Four 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 Omnibus Budget Reconciliation Act of 1980 and 1981

The Acts repealed two increases in tax deductions scheduled to become effective on October 1, 1982. One provision would have, according to a summary of the words of the Act: "liberalized the medical deduction for the elderly and disabled by: allowing elderly or disabled people to deduct medical costs exceeding $25 rather than $35; and by including in the deduction the medical expenses of spouses who were not elderly or disabled."

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.