Public Health out Of Pocket Expenses Questions

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Description

Question #1
Please answer the following questions/statements.
Explain to a patient what out-of-pocket expenses are and what is included.

What impact do these expenses have on a patient’s access to care?
What impact do these costs have on population health?
FORMULARIES

Question #2
Please answer the following questions/statements.
How would you explain a formulary exclusion to your patient? 

In your experience, are formularies useful? Why or why not?
PHARMACY BENEFIT MANAGERS

Question #3
Please answer the following questions/statements.
What roles do PBMs play in healthcare financing?

What are some of the current issues surrounding PBMs?
What will be the key impacts, according to you, of the Supreme Court’s
ruling in Arkansas vs. PBMs case?

Explain your answers.
2
EPP-2 Healthcare Finance Reflection Winter Semester 2023 (continued)
AFFORDABLE CARE ACT

Question #4
Please answer the following questions/statements.
How are circumstances in the healthcare system similar now to the year 2009?

How will these similarities drive healthcare reform over the next two years?
What do you suggest should be done to help solve some of the health care
problems we see now?1/6/2022
A Health Economics
Perspective on Public
Health
Ioana Popovici, Ph.D.
Associate Professor
Department of Sociobehavioral and
Administrative Pharmacy
College of Pharmacy
1

what is health economics

allocating limited healthcare
resources: disease treatment versus
health promotion, vaccination,
education

healthcare: right or privilege?

socioeconomic disparities in health and
the development of public health
insurance programs
Module Topics

Public Insurance programs (Medicaid,
Medicare, CHIP, etc.)

Private insurance (PPOs, ACOs, etc.)

socioeconomic disparities in health and
the need for health insurance reform
(reform efforts, Affordable Care Act)

implications for pharmacists
2
1
1/6/2022
Module Objectives
Discuss the importance of health economics in the allocation of limited healthcare
resources
Contrast health promotion, disease prevention, education, and vaccination with disease
treatment from an economic perspective
Recognize the need for public health insurance programs and the need for health
insurance reform
Compare and contrast the public health insurance programs in terms of coverage and
eligibility (Medicare, Medicaid, CHIP, etc.)
Differentiate between the different private health insurance plans (PPO, HMO, etc.)
Compare and contrast between private and public health insurance programs
Describe how the ACA impacts healthcare coverage and services in the healthcare system
3
Health

Health
 genetic factors
 environmental factors
 lifestyle
 healthcare

Health – “a state of complete physical, mental and social well-being” (World
Health Organization)

Victor Fuchs (Professor of Economics, Health Research and Policy, Stanford
University)
 “the greatest current potential for improving the health of the American
people is to be found in what they do or don’t do for themselves.”
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1/6/2022
Healthcare in the U.S.


life expectancy:
 1900: 47.3 years
 2017: 78.6 years
leading causes of death:
 1900: communicable diseases
 influenza and pneumonia, tuberculosis, diarrhea
 2017: chronic diseases
 heart disease, cancer, accidents (unintentional injuries), chronic
lower respiratory diseases
 2020: COVID-19
 3rd place
5
Healthcare in the U.S. (cont.)


Healthcare system focus:

diagnosis and treatment of disease

promotion of health
1979 – Healthy People: The Surgeon General’s Report on Health Promotion and Disease
Prevention (Department of Health and Human Services (DHHS) )

Healthy People 2030 – vision: “a society in which all people live long, healthy lives”

Objectives
(https://www.cdc.gov/nchs/healthy_people/hp2020/hp2020_topic_areas.htm):

physical activity

nutrition

obesity

tobacco use

substance use

access to health services
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Healthcare Spending in the U.S.

U.S. healthcare spending grew 4.6 percent in 2019, reaching $3.8 trillion or $10,966 per person

As a share of the nation’s Gross Domestic Product (GDP), health spending accounted for 17.7%

Spending accounts for 1 of every 9 employees in the U.S.

US healthcare system is the most expensive in the world

5,000 hospitals, 30,000 nursing homes, 800,000 physicians, 2.8 million registered nurses, and 10
million other healthcare workers (300,000 pharmacists)



Exercise: estimate the number of healthcare professionals in Cooper City (population 35,000)
based on approximate U.S. population 300 million
By 2028, health spending is projected to reach $6.2 trillion


$3,800,000,000,000
https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-andreports/nationalhealthexpenddata/nhe-fact-sheet.html
U.S. health spending fell for first time in 60 years in 2020 (2% decline)
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Healthcare Spending in the U.S.
Sources of Financing 1929, 1970, and 2012
•
Getzen’s Health Economics & Financing, 5th Edition
•
Copyright © John Wiley & Sons, Inc.
11
Factors linked to increases in U.S.
Healthcare Spending

Inflation

Exercise: Convert $1 in 1929 dollars to 2021 dollars

Use inflation calculator here: https://data.bls.gov/cgi-bin/cpicalc.pl

U.S. population growth (122 million in 1929 to 330 million today)

Increases in healthcare professionals’ incomes

Growth facilitated by the shift from individual payments to third-party
financing (cost-shifting)

Increases in range and intensity of healthcare services => increases in life
expectancy => larger elderly population => more healthcare spending
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Distribution of Individual Medical Care
Expenditures
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The Concentration of Personal Health Expenditures
•
Getzen’s Health Economics & Financing, 5th Edition
•
Copyright © John Wiley & Sons, Inc.
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U.S. Sources and Uses of Healthcare Funds, 2010
•
Getzen’s Health Economics & Financing, 5th Edition
•
Copyright © John Wiley & Sons, Inc.
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Pharmaceutical Spending in the U.S.
 Pharmaceutical expenditures -10% of healthcare costs

Fastest growing segment

Expected to increase by 50% in the next decade
 Americans spend more on medicines than Japan,
Germany, France, Italy, Spain, UK, Australia, New
Zealand, Canada, Mexico, Brazil, and Argentina…combined
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Sources of Funds for Pharmaceutical
Products
•
Getzen’s Health Economics & Financing, 5th Edition
•
Copyright © John Wiley & Sons, Inc.
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Health Insurance

Healthcare in the U.S. – expensive

A small percentage of the population consumes a large share of the total healthcare spent

Who pays for the healthcare of those who are sick?

Could the 1-5% with the greatest personal healthcare expenses be able to pay for these
without health insurance? Who pays?

Is it fair that we contribute to the healthcare expenses of others?

What is the reason we agree to contribute to the expenses of others?

Health insurance protects us against this risk of sudden large healthcare expenses


Risk aversion
Trade health insurance premium every month for expenses coverage if sick
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1/6/2022
Methods for Covering Risks

Use private savings to pay for current expenses

Assistance from family and friends

Charity as a means of social exchange

Social healthcare insurance

Private medical care insurance




Individuals trade with themselves at different time periods
Mutual obligation and reciprocity
Limited for most people
Contributions are mandatory through the tax system

Individual perspective: trade monthly premium for affordable treatment
if/when sick

Societal perspective: risk pooling
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Private Health Insurance Risk Pooling

Club with 100 members

Risk of getting sick: 1/100 (1%)

Healthcare expenditure: $25,000

Annual contribution per member: $250

Money earns interest in a bank account

Every year, money used to pay healthcare expenses of sick member

Society’s point of view: insurance is a method of pooling risk such that a person’s
loss (when sick) is shared across many people

Risk pooling: funds are collected from many people (most healthy) and used to
cover for a few people’s illnesses
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1/6/2022
Health Insurance Terminology

Premium for coverage
 Agreed upon fees paid for coverage of medical benefits for a defined
benefit period
 Can be paid by employers, unions, employees, or shared by both the
insured individual and the plan sponsor

Deductible

Fixed dollar amount during the benefit period – usually a year – that an
insured person pays before the insurer starts to make payments for
covered medical services
 Plans may have both per individual and family deductibles

Coinsurance rate
 A form of medical cost sharing in a health insurance plan that requires an
insured person to pay a stated percentage of medical expenses after the
deductible amount, if any, was paid
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Health Insurance Terminology (cont.)

Copayment
 A form of medical cost sharing in a health insurance plan that requires an
insured person to pay a fixed dollar amount when a medical service is
received

Maximum plan dollar limit
 The maximum amount payable by the insurer for covered expenses for
the insured and each covered dependent while covered under the health
plan

Maximum out-of-pocket expense
 The maximum dollar amount a group member is required to pay out of
pocket during a year
 Until this maximum is met, the plan and group member shares in the cost
of covered expenses
 After the maximum is reached, the insurance carrier pays all covered
expenses, often up to a lifetime maximum. (See previous definition.)
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Healthcare: Right or Privilege?

2020: 30 million Americans uninsured

1965: Medicaid and Medicare programs

2010: The Patient Protection and Affordable Care Act

universal coverage – access to healthcare coverage for every citizen

purpose: access to healthcare and improve major gaps in coverage

number of uninsured decreased from 44 million in 2013 to 27 million in 2016

pay for other people’s healthcare?

disease cure/treatment versus disease prevention/health promotion

managed care

single-payer plan?

decisions based on economic evaluations
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The comprehensive healthcare reform law enacted in
March 2010

Affordable
Care Act
(ACA)

The law has 3 primary goals:
•
Make affordable health insurance available to more
people. The law provides consumers with subsidies
(“premium tax credits”) that lower costs for
households with incomes between 100% and 400% of
the federal poverty level.
•
Expand the Medicaid program to cover all adults with
income below 138% of the federal poverty level. (Not
all states have expanded their Medicaid programs.)
•
Support innovative medical care delivery methods
designed to lower the costs of healthcare generally.
https://www.kff.org/health-costs/issuebrief/summary-of-coverage-provisions-in-the-patient/

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Summary of
Coverage
Provisions in
the Patient
Protection
and
Affordable
Care Act
•
Expansion of Public Programs
•
The Medicaid expansion to 138% of the federal
poverty level ($15,415 for an individual and
$31,809 for a family of four in 2012) for individuals
under age 65
•
American Health Benefit Exchanges
•
The creation of health insurance exchanges
through which individuals who do not have access
to public coverage or affordable employer
coverage will be able to purchase insurance with
premium and cost-sharing credits available to some
people to make coverage more affordable
•
Changes to Private Insurance
•
New regulations on all health plans that will
prevent health insurers from denying coverage to
people for any reason, including health status, and
from charging higher premiums based on health
status and gender
•
Young adults will be allowed to remain on their
parent’s health insurance up to age 26
•
The penalties to employers that do not offer
affordable coverage to their employees, with
exceptions for small employers.
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Thank you!
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18
1/6/2022
A Health Economics
Perspective on Public
Health
Ioana Popovici, Ph.D.
Associate Professor
Department of Sociobehavioral and
Administrative Pharmacy
College of Pharmacy
1

what is health economics

allocating limited healthcare
resources: disease treatment versus
health promotion, vaccination,
education

healthcare: right or privilege?

socioeconomic disparities in health and
the development of public health
insurance programs
Module Topics

Public Insurance programs (Medicaid,
Medicare, CHIP, etc.)

Private insurance (PPOs, ACOs, etc.)

socioeconomic disparities in health and
the need for health insurance reform
(reform efforts, Affordable Care Act)

implications for pharmacists
2
1
1/6/2022
Module Objectives
Discuss the importance of health economics in the allocation of limited healthcare
resources
Contrast health promotion, disease prevention, education, and vaccination with disease
treatment from an economic perspective
Recognize the need for public health insurance programs and the need for health
insurance reform
Compare and contrast the public health insurance programs in terms of coverage and
eligibility (Medicare, Medicaid, CHIP, etc.)
Differentiate between the different private health insurance plans (PPO, HMO, etc.)
Compare and contrast between private and public health insurance programs
Describe how the ACA impacts healthcare coverage and services in the healthcare system
3
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1/6/2022
5
Public Healthcare Financing in the US
– Social Insurance

Insurer = Government

Mandatory contributions

Programs:
 Medicare
 Medicaid
 Veterans Affairs healthcare (VA)
 TRICARE
 Indian Health Service (IHS)
 Federal Employees Health Benefits Program (FEHBP)
 Children’s Health Insurance Program (CHIP)
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Medicare

Established 1965

~ 61 million beneficiaries in 2020

Beneficiaries: Who is eligible for Medicare?
 > 65 years of age

< 65 years of age with disabilities  any age with end-stage renal disease (permanent kidney failure requiring dialysis or transplant) 7 7 8 4 1/6/2022 Medicare  Structure:    Original Medicare – fee-for-service  Part A – hospital care  Part B - outpatient care and physician services  Part C – alternative option through private insurance plans  Part D – optional prescription drug coverage through private insurance plans MediGap – private plans standardized by the Centers for Medicare & Medicaid Services (CMS) that cover out-of-pocket costs Financing:  Beneficiary premiums  Payroll taxes (payroll tax = 2.9% paid jointly by employee -1.45%- and employer -1.45%-)  General revenue  2013 - tax increased to 3.8% for incomes above $200,000/year 9 10 5 1/6/2022 Cost Control in Medicare  Expensive – why?  Cost control mechanism  Diagnosis related group (DRG) system  Introduced in 1984  Rather than pay the hospital for each specific service it provides, Medicare pays a predetermined amount based on the Diagnostic Related Group, which is based on the patient’s age, gender, diagnosis, and the medical procedures involved in your care  Reimbursements based on diagnosis, treatment, rather than length of stay  Based on the care given to and resources used by a "typical" patient within the group 11 12 6 1/6/2022 Medicare Part A – Hospital Coverage   Medicare Part A covers hospital expenses such as  inpatient care in hospitals  skilled nursing facility care  nursing home care (inpatient care in a skilled nursing facility that’s not custodial or long-term care)  hospice care  home healthcare Eligibility: automatic enrollment in Medicare Part A for all Medicare recipients  Every American over age 65 is eligible to enroll in Part A  Disabled Americans who have been out of work for 2 years are also eligible  Majority of Medicare Part A revenue is financed through payroll taxes  Premiums: No fee for the majority of beneficiaries*   *A small number of beneficiaries (who didn’t pay enough Medicare taxes during their working years) must pay a $471 monthly premium.  the vast majority of enrollees are exempt: those who worked in the U.S. for at least 10 years and paid the Medicare taxes Deductible: $1,484 in 2021 13 13 Medicare Part B - Doctor and Outpatient Services  Medicare Part B covers medically necessary services such as  doctors’ services  outpatient care  lab tests and diagnostic screenings  medical equipment  ambulance transportation  preventive care  Eligibility: Medicare recipients - voluntary enrollment  Medicare Part B is mostly financed by general revenues and beneficiary premiums  Premiums: $148.50 monthly for 2021  Individuals with an annual income of more than $88,000 pay a higher premium 14 14 7 1/6/2022 Medicare Part C (Medicare Advantage)  Eligibility: Medicare beneficiaries have the option to receive their Medicare benefits through private health plans as an alternative to the federally administered traditional Medicare program  Plans are offered by Medicare-approved private companies that must follow rules set by Medicare  Plans cover everything that original Medicare covers   Some plans pay for services that original Medicare does not, including dental and vision care  Most plans also fold in prescription drug coverage These private health plans receive capitated payments to provide all Medicare-covered services to plan enrollees (Medicare pays the private insurance company a fixed amount every month to provide all Part A and B benefits)  In addition, Medicare makes a separate payment to plans for providing prescription drug benefits under Medicare Part D  Medicare Part D is financed from general revenues and beneficiary premiums  Premium: $148.50 monthly for the Part B premium for 2021, plus any additional premium 15 set by the insurer 15 Medicare Part D - Prescription Drugs  Optional prescription drug coverage  Prior to its introduction in 2006 (Medicare Prescription Drug, Improvement, and Modernization Act), only 75% of elderly Americans had prescription drug insurance => Within 1 year, over 90% had coverage

Eligibility: everyone with Part A or B – voluntary prescription drug benefits

Coverage is available through private insurance companies approved by Medicare

Medicare Part D is financed from general revenues, beneficiary premiums, and
state payments

Premium: varies by plan, averages $30.50 monthly for 2021

Medicare subsidy covers most of that cost
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Medicare Part D

Two ways to use Medicare Part D:
 Medicare prescription drug plans (PDP):
 These plans add drug coverage to the original Medicare plan
 Must have Part A and/or Part B to join a separate Medicare drug plan
 Medicare Advantage Plans (Part C) with prescription drug coverage
 A specific Medicare health plan that offers Medicare prescription drug
coverage through private insurance companies
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What Medicare Part D drug plans cover

All plans must cover a wide range of prescription drugs

Formulary: the approved list of medications covered
 Plans include both brand-name prescription drugs and generic drug
coverage
 The formulary includes at least 2 drugs in the most commonly prescribed
categories and classes

Tiers (to lower costs)
 Most Medicare drug plans place drugs into different levels called “tiers”
on their formularies
 Drugs in each tier have a different cost (a drug in a lower tier
will generally cost you less than a drug in a higher tier)
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Medicare Part D formulary tiers
 Example:
•
Tier 1—lowest copayment: most generic prescription drugs
•
Tier 2—medium copayment: preferred, brand-name prescription drugs
•
Tier 3—higher copayment: non-preferred, brand-name prescription drugs
•
Specialty tier—highest copayment: very high cost prescription drugs
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Medication Therapy Management

CMS has mandated that Part D sponsors offer beneficiaries a Mediation
Therapy Management (MTM) program

MTM – free program offered by Part D plans to certain members to help
improve their medication use so they can better manage their chronic
conditions

Service: face-to face, via phone, mail, email, combination

Targeted beneficiaries:

Have multiple chronic diseases

Taking multiple Part D drugs

Likely to incur annual costs for covered Part D drugs that exceed $3,000
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Medicaid

Established 1965

Highly subsidized insurance coverage to low-income families, nearly free

71 million Medicaid beneficiaries in 2020

Financed and ran jointly by state and federal governments

State governments have wide latitude to set budgets, determine eligibility rules, and
decide how generous their programs will be

~15% of state budgets, 2nd to education

federal government matches state expenditures to help states finance Medicaid, but it
also mandates minimum levels of coverage and eligibility

Eligibility vary state by state:


Financial Eligibility: low income

Non-Financial Eligibility criteria: marital status, number of children, pregnancy,
health (disabled, blind), immigration status
Almost all expenses are paid with taxpayers dollars
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Children’s Health Insurance Program
(CHIP)

Eligibility: children up to 19 years of age whose parents earn too much to
qualify for Medicaid but not enough to afford private insurance

State-federal partnership that provides health insurance to low-income
children

Each state offers CHIP coverage and works closely with its state Medicaid program

Provides comprehensive coverage

Federal and state governments jointly finance CHIP

Premium: free or families may be required to pay a modest enrollment fee or
premiums

6.7 million children were enrolled in CHIP in 2020
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Veterans Affairs and TRICARE

VA and Tricare provide medical benefits in military including reservists, national guard,
military retiree and their dependents

Eligibility:

Any individual who serves on active duty in the armed forces and is discharged
other than dishonorably is technically eligible to receive health services from the
VA

Majority financed by the federal government

VA operates the nation’s largest integrated healthcare system (approximately 1,700
hospitals, outpatient clinics, counseling centers and long-term care facilities) with
coverage for almost all medical services, such as

Primary care or specialist physician office visits, immunizations, hospitalizations,
emergency room visits, medical and surgical supplies, as well as prescription
medications

VA provides care to nearly 9 million veterans

TRICARE

Insurance that is paid by the government, but uses private doctors and hospitals

Does not require services provided by the VA system

Financed by the federal government
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Indian Health Services (IHS)

Provides health benefits to members of federally-recognized Native American
Tribes and Alaska Native people

Majority financed by the federal government

Health services are provided directly by the IHS, through tribally contracted
and operated health programs, and through services purchased from private
providers

Covers 2.6 million American Indians and Alaska Natives
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Federal Employees Health Benefits
Program (FEHBP)

Provides health benefits to civilian federal employees, former employees,
family members, and former spouses

FEHBP is financed and managed by the federal Office of Personnel
Management (OPM) (federal government) via a “managed competition”
system by allowing qualified insurance companies, employee associations, and
labor unions to promote health insurance plans to governmental employees

FEHBP employers pay about 25% of the cost of insurance, the government
pays the rest (75%)

FEHB program is the largest employer-sponsored group health insurance
program in the world

covers 8 million federal employees, former employees, family members and former
spouses
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Private Health Insurance Plans

Fee-for-service
 Traditional type of insurance in which the health plan will either pay
healthcare provider directly or reimburse after claim is filed
 When medical attention is needed, the beneficiary can visit the doctor or
hospital of their choice

Managed care
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Managed healthcare

Managed healthcare plans are an alternative to traditional healthcare plans
like fee-for-service plans

Managed healthcare plans allow plan sponsors to negotiate reduced rates for
their policyholders with hospitals, medical service providers, and physicians,
by including them in the network

In the past few decades, managed healthcare plans have become a popular
health insurance choice, as healthcare costs have increased

The type of managed plan you have will dictate how you obtain your medical
services.

Main types of network health plans include:
 Health Maintenance Organization (HMO)
 Preferred Provider Organization (PPO)
 Point of Service Plan (POS)
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Health Maintenance Organization (HMO)
•
•
•
“Gatekeeper” principle
–
Primary care provider (PCP) serves as a gatekeeper and must authorize all
medical services (visit to specialist)
–
Services not authorized by the PCP will generally not be reimbursed
–
Rationale for gatekeeper is to avoid unnecessary expenses
Preferred networks
–
Plans will only pay for services provided by healthcare providers that they
have contracted with, aka “In Network” providers
–
Plans will not pay for “Out of Network” providers
Patient premiums are generally lowest among managed care plans
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Preferred Provider Organization (PPO)
•
No gatekeeper
–
•
Patients can choose their own providers (specialists) without having to use
a designated PCP first
Preferred networks with some out of network coverage
–
Patient can see any healthcare practitioner they want, but they are
financially incentivized to see in-network providers
•
•
e.g., Patient pays 10% to see in-network vs. 50% to see out-of-network
Patient premiums are generally higher than HMO premiums
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Point of Service (POS)

Hybrid PPO-HMO plans

Gatekeeper system like HMO
 Primary care physician who makes referrals to specialists as needed

Members who see providers in the POS plan network generally pay a reduced
service fee

Members can see providers outside the plan network only if they receive a
referral from their primary care physician, plus they’ll generally pay a much
larger percentage of the cost for out-of-network provider services

Higher copayments for outside plan providers but lower premiums than PPOs
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Managed care comparison
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Integrated Delivery System
(IDS)

A network of healthcare organizations all under the same parent company

Provides all healthcare services to a group of patients, such as within a geographic
location

Includes PCPs, physicians, hospitals, pharmacies, and insurers

Note: Not all models include all groups

All work towards the same financial and clinical goals

Main benefit: improved the coordination and quality of care while controlling costs

Do not cover services from out-of-network providers and require referrals for most
specialist visits

Example:

Florida Memorial Health Network

https://www.memorialhealthnetwork.net/
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Thank you!
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Description Question #1 Please answer the following questions/statements. Explain to a patient what out-of-pocket expenses are and what is included. What impact do these expenses have on a patient’s access to care? What impact do these costs have on population health? FORMULARIES Question #2 Please answer the following questions/statements. How would you explain a formulary exclusion to your patient?  In your experience, are formularies useful? Why or why not? PHARMACY BENEFIT MANAGERS Question #3 Please answer the following questions/statements. What roles do PBMs play in healthcare financing? What are some of the current issues surrounding PBMs? What will be the key impacts, according to you, of the Supreme Court’s ruling in Arkansas vs. PBMs case? Explain your answers. 2 EPP-2 Healthcare Finance Reflection Winter Semester 2023 (continued) AFFORDABLE CARE ACT Question #4 Please answer the following questions/statements. How are circumstances in the healthcare system similar now to the year 2009? How will these similarities drive healthcare reform over the next two years? What do you suggest should be done to help solve some of the health care problems we see now?1/6/2022 A Health Economics Perspective on Public Health Ioana Popovici, Ph.D. Associate Professor Department of Sociobehavioral and Administrative Pharmacy College of Pharmacy 1  what is health economics  allocating limited healthcare resources: disease treatment versus health promotion, vaccination, education  healthcare: right or privilege?  socioeconomic disparities in health and the development of public health insurance programs Module Topics  Public Insurance programs (Medicaid, Medicare, CHIP, etc.)  Private insurance (PPOs, ACOs, etc.)  socioeconomic disparities in health and the need for health insurance reform (reform efforts, Affordable Care Act)  implications for pharmacists 2 1 1/6/2022 Module Objectives Discuss the importance of health economics in the allocation of limited healthcare resources Contrast health promotion, disease prevention, education, and vaccination with disease treatment from an economic perspective Recognize the need for public health insurance programs and the need for health insurance reform Compare and contrast the public health insurance programs in terms of coverage and eligibility (Medicare, Medicaid, CHIP, etc.) Differentiate between the different private health insurance plans (PPO, HMO, etc.) Compare and contrast between private and public health insurance programs Describe how the ACA impacts healthcare coverage and services in the healthcare system 3 Health  Health  genetic factors  environmental factors  lifestyle  healthcare  Health – “a state of complete physical, mental and social well-being” (World Health Organization)  Victor Fuchs (Professor of Economics, Health Research and Policy, Stanford University)  “the greatest current potential for improving the health of the American people is to be found in what they do or don’t do for themselves.” 4 2 1/6/2022 Healthcare in the U.S.   life expectancy:  1900: 47.3 years  2017: 78.6 years leading causes of death:  1900: communicable diseases  influenza and pneumonia, tuberculosis, diarrhea  2017: chronic diseases  heart disease, cancer, accidents (unintentional injuries), chronic lower respiratory diseases  2020: COVID-19  3rd place 5 Healthcare in the U.S. (cont.)   Healthcare system focus:  diagnosis and treatment of disease  promotion of health 1979 – Healthy People: The Surgeon General’s Report on Health Promotion and Disease Prevention (Department of Health and Human Services (DHHS) )  Healthy People 2030 – vision: “a society in which all people live long, healthy lives”  Objectives (https://www.cdc.gov/nchs/healthy_people/hp2020/hp2020_topic_areas.htm):  physical activity  nutrition  obesity  tobacco use  substance use  access to health services 6 3 1/6/2022 Healthcare Spending in the U.S.  U.S. healthcare spending grew 4.6 percent in 2019, reaching $3.8 trillion or $10,966 per person  As a share of the nation’s Gross Domestic Product (GDP), health spending accounted for 17.7%  Spending accounts for 1 of every 9 employees in the U.S.  US healthcare system is the most expensive in the world  5,000 hospitals, 30,000 nursing homes, 800,000 physicians, 2.8 million registered nurses, and 10 million other healthcare workers (300,000 pharmacists)    Exercise: estimate the number of healthcare professionals in Cooper City (population 35,000) based on approximate U.S. population 300 million By 2028, health spending is projected to reach $6.2 trillion   $3,800,000,000,000 https://www.cms.gov/research-statistics-data-and-systems/statistics-trends-andreports/nationalhealthexpenddata/nhe-fact-sheet.html U.S. health spending fell for first time in 60 years in 2020 (2% decline) 7 8 4 1/6/2022 9 10 5 1/6/2022 Healthcare Spending in the U.S. Sources of Financing 1929, 1970, and 2012 • Getzen’s Health Economics & Financing, 5th Edition • Copyright © John Wiley & Sons, Inc. 11 Factors linked to increases in U.S. Healthcare Spending  Inflation  Exercise: Convert $1 in 1929 dollars to 2021 dollars  Use inflation calculator here: https://data.bls.gov/cgi-bin/cpicalc.pl  U.S. population growth (122 million in 1929 to 330 million today)  Increases in healthcare professionals’ incomes  Growth facilitated by the shift from individual payments to third-party financing (cost-shifting)  Increases in range and intensity of healthcare services => increases in life expectancy => larger elderly population => more healthcare spending 12 6 1/6/2022 13 Distribution of Individual Medical Care Expenditures 14 7 1/6/2022 The Concentration of Personal Health Expenditures • Getzen’s Health Economics & Financing, 5th Edition • Copyright © John Wiley & Sons, Inc. 15 16 8 1/6/2022 17 U.S. Sources and Uses of Healthcare Funds, 2010 • Getzen’s Health Economics & Financing, 5th Edition • Copyright © John Wiley & Sons, Inc. 18 9 1/6/2022 Pharmaceutical Spending in the U.S.  Pharmaceutical expenditures -10% of healthcare costs  Fastest growing segment  Expected to increase by 50% in the next decade  Americans spend more on medicines than Japan, Germany, France, Italy, Spain, UK, Australia, New Zealand, Canada, Mexico, Brazil, and Argentina…combined 19 Sources of Funds for Pharmaceutical Products • Getzen’s Health Economics & Financing, 5th Edition • Copyright © John Wiley & Sons, Inc. 20 10 1/6/2022 21 Health Insurance  Healthcare in the U.S. – expensive  A small percentage of the population consumes a large share of the total healthcare spent  Who pays for the healthcare of those who are sick?  Could the 1-5% with the greatest personal healthcare expenses be able to pay for these without health insurance? Who pays?  Is it fair that we contribute to the healthcare expenses of others?  What is the reason we agree to contribute to the expenses of others?  Health insurance protects us against this risk of sudden large healthcare expenses   Risk aversion Trade health insurance premium every month for expenses coverage if sick 22 11 1/6/2022 Methods for Covering Risks  Use private savings to pay for current expenses  Assistance from family and friends  Charity as a means of social exchange  Social healthcare insurance  Private medical care insurance     Individuals trade with themselves at different time periods Mutual obligation and reciprocity Limited for most people Contributions are mandatory through the tax system  Individual perspective: trade monthly premium for affordable treatment if/when sick  Societal perspective: risk pooling 23 Private Health Insurance Risk Pooling  Club with 100 members  Risk of getting sick: 1/100 (1%)  Healthcare expenditure: $25,000  Annual contribution per member: $250  Money earns interest in a bank account  Every year, money used to pay healthcare expenses of sick member  Society’s point of view: insurance is a method of pooling risk such that a person’s loss (when sick) is shared across many people  Risk pooling: funds are collected from many people (most healthy) and used to cover for a few people’s illnesses 24 12 1/6/2022 Health Insurance Terminology  Premium for coverage  Agreed upon fees paid for coverage of medical benefits for a defined benefit period  Can be paid by employers, unions, employees, or shared by both the insured individual and the plan sponsor  Deductible  Fixed dollar amount during the benefit period – usually a year – that an insured person pays before the insurer starts to make payments for covered medical services  Plans may have both per individual and family deductibles  Coinsurance rate  A form of medical cost sharing in a health insurance plan that requires an insured person to pay a stated percentage of medical expenses after the deductible amount, if any, was paid 25 Health Insurance Terminology (cont.)  Copayment  A form of medical cost sharing in a health insurance plan that requires an insured person to pay a fixed dollar amount when a medical service is received  Maximum plan dollar limit  The maximum amount payable by the insurer for covered expenses for the insured and each covered dependent while covered under the health plan  Maximum out-of-pocket expense  The maximum dollar amount a group member is required to pay out of pocket during a year  Until this maximum is met, the plan and group member shares in the cost of covered expenses  After the maximum is reached, the insurance carrier pays all covered expenses, often up to a lifetime maximum. (See previous definition.) 26 13 1/6/2022 Healthcare: Right or Privilege?  2020: 30 million Americans uninsured  1965: Medicaid and Medicare programs  2010: The Patient Protection and Affordable Care Act  universal coverage – access to healthcare coverage for every citizen  purpose: access to healthcare and improve major gaps in coverage  number of uninsured decreased from 44 million in 2013 to 27 million in 2016  pay for other people’s healthcare?  disease cure/treatment versus disease prevention/health promotion  managed care  single-payer plan?  decisions based on economic evaluations 27 28 14 1/6/2022 29 30 15 1/6/2022 31 The comprehensive healthcare reform law enacted in March 2010  Affordable Care Act (ACA)  The law has 3 primary goals: • Make affordable health insurance available to more people. The law provides consumers with subsidies (“premium tax credits”) that lower costs for households with incomes between 100% and 400% of the federal poverty level. • Expand the Medicaid program to cover all adults with income below 138% of the federal poverty level. (Not all states have expanded their Medicaid programs.) • Support innovative medical care delivery methods designed to lower the costs of healthcare generally. https://www.kff.org/health-costs/issuebrief/summary-of-coverage-provisions-in-the-patient/  32 16 1/6/2022 Summary of Coverage Provisions in the Patient Protection and Affordable Care Act • Expansion of Public Programs • The Medicaid expansion to 138% of the federal poverty level ($15,415 for an individual and $31,809 for a family of four in 2012) for individuals under age 65 • American Health Benefit Exchanges • The creation of health insurance exchanges through which individuals who do not have access to public coverage or affordable employer coverage will be able to purchase insurance with premium and cost-sharing credits available to some people to make coverage more affordable • Changes to Private Insurance • New regulations on all health plans that will prevent health insurers from denying coverage to people for any reason, including health status, and from charging higher premiums based on health status and gender • Young adults will be allowed to remain on their parent’s health insurance up to age 26 • The penalties to employers that do not offer affordable coverage to their employees, with exceptions for small employers. 33 34 17 1/6/2022 Thank you! 35 18 1/6/2022 A Health Economics Perspective on Public Health Ioana Popovici, Ph.D. Associate Professor Department of Sociobehavioral and Administrative Pharmacy College of Pharmacy 1  what is health economics  allocating limited healthcare resources: disease treatment versus health promotion, vaccination, education  healthcare: right or privilege?  socioeconomic disparities in health and the development of public health insurance programs Module Topics  Public Insurance programs (Medicaid, Medicare, CHIP, etc.)  Private insurance (PPOs, ACOs, etc.)  socioeconomic disparities in health and the need for health insurance reform (reform efforts, Affordable Care Act)  implications for pharmacists 2 1 1/6/2022 Module Objectives Discuss the importance of health economics in the allocation of limited healthcare resources Contrast health promotion, disease prevention, education, and vaccination with disease treatment from an economic perspective Recognize the need for public health insurance programs and the need for health insurance reform Compare and contrast the public health insurance programs in terms of coverage and eligibility (Medicare, Medicaid, CHIP, etc.) Differentiate between the different private health insurance plans (PPO, HMO, etc.) Compare and contrast between private and public health insurance programs Describe how the ACA impacts healthcare coverage and services in the healthcare system 3 4 2 1/6/2022 5 Public Healthcare Financing in the US – Social Insurance  Insurer = Government  Mandatory contributions  Programs:  Medicare  Medicaid  Veterans Affairs healthcare (VA)  TRICARE  Indian Health Service (IHS)  Federal Employees Health Benefits Program (FEHBP)  Children’s Health Insurance Program (CHIP) 6 6 3 1/6/2022 Medicare  Established 1965  ~ 61 million beneficiaries in 2020  Beneficiaries: Who is eligible for Medicare?  > 65 years of age  < 65 years of age with disabilities  any age with end-stage renal disease (permanent kidney failure requiring dialysis or transplant) 7 7 8 4 1/6/2022 Medicare  Structure:    Original Medicare – fee-for-service  Part A – hospital care  Part B - outpatient care and physician services  Part C – alternative option through private insurance plans  Part D – optional prescription drug coverage through private insurance plans MediGap – private plans standardized by the Centers for Medicare & Medicaid Services (CMS) that cover out-of-pocket costs Financing:  Beneficiary premiums  Payroll taxes (payroll tax = 2.9% paid jointly by employee -1.45%- and employer -1.45%-)  General revenue  2013 - tax increased to 3.8% for incomes above $200,000/year 9 10 5 1/6/2022 Cost Control in Medicare  Expensive – why?  Cost control mechanism  Diagnosis related group (DRG) system  Introduced in 1984  Rather than pay the hospital for each specific service it provides, Medicare pays a predetermined amount based on the Diagnostic Related Group, which is based on the patient’s age, gender, diagnosis, and the medical procedures involved in your care  Reimbursements based on diagnosis, treatment, rather than length of stay  Based on the care given to and resources used by a "typical" patient within the group 11 12 6 1/6/2022 Medicare Part A – Hospital Coverage   Medicare Part A covers hospital expenses such as  inpatient care in hospitals  skilled nursing facility care  nursing home care (inpatient care in a skilled nursing facility that’s not custodial or long-term care)  hospice care  home healthcare Eligibility: automatic enrollment in Medicare Part A for all Medicare recipients  Every American over age 65 is eligible to enroll in Part A  Disabled Americans who have been out of work for 2 years are also eligible  Majority of Medicare Part A revenue is financed through payroll taxes  Premiums: No fee for the majority of beneficiaries*   *A small number of beneficiaries (who didn’t pay enough Medicare taxes during their working years) must pay a $471 monthly premium.  the vast majority of enrollees are exempt: those who worked in the U.S. for at least 10 years and paid the Medicare taxes Deductible: $1,484 in 2021 13 13 Medicare Part B - Doctor and Outpatient Services  Medicare Part B covers medically necessary services such as  doctors’ services  outpatient care  lab tests and diagnostic screenings  medical equipment  ambulance transportation  preventive care  Eligibility: Medicare recipients - voluntary enrollment  Medicare Part B is mostly financed by general revenues and beneficiary premiums  Premiums: $148.50 monthly for 2021  Individuals with an annual income of more than $88,000 pay a higher premium 14 14 7 1/6/2022 Medicare Part C (Medicare Advantage)  Eligibility: Medicare beneficiaries have the option to receive their Medicare benefits through private health plans as an alternative to the federally administered traditional Medicare program  Plans are offered by Medicare-approved private companies that must follow rules set by Medicare  Plans cover everything that original Medicare covers   Some plans pay for services that original Medicare does not, including dental and vision care  Most plans also fold in prescription drug coverage These private health plans receive capitated payments to provide all Medicare-covered services to plan enrollees (Medicare pays the private insurance company a fixed amount every month to provide all Part A and B benefits)  In addition, Medicare makes a separate payment to plans for providing prescription drug benefits under Medicare Part D  Medicare Part D is financed from general revenues and beneficiary premiums  Premium: $148.50 monthly for the Part B premium for 2021, plus any additional premium 15 set by the insurer 15 Medicare Part D - Prescription Drugs  Optional prescription drug coverage  Prior to its introduction in 2006 (Medicare Prescription Drug, Improvement, and Modernization Act), only 75% of elderly Americans had prescription drug insurance => Within 1 year, over 90% had coverage  Eligibility: everyone with Part A or B – voluntary prescription drug benefits  Coverage is available through private insurance companies approved by Medicare  Medicare Part D is financed from general revenues, beneficiary premiums, and state payments  Premium: varies by plan, averages $30.50 monthly for 2021  Medicare subsidy covers most of that cost 16 16 8 1/6/2022 Medicare Part D  Two ways to use Medicare Part D:  Medicare prescription drug plans (PDP):  These plans add drug coverage to the original Medicare plan  Must have Part A and/or Part B to join a separate Medicare drug plan  Medicare Advantage Plans (Part C) with prescription drug coverage  A specific Medicare health plan that offers Medicare prescription drug coverage through private insurance companies 17 17 What Medicare Part D drug plans cover  All plans must cover a wide range of prescription drugs  Formulary: the approved list of medications covered  Plans include both brand-name prescription drugs and generic drug coverage  The formulary includes at least 2 drugs in the most commonly prescribed categories and classes  Tiers (to lower costs)  Most Medicare drug plans place drugs into different levels called “tiers” on their formularies  Drugs in each tier have a different cost (a drug in a lower tier will generally cost you less than a drug in a higher tier) 18 18 9 1/6/2022 Medicare Part D formulary tiers  Example: • Tier 1—lowest copayment: most generic prescription drugs • Tier 2—medium copayment: preferred, brand-name prescription drugs • Tier 3—higher copayment: non-preferred, brand-name prescription drugs • Specialty tier—highest copayment: very high cost prescription drugs 19 19 Medication Therapy Management  CMS has mandated that Part D sponsors offer beneficiaries a Mediation Therapy Management (MTM) program  MTM – free program offered by Part D plans to certain members to help improve their medication use so they can better manage their chronic conditions  Service: face-to face, via phone, mail, email, combination  Targeted beneficiaries:  Have multiple chronic diseases  Taking multiple Part D drugs  Likely to incur annual costs for covered Part D drugs that exceed $3,000 20 20 10 1/6/2022 Medicaid  Established 1965  Highly subsidized insurance coverage to low-income families, nearly free  71 million Medicaid beneficiaries in 2020  Financed and ran jointly by state and federal governments  State governments have wide latitude to set budgets, determine eligibility rules, and decide how generous their programs will be  ~15% of state budgets, 2nd to education  federal government matches state expenditures to help states finance Medicaid, but it also mandates minimum levels of coverage and eligibility  Eligibility vary state by state:   Financial Eligibility: low income  Non-Financial Eligibility criteria: marital status, number of children, pregnancy, health (disabled, blind), immigration status Almost all expenses are paid with taxpayers dollars 21 Children’s Health Insurance Program (CHIP)  Eligibility: children up to 19 years of age whose parents earn too much to qualify for Medicaid but not enough to afford private insurance  State-federal partnership that provides health insurance to low-income children  Each state offers CHIP coverage and works closely with its state Medicaid program  Provides comprehensive coverage  Federal and state governments jointly finance CHIP  Premium: free or families may be required to pay a modest enrollment fee or premiums  6.7 million children were enrolled in CHIP in 2020 22 22 11 1/6/2022 Veterans Affairs and TRICARE  VA and Tricare provide medical benefits in military including reservists, national guard, military retiree and their dependents  Eligibility:  Any individual who serves on active duty in the armed forces and is discharged other than dishonorably is technically eligible to receive health services from the VA  Majority financed by the federal government  VA operates the nation’s largest integrated healthcare system (approximately 1,700 hospitals, outpatient clinics, counseling centers and long-term care facilities) with coverage for almost all medical services, such as  Primary care or specialist physician office visits, immunizations, hospitalizations, emergency room visits, medical and surgical supplies, as well as prescription medications  VA provides care to nearly 9 million veterans  TRICARE  Insurance that is paid by the government, but uses private doctors and hospitals  Does not require services provided by the VA system  Financed by the federal government 23 23 Indian Health Services (IHS)  Provides health benefits to members of federally-recognized Native American Tribes and Alaska Native people  Majority financed by the federal government  Health services are provided directly by the IHS, through tribally contracted and operated health programs, and through services purchased from private providers  Covers 2.6 million American Indians and Alaska Natives 24 24 12 1/6/2022 Federal Employees Health Benefits Program (FEHBP)  Provides health benefits to civilian federal employees, former employees, family members, and former spouses  FEHBP is financed and managed by the federal Office of Personnel Management (OPM) (federal government) via a “managed competition” system by allowing qualified insurance companies, employee associations, and labor unions to promote health insurance plans to governmental employees  FEHBP employers pay about 25% of the cost of insurance, the government pays the rest (75%)  FEHB program is the largest employer-sponsored group health insurance program in the world  covers 8 million federal employees, former employees, family members and former spouses 25 25 Private Health Insurance Plans  Fee-for-service  Traditional type of insurance in which the health plan will either pay healthcare provider directly or reimburse after claim is filed  When medical attention is needed, the beneficiary can visit the doctor or hospital of their choice  Managed care 26 13 1/6/2022 Managed healthcare  Managed healthcare plans are an alternative to traditional healthcare plans like fee-for-service plans  Managed healthcare plans allow plan sponsors to negotiate reduced rates for their policyholders with hospitals, medical service providers, and physicians, by including them in the network  In the past few decades, managed healthcare plans have become a popular health insurance choice, as healthcare costs have increased  The type of managed plan you have will dictate how you obtain your medical services.  Main types of network health plans include:  Health Maintenance Organization (HMO)  Preferred Provider Organization (PPO)  Point of Service Plan (POS) 27 Health Maintenance Organization (HMO) • • • “Gatekeeper” principle – Primary care provider (PCP) serves as a gatekeeper and must authorize all medical services (visit to specialist) – Services not authorized by the PCP will generally not be reimbursed – Rationale for gatekeeper is to avoid unnecessary expenses Preferred networks – Plans will only pay for services provided by healthcare providers that they have contracted with, aka “In Network” providers – Plans will not pay for “Out of Network” providers Patient premiums are generally lowest among managed care plans 28 14 1/6/2022 Preferred Provider Organization (PPO) • No gatekeeper – • Patients can choose their own providers (specialists) without having to use a designated PCP first Preferred networks with some out of network coverage – Patient can see any healthcare practitioner they want, but they are financially incentivized to see in-network providers • • e.g., Patient pays 10% to see in-network vs. 50% to see out-of-network Patient premiums are generally higher than HMO premiums 29 Point of Service (POS)  Hybrid PPO-HMO plans  Gatekeeper system like HMO  Primary care physician who makes referrals to specialists as needed  Members who see providers in the POS plan network generally pay a reduced service fee  Members can see providers outside the plan network only if they receive a referral from their primary care physician, plus they’ll generally pay a much larger percentage of the cost for out-of-network provider services  Higher copayments for outside plan providers but lower premiums than PPOs 30 15 1/6/2022 Managed care comparison 31 Integrated Delivery System (IDS)  A network of healthcare organizations all under the same parent company  Provides all healthcare services to a group of patients, such as within a geographic location  Includes PCPs, physicians, hospitals, pharmacies, and insurers  Note: Not all models include all groups  All work towards the same financial and clinical goals  Main benefit: improved the coordination and quality of care while controlling costs  Do not cover services from out-of-network providers and require referrals for most specialist visits  Example:  Florida Memorial Health Network  https://www.memorialhealthnetwork.net/ 32 16 1/6/2022 Thank you! 33 17 Purchase answer to see full attachment

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