INTRODUCTION TO US HEALTHCARE BASICS

The Development of Health Plans

1910. Health plans were in the form of prepaid group practices. These were healthcare systems in which plan members paid a monthly premium and in return received a wide range of medical services through an exclusive group of providers.

1929. Blue Cross plans providing prepaid hospital care were established.

1930. Blue Shield plans providing reimbursement for physician services were established.

1954. Individual practice associations (IPAs), which contracted with physicians in independent fee-for-service practices,emerged as a competitive response to health maintenance organizations (HMOs)

Growth of insurance sector

• For many years health plans accounted for only a small fraction of all health coverage.
• But in recent decades they have grown dramatically, and they now cover a large portion of the U.S. population. There have been many reasons for this growth, but we will focus on three key factors:
• HMO Act of 1973,
• Consumer and employer demand,
• Government involvement.

The HMO Act of 1973

• The HMO Act of 1973 One of the most important causes of the expansion of health

plans was the federal Health Maintenance Organization Act of 1973.

• This legislation was designed to reduce the cost of healthcare by increasing competition in the health coverage market and to increase access to health coverage for individuals without insurance or with only limited benefit.

Consumer and Employer Demand

• HMOs had significant success and consumers and employers sponsoring health coverage had come to embrace them.
• But a traditional HMO required members to receive healthcare only from participating
• providers and consumers became dissatisfied with this restriction.
• They wanted the lower cost of an HMO but more leeway in choosing providers.
• New health plan types were developed to address this demand (PPOs and POS products).
• Consumers also wanted coverage of speciality healthcare, such as dental care, vision care, behavioural health, and prescription drugs, and employers wanted more cost-effective ways of providing such benefits.
• In response, health plans developed speciality “carve-out” plans and products with specialized provider networks .

Government Involvement

• Government has long been involved in health insurance, at both the state and federal levels.
• 1973 Congress enacted the HMO Act. In 1996 it passed the Health Insurance Portability andAccountability Act (HIPAA), which included a wide variety of requirements for health plans. And most recently, in March 2010, the Affordable Care Act
(ACA)
• The government plays another important role in health plans—it is a major purchaser of health coverage, financing healthcare for millions of Americans through several programs

Health care debate

• A poll released in March 2008 by the Harvard School of Public Health and Harris Interactive found that Americans are divided in their views of the U.S. health system, and that there are significant differences by political affiliation.
• When asked whether the U.S. has the best health care system or if other countries have better systems, 45% said that the U.S. system was best and 39% said that other
countries' systems are better.
• There is currently an ongoing political debate centering around questions of access, efficiency, quality, and sustainability.
• Whether a government-mandated system of universal health care should be implemented in the U.S. remains a hotly debated political topic, with Americans divided along party lines in their views of the U.S. health system and what should be done to improve it.
• Those in favor of universal health care argue that the large number of uninsured Americans creates direct and hidden costs shared by all, and that extending coverage to all would lower costs and improve quality