History and Overview of Health Care Financing in the United States

One of the biggest concerns regarding health care delivery in the United States is the complexity of financing. Health services financing helps pay for the medical costs of individuals and/or families receiving health care.

Financing in this sector is also a means of cost control. Looking at the commonly used equation E = P x Q, we observe that expenditures of health care equals payment multiplied by utilization. Knowing this, there are several factors that help keep these costs down including insurance, access, supply and demand, all factors of health care financing.
The main function of insurance in any situation; be it health care or other, is to protection an individual against risk. In this case, its function is to protect families and individuals against the costs of utilizing the heath care system.

Two main types of health care financing include public and private. The difference between the two can be looked at as follows. Private health insurance is often known as “voluntary health insurance” where as public financing for health care is helped paid for by the government. Looking closer into private financing, different types of private insurance include group insurance, self-insurance, individual private health insurance and managed care plans. Private insurances, or beneficiaries, such as these commonly use concepts like premiums, cost sharing, indemnity and service plans and covered services. Probably the most commonly known forms of public financing include Medicare and Medicaid. Medicare is a publicly funded program for those who fit in to one of the following categories: 1) Those over 65 years of age 2) Those under 65 years of age with certain disabilities and 3) Those of all ages with End-Stage Renal Disease. The program has three main subcategories of which include Medicare Part A, for hospital insurance, Medicare Part B, for supplementary medical insurance, and Medicare Part D, for prescription drug coverage. Medicare as a program was passed into law on July 30th of 1965, and has made many progressions and changes since then. Medicaid is a program designed for low income individuals and families who fit into a specific group as recognized by federal and state law. Within Medicaid programs, each state sets their own laws and standards as to the rules, regulations, and coverage of Medicaid patients. Medicaid was initiated the same day as Medicare was under the Social Security Act, also known as Title XIX.

Under the Balanced Budget Act of 1997, two programs were added to the public sector which include PACE and SCHIP. PACE stands for Program of All-inclusive Care for the Elderly. Though it is not available in all states, the PACE program provide community based care for those over the age of 55 who do not qualify for placement in a nursing facility. SCHIP, or the The State Children’s Health Insurance Program, started as a response to an increase in number of uninsured children. It offers additional funds for children under the age of 19 years whose families do not qualify for Medicaid.

Amongst the numerous programs that the public sector now has implemented, some of the main ones include The Military Health Services System, the Veterans Health Administration, Indian Health Service and Workers’ Compensation, all of which are fairly self explanatory.
A growing concern in today’s society are national health care expenditures, which are “An aggregate of the amount the nation spends for all health services and supplies, public health services, health-related research, administrative costs, and investment in structures and equipment during a calendar year.” (Shi & Singh, 2008). Recently the ratio of private financing to public financing has held steady at about 55 to 45. This was not always the case. Prior to 1960, private financing held a much greater piece of the expenditure pie. A large reason the ratio shifted was because of the implementation of Medicare and Medicaid, both public financing that affect millions of people.

Every health care system and its subcategories have their downfalls and financing within the United States health care system is no exception to the rule. There are seven main problems/issues facing insurance and financing today which are Insurance Portability and Continuity, the Erosion of Private Insurance Coverage, Community Rating and Adverse Selection, Favorable Risk Selection, Cost Shifting, Financing for the Uninsured and finally, Fraud and Abuse.

Financing is an integral segment of our health care system. It determines who has access and coverage amongst other important factors. Without a doubt, revamping of financing health care will be a long and difficult process.

U.s. department of health and human services. (n.d.). Retrieved from http://www.cms.gov/MedicaidGenInfo/

U.s. department of health and human services. (n.d.). Retrieved from http://www.cms.gov/MedicareGenInfo/

Shi, L, & Shingh, DA. (2008). Delivering health care in america: a systems approach. Sudbury, MA: Jones and Bartlett Publishers.