A Primer on Healthcare Systems + Public and Private Insurance
A skeleton on the US Healthcare systems and a basic overview of public and private insurance.
I’ve always been fascinated with the growing complexities of our Healthcare system. The price of life is so utterly expensive, and the growing costs of maintaining health aren’t looking like it’ll plateau anytime soon. I’m sure we’ve all experienced healthcare burdens or read articles on the internet about how a family is on the verge of bankruptcy because of their unpaid medical bills, or even seen a news report on that same story. And this happens on a consistent basis.
I’ve worked in the dental industry for a few years, and I just found so many discrepancies between providers, insurance companies, and patients. And at the end of the day, this industry seems to forget that the main premise is to serve. Too often, we find ourselves lost in greed, but humanity deserves more than that. We deserve quality care at an affordable price. And I also feel that physicians and healthcare professionals be paid fairly for their education, their resilience, and their bravery. They hold our health in their hands, and that is a grave responsibility.
So, I’m curious. Why is this so complex? What is the root issue if there is any? What are alternative solutions to help people? How can we be better?
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Let’s take a deep dive into America’s Healthcare systems and understand the fundamentals, so that way, we can figure out a solution.
There are three components to our healthcare systems.
Consumers: patients, humans, our families, and loved ones
Healthcare professionals: nurses, doctors, technicians, etc.
Facilitating organizations: hospitals that finance, coordinate, and regulate health care
Our system has three goals in mind:
Quality of care
Access to care
Costs of care
We find that cost drives access and quality. So now, we’re in a predicament- the better the quality, the higher the cost, and the lower the accessibility. And vice-versa. The lesser the quality, the lower the cost, and the higher the accessibility.
And there is no doubt that one of the largest problems in our country, is the rising costs of healthcare.
In 1970, healthcare costs accounted for 7.4% of the GDP. In 2016, it accounted for 18% of the country’s GDP and is expected to account for a fifth of our GDP by 2028. (Source: statista.com/statistics/934320/us-health-expenditure-)
And as of 2020, the US’s GDP on national health spending accounted for 17.7%, and it is estimated that each American spend about $11,582 on healthcare. (Source: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsHistorical#:~:text=U.S.%20health%20care%20spending%20grew,spending%20accounted%20for%2017.7%20percent)
Since costs are forecasted to continue to rise, then 2 probable things will occur.
Access: we think twice when we get care - ‘Do I really have a cough? Or am I making it up? It’s probably nothing’
Quality: If we go to a lesser expensive facility, will quality be compromised?
But why is US Healthcare so expensive?
Admin costs
Greed
Cost of technology
Drugs and pharmaceuticals
But, wait there’s more. The web of Healthcare Systems is extremely complex and obviously, I need to sprinkle in complexities.
Our system intertwines governmental insights and actions, market forces, and voluntary charitable initiatives (ie. some insurance companies and hospital organizations) to deliver health services.
And the fact of the matter is that most people can only be seen if they have insurance. Hence why in 2008, our past president, Barack Obama launched Obamacare which had one goal in mind- give all American people, insurance.
So now that we have a basic understanding of what our healthcare goals are, how we staged our system, some of the complexities, and the problems in our current healthcare system, let’s talk about how we finance our health.
And that’s one word- INSURANCE.
But what exactly is health insurance?
According to Cigna, health insurance is a legal agreement between you and an insurance company. That agreement includes a health plan to pay for care, so you don’t have to pay for all the costs on your own.
So let’s dive in.
We currently have two options in the states- ‘Public Insurance’ and ‘Private Insurance'.’
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Public Insurance
There are four types of public insurance:
Medicare
Medicaid
State Children’s Health Insurance Program
Veteran’s Administrative Benefits
For the brevity of this post, I will only be focusing on Medicare. In a later post, I will be breaking down the other three.
Medicare
Medicare health insurance covers:
The elderly
Those under 65 with social security disability benefits for the past two years and long-term disabilities
Medicare is finaced by:
US General Fund
Employee Contributions
There 4 distinct coverage plans:
Medicare A
Medicare B (voluntary)
Medicare C (voluntary)
Medicare D (voluntary)
Medicare A - Hospital Care
In general, this covers:
Inpatient care in a hospital
Skilled nursing facility care
Nursing home care (that isn’t long-term care or custodial care)
Hospice care
Home health care
However, there are limitations on the number of days of hospitalization, days of care, and the level of care that can also determine the status of a patient’s health.
Medicare B - Health
Medicare B is the public, voluntary option for:
Medical health care coverage
Durable medical equipment
Ambulance services
Outpatient rehabilitative services
Some home healthcare services
X-Ray scans
Certain lab exams
Combined, A and B offer a significant amount of coverage. However, not all health care services are covered. This is why it is recommended people do not solely rely on Medicare for health coverage needs.
Medicare C - Advantage aka ‘Private Health Plan’ or ‘Medicare Advantage Plan’
This is huge and can be a great addition to your current Medicare plan. Part C delivers about 35% of all Medicare benefits and offers additional coverage, including:
Vision
Dental
Hearing
Health Programs
What Medicare does, is pay a fixed amount of premiums every month to the third-party plan, which will give you access to additional benefits. What this means is that the government will pay large institutions (think Kaiser and Sutter) so they (Kaiser and Sutter) so they can deliver care.
And last but not least,
Medicare D- Prescriptions
This is also a voluntary program that helps pay for all prescription needs. However, this part comes with many loopholes and unanswered questions and can create a lot of confusion. Patients need to keep track of their medications and their own drug regimen recommended by physicians because that option may not be available on the plan’s formulary list, which could mean you need to seek options elsewhere.
What’s also curious is that there is Donut Hole gap. After a patient has paid a certain amount (deductible) and your plan has paid their share of funds and if there is still a cost for the drug, you are responsible for the rest of the cost of prescriptions.
And depending on the option you sign up for, there are gaps in other parts of coverage, including:
Dental
Vision
Hearing
SNF Care
Preventative Care
Prescriptions
And there you have it. This is a condensed overview of Medicare. Now let’s get into private health insurance.
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Private Insurance
There are six types of coverage when it comes to private insurance.
We have:
Health Maintenance Organizations (HMOs)
This plan delivers all health services through a network of providers. Typically, patients usually see a primary care physician (PCP) in-network and if they need a specialist, the PCP will refer them to a specialist.
This plan is most restrictive, but also can be one of the most affordable options.
Ie. Kaiser
Preferred Provider Organizations (PPOs)
With this type of plan, patients typically have the freedom to choose their own PCP and their own specialists. Patients also have the option of seeing a specialist even before they see their PCP. And with this freedom, there is a higher cost associated with buying this plan.
Ie. Blue Shield Blue Cross
Exclusive Provider Organizations (EPOs)
With this plan, services are from a local network of doctors and hospitals to choose from that are in the plan’s network.
Point-of-Service (POS)
This is an HMO and PPO plan hybrid. You are able to use in-network physicians as your PCP and go outside your provider’s network for other healthcare services and needs.
High-deductible health plans (HDHP)
Health Savings Account (HSAs)
HDHP’s and HSA’s work cohesively together. When you enroll in an HDHP, typically patients pay a lower monthly premium and a higher deductible. And if you combine this plan with an HSA, then some medical expenses can be paid tax-free.
HSA’s are really cool. It is an option to invest a part of your pre-tax income into an account that grows (it is similar to a mutual fund - where your funds are invested in the stock market) and when you need to pay for a healthcare service, you are able to take out funds from your HSA account. That money will never be taxed.
Now that we know what kinds of options we have, lets see how our country finances health care!
Money is collected through various means- premiums, tax appropriations, general revenue funds, insurance companies, directly from private payers, etc.
And for most types of health care, the provider will bill the insurance company which pays a standard fee. The patient may need to pay a co-payment or any balance that their insurance company doesn’t cover. And if this was funded for public programs, providers usually accept a contractually agreed upon reimbursement.
And to add to this, let’s quickly take a second to discuss “Prior Authorization” for some services.
Insurance companies require prior approval for services, and if it’s not completed, they may deny service and even payment. And on a tangent, this has always boggled my mind- how does this make sense? Do insurance companies have physicians that screen the validity of service or treatment? Do they deny coverage based on how expensive treatment is? Are they actually doing this in the patient’s best interest? What about physicians? Does this neglect the efficacy of a physician’s decision?
I don’t really know.
To add, some insurance companies also require episodic reports to justify continued services. For example- if we have a 48-year-old man that breaks his hand and the doctor recommends 10 sessions of hand occupational therapy, but if by the ninth session, recovery isn’t adequate and the physician will recommend four additional sessions, the insurance company will have to see if this request is valid.
And there you have it. A highly condensed overview of our current healthcare system. Let me know your thoughts.
Until next time,
Damini