Pertinent Issues in Public Health

PUBLIC HEALTH 12

Week 5 Assignment:

Why were American Businesses Originally Motivated to offer healthcare to their employeeS? How does this choice influence healthcare in America today?

The system of employer-sponsored insurance is largely a result of one event – World War II, and the tax policy and wage freezes that emerged out of it (Field & Shapiro, 1993). Before the 1930s, American employers had little motivation to provide health coverage, and citizens paid their own way where medical costs were concerned (Field & Shapiro. 1993). Employees who worked in dangerous professions such as railroads, steel, and mining had access to company doctors in union-operated infirmaries or industrial clinics, but no coverage was offered for healthcare services beyond these (Rook, 2020). Private insurance in the form of Blue Cross and Blue Shield began to emerge in the 1930s following the Great Depression, where many families, hard-pressed to provide the basic necessities, found themselves leaving healthcare unattended (Rook, 2020). Employers were generally not in the picture at this stage as health insurance offerings were purchased almost exclusively by individuals (Rook, 2020). Things, however, changed during World War II.

With so many eligible workers diverted to military service, there was a severe labor shortage and policymakers feared that businesses would keep raising salaries to compete for the few workers available (Rook, 2010). This would push inflation out of control as was the case in war-torn Germany (Rook, 2020). To minimize this risk and combat inflation, President Roosevelt signed Executive Order No 9250, which established the Office of Economic Stabilization (Rook, 2020). In a bid to combat inflation, the newly-established office froze wages such that businesses were not allowed to raise their pay in order to attract workers (Rook, 2020). In response, employers began to offer health benefits as incentives to employees instead. In 1943, the Internal Revenue Service instituted a policy exempting employer-based insurance from taxation. The tax exemptions increased the incentive for employer-sponsored health coverage, making it cheaper to obtain coverage through a job than by any other means (Rook, 2020). Thus, the original motivation for employer-sponsored coverage was the need to attract workers in a regime of capped wages.

Today, employer-sponsored coverage continues to influence the provision of healthcare. According to America’s Health Insurance Plans (AHIP), approximately 180 million Americans receive their health coverage through employer-sponsored plans (AHIP, 2021). One of the most prominent effects of the current system is job lock, which is a situation where people are dependent on their jobs for their health insurance and are less inclined to leave their jobs even when doing so may be profitable for them. In most cases, workers affected by job lock are often afraid to leave their job because they fear that Medicaid or other market exchange coverage may not be as good (Mann, 2021). The reliance on employer-sponsored insurance coverage induces people to spend more money on health insurance than other things, which consequently increases the level of overall healthcare spending (Mann, 2021). The high demand for employer-sponsored coverage increases health coverage premiums, while wages remain fairly stable.

Secondly, the connection between access to health insurance and employment status means that as people lose their jobs in times of recession such as the Covid19 pandemic, they lose the very health insurance they need for treatment (Mann, 2021). The next few years may bring about significant changes to health insurance. However, employers are expected to still play a large role in administering health insurance (Mann, 2021). The most plausible way to manage the gaps in coverage resulting from the overreliance on employer-sponsored coverage would be for employers and the government to work together to provide insurance coverage for all Americans regardless of their employment status (Mann, 2021).

References

America’s Health Insurance Plans (202). Employer-Provided Coverage. AHIP. Retrieved from https://www.ahip.org/issues/employer-sponsored-plans/

Field, M. J., & Shapiro, H. T. (Eds.). (1993). Employment and Health Benefits: A Connection at Risk. Washington, DC: National Academies Press.

Mann, R. (2021). The Employment-Health Nexus: Sufficiently Entrenched to Survive Healthcare-for-All. American Bar Association, (Summer 2020)

Rook, D. (2020). A Brief History of Employer-Sponsored Healthcare (From the 1930s to Now). JP Griffin Group. Retrieved from https://www.griffinbenefits.com/blog/history-of-employer-sponsored-healthcare#:~:text=To%20combat%20inflation%2C%20the%201942,health%20benefits%20as%20incentives%20instead.

Week 6 Assignment

Write an essay about a current event elated to health policy. It could be local, state, national, or international

On 11th March 2021, President Joe Biden signed into law the $1.9 trillion Covid19 Stimulus Bill that seeks to deliver direct and immediate relief to workers and families impacted by the Covid19 pandemic. Among the core provisions of the Bill, which was passed by Democrats in Congress without a Republican vote, is an incentive to entice the 12 states that are yet to expand Medicaid coverage under the Affordable Care Act of 2010 to do so. The provision is based on the Federal Medial Assistance Percentage (FMAP), which is the amount of federal money states receive to fund their Medicaid programs (Rudowitz, Corallo & Garfield, 2021). The FMAP is 90 percent for beneficiaries eligible through Medicaid expansion, which implies that the federal government already covers nearly the entire cost of expansion (Rudowitz et al., 2021). The Bill, however, incentivizes Medicaid expansion by the 12 states that are yet to do so by having the federal government pay for an additional 5 percentage points of Medicaid costs in the traditional Medicaid program for two years (Rudowitz et al., 2021). This increase of 5 percentage points represents a massive flow of federal funds to states as sources project that even in states that have expanded coverage, spending in the traditional Medicaid program accounts for almost 80 percent of total program spending (Gee & Waldrop, 2021).

Another provision in the Bill seeks to have the federal government temporarily pick up health insurance costs for those who have lost their employer-sponsored or private coverage due to the Covid19 pandemic. It is estimated that the generous subsidies to non-expanding states and the other changes related to private insurance would increase the number of Americans enrolled in health insurance by 5.3 million (Ollove, 2021). The targeted states also stand to reap huge benefits from the incentive – for instance, Florida and Georgia, the two largest holdout states, could net $3.5 billion and $5.9 billion respectively if they took the deal (Rudowitz et al., 2021). This begs the question - to expand or not to expand Medicaid coverage?

The ACA’s original design was such that all persons in households earning up to 138 percent of the federal poverty level were eligible for Medicaid (Sohn & Timmemans, 2017). A Supreme Court ruling in National Federation of Independent Business vs. Sebelius (2012), however, limited the ability of the federal government to enforce state compliance (Sohn & Timmemans, 2017). This opened up avenues for states to expand Medicaid eligibility within their jurisdictions in line with economic conditions, political factors, and the number of uninsured citizens (Sohn & Timmemans, 2017). Twenty-four states and the District of Columbia had expanded coverage by January 2014, and only 12 states are yet to expand coverage this far (Sohn & Timmemans, 2017).

However, the decision on whether or not to expand coverage ought to be based on the long-term benefits and costs of such expansion, and not the two-year subsidies proposed in the Covid19 Stimulus Bill. Medicaid expansion has been shown to reduce the number of uninsured persons in a state (Sohn & Timmemans, 2017). For instance, Medicaid expansions in 2014 were deemed responsible for over 60 percent of health insurance coverage gains reported over the said period (Sohn & Timmemans, 2017). Improved coverage comes with better access to care and self-reported health, thus reduced mortality (Sohn & Timmemans, 2017). Beyond the health benefits, Medicaid expansion has been associated with improved financial stability for those gaining health insurance (Sohn & Timmemans, 2017). Findings from the Oregon Medicaid Experiment showed that coverage reduced financial strain for low-income families as measured by the incidence of catastrophic expenditures, skipping meals or borrowing money to cover medical bills, and out-of-pocket medical payments (Sohn & Timmemans, 2017). A 10 percent decrease in Medicaid eligibility was associated with an 8 percent decrease in household bankruptcy (Sohn & Timmemans, 2017).

Those opposed to Medicaid expansion argue that it would cause a ballooning of budgetary deficits and affect the quality of care in hospitals (Sohn & Timmemans, 2017). However, as Mazurencko et al. (2018) point out, no study has reported a decrease in quality of care or health following expansion. As such, the benefits of Medicaid expansion outweigh the costs and it may be beneficial for the 12 states targeted by the Covid19 Stimulus Bill to consider expansion for the benefit of their low-income citizens.

References

Mazurenko, O., Balio, C. P., Agarwal, R., Caroll, A. E., & Manachemi, N. (2018). The Effects of Medicaid Expansion under the ACA. A Systematic Review. Health Affairs, 37(6), 944-50.

Rudowitz, R., Corallo, B., & Garfield, R. (2021). New Incentive for States to Adopt the ACA Medicaid Expansion: Implications for State Spending. Kaiser Family Foundation. Retrieved from https://www.kff.org/medicaid/issue-brief/new-incentive-for-states-to-adopt-the-aca-medicaid-expansion-implications-for-state-spending/

Ollove, M. (2021). Covid19 Relief Package Includes Expansion of Healthcare Coverage. PEW Research Center. Retrieved from https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2021/02/18/covid-19-relief-package-includes-expansion-of-health-care-coverage

Sohn, H., & Timmermans, S. (2017). Social Effects of Healthcare Reform: Medicaid Expansion under the Affordable Care Act and Changes in Volunteering. Socius, 3(1), doi: 0.1177/2378023117700903

Week 7 Discussion

Explain and define a health savings account. Are Health Savings Account Good or Bad for the Healthcare Consumer? Does it expand or limit your options as a healthcare consumer?

Health savings accounts (HSAs) are tax-free savings vehicles available to people enrolled into high-deductible health plans (HDHP). This text demonstrates why HSAs are good for the healthcare consumers. It begins with a discussion of how HSAs operate.

Under a HSA plan, enrollees are allowed to save money, tax-free, into their savings accounts, which they can later withdraw to cover out-of-pocket healthcare costs (Lowsky, Lee & Zenios, 2018). A HDHP is defined as a health insurance plan with a deductible of at least $1,400 for an individual or $2,800 for family, and total annual out-of-pocket expense (including coinsurance, copayments and deductibles) not exceeding $6,900 for individual and $13,800 for family. In most cases, HSA contributions are deducted by employers from employees’ pretax income and then remitted to a trustee. Withdrawals used to cover medical expenses such as over-the-counter drugs, copayments, and deductibles – are not taxed and so is the interest earned on savings (Glied & Remler, 2005).

Unused balances in the HSA at the end of every year are carried forward to the subsequent year and the customer could be allowed to invest their accumulated savings in alternative areas such as stocks, bonds or mutual funds (Glued & Remler, 2005). However, withdrawals for purposes unelated to healthcare are taxed and a penalty imposed (Glied & Remler, 2005). HSAs were introduced by the Medicare Modernization Act of 2003 to complement HDHPs as a way of curbing rising healthcare costs (Lowsky et al., 2018). The pairing of HSAs and HDHPs is based on the hypothesis that consumers are likely to be more prudent in their healthcare spending if they are given responsibility for a greater portion of their healthcare costs (Lowsky et al., 2018).

There are several reasons why a HSA is good for the healthcare consumer. First, HSAs help to control the consumption of healthcare (Balcker, Doe, & Wolfson, 2006). Economic theory suggests that when individuals are covered by health insurance, they are more likely to engage in risky behaviors or take less care of their health because they know they will have access to healthcare if they need it (Balcker et al., 2006). Further, since this healthcare is essentially free at the time of use, the healthcare consumer may find themselves using more healthcare than they really need (Balcker et al., 2006). At the same time, healthcare providers may be inclined to supply more healthcare than is actually needed, thus unnecessarily increasing healthcare costs (Balcker et al., 2006). However, HSAs introduce the participation of the healthcare consumer as they are based on cost-sharing and hence, individual responsibility in the area of healthcare spending. Studies have shown that this helps to reduce healthcare consumption and spending relative to free care. For instance, Balcker et al. (2006), using simulation modeling, found that on average, healthcare consumers decreased their spending by 5 percent when they switched from a traditional Preferred Provider Organization plan to a typical HSA plan.