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The Nature of Health Insurance in the U.S Research Paper

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Updated: Feb 7th, 2019

Introduction

The provision of health care services has been a topic generating heated discussion among Americans for many years. This debate has been caused by the availability of two contrasting health insurance policy proposals in the United States that claim to solve the health care crisis in the country.

On one hand, policy makers have been championing for the adoption of universal health insurance, which is a universal health care system that gives emphasis on the community. On the other hand, another group has been campaigning for the adoption of private health insurance, which gives emphasis to more individual risk assessment insurances. This unending debate has put the health care system in the U.S in a crisis.

The ever-increasing cost of health insurance coverage is forcing many people to go without medical insurance. These people include more than 45 million children who are caught in the middle of the raging debate. Politicians are caught between adopting a universal health care insurance that gives an emphasis to the community or the private insurance that gives an emphasis on the individual.

This research paper looks at a comparison of the two policies in terms of efficiency and political influence. The research paper also looks at the issue of private funding for the two policies and gives a comparison on the outcome of the two policies. Finally, the paper gives an analysis of which of the two policies or some combination is most suitable to fix the U.S health care system. (National Council of Churches, 1999)

Efficiency

The pursuit for more efficiency in delivering health care services is unending in a country that uses more money in health care than any other. Attaining efficiency is also important in a country whose growth in spending surpasses its income and is incapable of providing insurance coverage to more than 15% of its total populace.

This is also happening in a country that ranks badly among developed countries in terms of putting up system measures that seek to increase life expectancy and reduce infant mortality. All these issues coupled with the country’s quality problems make it hard for Americans to be complacent about the value they get from their health care contributions. In the real sense, health care can only be termed to be efficient when it improves a patient’s well being while at the same time dissuading the misuse of resources.

For the health care system to be termed as efficient, it should also be devoid of unnecessary care and eliminate any perceived inefficiency in the system. On top of this, any increase in health care cost should go hand in hand with enhanced value and efficiency of care. In these parameters, the U.S health system is far from being effective. (NCC, 1999)

The universal health care system that focuses on the community in the U.S has forever been inefficient. Rural environment where this type of care is mainly centered has been presenting exceptional challenges for health care admission. In most cases, there are deficiencies of medical personnel in rural areas as well as transportation problems. On top of these, there is the existence of distance hurdles from care as well as the ever-rising issue of economic deterioration of rural health care services.

For a long time now, majority of doctors have been shunning practicing medicine in rural areas in favor of urban places. Most of these doctors are in the pursuit of productive practices to help them in repaying high education debts that they might have incurred during their schooling days. On top of this, the doctors have been taught to make use of costly new machineries in diagnosis and treatment.

Countryside practice locations often give lower returns for doctors and have less and more ancient technology resources than cities and uptown locations. Today, graduates from medical school are giving any excuse to avoid putting up their practice in rural places. As a result, rural communities suffer severe doctor shortage, which leads to high inefficiency in terms of quality provision of health care. (Bailey, 2009)

The shortage of physicians is most evident in crucial prevention, analysis, and treatment. Public health systems and a score of other basic caregivers step in to fill in the gaps. These basic caregivers include practicing nurses, general practitioners, and community health workers.

The ever-changing technology, sky rocketing charges coupled with other market determinants have caused many rural health care systems to sink to low levels of operation. The small upcountry health care providers lack the right equipment and workforce to treat the wide range of recent diseases and injury.

Diseases like coronary bypass surgery require specialized medical personnel, which can only be accessed in big hospitals. Patients in rural hospitals have to put up with long distance to access complex medical care that is usually not available in local hospitals. This makes many patients to regard the care offered in rural hospitals to be of inferior quality. This makes people with financial means and who are able to travel to shun rural hospitals in favor of urban ones even for less complex diseases.

This negates the role of rural hospitals to treating only those people who are too weak to travel or those who cannot afford the high cost of care in urban areas. Since the small number of people visiting rural areas cannot support the hospitals’ operations, most of the hospitals end up closing.

Upon the closure of these hospitals, old people, the physically handicapped, and the underprivileged are left with no access to inpatient care. On top of this, the whole community is deprived of access to emergency care. The situation in these rural hospitals shows the inefficient nature of universal health care system that many poor people rely upon. (NCC, 1999)

As expenditures rise, public and private insurers must endeavor to manage their expenses. Prices for services include the least projected cost of providing each examination. Setting price controls adversely influence rural health systems.

Owing to the high distance between service placements, the cost per every unit of service increases compared to that of urban centers. Home based care providers in rural settings spent most of their time hopping from one home to the other to where their patients are located while an urban nurse will find their work cut out since most of their patients live in the same locality.

At the end of it all, the nurse in the city will end up visiting say ten patients while the one in the rural setting only gets to visit a maximum of two. While the urban home care provider gets paid for visiting ten patients, the one in rural areas gets paid for only three visitations despite the fact that both put up the same amount of time.

This calls for stakeholders to rethink seriously about they scheme used to reimburse health care providers in rural places if they are to attract more people to work in such places. Since this has not been the case, we cannot yet claim that universal health insurance providers has attained the required level of efficiency in providing health care in rural areas where the many people who are in need of its services are located. (NCC, 1999)

On its part, many people perceive private health care insurance as being responsible for keeping in check the medical cost inflation experienced in the 1980’s through reducing unnecessary hospital care, forcing providers to reduce their prices, and causing the whole health care industry to gain more efficiency and competitiveness.

This was achieved through private insurance policy of managed care plans. Although consumers first saw managed care plan as their solution to more efficient health care provision, its fast growth led to consumer criticism.

Most of the private health insurers are concerned with making profits than they are concerned with patient’s health. Today, many people believe that private insurers decrease the time that a doctor spends with his patient. Statistics also show that it has become harder for patients to book an appointment with a consultant. On top of this, patients are unable to produce any meaningful health care savings. (Star, 1994)

There have been claims from discontented patients and customer-support groups who claim that managed care initiatives control cost by disallowing required medical services to patients. These disgruntled parties claim that this happens even in life threatening circumstances. There have also been claims that most private health care insurers provide low-quality care that would cost them less money.

This shows that private health insurance is yet to attain the efficiency level that Americans expect. The U.S health care system is tasked with the primary goals of providing high-value care, ready admission to the scheme, and reasonable prices. The realistic problem in proving health care is that following whichever two of these objectives magnifies the third. Therefore, a readily available system of high-value care tends to increase the cost, while a lower cost scheme that is readily available often leads to low quality levels. (Cleveland, 2002)

This makes it important for people to realize that certain reasons of inflated health care prices are advantageous and expected. These are issues like an aging populace and the innovation of latest drugs and equipments. However, other causes of increased health care are unacceptable.

These include the existence of profit minded care organizations that divert billions of health care dollars to their private coffers. If all the existing issues are looked at, there is much room left for the operation of a more efficient and accountable health care delivery scheme in America at a more cost effective price.

Until America gets to that point, people will continue clamoring for a more efficient health care insurance scheme. Since the biggest challenge to attaining a more efficient health care system is good use of resources, there is need for all stakeholders to come up with modalities that address this issue. In the future, the country will still experience the problem of limitless demand against diminishing resources.

This calls for the need to make some hard decisions about what services are to be funded and which are to be ignored. While trying to contain inflation there is also the need to maintain high quality standards in medical care as well as provide better access to the system. As it is right now, both the community and private health care insurance schemes have serious flaws that make them far from being efficient. (Cleveland, 2002)

Political Influence

The provision of medical insurance has been experiencing interference from the political class in America for a long time. Medical insurance has become the subject of every presidential campaign. American presidents have been trying to dictate which medical insurance plan is suitable for the people.

Since different presidents have had different views regarding which system is the best, there have been great misunderstandings between different stakeholders. This has led to the number of Americans without insurance cover to go up in recent years. In the early period of the 1970’s, President Richard Nixon took conscious steps to change American health care from its traditional mode of not-for-profit business philosophy in to a for-profit model that would be under the insurance industry.

This led to congress passing the Health Maintenance Organization Act, which brought some sanity in the business. Although the scheme received acclamation from the public, it lost favor among the public who viewed it as a scheme by organizations to make money from hapless citizens at the expense of their health.

In his office days, President Bill Clinton termed the country’s health care system as “badly broken” and advised that it needed urgent repairs if all Americans were to benefit from the scheme. The president outlined a reform package that would be based on provision of universal health insurance for every American citizen. (Star, 1994)

According to the plan, the federal government would play a key role in funding health care services. According to the president, a new law would be created that would bar people from enrolling in private insurance schemes. In the new scheme, both employers and individuals would be compelled to contribute to meet the insurance cost. This proposal received praise and criticism from different quarters.

The crisis that President Clinton tried to address was out of concern from the high rate at which health care costs were increasing. At the time, Americans were using a large percentage of their earning on medical care. There was also concern over the high managerial costs that the system was spending and the high number of American citizens who were without insurance cover.

According to sources, the average American spends about 11% of his income on medical care. According to the same source, this figure is expected to rise to about 17% in the next 10-15 years. Coupled to this, the costs of administration constitutes 12% of the overall health care expenditures and at any given time an average of 13% of Americans are without medical insurance cover. (Star, 1994)

According to Clinton, the situation in the health care industry arose due to the use of scarce resources. He reasoned that since all resources have different uses, there are times when one has to quit using some goods in favor of others. This means that consumers will always buy products based on their economic value. When the price of an economic commodity goes up, people tend to preserve the consumption of that product. Clinton reasoned that the consumption of medical insurance would go up if a third party were paying for it.

The people who were opposing this plan claimed that if the government took the responsibility of meeting the full cost of medical insurance, then Americans would never know the real value of medical cover. According to skeptics, this would be like giving free goods to a child who would never know the true value of them. Simply put, this means that people would misuse the scheme since they were not involved in funding it. (Star, 1994)

Although Clinton’s reform program was much hyped, it never saw the light of day once it got into congress. Republicans did everything within their power to ensure that the reforms never sailed through. At the end of it all, Clinton had not only lost his reform agenda but he had also been accused of leading Americans into an illusion. The collapse of the proposed Clinton health care reforms is touted to be one of the worst failures that a government plan has received in the recent past.

Considering the groundwork that had been put up by Democrats and their fellow Republicans who were considered lukewarm, one soon realizes that reforming the health sector in America is not as easy as people think. This is partly because there are vested interests from different stakeholders. Bill Clintons’ reform package probably remains the closest thing that Americans ever came to getting a consensus in to the health care insurance debate.

However, due to majority of politicians favoring the universal health care system, it has remained as the most favorable scheme among Americans who consider private insurance as more concerned about making profits than it is in taking care of people’s health. (Star, 1994)

The health care reform debate was re-ignited once President Barack Obama came to power in 2008. Perhaps taking the cue from his fellow democrat Bill Clinton, Obama came up with reforms that sought to make health care insurance affordable for all Americans. President Obama proposed that the existing universal health insurance was supposed to be made more attractive for it to be able to effectively compete with the private insurance schemes.

According to Obama, this would give Americans a wide variety of choices, make the health care sector become more viable, and make insurance companies become more honest. However, this scheme received instant rejection from Republican lawmakers who viewed it as undermining the spirit of competition in the health insurance industry.

The lawmakers claimed that forcing liberal markets to compete with government-funded programs was creating an uneven playing ground, something that went against the rules of running free markets. Despite rejections by Republican lawmakers and other stakeholders, America is still gravitating toward a fully government-funded health insurance scheme.

Today, the governments pay accounts for about 47% of all health care expenses. This is done through schemes such as Medicare, Medicaid, and the state sponsored Children Health Insurance Program (SCHIP). If the government manages to carry through with its public health scheme, the total amount that the government chips in the health insurance sector would significantly go up. (Bailey, 2009)

Today, the number of Americans covered by private health insurance totals to about 170 million. Employers enroll majority of these people in the scheme.

If the Obama health care plan sails through congress, the premiums that the public pays in the universal health care scheme would go down by between 30-40%. Although this seems to be a great move, analysts claim that it is ill advised since it is achieved by forcing price regulations. Despite the fact that lowering the premiums would attract more people to join health insurance, the scheme has its shortcomings.

According to analysts, the lower premiums would push employers to do away with the private insurance and enroll their workers in the universal health scheme. Analysts predict that if the Obama health package sails through, it would reduce the number of Americans enrolled in the private health scheme to only 50 million down from 170 million. The Nixon, Clinton, and Obama examples show just how U.S presidents have been trying to dictate which health care insurance plan is fit for Americans. (Live Pulse, 2010)

Private Funding

About 85% of Americans have membership in a type of medical insurance scheme. This is either through some form of private health insurance or universal insurance programs provided for by the government. Majority of Americans receive funding for their health insurance from employers.

The employers meet a large amount of the health insurance cost. From the beginning of 2001, the premiums for family coverage have gone up by 78%. On top of the employer contributions, workers under the employer-sponsored insurance scheme are also required to contribute a certain percentage of the total cost.

Every time someone goes to receive medical attention, he is supposed to pay a small fee that the insurance company does not meet. This is done in form of deductions and co-payments. A very small percentage of Americans pay for health insurance from their pockets. Some states have also come up with “high-risk insurance pools” (HRPs) to provide medical cover to people whose health status bars them from accessing coverage under the private health insurance scheme.

Under this scheme, the state governments enter into an agreement with private health insurance providers to allow them to manage the pool. In return, the private insurers are required to offer a variety of health plan options to that group of people who are considered “medically uninsurable”.

The private insurance companies charge higher premiums for HRP patients than those charged for the ordinary people. This pool is funded by money from the state revenue collections. The federal government also chips in some money to help the state governments to set up and fund this pool. (Bailey, 2009)

In the universal scheme, government initiatives directly cover about 27.8% of the total population. These include the elderly people, physically handicapped, children, and a certain fraction of the extremely poor. On top of this, there is a federal law that allows public access to emergency services regardless of whether they are in an insurance scheme or not. The public scheme uses almost 57% of the total sum spend in the health care insurance sector.

Charity organizations also contribute a sizable amount of money toward the universal health scheme. This money comes from non-profit organizations, religious organizations, and services donated by employees to aid the poor. Overall, both the private and the public health schemes heavily rely on third parties to meet the cost of health care. Analysts observe this as one reason why the cost of providing health care has been on the rise. (Bailey, 2009)

Achievements of the two schemes

Over the last fifty years, the phenomenal rise in medical usage has been one of the most outstanding occurrences in the health care industry. Over the years, the total health care expenditures as total share of GDP have grown threefold from the paltry figure of 5% to about 14% at the turn of the century.

According to analysts, this commendable growth was because of the vigorous campaign put in promoting health insurance. Studies show that the consumption of medical usage began showing an upward growth in 1965 when the government introduced the Medicare program.

Prior to this, the only health insurance cover available to Americans was the private one that many people could not afford. Today, Medicare is one of the major health insurance plans in the world benefiting close to 40 million people and spending a big fraction of the federal budget as well as 2% of the country’s GDP. Before the introduction of Medicare, universal health insurance was unheard of and the private health insurance schemes available then did not cover the aged.

During this time, elderly patients or their relatives had to meet all the medical cost. Once Medicare was introduced in 1965, the enrollment of elderly people went up by almost 100%. Today, even the private health insurance sector has come up with programs destined specifically for the elderly population. (Cleveland, 2002)

By looking at the two schemes, it is prudent to say that both have helped in putting each other in check. The introduction of Medicare has done a great deal in streamlining the health insurance industry which prior to this was only run by private health insurers.

Although the elderly population constituted of only 10% of the total population, their contributions totaled to about 20% of the total expenditure at the time. Today the equation is level between the age divide. Alternatively, many people were able to join insurance schemes after the introduction of Medicaid. Although the universal health insurance program is not anywhere near perfect, it is still a relief for many American people who cannot afford the cost of private medical insurance.

The competition generated by the existence of the two schemes has helped to streamline the industry. However, more work needs to be done if the two schemes are to be effective. Key among this would be to bring down the inflated costs of health insurance and to provide more quality services for Americans. It is also important to look at the group of people who lack medical insurance because they do not fit into any scheme. This group of people earns more money that disqualifies them from joining the public insurance scheme.

At the same time, their salary cannot allow them to fit in the private insurance scheme making them to remain uninsured. However, state governments have been doing an extra job to ensure that these people get group insurance that is given to groups of small employers. All these developments can only be credited to the introduction of public health insurance and especially Medicare. (Cleveland, 2002)

Final Analysis

From the look of things, the woes bedeviling health care insurance are far from being over. Neither the universal nor the private health insurance is capable of solving America’s health care woes on its own. The best insurance scheme would be the one that seeks to reduce the inflated costs of obtaining health insurance.

While the universal health care scheme that most politicians have been routing for tends to gravitate towards this end, it does not actually attain this objective. If the Obama proposed health care overhaul is implemented, it would cost the exchequer about $115 billion in unrestricted spending over ten years more than the initial projections.

If congress approves the plan, the added spending would see the expected revamp costing over $1 trillion. This would go against the people’s wish of seeing a health care reform that brings down the cost of health insurance. This shows that while the program is laudable, it cannot be relied to bring about the much-needed efficiency lacking in the health insurance sector.

Running a universal health insurance scheme that forces people to give up their membership on private health insurance is not only illegal but also lacks morals. The proposed universal health scheme also goes against the tenets of market-based competition. This is because a universal health scheme would give the government an upper hand and hence knock private health insurers out of business. (Cleveland, 2002)

The best health care insurance for Americans would be the one that balances between the universal and private health insurance. This can be achieved by putting the compensation to doctors and hospitals proposed under the universal health insurance at the middle between Medicare and private insurance.

In this set-up, the number of people under private insurance would only drop to 67 million. This would be a big relief given the original figure of 120 million people that the private insurance scheme would lose if the government pushed ahead with its plan to adopt a universal health insurance for all Americans.

The best thing about setting up a corresponding public insurance scheme is that America would end up with an unambiguous two level medical insurance system where citizens insured under the private scheme would have an access to superior medical care. Some developed countries have also come up with this form of a health care insurance scheme.

In the U.K, more people are opting to enroll for private insurance other than enrolling in the government’s National Health Service. This would mean that privately insured Americans got higher quality health care compared to their colleagues in the universal insurance scheme. This policy will not work any time soon since majority of the political class favor the creation of a universal health over private health care insurance issuers. (Live Pulse, 2010)

Conclusion

The health insurance debate has continued to generate heated debate for a long period. Given the vested interests in the different schemes, the debate is not about to die any time soon.

Caught in the middle are American citizens who have to content with inflated prices and others who have to go without insurance cover simply because they cannot afford it. The political elite has been trying to come up with a universal health insurance that focuses on the public. Another group has been pushing for the striking of a balance between the universal and private health schemes.

This tug of war between the divergent groups has made prices in health insurance to soar to levels where most Americans are unable to afford. As it is, both the private and the universal health schemes as they exist today lack efficiency and until they are streamlined, Americans will continue to demand more value for their money. This should be done with haste in order to put America’s health insurance in the same rank with that of other developed economies.

References

Bailey, R. (2009) . How Obama’s Public Health Insurance Option Will Quickly Evolve in to the Only Option. Web.

Cleveland, P. (2002) Critical Issues, 4 (1). Web.

Live Pulse. (2010) Breaking News on the Health Care Fight. Web.

National Council of Churches. (1999) Resolution for Renewed Faith Community Universal Health Care Campaign. Web.

Star, P. (1994) The American Prospect, 20 (1). Web.

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