Four federal acts controlling hospital costs and health insurance evolution

Health Insurance Costs

Name the four acts controlling hospital costs through regulations, describe one in full detail. Discuss the evolution of health insurance as a third party payment system and discuss the role of government in health care funding.

Name the four acts controlling hospital costs through regulations, describe one in full detail.

The 1974 Health Planning and Resources Development Act

This Act created a national network of local health systems agencies, state health planning and development agencies, and state health coordinating councils. It shifted federal control of health resources to local agencies in a radical fashion, in an effort to contain healthcare costs. The National Council for Health Policy was created to aid in health planning on a federal level and a new provision was made for federal financial assistance for construction and modernization of health care facilities, specifically outpatient facilities, to contain costs. To further decentralize government health and resources planning, the day-to-day operation of the program was given to ten regional offices (Rubin 1974).

The Health Insurance Portability Act of 1996

The purpose of the Act, in its own words was to contain costs through streamlining healthcare record-keeping "by encouraging the development of a health information system through the establishment of standards and requirements for the electronic transmission of certain health information."

The Balanced Budget Act of 1997

The Balanced Budget Act of 1997 encompassed the largest cuts in the history of Medicare. Cuts in Medicare accounted for almost one half of the total reduction in federal expenditures. The Act reduced Medicare payments by $119 billion, including $2.3 billion in graduate medical education (GME) payment reductions. "Medicare is the largest single source of financing of GME, which accounted for 7% of Medicare expenditures by 1999" (Phillips et al. 2004, p.71).

Q2: Discuss the evolution of health insurance as a third-party payment system

Healthcare only became a necessity when medical treatment became relatively safe and accurate. In 1929, "the first modern group health insurance plan was formed. A group of teachers in Dallas, Texas, contracted with Baylor Hospital for room, board, and medical services in exchange for a monthly fee. Several large life insurance companies entered the health insurance field in the 1930's and 1940's as the popularity of health insurance increased. In 1932 nonprofit organizations called Blue Cross or Blue Shield first offered group health plans. Blue Cross and Blue Shield Plans were successful because they involved discounted contracts negotiated with doctors and hospitals. In return for promises of increased volume and prompt payment, providers gave discounts to the Blue Cross and Shield plans" (History, 2010, Neurosurgery). However, all collection of payments was conducted, at that time, by Blue Cross.

More powerful unions began to unify workers together in collectives to facilitate bargaining with employers for healthcare, and during World War II wage freezes, employers used health insurance to attract higher-quality employees. However, third-party payer systems became more popular with the increased bureaucratization of healthcare, particularly with the spread of HMOs and their complex paperwork for referrals. The use of third-party payers means "the processing of payments for insurance and other duties are handled" by another agency that is responsible for collecting premium payments and issuing reimbursements (Easey 2009).

It has been alleged that the use of such third parties means that individuals not well-versed in medical needs are making decisions about when reimbursements are valid regarding treatment and care, and are often looking for reasons not to pay for care, rather than to provide customers with the medical services they require as patients. It also creates another level of red tape between the patient and his or her doctor and insurance provider. An example of such an abuse might be an individual denied coverage because of forgetting to disclose a relatively benign 'pre-existing condition' such as acne.

Q3: Discuss the role of government in health care funding.

Despite current fears about a government take-over of healthcare via a single-payer system, today the government already has a relatively aggressive role in health care funding. "Government programs to cover health care costs began to expand during the 1950s and 1960s. Disability benefits were included in Social Security coverage for the first time in 1954. When the government created Medicare and Medicaid programs in 1965, private sources still paid 75% of all of the health care costs. By 1995, individuals and companies only paid for about half of the health care with the government responsible for the other half" (History, 2010, Neurosurgery).

According to the Brookings Institute, the federal government spent over $600 billion on health care in fiscal 2008, with Medicare will claiming roughly $390 billion of that total, Medicaid and the State Children's Health Insurance Program (SCHIP) about $210 billion, and veterans' medical care about $34 billion. SCHIP is a state-administered program for needy children of the working poor who do not qualify for poverty-level assistance. "In addition to these direct outlays, various tax provisions for health create tax expenditures that total roughly $175 billion; about 85% of that figure comes from the exclusion from taxable income of employers' payments for their workers' health insurance premiums."