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					   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
  ~ 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
$ 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
$ 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

2. Controlling both
   total and federal
   costs for
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
• Public Programs:
   1. Medicaid
   2. Medicare
   3. Other programs:
      State Children’s Health Insurance
      Program (SCHIP), military system,
      veterans affairs
• Social health insurance
  administered by the
• 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

• 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
• 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

             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
• Some rejected by insurance
       companies because they
       have pre-existing conditions
• Results:
    Many don’t go to the doctor
    Increase in emergency
       room care
        in the

              What do
the statistics tell us?
Medicare, Medicaid and Social Security
   Spending, % of GDP, 2000-2080
Federal Spending for
     Mandatory and

                    Net Interest

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
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
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
  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
 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?