Question

How is adverse selection mitigated in the US system of care? How might repealing the individual mandate affect adverse selection and insurance premiums?

When it was passed, part of the goal of the ACA was to decrease health care costs in the United States. Discuss the ways in which costs might be reduced and the ways in which costs might actually increase as a result of ACA (There are several supplemental readings that are helpful for answering this question).

We have now looked at three different health care systems. Compare and contrast the American System with the Bismarck and Beveridge Systems. What are the strengths and weaknesses of each in your mind?

Suppose you are a middle-aged person with cancer. Your job doesn’t offer health insurance. Briefly explain how you might have been impacted by the implementation of the ACA.

Answer 1

a) Compare and contrast the American System with the Bismarck and Beveridge Systems. What are the strengths and weaknesses of each in your mind?

• American Health Care System

American health care system is not a universally accessible system – it is a publicly and privately-funded patchwork of fragmented systems and programs. Insured Americans are covered by both public and private health insurance, with a majority covered by private insurance plans through their employers. Government-funded programs, such as Medicaid and Medicare, provide health care coverage to some vulnerable population groups. Despite implementation of the Affordable Care Act (“Obamacare”), introduced in 2010, 10.4 percent of Americans (33 million) remain uninsured.

Although public financing comes secondary to private sector financing in the U.S. health care system, it is worth noting the breakdown of sources of payment as reported in 2013. Some calculations estimate that public payers (federal and state governments) account for almost half of all health care expenditures (46 percent), private third-party payer sources, 27 percent, while households pay the remaining 27 percent. Other calculations, however, estimate that public sources pay as much as 60.5 percent of total health spending, when taking into account federal tax subsidies for private insurance and government purchases of private insurance for public employees. In other words, government financing of the health care system in the U.S. is sizeable.

The U.S. spends far more public and private money combined on health care than any other OECD country – 16.4 percent of GDP in 2013 compared to the second-highest countries, the Netherlands and Switzerland at 11.1 percent of GDP. For context, Canada ranks 10th highest at an estimated 10.2 percent of GDP. Unfortunately, this higher spending does not translate well to health outcomes.

• How does insurance work in the US?

Private health insurance is either offered through your employer or school, or you have to buy it on your own. You can select a plan that suits you best from the ACA’s Health Insurance Marketplace. The ACA, which stands for the Affordable Care Act—it’s nicknamed “Obamacare”—provides subsidies to those who can’t afford high premiums of insurance plans. The size of the subsidy depends on the individual’s income. Some states like California, Colorado, New York, and Massachusetts run their own healthcare exchanges.

The world of health insurance also has its own language and an extended glossary. It helps to learn a few of the essential terms in order to understand the plan you’re buying:

• Premium: The monthly cost of your plan.
• Deductible: The amount you pay out of pocket before your insurance kicks in.
• Co-Insurance: The percentage of costs you still need to pay after your insurance kicks in.
• Co-pay: What you pay the doctor at every visit.

Cost of health insurance varies widely, and it depends on the types of benefits you choose. Usually plans with higher premiums cover more of your medical expenses. In 2018, premiums averaged $440 per month for individuals, and $1,168 per month for families.

• Beveridge Model

Named after William Beveridge, the daring social reformer who designed Britain’s National Health Service. In this system, health care is provided and financed by the government through tax payments, just like the police force or the public library.

Many, but not all, hospitals and clinics are owned by the government; some doctors are government employees, but there are also private doctors who collect their fees from the government. In Britain, you never get a doctor bill. These systems tend to have low costs per capita, because the government, as the sole payer, controls what doctors can do and what they can charge.

Countries using the Beveridge plan or variations on it include its birthplace Great Britain, Spain, most of Scandinavia and New Zealand. Hong Kong still has its own Beveridge-style health care, because the populace simply refused to give it up when the Chinese took over that former British colony in 1997. Cuba represents the extreme application of the Beveridge approach; it is probably the world’s purest example of total government control.

• Bismarck Model

Named for the Prussian Chancellor Otto von Bismarck, who invented the welfare state as part of the unification of Germany in the 19th century. Despite its European heritage, this system of providing health care would look fairly familiar to Americans. It uses an insurance system — the insurers are called “sickness funds” — usually financed jointly by employers and employees through payroll deduction.

Unlike the U.S. insurance industry, though, Bismarck-type health insurance plans have to cover everybody, and they don’t make a profit. Doctors and hospitals tend to be private in Bismarck countries; Japan has more private hospitals than the U.S. Although this is a multi-payer model — Germany has about 240 different funds — tight regulation gives government much of the cost-control clout that the single-payer Beveridge Model provides.

The Bismarck model is found in Germany, of course, and France, Belgium, the Netherlands, Japan, Switzerland, and, to a degree, in Latin America.

Compare and contrast the American System with the Bismarck and Beveridge Systems.

1. American Health Care Model :- Income base

In the United States, many aspects of health care are driven by income-level. Adults in the US are less likely to see a regular physician and are more likely to have untreated conditions than adults in Canada, while at the same time rating their care as either extremely high or low in quality more often than Canadians, who are more moderate in their responses. Disparities in care due to socioeconomic status and ethnicity are found in all countries, but tend to be more pronounced in the United States than in areas like Canada. The percent uninsured ranges for different states, from as low as 3.6% in Massachusetts to as high as 20.6% in Texas. As of 2015, the percent of uninsured persons is 13.0% in the United States. The debate over increasing coverage and minimizing costs still rages in Congress – any developments may drastically change these numbers.

2. The Bismarck Model: social health insurance model

Examples: Germany, Belgium, Japan, Switzerland
Relevance to the US: similar to employer-based health care plans and some aspects of Medicaid

A more decentralized form of healthcare, the Bismarck model was created near the end of the 19th century by Otto von Bismarck. Employers and employees fund health insurance in this model – those who are employed have access to “sickness funds” created by compulsory payroll dedications. In addition, private insurance plans cover every employed person, regardless of pre-existing conditions.

Health providers are generally private institutions, though the Social Health Insurance funds are considered public. In some countries, there is a single insurer (France, Korea); other countries may have multiple, competing insurers (Germany, Czech Republic) or multiple, non-competing insurers (Japan). Regardless of the number of insurers, the government tightly controls prices while insurers do not make a profit. These measures allow for the government to exercise a similar amount of control over prices for health services seen in the Beveridge model.

The requirement of employment for health insurance provides benefits and causes problems. These measures ensure that employed people will have the healthcare needed to continue working and ensure a productive workforce. Because it was not initially established to provide universal health coverage, the Bismarck model focuses resources on those who can contribute financially. With a shift in mindset from health as a privilege for employed citizens to a right for all citizens, the model faces a number of concerns, such as how to care for those unable to work or those who may not be able to afford contributions. More immediate practical concerns include how to contend with aging populations, with an uneven number of retired citizens compared to employed citizens, and how to stay competitive in attracting international companies that may prefer locations without these required payroll dedications.

3. The Beveridge Model: single-payer national health service

Examples: the United Kingdom, Spain, New Zealand, Cuba
Relevance to the US: similar to the Veterans Health Administration

The Beveridge Model was first developed by Sir William Beveridge in 1948. Established in the United Kingdom and spreading throughout many areas of Northern Europe and the world, this system is often centralized through the establishment of a national health service. The government acts as the single-payer, eliminating competition in the market and generally keeping prices low. Funding health care through income taxes allows for health care to be free at the point of service – after an appointment or operation, the patient does not have to pay any out-of-pocket fees because of their contribution through taxes. Under this system, a large majority of health staff is composed of government employees. A central tenant of this model is health as a human right. Thus, universal coverage is guaranteed by the government and anyone who is a citizen has the same access to care.

With the government as the sole payer in this healthcare system, costs can be kept low and benefits are standardized across the country. However, a common criticism of this system is the tendency toward long waiting lists. Because everyone is guaranteed access to health services, over-utilization of the system may lead to increasing costs. There are fears that adoption of a single-payer national health service in the US would lead to an increase in demand for all procedures, even medically unnecessary ones because citizens

would not pay upfront costs for these services. However, other analysts argue against this problem, stating that current American practices waste a similar amount of money covering the uninsured.

Another practical concern is the government response to crisis. In the case of a precarious national emergency, such as war or a health crisis, funding for health services may decline as public revenue decreases, exacerbating the financial burden inherent in a large influx of patients. Such a situation would require careful allocation of emergency funding before the crisis.

Highlights of three health care systems

1. The Beveridge model provides health care for all citizens and is financed by the government through tax payments. This “socialized medicine” model is currently found in Great Britain, Spain, and New Zealand.
2. The Bismarck model uses an insurance system and is usually financed jointly by employers and employees through payroll deduction. Unlike with the US insurance industry, Bismarck-type health insurance plans do not make a profit and must include all citizens. Doctors and hospitals tend to be private in Bismarck countries. This model is found in Germany, France, Belgium, the Netherlands, Japan, and Switzerland.
3.   American health care system is not a universally accessible system . Despite implementation of the Affordable Care Act (“Obamacare”), introduced in 2010, 10.4 percent of Americans (33 million) remain uninsured.Unfortunately, this higher spending does not translate well to health outcomes.

b) Impact of ACA in Americans

On March 23, 2010, the Patient Protection and Affordable Care Act was signed into law by the president. Barrack Obama’s administration has been working on the Affordable Care Act throughout his entire term with the hopes of changing healthcare for the better.It’s slowly rolling out into law and will continue to have far reaching impacts for the American people when it comes to their selection of health insurance.

The Affordable Care Act aims to achieve the following goals:

• Improve the quality of healthcare and patient safety
• Make coverage more secure for those who have insurance, and extend affordable coverage to anyone that is uninsured
• Ensure access to quality, culturally competent care for all American demographics
• Reduce the growth of healthcare costs while promoting high-value, effective care
• Emphasize primary and preventive care associated with community prevention services
• Promote the adoption and usefulness of health information technology

The Affordable Care Act, often referred to as Obamacare, has been dominating headlines for the past few months, especially with all the issues related to the launch of the Health Insurance Marketplace.

• Four Tiers of Healthcare Coverage

Under the Affordable Care Act, starting in 2014, there will be four tiers of coverage for health insurance plans named for different metals: Bronze, Silver, Gold and Platinum.

This approach gives Americans of all backgrounds different options of coverage depending on their interest, medical needs and budget. It’s required that all Americans be covered at a minimum of a bronze tier. These levels of coverage can be purchase by you or an employer to cover its employees.

The four levels are distinguished based on their actuarial values, or the average percentage of healthcare expenses that will be paid by the plan. The rest of the insurance plan on each tier will be paid by the individual being covered, based off the actuarial value. The actuarial values for the four tiers of coverage are approximately broken up like so:

• Bronze offers 60% coverage
• Silver offers 70% coverage
• Gold offers 80% coverage
• Platinum offers 90% coverage

• Access to a Range of Guaranteed Health Benefits & Services

The Affordable Care Act requires that all healthcare plans offer a minimum of ten categories of care for beneficiaries. Never before have all Americans been privy to this level of coverage offering comprehensive care in all categories with different restrictions applying to each.

• Emergency Services
• Patient Services
• Preventive and Wellness Services
• Prescription Drugs
• Pediatric Services
• Mental Health Services
• Rehabilitative Services
• Maternity and Newborn Care
• Laboratory Services
• Hospitalization

Employers or individuals can elect to purchase higher tier plans for more extensive coverage if they wish, it just costs more for the sole proprietor or the company. Many existing insurance plans today are grandfathered, but regardless, they must offer benefits in the above categories in order to remain legal.

• Holding Insurance Companies Accountable

This legislation aims to make insurance companies more accountable across all of their service offerings, ensuring their is more focus on providing reliable and helpful services to patients and less emphasis based on their profits.

• Main impacts in simple words:- Improve the quality of healthcare and patient safety. Make coverage more secure for those who have insurance, and extend affordable coverage to anyone that is uninsured. Ensure access to quality, culturally competent care for all American demographics.