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Understanding Health Care Policy

Last Updated:2014-Nov-29
Principal Writer:Barry Shatzman

Issue Sections

Understanding The Issue
Analysis and Perspectives
More Information

Reported News

Health Care Policy

Related Bills

American Health Security Act

2013 (S-1782)

Patient Protection & Affordable Care Act

2010 (HR-3590)

Related Court Cases

(2012) NFIB v. Sebelius

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What is this about?

Understanding health care in terms of public policy seems daunting at first, but basically it comes down to answering just one question:

If you become sick or injured, who pays the bill?

In the United States, there are three possible answers to the question...

o A private insurance company
o The government
o Your personal resources - savings or credit

This 2-minute video will help you understand how it works...

Of course, other perspectives need to be considered. People care about how much they'll need to pay for quality and timely health care when they need it.

Health care providers, meanwhile, are concerned about the best ways to provide effective care while keeping costs down, and still be appropriately compensated.

A national policy that improves the health of citizens while remaining economically feasible needs to satisfy all of these perspectives.

Understanding Health Care as Public Policy

It doesn't matter how healthy you are right now, what your lifestyle is, or what your political beliefs are. If you inherit or acquire some disease, if your kid smashes a finger at the gym, if you're the victim of a violent crime, or even if you just want an annual checkup, someone has to pay the doctor, hospital, pharmacy, physical therapist, and every other professional who helps you.

The real public policy choice comes down to whether providers are paid by private insurance providers or by a single government entity.

The third option - paying out of your own pocket - simply is unrealistic, as bills can run into many thousands of dollars. Even if you would prefer that option, as soon as you or a member of your family need any sort of health care, you'll find yourself buried in debt. And if you can't pay? Providers still need to provide you with basic emergency service - which will be paid for by other taxpayers. We won't discuss this option in any depth.

Keep this in mind. In all of these options, the money to pay providers ultimately comes from one source - YOU. For private insurers, that money comes from the premiums you pay. In the case of a government entity, the money comes (directly or indirectly) from some sort of tax or fee.

Our discussion here will provide a matter-of-fact comparision between the private insurance and single-payer (government) models. And we'll discuss important public policy details of each, such as...

o Should businesses be required to contribute to the health care costs of their employees?

o If you choose to not have medical insurance, how will you deal with a serious illness or injury?

o If you want insurance but can't afford it - or no insurance company will insure you because you're already sick - how will you receive health care and how will it be paid for?

As public policy questions, it's the job of your representatives to adopt a policy that best serves you.

How are you affected by health care public policy?

You have many concerns when it comes to health care. Way too many to list here. But here are few that come to mind...

o Can you see a doctor that you're comfortable with?

o What will you do if you're injured in car accident, or wake up with a weird rash, or become so stressed that you wonder how you can keep on going?

o What do you do if your child develops a high fever, or an excruciating toothache?

o How much will you spend on health care during the year for you and your family - even if everyone stays completely healthy?

o If your employer pays for all or part of your health care, will that discourage you from pursuing another job that you would find more fulfilling?

o Would an annual checkup or recommended test such as a colonoscopy or mammogram allow you to catch a life-threatening disease early enough to benefit from the least invasive and least expensive treatment?

It should be clear that our nation's public policies toward health care can have a profound impact on both the quality and length of your life. It is our mission to explain and advocate policies in which the overwhelming majority of Americans will be able to find satisfactory solutions to those concerns.

The Problem - By the Numbers

At the end of the day, health care is similar to anything else you buy. You want the best product for the least amount of money. So let's see how the United States is doing in that respect.

As you can see in the table above, the United States spends more than twice as much per person on health care as most other countries. It also spends a significantly larger portion of its Gross Domestic Product on health care - almost 20 percent.

This is money spent by both individuals and governments. It goes to - among others - doctors, hospitals, drug manufacturers, and insurance companies.

So what do we get for all the extra money we're spending? One measure of the quality of a country's health care is the life expectancy of a person born in that country. Yet the United States ranks only 49th in the world in life expectancy. In other words - we're spending far more on health care than virtually every other country in the world, yet people in 48 other countries (including all the ones shown in this chart) are expected to outlive us.

While the quality of health care is only one factor that contributes to a person's longevity, the data strongly suggests that our current way of doing business is severely hurting us - both financially and health-wise.

The Problem - For YOU

Chances are this country's health care policy has affected you - without you even thinking twice that it doesn't have to be that way.

o Maybe you've been turned down for insurance coverage because of a health issue you already have (a pre-existing condition). If you had insurance through a previous job, you might have noticed the letter you received in the mail that proves you had prior coverage - so you can't be denied. But what if you didn't have insurance before?

o Maybe you received a letter from your insurance company telling you they have a new network of providers, and if you want to keep your current doctor you'll have to pay more. Or your friend recommended a doctor - but that doctor isn't in your insurance company's network.

o Maybe you just turned 30, and your monthly premium is about to go up. Or you can choose a plan that means you'll have to pay more of your own money should you need to see a doctor.

Even buying insurance is a gamble. Do you think you'll be healthy, so you choose an inexpensive policy? Or do you spend a lot of money on an expensive policy that you might never use? The future of your finances and your health comes down to a roll of the dice.

And that's if you're generally healthy! If you get sick, you'll have a whole new set of problems to deal with.

o Your insurance company will evaluate your treatment, and decide whether or not they'll pay for it

o If your insurance company thinks your treatment will be expensive, they will review your original application and hunt for any omissions on your part that would allow them to void your policy - meaning you won't be covered after paying premiums for many years (in the insurance industry, this is called "recision")

o Your treatment might cost more than the maximum amount the insurance company has to pay - as stated in your policy. Then what?

o You might not be able to choose the best hospital for you. Or one that's close to your home.

All of these things are features of the health care policy in the United States - all written by the people you've chosen to represent you.

By the way, there's a reason we mention that this is the case in the United States. The United States is the only industrialized country that requires its citizens to rely on private insurers for their primary health care. Every other one - including those in the chart above - provides one form or another of guaranteed health care for their citizens.

How the Patient Protection and Affordable Care Act (Obamacare) helps you

The Patient Protection and Affordable Care Act, dubbed 'Obamacare' was signed into law by President Barack Obama on March 23, 2010. The most significant provisions took effect in 2014.

Key provisions include...

o Insurance companies cannot limit the amount they will pay during a year or over the lifetime of an insured person.

o Insurance companies cannot rescind coverage on someone if they get sick.

o Health care must provide preventive procedures such as mammograms and colonoscopies at no cost.

o Insurance companies must insure everyone, regardless of their health. In other words, the concept of "pre-existing conditions" is eliminated.

o Insurance companies cannot charge higher premiums because of a person's health.

Every state is required to have its own "health insurance exchange" - a marketplace where people can compare insurance companies and policies. There also is federal version of an exchange - for residents of states that do not set up their own.

Most people now are required to purchase a minimum amount of health care coverage. If you can afford health care insurance but choose to not buy it, the government will charge you a tax penalty. This provision is what has been labeled the mandate. To understand why the mandate is a necessary component of the law, read our discussion.

Also, the law provides for different types of financial help (depending on income level) to make health care affordable for most Americans - even the poorest.

To read our more in-depth discussion of the Patient Protection and Affordable Care Act, click here.

The problem with private insurance companies

For many people, the issue isn't that they're being required to pay for health care. The issue is that they're being required to buy it from a private insurance company. Here's why, from an individual's persective...

Imagine going to the grocery store and buying $20 worth of food. But after the register is totaled, the checker tells you that only 80 cents of every dollar you pay will go toward the food bill. You would need to hand the checker $25 to pay for that $20 worth of food.

Sound absurd? Well, that's how private insurance companies work. It's called "overhead", and it's the money used to pay for the company's operating expenses and profit (as well as multimillion-dollar executive bonuses and lobbyists).

Like any company, of course, an insurance company is expected to earn a profit for the service they provide. In this case, however, the company is providing a basic human service - similar to water, electricity, or fire protection - that most societies deem all of its members ought to have (mandated or not).

Some insurance companies typically have an overhead exceeding 30 percent - meaning that less than 70 cents out of every premium dollar you paid actually was used to pay health care providers.

One provision of the Patient Protection and Affordable Health Care Act limits the amount of overhead insurance companies are allowed to charge policy holders to 15 percent (though insurance companies are lobbying to reclassify some things previously classified as overhead to now be considered healthcare expenses). But, considering that every percentage point is adding to the cost of health care, it should be incumbent on us (and the people we elect to represent us) to ask whether a less expensive solution is possible.

What would be better?

We already know the answer. As we mentioned above, every industrialized nation other than the United States provides health care for its citizens. Though each country does it differently (and every system has its own unique set of problems just like the system in the United States) we've also shown that their citizens pay significantly less for health care than U.S. citizens. And with better outcomes.

But you don't need a passport to observe a better system. Medicare, which provides health care primarily to those over 65 years old, operates with an overhead of less than 5 percent. In other words, more than 95 cents out of every premium dollar Medicare collects is used to pay for health care.

We should note that a proposed addition to the Patient Protection and Affordable Care Act would have given all U.S. citizens the option of purchasing health care coverage through a government agency. Without a profit motive, such an agency would be in a better financial position to provide quality health care coverage at a reasonable price. This provision - dubbed the Public Option, was not included in the final bill.

Medicare - just like any large system - is not without its problems. It is likely that any version of the Public Option would have run into problems also. However, these things demonstrate that quality health care can be achieved in the U.S. at a much more reasonable cost than we're currently paying - all while leaving nobody uncovered.

Please read the other sections on this topic to learn more and understand the health care policy that will benefit the overwhelming majority of Americans (and that most likely includes you).

American Health Security Act of 2013

In December 2013, the American Health Security Act was introduced in the Senate. It would create a single-payer, universal health care system in the U.S.

Please see our discussion of the proposed policy.

Where do we get our data?

In the chart on health care spending and life expectancy, the data for per-capita spending and spending as a percentage of GDP comes from The World Bank.

Life expectancy data comes from the U.S. Central Intelligence Agency (their chart shows the U.S. at position 50 because it includes and overall statistic for the European Union).

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