Introduction
There are very few things which cause people in the Western world more stress than facing the possibilities of getting sick or injured. Anything which threatens our most basic instinct of staying alive catches our attention and begs to have a solution found. This motivation for living and prolonging life expectancy has been a major incentive in how we look at health care.
In the 1930’s 2.8 billion was paid for health care–$23 per person and 3.5% of the gross domestic product. In 2015 the cost had risen to 3 trillion dollars–$9536 per person and 15% of gross domestic product. In 1980’s medical expenses increased by 117%–43% due to general inflation, 10% for population growing larger and older, 23% to technology treatments and pharmaceuticals that had not been available at the beginning of the decade, and 24% due solely to inflation peculiar to the American medical system itself. It is interesting to note that more than 90% of medicine being practiced today did not exist prior to 1950. (https://imprimis.hillsdale.edu/short-history-american-medical-insurance/)
According to a Bloomberg report, the cost of family health coverage in the U.S. now tops $20,000 based on an annual survey of employers, a record high that has pushed an increasing number of American workers into plans that cover less or cost more, or force them out of the insurance market entirely. “It’s as much as buying a basic economy car,” said Drew Altman, chief executive officer of the Kaiser Family Foundation, “but buying it every year.” (www.msn.com/en-us/money/healthcare/annual-health-insurance-costs-hit-record-high-above-dollar20000/ur_AAHPRKp?ocid)
While employers pay most of the costs of coverage, according to the survey a worker’s average contribution is now $6,000 for a family plan. That’s just their share of upfront premiums and doesn’t include co-payments, deductibles, and other forms of cost-sharing once they need care. (ibid)
Spiraling Medical Costs
At the pace we are on with spiraling medical costs and national debt, some wonder if our economy can survive under the present methods of delivering health care at the level the public is demanding. What used to be the attitude, “That’s just a little bruise, suck it up and keep playing,” is now “Oh my goodness, you better go to the emergency room and make sure you didn’t break a bone.” We are relentless in making sure we don’t have to deal with any kind of pain or discomfort. Like Tom Brady, age 42, the legendary quarterback for the New England Patriots said about being limited in practice, “I wouldn’t say I am a spring chicken anymore. I guess I just don’t heal as fast as I used to.” This is perhaps not the best example for acknowledging at some point we are going to have to recognize growing older is inevitable and that doctors should cease their efforts and nature must be allowed to take its natural course, but it will suffice.
Human Life Value
Another element in this motivation for living and prolonging mortal existence is the concept of human life value. What is the socio economic benefit of keeping an individual alive after they have outlived their economical production years; or, in other words, should consideration be made for prolonging life after an individual becomes more of a consumer than a producer? Should services rendered be measured by the yardstick of survival of the fittest? Under the public health care distribution payment system, should health care payments for an older retired man who has a kidney ailment be the same as for a young man just starting his career who has the same ailment? If one makes a decision based solely on the economic value one has in society, it would not be hard to argue that making the choice of paying for the young man over the “end of life” individual would be a reasonable financial decision to make. In making that decision, the system has a much greater chance of recouping its costs, helping it to remain solvent.
Fortunately, our society has developed ways of attending to the infirm and elderly without practicing senilicide as reported among some Eskimo tribes. They, too, have had no reported cases of senilicide since 1939.
Oregon as early as 1994 enacted a law which allowed an individual to receive a prescription the individual could administer to him/herself if they have a terminal illness which would cause death within 6 months. This Death with Dignity Act was put up for a vote to rescind it in 1997, but 60% of Oregonians voted in favor of keeping it in place. Apparently, since this is not a government controlled activity, statistics on how many are actually taking advantage of it are scant. It is known, however, that a physician can prescribe the lethal medication but cannot administer it to the individual. One of the purported advantages of this act was to alleviate pain and suffering for the afflicted person. It was also intended to control some of the costs associated with end of life events. The passing of this bill has caused a nationwide debate regarding protocol for the aging process.
https://public.health.oregon.gov/Provider Partner Resources/Evaluation Research/Death with Dignity Act/Pages/ors.aspx
How to pay for health care
At the same time we are dealing with the stress of living and prolonged life expectancy, we are dealing with the stress of when we get sick, how is the sickness going to be paid for.
One of the captivating lores of our society is the traveling salesman plying his trade of providing a remedy for just about anything which ailed the people he could attract to his medicine wagon when he would visit their town. Reminiscent of that era is the snake oil doctor of Pete’s Dragon. Remember when he promoted his elixor to the lighthouse keeper? It was to cure whatever ailed him. However, when he heard about Pete’s dragon, his true motivation became clear. In his exuberance, he pronounced what good could be done with all the dragon parts while keeping hidden to himself and his sidekick his real intent was “money, money, money by the pound.” Sound familiar to present day health care delivery? More on this to come.
In 1850, out of the population of 23,191,876–40,755 people identified themselves as being physicians (mostly charlatans) which meant there were more physicians then per capita than in 1970. It wasn’t that advancements weren’t being made in the medical profession but still a lot of “snake oil” was being promoted. It wasn’t the medication making people better but the patient’s immune system that cured them–or that didn’t.
Paying for medical care wasn’t something looked upon as a societal issue but more as a familial concern. Families bonded together to assist other family members when the expense or the severity got beyond a family’s own resources. This worked rather efficiently where families were living close by one another, but with societal changes–such as the breakdown of family ties, mobility of the society where families are now scattered from one end of the country to another, disparity in level of income, a lack of attitude of “am I my brother’s keeper?” and the sheer weight of the health delivery system–different mind set was required.
Necessity being the mother of invention could certainly be applied to our evolution of health insurance plans to assist in the payment of medical expenses and to facilitate access to the marvels of modern medicine.
The concept of health insurance is relatively new even though there was some attempts to provide health insurance plans as early as the Civil War. These plans only offered coverage against accidents related from travel by rail or steamship. Also in the 1800’s private insurance plans called industrial sickness funds were being made available for those workers who were forced out of employment due to accident or illness.
As the Great Depression of 1929 began to cast its gloomy shadow across the economy of the United States and then the rest of the world, a group of teachers in Dallas, Texas, contracted with Baylor Hospital for room, board, and medical services in exchange for a monthly fee. This became the first effort to “spread” the potential cost of health care. It was also the beginning of the “fee-for-service” model of paying for health expenses where procedures were identified and a payment schedule was established for each procedure. These plans allowed for patients to rely on autonomous physicians to act as their agents; patients received complex care from independent non-profit hospitals; insurers did not intervene in medical decision making and reimbursed physicians, hospitals and other providers on a fee-for-service basis. Under this plan both the patient and health care provider know what will be paid for and what will not be paid for.
Up until the 1930’s, companies like Cigna (beginning in 1792) only issued individual health plans; but due to the interest in and the popularity of the health insurance field, several large life insurance companies entered the health insurance field with group plans. In 1932 nonprofit organizations called Blue Cross or Blue Shield first offered group health plans. They became very successful because they involved discounted contracts negotiated with doctors and hospitals. In return for promises of increased volume and prompt payment, providers gave discounts to the Blue Cross and Blue Shield plans. (Blue Cross focused on favorable payments to hospitals while Blue Shield leaned more favorably toward physicians’ pay schedules).
Government Involvement
The government also got into the healthcare field in the 1930’s when Franklin Delano Roosevelt signed into law the Social Security Act which allowed people who had to stop working due to accident or illness access to government paid health care. These funds were made available through taxes paid by employers and employees from income of employees.
A special program for health care designed just for service men and women coming back from World War 2 was passed in 1944 called the Servicemen’s Readjustment Act.
The 1940’s and ‘50’s saw a tremendous growth in employee benefit plans which included tax free, employer-sponsored health insurance plans. It is apparent the government wage freeze in 1939 through 1945 helped to accelerate group health care plans. Since the employers could not attract employees by paying more, they defaulted to improving the employee benefit packages for their workers which included the adding of health care plans.
Again, government intervention with government programs like disability benefits being included with social security benefits in 1954 and creation of Medicare and Medicaid in 1965 began the shifting of costs from the private sector to the government operated programs. By 1995, individuals and companies were responsible for about half of the cost while the government became responsible for the rest.
(www.neurosurgical.com/medical_health_history_and_ethics/history/history_of_health-insurance.htm)
During the 1980’s and 1990’s, health care expenditures grew dramatically due to:
- Growth in U.S. population as well as increasing number and percent of elderly people in the population
- Growth of allied health care professionals
- Increase in key health care technologies and related costs
- Increased reliance on drugs and related pharmaceutical costs
- Rising cost of individual and family health care insurance
- Higher malpractice insurance
- Case settlements and injury awards
Standardizing and Controlling Costs
These factors and a desire on the part of health plan providers to standardize and control the widely varying quality of care offered by traditional fee-for-service plans gave rise to the managed care plans which were intended to optimize health through preventive care, reducing over utilization and unnecessary utilization of expensive services most companies now offer. These are normally referred to as health maintenance organizations (HMO’s.) Budenheimer and Grumbach defined it quite simply as “organizations that foot the bill for a patient’s care have taken the role of managing the patient’s care. Payers and insurers no longer simply write checks; they become involved in decisions about how much care a patient receives, what kind, and by which provider. (Budenheimer, T.S. and Grumbach,K.I., 1998, Understanding health policy: A clinical approach, 2nd ed., Stanford, CT: Appleton and Lange)
The most sweeping reform to health insurance delivery system and coverages began in 1993 when the then President Bill Clinton presented to Congress a health care reform plan that would have guaranteed health insurance to every American. Congress rejected the plan as they felt it was too expensive and excessively regulated.
This action opened a pandora’s box which continues to create confusion in the health insurance portion of our economy even until today.
With the ever increasing costs of healthcare and, in some cases, limited access to healthcare, and the paradigm shift to have government provide as many services as the buying public would want, the door was opened to candidate Barack Obama to use the call for universal healthcare as his main political ploy. People liked what they heard about universal coverage cutting costs and increasing coverages so they voted him into office. March of 2010 with a little boy and other advocates for universal healthcare standing by President Obama in the Oval Office, he signed into law the Affordable Care Act (ACA.) This 955 page document spelled out what was to be the most sweeping changes in how healthcare would be delivered and paid for. All of these changes were to go into effect by January of 2014.
Confusion reigned as the private sector and government regulators wrestled with how to implement this far reaching plan.
The goals of the ACA to 1) make insurance available for everyone, 2) make it cheaper, and 3) expand Medicaid seems simple enough yet huge hurdles had to be vaulted. It was a campaign slogan that you can keep your own doctor and it will save you up to $2500 a year. It became immediately apparent that this was simply a campaign slogan and nothing else. It also was immediately apparent not everyone was going to purchase insurance, and this would have to be achieved in order for this plan to work. This was emphasized with the passing of the Individual Mandate of 2014 which required a penalty paid if you chose not to join a plan. Not enough penalty was involved to offset the amount of premium one would have to pay.
Since many of the states did not want to participate in this federally mandated program, the federal government set up a healthcare marketplace to jumpstart the utilization of the ACA. These exchanges were intended to make understanding and purchasing health insurance easier. Recently this author received in the mail a booklet (123 pages) titled “The Official U.S. Government Medicare Handbook, Medicare and You”.) It depicted happy smiling singles and couples exuding their joy for apparently qualifying for medicare benefits. After opening the booklet, looking at the content page, and then scanning through the pages, I was not sharing the “love” those individuals portrayed on the cover. Perhaps a little tongue in cheek humor, but this may be the next new occupation for someone who understands this health care plan in preparation for helping the rest of us through the depth and breadth of it. So here we are 6 years after this panacea was to go in effect still struggling with understanding it and implementing it.
Plan Coverages
With the passing of the ACA, the following minimum requirements had to now be covered under every insurance plan being made available to the public whether it be from a private carrier or a government exchange:
- ambulatory patient services
- emergency services
- hospitalization, maternity and newborn care
- mental health services,
- prescription drugs
- rehabilitative and habilitative services
- laboratory services
- preventive and wellness services
- pediatric services
- coverage to age 26 for dependents
- no underwriting for pre existing conditions.
Each of these plans have minimum benefits and are identifiable by:
Platinum–90%, Gold–80%, Silver–70%, Bronze–60%, Catastrophic–60%.
These percentages represent how much of the insurance premium is used for total average estimated cost for plan benefit package. Different deductibles also apply. The Catastrophic plan is for underage 30 and has some limited coverages as compared to the other plans.
The following were intended to make the buying process less complicated and time consuming:
- guaranteed coverage
- no complicated medical history questions
- no lengthy waiting
- possibly receiving tax credits or subsidies
- new marketplace (exchanges or eHealth.com)
- additional places to buy insurance.
Unfortunately, due to the government’s involvement in subsidies available at different degrees, one must first find out where they stand on the income level in order to qualify for one plan or another. There is a website which is a single page source for average premiums and subsidies. It shows premiums, deductibles, subsidies and penalties for various ages, family types, and income levels.
https://www.dropbox.com/s/qnyp3w88jkcw65p/ACA%20Chart
Another hurdle to cross is the open enrollment period. Each state has a one period event every year for you to enroll. If you miss it, you will pay a penalty for not having insurance. The only way around this dilemma is to have a qualifying event occur, i.e. loss of job, marriage, birth of child, or move to a new area of coverage.
Seek Help
Ready to throw in the towel?? Probably the best solution to this whole problem is to talk to an insurance professional who knows how these plans work and can customize a plan for you out of the 24 options available from some private plans or from the exchanges. This author is reluctant to go into more detail on the different plans because of the ambiguity and ever changing rules and regulations with the latest being the executive order signed by President Trump allowing the sale of cheaper insurance plans and the tax bill, which repealed the individual mandate.
These plans are for the general public while the following two are for specific segments of the population–Medicare and Medicaid.
Medicare and Medicaid
In 1965 Medicare and Medicaid were introduced to the nation. Medicare was to make available health care services to people over age 65, younger people with disabilities, and people with End Stage Renal Disease (permanent kidney failure requiring dialysis or transplant.)
It has two parts in its implementation. Part A is for inpatient hospital care, skilled nursing facility, home health care, and hospice care. Part B is for services from doctors and other health care providers, outpatient care, home health care, durable medical equipment, many preventive services (like screenings, shots or vaccines, and yearly wellness visits.) The funding of Part A and B comes from two health insurance trust funds which can only be used for medicare payments.
Part A is paid for by Hospital Insurance (HI) trust which gets its money from payroll tax of 2.9%, medicare premiums, general revenue funds, interest on funds invested by the trust, and Medicare Part A premiums from people who aren’t eligible for premium free Part A. The other trust for Part B disbursements is Supplemental Medical Insurance (SMI) which receives it funds authorized by Congress, premiums from people enrolled in Medicare Part B (medical insurance), medicare prescription drug coverage (Part D), and other sources like interest earned on the trust fund investments.
Other options like prescription drugs can be tied into your Medicare plans. See your agent or financial consultant for details beyond the scope of this writing.
Upon reaching age 65, most individuals are automatically enrolled in Medicare Part A. This portion of Medicare is provided at no out of pocket premium for the recipient. However, you must choose Part B and chose a payment plan. Easiest and simplest is to have it be automatically deducted from your social security check. When you become eligible for Medicare, keep in mind that not all your health care concerns are going to be met with this government plan. Considering a medicare supplement plan from a private health care provider could save you a considerable amount as you age, becoming more of a candidate for using health benefits provided by insurance. An excellent site for comparing supplements is QuickMedigap where they have compiled a number of company plans for easier comparisons.
Medicaid is a federal-state program administered by the state, subject to federal minimum requirements for benefits. The federal government pays states for a share of program expenditures through a program called Federal Medical Assistance Percentage (FMAP.) Each State has its own FMAP based on per capita and other criteria. These payments can range from 50% in wealthier states to 75% in lower per capita incomes and are adjusted on a 3 year cycle to account for fluctuations in the economy. The Medicaid program is not an insurance program per se. It is more of a financial assistance program for the low-income people of every age, along with health coverage for families and children, pregnant women, the elderly, and people with disabilities. Patients usually pay no part of costs for covered medical expenses, with the exception of a small co-payment being required. The Federal government pays its share from contributions made pursuant to Federal Insurance Contribution Act (FICA) which consists of 6.2% on earned income for social security and 1.45% on earned income for Medicare.
Each state has its own requirements for eligibility so it would be wise to check with your individual State Department of Health to see if you qualify.
Conclusion
Hopefully this short narrative may help you understand this important aspect of your financial planning. As tedious and confusing as it appears, there are individuals who have taught themselves the intricacies of the various health care plans available. With a little research on your own you can use their expertise to choose wisely how you can qualify for, apply for, and pay for your health care needs. Breathe lots of fresh air, take your vitamins, laugh a lot, slow down, and stay healthy!!!
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