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Introduction to Healthcare and Public Health in the US

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1 Introduction to Healthcare and Public Health in the US
Welcome to Introduction to Healthcare and Public Health in the US: Financing Healthcare (Part1). This is Lecture (b). The component, Introduction to Healthcare and Public Health in the US, is a survey of how healthcare and public health are organized and services delivered in the US. Financing Healthcare (Part 1) Lecture b This material (Comp1_Unit4b) was developed by Oregon Health and Science University, funded by the Department of Health and Human Services, Office of the National Coordinator for Health Information Technology under Award Number [IU24OC000015)].

2 Financing Healthcare (Part 1) Learning Objectives
Understand the importance of the healthcare industry in the US economy and the role of financial management in healthcare.  (Lecture b) Describe models of health care financing in the US and in selected other countries. (Lecture c) Describe the history and role of the health insurance industry in financing healthcare in the United States, and Federal laws that have influenced the development of the industry. (Lecture a) Understand the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs. (Lecture d) Understand the various roles played by government as policy maker, payer, provider, and regulator of healthcare. (Lecture d) Describe the organization and function of Medicare and Medicaid. (Lecture e) The objectives for Financing Healthcare (Part 1) are: Understand the importance of the healthcare industry in the US economy and the role of financial management in healthcare.  Describe models of health care financing in the US and in selected other countries Describe the history and role of the health insurance industry in financing healthcare in the United States, and Federal laws that have influenced the development of the industry. Understand the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs. Understand the various roles played by government as policy maker, payer, provider, and regulator of healthcare. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

3 Lecture b Goals Health care spending
Economic impact and gross domestic product Health care jobs The History of the US Health Insurance Industry Historic legislation and factors contributing to the current US system of insurance Roles of government in health care Privately funded health care Publically funded health care Role Important federal laws This lecture describes the role that healthcare plays in the US economy including healthcare expenditures and methods of financing. A healthcare system provides services for the prevention and treatment of illness and the maintenance of the health of a population. The model for a country’s healthcare system may be public, private, or mixed, and varies from country to country. The US healthcare system is a mixed model of private healthcare organizations (HCOs) and government operated systems such as the Military Health System, the Veterans Administration, and the Indian Health Service, among others. No matter how an organization structures the delivery of healthcare services, the challenge of paying for the services it provides is a complex and taxing problem. It is important that the collection and disbursement of funds is appropriately managed to ensure the continued delivery of healthcare services. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

4 Healthcare Financing & Expenditures
the collection and pooling of funds used to pay for healthcare services provided by a healthcare system, and a mechanism of payment for these services Healthcare expenditures represent the total value of the healthcare services delivered by the healthcare system in a time period Methods for examining spending include: Category of Service Contributor Payer This slide defines what is meant by healthcare financing and healthcare spending. Healthcare financing is the collection and pooling of funds used to pay the cost of healthcare services provided by a healthcare system to individuals and populations. It also involves a method for the distribution of payments for the services provided. Healthcare expenditures, or spending, represent the total value of the services delivered during a time period, usually one year. Various methods can be used to examine spending including category of service, contributor, and payer. For this discussion and using the Centers for Medicare & Medicaid Services (CMS) actuarial categories, healthcare services include hospital, nursing, and home healthcare; physician, dental, and ancillary services; prescription medications; and equipment, public health activities, research, administration, and infrastructure. Contributor and payer may appear to be the same, but there is a distinction to be made between the two. Contributors represent the various governmental and private entities that provide money into the pool or fund used to pay for services. Payers represent the fund or pool that pays for healthcare services. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

5 The US Healthcare Industry
Fifth largest sector of the economy by sales 14.3 million employees More than any other sector 10 of 20 fastest growing occupations 3.2 million new jobs by 2018 The healthcare industry is one of the largest industries in the US. According to the latest Bureau of Labor Statistics information from 2008, the healthcare industry employs approximately 14.3 million people. It has 10 of the 20 fastest growing occupations, and will generate an additional 3.2 million jobs by 2018. With this in mind, the next slide will look at the economic impact of the healthcare industry and healthcare spending on the US economy and the gross domestic product, or GDP. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

6 Healthcare and the Economy National Healthcare Spending 2009
Gross Domestic Product (GDP): $14.25T National Health Spending: $2.5T as percentage GDP: 17.6% projected spending %GDP (2019): 19.6% U.S. Population (Millions): 305M U.S. Per Capita Healthcare Costs: $8086 The GDP is a measure of the US economy that reflects the market value of all goods and services produced in a given period of time. It indicates how fast or slow the economy is growing year to year, and allows comparison of the US economy to those of other countries. In 2009, the US GDP was just over fourteen trillion dollars. Approximately two point five trillion dollars, or seventeen point six percent of GDP was spent on healthcare, the highest worldwide. This translates into a per capita value of more than eight thousand dollars and represents one out of every six dollars spent in the US during It is projected that by 2019, spending will approach nineteen point six percent of GDP, or one out of five dollars spent in the US economy. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

7 National Health Expenditures and Their Share of Gross Domestic Product, 1960-2009
This slide shows a chart prepared by the Kaiser Family Foundation, that illustrates the increase in total national healthcare spending in billions of dollars for select years from 1960 until 2009 adjusted to 2009 dollars, and as a percentage of GDP. Healthcare spending as a percentage of GDP expanded by 3.8% during the last ten years compared to an average of 2.15% for the previous four decades. 5.2% % % % % % % % % % % % 16.6% % 4.1 Chart: Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at (see Historical; NHE summary including share of GDP, CY ; file nhegdp09.zip). (CMS, 2011, PD-US, CC BY-NC-SA 3.0) Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

8 National Health Expenditures per Capita, Select Years 1960-2009
In every year since 1960, the average cost of healthcare per person has risen. Total national healthcare expenditures per capita in 2009 reached almost $8100. Healthcare expenditures continue to outpace the consumer price index in every year. 4.2 Chart: The Kaiser Family Foundation, Kaiser Fast Facts. Data Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at (see Historical; NHE summary including share of GDP, CY ; file nhegdp09.zip). Available at (KFF, CMS, 2011, PD-US, CC BY-NC-SA 3.0) . Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

9 Total Health Expenditure per Capita, Select Countries, 2008
When comparing per capita healthcare expenditures in the US to other countries, the US spends fifty percent more than the next closest industrialized country, Norway, and almost twice the average expenditure of other industrialized countries. With all the money being spent in the US, one must ask: Where is the money being spent? What is the source of the funds to pay for all these healthcare expenditures? How is the money distributed to the various organizations and participants? One may look at spending in a number of different ways - by category of service, by contributors to spending, and by type of payer. 4.3 Chart: The Kaiser Family Foundation, Kaiser Fast Facts. Data Source: Organisation for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: /data en (Accessed on 14 February 2011). Available at (KFF, CMS, 2011, PD-US, CC BY-NC-SA 3.0) . Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are PPP adjusted. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

10 National Health Care Spending by Category of Service 2009
Spending Category US$ (Billions) Hospital Expenditures $759.1 Physician and Ancillary Clinical Expenditures $505.9 Nursing Care Facilities, Home Health Care, & Other Residential $327.9 Prescription Drug Expenditures $249.9 Dental & Other Professional Expenditures $169 Administration $163 Medical Equipment $78 Public Health Activity $77.3 Research, Structures, and Equipment $156.2 Total National Healthcare Expenditures $2486.3 This table groups national health care spending into nine categories. The four largest categories, hospital care, physician services, nursing and residential services, and prescription drugs, account for approximately three quarters of the nearly two point five trillion dollars spent in 2009. Healthcare spending is growing faster than most other sectors of the economy, and faster than the economy as a whole. This rapid increase in spending, coupled with the recession and rising federal deficit, places great strains on companies and individuals. Since 1999, family premiums for employer-sponsored health coverage have increased by 131 percent. 4.4 Table: Adapted from data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group. (CMS, nd., PD-US, CC BY-NC-SA 3.0). Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

11 2009 National Health Expenditures by Category (%)
This chart illustrates the data from the previous slide as a percentage of total spending. As seen on the right side of the slide, hospital care and physician services represent slightly more than one half of total spending. 4.5 Chart: National Health Expenditures by Category (%). Adapted from Centers for Medicare and Medicaid Services (CMS), Office of the Actuary . (CMS, nd., PD-US, CC BY-NC-SA 3.0). Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

12 National Healthcare Expenditures Distribution by Contributor 2009
Another method of classifying healthcare spending examines the contributors to the funds used to pay for services. This chart, prepared by the California HealthCare Foundation using CMS Office of the Actuary data, illustrates the percentage of healthcare spending from different contributors. As seen on the chart, Federal and state and local contributions represent twenty-seven and sixteen percent respectively or forty-three percent of the all spending, while private sector contributions represent the remaining fifty-seven percent. Federal, state and local government contributions to funding include general tax revenues used to fund healthcare systems such as the Federal government’s Indian Health Service or a state or county health department. It also includes any payroll tax and the cost of purchasing private health insurance for government employees. Households in this slide represent individual and family contributions and include the employee portion of health insurance premiums, payroll taxes, and out-of-pocket costs other than premiums which includes deductibles, co-payments/co-insurance, and non-covered services. Private business contributions include the employer portion of premiums for workers’ health insurance, and payroll taxes. The remaining 7% of healthcare financing funds come from the philanthropic activity of private organizations. 4.6 Chart : US Healthcare Expenditures by Contributor (2009). (CMS, CHCF, 2011, PD-US). Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

13 US Healthcare Expenditures by Payer (2009)
Spending by Payer, 2009 US $ (Billions) Percentage of Spending Out of Pocket 299.3 12.0% Private Health Insurance 801.2 32.2% Medicare 502.3 20.2% Medicaid 373.9 15.0% VA/DOD/CHIP/Other 276.1 11.1% Public Health 77.2 3.1% Investment (Research & Infrastructure) 156.2 6.3% 100.0% This table shows national healthcare expenditures by payer for the year 2009 and the percentage for each. 4.7 Table: National Health Expenditures by Payer, (CMS, nd., PD-US, CC BY-NC-SA 3.0) Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

14 National Health Expenditures by Payer, 2009
This slide presents a graphical representation of the information contained in the previous slide. Due to rounding, the totals equal 99%. Investment refers to research and infrastructure expenditures, and other payers include Department of Defense/Veterans Administration (OD/VA) (3.2%) and other Federal and state funded programs (7.9%) such as the Children’s Health Insurance Program (CHIP), Indian Health Service, Workers' Compensation, the Substance Abuse and Mental Health Services Administration (SAMHSA) and School Health, among others. 4.8 Chart: US Healthcare Expenditures by Payer (2009). (CMS, CHCF, 2011, PD-US). Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

15 Financing Healthcare (Part 1) Summary – Lecture b
US Healthcare and the Economy Highest healthcare costs in the world Healthcare cost represent almost one-fifth of GDP Healthcare jobs continue to grow Spending on services may be examined by Category of service Source of contributions used to pay for services The insurance payer or plan This concludes Lecture (b) of Financing Healthcare (Part 1). In summary, the US has the highest healthcare costs in the world and spends close to one fifth of its gross domestic product on healthcare. The good news is that the healthcare job market is consistently strong, and growth rates are often double those of other economic sectors. National healthcare expenditures can be examined by category of spending, contributor, and payer. Health insurance is an important factor in healthcare spending in the US. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

16 Financing Healthcare (Part 1) References – Lecture b
Centers for Medicare and Medicaid Services. National health expenditure data, Table 1: National health expenditures aggregate, per capita amounts, percent distribution, and average annual percent growth, by source of funds—selected calendar years 1960–2009. https://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp . Updated January 13, Accessed April 13, 2011. StarkLaw.org. Stark law–information on penalties, legal practices, latest news and advice. Accessed April 13, 2011. The Henry J Kaiser Family Foundation. U.S. health care costs explained. Updated March Accessed April 5, 2011. The Henry J Kaiser Family Foundation. Healthcare Costs: A Primer; available from: cfm Key information on health care costs. Last accessed March 22, 2011 The Henry J Kaiser Family Foundation. Menlo Park, CA: 2010 US Healthcare Costs; available from: Provides background information, links to key data and policy information on US healthcare costs. Last accessed March 22, 2011 References slide. No audio. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

17 Financing Healthcare (Part 1) References - Lecture b (continued)
Charts, Tables, Figures 4.1 Chart: The Kaiser Family Foundation, Kaiser Fast Facts. Data source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at (see Historical; NHE summary including share of GDP, CY ; file nhegdp09.zip). Accessed 11 Dec (CMS, 2011, PD-US, CC BY-NC-SA 3.0). 4.2 Chart: The Kaiser Family Foundation, Kaiser Fast Facts. Data Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at (see Historical; NHE summary including share of GDP, CY ; file nhegdp09.zip). Accessed 11 Dec Available at (KFF, CMS, 2011, PD-US, CC BY-NC-SA 3.0). 4.3 Chart: The Kaiser Family Foundation, Kaiser Fast Facts. Data Source: Organisation for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: /data en. Accessed on 11 Dec Available at (KFF, CMS, 2011, PD-US, CC BY-NC-SA 3.0). Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are PPP adjusted. 4.4 Table: Adapted from the National Health Care Spending by Category of Service Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at Accessed on 11 Dec (see Historical; NHE summary including share of GDP, CY ; file nhegdp09.zip). (CMS, nd., PD-US, CC BY-NC-SA 3.0). 4.5 Chart: National Health Expenditures by Category (%) Adapted from data source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at Accessed Dec 11, (see Historical; NHE summary including share of GDP, CY ; file nhegdp09.zip). (CMS, nd., PD-US, CC BY-NC-SA 3.0). References slide. No audio. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b

18 Financing Healthcare (Part 1) References - Lecture b (continued)
Charts, Tables, Figures 4.6 Chart: National Healthcare Expenditures Distribution by Contributor (2009), Data Source: Centers for Medicare and Medicaid Services (CMS), Office of the Actuary. Retrieved 11 Dec 2011 from: (CMS, CHCF, 2011, PD-US). 4.7 Table: National Health Expenditures by Payer, 2009 Data source: (see Historical; NHE summary including share of GDP, CY ; file nhegdp09.zip). Accessed December 11, 2011 from: https://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp. 4.8 Chart: US Healthcare Expenditures by Payer. CMS, CHCF(2009). Data Source: Centers for Medicare and Medicaid Services (CMS), Office of the Actuary. https://www.cms.gov/NationalHealthExpendData/25_NHE_Fact_Sheet.asp. Retrieved Jan 2012 from: (CMS, CHCF, 2011, PD-US). References slide. No audio. Health IT Workforce Curriculum Version 3.0/Spring 2012 Introduction to Healthcare and Public Health in the US Financing Healthcare Lecture b


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