This document summarizes a lecture on U.S. health care policy. It discusses: 1. The rising costs of health care in the U.S. and poor health outcomes compared to other countries. 2. Major U.S. health care programs like Medicare, Medicaid, and Veterans' health care. 3. Efforts to reduce health care costs through strategies like preventive care programs and personal health accounts.

1. PMAP 3311: CRITICAL POLICY ISSUES
Fall 2014
Lecture 8
Prof. Reynold V. Galope
Department of Public Management and Policy
Andrew Young School of Policy Studies
Georgia State University
Health Care Policy
October 20 & 22, 2014
TOPIC
2. Issue Paper #2
1. U.S. Health Care Policy
- laws
- major health care programs
- reducing health care cost
- preventive health care
1. U.S. HEALTH CARE
SYSTEM
Rising Cost of Health Care

2. 1. U.S. HEALTH CARE
SYSTEM
- but achieve less for it (poor health outcomes despite huge
health expenditure)
U.S. health expenditure per capita twice as much as
any other developed/industrialized country
- “We are not getting what we pay for.” – a Mayo Clinic chief
executive
- “The health care system is fraught with waste.”
75% spent on the treatment of preventable diseases
(e.g. diabetes, heart disease)
- need to shift to preventive health care and wellness activities?
- how?
1. U.S. HEALTH CARE
SYSTEM
1. quality
2010 Commonwealth Fund Report ranked the U.S.
(among 6 developed nations) last in health care
performance:
2. efficiency

3. 3. access to care
4. equity
5. individual’s ability to lead long, healthy, and productive lives
1. U.S. HEALTH CARE
SYSTEM
1. about 75 million lack health insurance or are underinsured
Reasons for the poor health outcomes of the US:
2. quality of health care received and payments (e.g.
deductibles,
co-payments) depend on:
- leads to limited access to health care services
- underlying cause?
- high cost of health insurance premiums (as high as $15,073 for
a family of four in 2011)
- where you live, personal characteristics such as race, income,
education
*** Q. Does the 2010 Affordable Care Act solve the problems
above?
1. U.S. HEALTH CARE
SYSTEM
The Perils of Being Uninsured

4. the uninsured are more likely to receive too little
medical care, to receive it too late, to be sicker, and
to die sooner
- more likely to go without screening tests (e.g. mammograms,
Pap tests,
colorectal screenings), suffer from delayed diagnosis and
treatment
- tend not to receive the care recommended for chronic diseases
(e.g.
diabetes, HIV infection, end-stage renal disease, high blood
pressure)
25 percentage points more likely to die that those
with health insurance
1. U.S. HEALTH CARE
SYSTEM
Healthcare Scorecard by State:
- link http://www.longtermscorecard.org/
- copy of the report here:
http://www.longtermscorecard.org/~/media/Microsite/Files/2014
/R
einhard_LTSS_Scorecard_web_619v2.pdf
access, (2) choice of setting and provider, (3) quality of life
and quality of care, (4) support for family caregivers, and
(5) effective transitions

5. 1. U.S. HEALTH CARE
SYSTEM
Healthcare Scorecard by State:
- link http://www.longtermscorecard.org/
- copy of the report here:
http://www.longtermscorecard.org/~/media/Microsite/Files/2014
/R
einhard_LTSS_Scorecard_web_619v2.pdf
shington, Oregon,
Colorado, Alaska, Hawaii, Vermont, and Wisconsin
Tennessee, Indiana, West Virginia, and Oklahoma
– ranked # 36; lower bottom half
1. U.S. HEALTH CARE
SYSTEM
1. quality of health care
Public policy in health care: it influences the
following:
2. access to urgent, primary, and specialty care
3. pace of the development of new drugs and medical
technologies

6. 4. basic and applied research that could lead to new life-saving
treatments
1. U.S. HEALTH CARE
SYSTEM
What is health care policy?
- includes all of the actions that governments take to influence
the
provision of health care and the various government activities
that
affect or attempt to affect public health and well-being
- Narrow Definition: design and implementation of federal and
state
programs (e.g. Medicare, Medicaid) that affect the provision of
health care services
- Broader Definition: also includes government activities that
influence both public and health care decision-making
1. U.S. HEALTH CARE
SYSTEM
What is health care policy?
- Broader Definition: also includes government activities that
influence both public and health care decision-making
1. operation and/or funding of health science (medical)
research and public health departments and agencies

7. (e.g. CDC, NIH)
2. subsidy to medical education and hospital construction
3. regulation of food, drugs, and medical devices (FDA)
4. regulation of health-damaging environmental pollution
5. tax deductions for health care expenditures (making them
more affordable)
1. U.S. HEALTH CARE
SYSTEM
Evolution of Health Care Policy
health care policy developed only after the 1930s, with
the idea of health insurance
- health insurance would defray the cost of health care should
an injury
develop or an injury occur
most are employer-sponsored health insurance
- became popular in the 1950s because it was ruled a tax-
deductible
business expense
- Economics of insurance? Health insurance?
- we want to prevent a potentially huge loss in the future (the
benefit) by
agreeing to pay “small” amounts today (the cost); thus, you buy
an
insurance only if you estimate that the benefit outweighs its

8. cost
1. U.S. HEALTH CARE
SYSTEM
Evolution of Health Care Policy
1960s – push for federal health insurance policies for
the poor and the elderly (segment of the population that
would not benefit from employer-sponsored insurance)
- federal Medicare and Medicaid created in 1965
U.S. health care system still different from those of
developed countries (e.g. Canada, Great Britain,
Switzerland), even with Medicare and Medicaid
- no national health insurance for all citizens; not a single-payer
(the
government) system
1. U.S. HEALTH CARE
SYSTEM
Evolution of Health Care Policy
Clinton Administration (1990s): proposed the National Health
Security Bill (result of the convening of a presidential health
care task force headed by then First Lady Hillary Clinton)
- would have guaranteed health insurance for every American
(about 34
million uninisured at that time)

9. - individuals: pay about $1,800 a year for coverage
- families: about $4,200 a year
- businesses: required to cover all employees
- small businesses: would be subsidized by the government so
they can also
cover their own employees
- not approved by Congress
1. U.S. HEALTH CARE
SYSTEM
Evolution of Health Care Policy
2010 Patient and Affordable Care Act
- a.k.a. Affordable Care Act (ACA) or “Obamacare”
- signed into law by President Obama on March 23, 2010
- approved by Congress strictly along party lines (i.e. no
Republican
voted for it)
-215
-39
1. U.S. HEALTH CARE
SYSTEM
Evolution of Health Care Policy

10. Main Purpose of the Affordable Care Act
- Increase Health Insurance Coverage and Access to Health Care
Services
by:
1. Expanding Medicaid and the Children’s Health Insurance
program (CHIP) and making eligibility requirements uniform
across states
2. Mandating a minimal level of health insurance for individuals
who are not covered through their employers or by public
programs
- to be offered through state insurance exchanges that must
offer
standard packages
1. U.S. HEALTH CARE
SYSTEM
Evolution of Health Care Policy
Main Purpose of the Affordable Care Act
- Increase Health Insurance Coverage and Access to Health Care
Services
by:
3. Subsidizing the cost of insurance for low- to moderate-
income
families

11. 4. Offering tax credits to encourage small businesses to provide
health insurance to their employees and instituting a penalty for
larger employers (with 50+ employees) who do not cover their
employees
1. U.S. HEALTH CARE
SYSTEM
Evolution of Health Care Policy
Main Purpose of the Affordable Care Act
- Increase Health Insurance Coverage and Access to Health Care
Services
by:
5. Creating new regulation for health insurers to deal with long-
standing concerns:
- exclusion of children and all individuals with pre-existing
conditions
- setting annual and lifetime limits on coverage
- coverage of family members (such as college students) up to
age 26
1. U.S. HEALTH CARE
SYSTEM
Evolution of Health Care Policy
Cost of the Affordable Care Act
- is expected to be offset by new revenues, including:

12. 1. 0.9 percentage point increase in Medicare payroll tax for
high-
income earners ($250,000/year)
2. new 3.8 percent tax on dividends and capital gains (e.g. sale
of
stocks) [Status of this new tax?]
1. U.S. HEALTH CARE
SYSTEM
1. degree of government involvement in health care
health care policy issues
2. how to ensure sufficient access to health care
3. how to deal with escalating costs
4. how to improve the quality of health care while containing
costs
1. U.S. HEALTH CARE
SYSTEM
1. Medicare
Major health care programs:
2. Medicaid

13. 3. Veterans’ health care
2. HEALTH CARE
PROGRAMS
Medicare
began in 1965
designed to help 65 year old and older citizens to
meet basic health care needs
- “national health insurance” for the elderly?
also covers:
- <65 with permanent disabilities and those with diabetes and
end-stage
renal disease (patients who need dialysis or a kidney transplant)
2011: 48 million beneficiaries
2. HEALTH CARE
PROGRAMS
Medicare
started with 2 main parts: standard and optional
- Medicare Part A: the core (standard) plan
responsible for
deductible and co-payments

14. release from a
hospital)
2. HEALTH CARE
PROGRAMS
Medicare
started with 2 main parts: standard and optional
- Medicare Part B: optional
hospital stays
- doctor’s fees, diagnostic tests, hospital outpatient services
government
– which covers about 75%.
1997: Medicare + Choice (Part C)
2003: Medicare Advantage (Part D)
2. HEALTH CARE
PROGRAMS
Medicare
Pros:
1. pays for the 1st 90 days of hospital stay and (limited)

15. nursing home care
2. a bargain for the elderly, who would have to pay
much higher fees for a full private insurance policy
2. HEALTH CARE
PROGRAMS
Medicare
Cons:
1. covers only about 2/3 of the health care cost of the
elderly
2. some physicians choose not to participate in
Medicare
dental care,
eyeglasses
purchase
supplementary private insurance policies (e.g. AARP health
insurance)
2. HEALTH CARE
PROGRAMS
Medicare
Fraud and Abuse
- health care providers may charge the government:

16. that may not be necessary
- other forms of fraud:
1. unqualified health care providers
2. patients who are not eligible
3. inappropriate charges
2. HEALTH CARE
PROGRAMS
Medicare
Fraud and Abuse
- $1 of every $3 is wasted on inappropriate and/or unnecessary
care
benefit to
patients
Potential
Solution
s?
1. strengthen monitoring/oversight of health care providers
2. criminal and civil action against these providers

17. 2. HEALTH CARE
PROGRAMS
Medicare
How to reform it?
- little agreement on how to alter benefits (raising the age
requirement of beneficiaries from 65 to 67) or improve its
effectiveness and sustainability
- Lecture 7: reforming entitlement programs politically volatile,
requires change in the law, “reneging on Americas promise to
take care of its elderly, sick, unemployed, etc.”; “harming
senior citizens”
- “a sacred cow”: Medicare can only be expanded?
2. HEALTH CARE
PROGRAMS
Medicaid

18. second major health program
also established in 1965 as Title XIX of the Social
Security Act
designed to assist the poor and the disabled through
a federal-state program of health insurance
- covers over 55 million people (in 2011)
- about half of Medicaid beneficiaries are children in low-
income families
2. HEALTH CARE
PROGRAMS
Medicaid
Who pays?
- federal government – ½
- states – ½ (eligibility requirements differ across states)
Note: The 2010 Affordable Care Act (1) included adults under

19. 65 in
households with income up to 138% of the poverty level, and
(2)
eliminated state differences in eligibility
- Medicaid is one of the largest programs in most state budgets
2. HEALTH CARE
PROGRAMS
Medicaid
one of the largest programs in most state budgets
- education, other welfare programs, public infrastructure may
suffer as Medicaid costs continue to rise
also vulnerable to fraud and abuse by health care
service providers (e.g. filing inaccurate claims for
reimbursement)
- defense of service providers: they are victims of excessively
complicated system of eligibility requirements and

20. reimbursement
procedures
2. HEALTH CARE
PROGRAMS
Medicaid
Estimated Waste of the New York Medicaid program:
a. 10% spent on fraudulent claims
b. 20-30% on unnecessary procedures
- as much as 40% of New York’s Medicaid claims could be
questioned; about $18 billion/year lost on fraud and abuse
Q: How can Medicaid be reformed to minimize fraud
and abuse?
2. HEALTH CARE

21. PROGRAMS
Veterans’ Health Care
“national health insurance” program for the veterans
provides primary and specialized medical care, and
other medical and social services (e.g. rehabilitation)
- medical needs attributable to service-related injuries and
disease (free of individual deductibles and co-payments)
- for not service-related injuries and diseases: use a financial
means test to set co-payment charges
2. HEALTH CARE
PROGRAMS
Veterans’ Health Care
Veterans Health Administration also operates veterans’
hospitals and clinics across the country

22. health care cost of the wars on Iraq and Afghanistan:
- mental health care patients from 900,000 (in 2000) to 1.2
million (in 2010)
- those who undergo therapy increased from 35,000 (in 2006)
to 139,000 (in 2010)
2. HEALTH CARE
PROGRAMS
Veterans’ Health Care
(+) has been a model for a national health care system:
1. electronic medical records
2. strong focus on preventive care (e.g., for cancer, diabetes,
and
heart disease)
3. high scores on health care quality indicators
Q: The government operates hospitals and clinics

23. across the country for veterans. Should this system be
expanded to provide health care to other Americans,
not just veterans?
2. HEALTH CARE
PROGRAMS
Veterans’ Health Care
In 2000, Congress approved the expansion of TriCare
(the military’s health plan) to include retirees with at
least 20 years of service once they become eligible for
Medicare
- pays for most of the costs for medical treatment that are not
covered
by Medicare, except for $3,000 per year in out-of-pocket
expenses
- also includes generous prescription drug coverage
- annual premium costs of only $520 per year for family
coverage
Q: Is the TriCare program too generous? Should the

24. government continue to subsidize health care insurance for
retired veterans (about $52 billion per year) this way?
3. REDUCING HEALTH CARE
COSTS
1. raising the policyholder’s share of the cost with higher
deductibles and
higher levels of co-payment – to inject “market discipline” into
health care
coverage
2. provide incentives for employers to set-up personal health
accounts for
their workers -- employers deposit money into an account that
is used to
pay for each employee’s health expenses that the regular
insurance does
not cover
Other Alternatives
3. disease management programs – e.g. HMOs/PPOs train

25. patients to take
better care of themselves by monitoring their diseases, watching
their
diets, and seeking appropriate and timely medical care. They
have
implemented programs for diseases such as diabetes, heart
disease, end-stage renal disease,
cancer, depression.
4. preventive health care
4. PREVENTIVE HEALTH
CARE PROGRAMS
1. more routine physical examinations and
diagnostic tests
2. education and training in diet, exercise, and
stress management
Alternatives
3. smoking cessation programs

26. PREPARATION FOR NEXT WEEK
Read Chapter 9 (Welfare and Social Security
Policy)
Issue Paper # 2 at D2L (due October 29, 11:00
pm)
1. Choose a position: A strategy to reduce health care costs is to
encourage
individuals to adopt healthier lifestyles (e.g. avoiding salty,
sugary, and
fatty foods). Are you in favor of imposing a higher sales tax on
soda,
hamburgers, and other unhealthy food to discourage their
consumption?
2. Discuss effectiveness, efficiency, individual choice and
economic
freedom, and equity issues of adopting or not adopting this
strategy. Cite
also any political acceptability or administrative feasibility
issues.

27. 3. 1.5 to 2 single-spaced pages