in the United States today? 2. What are major weaknesses of the U.S. healthcare system? 3. What conclusions can you draw about U.S. healthcare relative to other countries?