Paying for Medical Care in the United States
The United States and the Union of South Africa arc the only developed nations without some form of universal health coverage for all citizens. Before we examine the health care systems of several other nations. however. let’s look more closely at ou r own system. Private Health Insurance Part of the reason that the COSt of fee-for-service health care in the United States escalated rapidly beginning in ihe 1960s was the expansion of medical insurance programs at that time. Third-party providers (public and private insurers) began picking up large portions of doctor and hospital hills for insured patients. With third-party fee-forservice payment, patients pay premiums into a fund thatin turn pa s doctors and hospitals tor each treatment the patient receives, Private health insurance premiums have continued to increase by about 6 percent per year. after a peak of 10.7 percent in 2002. Between 2002 and 2007. benefit payments slowed. from 9.4 percent to 6.6
percent. largely due to a decline in private health insurance spending growth on prescription drugs. During the same period. out-of-pocket spending (that is. not
reimbursed by a health insurance plan) increased by 5.3 percent because of increased out-of-pocket payments lor prescription drugs. nursing home services. and nondurable medical supplies (HHS.~ov. 2008).’ Private health insurance is largely paid lor hy businesses and households. and this has been a source of major controversy as the Obama administration has attempted to overhaul health care and reform how we receive and pay for medical services. 1l1C battle continues over third-party fee for service because the American Medical Association and some other professional groups of health care providers believe that this remains the best and most cost-efficient method of delivering medical care. Others argue that the feefor- service approach is outrageously expensive and a very cost-ineffective way ill which to provide for the medical needs of people in this country. particularly those who are without health insurance coverage. According to the medical sociologist Paul Starr (1982). third-party fee for Service is the main reason for medical inflation because it gives doctors and hospitals an incentive to increase medical services, In other words, the more services they provide. the more fees they charge. and the more money they make. Patients have no incentive to limit their visits to doctors or hospitals because they have already paid their premiums and feel entitled to medical care. regardless of the cost.
Medicare and Medicaid (see Box 18.3). Medicare is a program for persons age 6S or older who are covered by Social Security or who arc eligible and “buy into” the program by paying a monthly premium. Medicare pays part of the health care costs of these people. Medicaid. a jointly funded federal-state-Local program. was established to make health care more available to the poor. However, both the Medicaid program and the Medicare program are in financial difficulty. These two programs cost $760.6 billion annually and account for one-fourth of all federal
spending. Medicare and Medicaid arc growing more rapidly than the U.S. economy and the revenues that arc used to finance them. Medicare spending grew 7.2 percent in 2007. for example, to $431.2 billion, which followed a growth of 18.5 percent in 2006. because of the one-time implementation of Medicare Part D (prescription coverage). Similarly. Medicaid spending grew 6.4 percent in 2007 to $329.4 billion
(HHS.gov. 2008). As a result. the Congressional Budget Office estimates that the costs of these programs will more than double in the next decade unless significant
changes an: made. Medicare is particularly endangered because the number of older Americans who rely on the program to pay for their health care is rising dramatically. At the same time. health care spending is also growing rapidly because of the increased use of new medical technologies.