a sociology essay

C h a p t e r 5 : R a t i o n i n g M e d i c a l S e r v i c e s 55

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H e a l t h P o l i c y I s s u e s : A n E c o n o m i c P e r s p e c t i v e606

The need for LTC increases with age. As shown in exhibits 37.2 and 37.3, the group most in need makes up 50 percent of those 85 years and older. The need for nursing home care also increases with age. At any point in time (as of 2014), approximately 3.0 percent of the aged (about 1.4 million) are in a nursing home. An estimated 0.84 percent of those aged 65 to 74 years are in nursing homes, compared with 2.7 percent of those aged 75 to 84 years and 9.3 percent of those 85 years and older (Administration on Aging 2016). The main reasons for nursing home use are severe functional deficiencies, mental disabilities (e.g., Alzheimer’s disease), and lack of a family member to provide services in the elderly person’s own home. As shown in exhibit 37.3, the number of functional limitations increases with age.

Most LTC is provided in the home rather than in an institutional set- ting. Informal caregivers are predominantly family members or other close relatives. Older men with a disability are more likely to have a surviving spouse to provide them with LTC than are older women. However, as those requir- ing LTC age, it becomes increasingly difficult for their spouse to provide the care or services they need. In 2011, about 9 million people older than 65 years were cared for by about 18 million informal caregivers (Freedman and Spillman 2013). Of the informal caregivers, about 20 percent were spouses,

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Source: Data from US Census Bureau (2017).

EXHIBIT 37.1 Percentage of

US Population Aged 65 Years

or Older, 1980–2050

H e a l t h P o l i c y I s s u e s : A n E c o n o m i c P e r s p e c t i v e338

the use or cost of services. Comprehensive health insurance results in a “moral hazard” problem; patients use more services because their insurance has greatly reduced the price they must pay. The additional benefit of using more services is much less than it would be if the patient had to pay more of the cost. Exhibit 21.1 illustrates how payment for medical services has changed since 1960.

Private insurance and government now pay for most medical services; out-of-pocket payments by patients have declined from almost 50 percent of total medical expenditures to just 10.6 percent. Furthermore, physicians, because they are paid on a fee-for-service basis, have a financial incentive to provide more services. Given the lack of patient and provider incentives to be concerned about the cost and use of services, too many services are delivered. Wide variations in care occur because factors other than clinical value are used to decide whether the services should be provided, and rapid increases have occurred in the growth of medical spending.

To control rapidly rising medical costs from the late 1960s to the early 1980s, federal and state governments used regulatory approaches. The medical sector was placed under wage and price controls from 1971 to 1974, health- planning legislation placed controls on hospital investment, many states used hospital rate regulations, and Medicare instituted hospital utilization review and

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Source: Data from Centers for Medicare & Medicaid Services (2017).

EXHIBIT 21.1 Trends in Payment

for Medical Services,

1960–2016

C h a p t e r 3 5 : E m p l o y e r- M a n d a t e d N a t i o n a l H e a l t h I n s u r a n c e 577

employed part time and those not employed, together with their dependents, would still not have insurance coverage. This would leave approximately 25 percent of the uninsured without coverage. To achieve universal coverage, the ACA combined an employer mandate with an individual mandate, together with an expansion of Medicaid eligibility and insurance subsidies for other low-income population groups, such as the self-employed. Although the ACA decreased the number of uninsured by about 14 million, it was unable to achieve universal coverage. In 2016, 10.1 percent of those younger than 65 years, or 27.5 million individuals, were still uninsured.

Who Pays for Employer Mandates? Proposals for an employer mandate have always required the employer to pay for a significant part of the cost of health insurance and the employee to pay for a small part. The ACA required employers with 50 or more employees to offer uninsured employees health insurance and pay between 90.34 and 97.5 percent of the employees’ premium (the employees’ contribution was not to

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Employer Nongroup Medicaid Other Public Uninsured

2013 2016

Employer: Includes those covered by employer-sponsored insurance, either through their own job or as a dependent in the same household.

Nongroup: Includes individuals and families who purchased or are covered as a dependent by nongroup insurance.

Medicaid: Includes those covered by Medicaid, the Children’s Health Insurance Program (CHIP), and those who have both Medicaid and another type of coverage, such as dual eligibles who are also covered by Medicare.

Other Public: Includes those covered under the military or Veterans Affairs, as well as nonelderly Medicare enrollees.

Uninsured: Includes those without health insurance and those who have coverage under the Indian Health Service only.

Source: Kaiser Family Foundation (2017b).

EXHIBIT 35.5 Health Insurance Coverage for Nonelderly, 2013 and 2016

C h a p t e r 3 6 : N a t i o n a l H e a l t h I n s u r a n c e : W h i c h A p p r o a c h a n d W h y ? 601

of production efficiency and consumption efficiency. Subsidies to those with low income, such as through a refundable tax credit, are a direct method of improving equity and can provide greater choices (consumption efficiency) and result in production efficiency when provided through a market-based system.

An important role of government under national health insurance is to monitor quality and access to care received by those with low income. Govern- ment has not adequately performed this function for Medicaid (and Veterans Health Administration) patients. However, Medicaid can be eliminated by pro- viding everyone with a refundable tax credit. Allowing those with low income to enroll in managed care plans that also serve other population groups and to buy health insurance on exchanges would provide consumers with greater choice of health plans and achieve greater competition among insurers.

Information on health plans, their prices, and the quality and access they provide are important in achieving a competitive market. In addition to states providing information on each plan’s performance, other organizations and websites likely would develop and offer information to assist consumers in making informed choices. These reporting and monitoring activities would benefit all enrollees, including those subsidized by the government.

Under a market-based national health insurance system, the rate of increase in medical expenditures would be based on what consumers decide is appropriate by balancing cost and use of services. The government would

Ideology Values Cost Containment Redistribution

Left • Trust in government as regulator

• Distrust of profit motive • Distrust of consumers’

ability to make choices

• Fee and price con- trols IPAB (hospitals, physicians)

• Government negotiation with pharmaceutical companies

• Comparative/ cost-effectiveness

• Expand existing public programs

• Expand eligibility for Medicare (age ≥ 55)

• Expand eligibility for Medicaid (by income and age)

• Maintain employer-paid system

• Single-payer program (by combining above programs)

Right • Trust in market competition

• Belief in necessity of financial incentives

• Values consumer sover- eignty and choices

• Markets and competition • FEHB for Medicare • Individual choice (HSAs) • Eliminate state mandates

• Income-related refund- able tax credits

• Medicare should be a fixed contribution pro- gram (premium support)

• Income-related public programs

• Cap amount of health insurance premiums that are tax exempt

Notes: FEHB = Federal Employees Health Benefits; HSA = health savings account; IPAB = Indepen- dent Payment Advisory Board (Affordable Care Act).

EXHIBIT 36.3 Constituent/ Ideological Differences on Health Policy

H e a l t h P o l i c y I s s u e s : A n E c o n o m i c P e r s p e c t i v e626

Medicaid Eligibility Expansion

About 74 million people are enrolled in Medicaid (68 million in Medicaid and 6 million in CHIP), or one in five Americans. The program is funded by state and federal matching funds (CMS 2018). The federal government and each state have different federal matching formulas, which vary between 50 and 74 percent of the state’s cost.

The ACA expanded Medicaid eligibility from 100 percent of the FPL up to 138 percent of the FPL (which translates to $16,643 for an individual and $33,948 for a family of four, as of 2017). For the first time, these eligibility standards include childless adults.

The ACA committed the federal government to pay the entire Medicaid cost (100 percent) for each state’s expansion population (i.e., from 100 to 138 percent of the FPL) for the first three years; the percentage was decreased to 95 percent in 2017 and then to 90 percent in subsequent years. Given that almost all of the expense is paid by the federal government, an expansion state has little incentive to monitor how well federal dollars are spent.5

When the US Supreme Court overturned the ACA requirement that all states expand Medicaid eligibility, only 30 states and the District of Columbia chose to expand Medicaid eligibility. By 2017, about 13 million new adults had enrolled in Medicaid (Kaiser Family Foundation 2017d). A recent study, however, estimates that only about one-third of the new enrollees became eligible as a result of Medicaid expansion. Those who had been previously

Market Segment

2013 2016

Population (Millions)

Percentage of Total

Population (Millions)

Percentage of Total

Employment-based 161.1 59.9% 164.9 60.8%

Individual (direct purchase)

23.7 8.8% 37.9 14.0%

Medicaid 52.0 19.3% 58.9 21.7%

Medicarea 7.5 2.8% 7.5 2.8%

Military-related healthcare

10.8 4.0% 10.9 4.0%

Uninsured 41.1 15.3% 27.5 10.1%

Note: Numbers may not add up exactly to totals because individuals may receive coverage from more than one source. aThose younger than 65 may be eligible for Medicare if they have end-stage kidney disease and/ or are permanently disabled.

Source: Data from US Census Bureau (2017), table HI01.

EXHIBIT 38.1 Sources

of Health Insurance

Coverage of US Nonelderly (Younger than

65 Years), 2013 and 2016