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Component 1:
Introduction to Health Care
and Public Health in the U.S.
Unit 4: Financing Health Care
Lecture 1
This material was developed by Oregon Health & Science University, funded by the Department of Health and Human
Services, Office of the National Coordinator for Health Information Technology under Award Number IU24OC000015.
Lectures in This Unit
• Lecture 1: Distinction between Publically
Funded and Privately Funded Health Care
• Lecture 2: Single-Payer Systems versus
Multiple-Payer Systems
• Lecture 3: Insurance and Third-Party Payers
• Lecture 4: Government Payment Programs
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Topics in This Lecture
• Health care spending
– Economic impact and gross domestic product
– Health care jobs
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Publically funded health care
Privately funded health care
3 roles of government in health care
Important federal laws
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Health Care Spending
and the U.S. GDP
• Gross domestic product (GDP) reflects value of
goods and services we produce
• GDP was $14.1 trillion in 2009
• Health care spending was 17.6% of GDP
– One of the highest amounts in the world
• The U.S. spent $8,086/person on health care
• Health care spending expected to be one fifth of
GDP by 2019
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Major Areas of
Health Care Spending
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31% hospital care
21% physicians and medical laboratories
10% prescription drugs
Health care spending grows faster than most
other sectors of the economy
• Spending on government programs has
increased at slower rate than private spending
– Since 1999, family premiums for employer-sponsored
health insurance have increased by 131%
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Health Care Jobs
• 10 of the 20 fastest-growing occupations are
related to health care
• 14.3 million jobs in 2008
– 40% of jobs in hospitals
– 21% in nursing and residential care
– 16% in physician offices
• 3.2 million new jobs between 2008–2018, due to
growth of elderly population
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Privately Funded Health Care
• 2 categories:
– State-licensed health insurance organizations
• Commercial insurers
• Blue Cross/Blue Shield
• Managed care organizations
– Self-funded employer-sponsored insurance plans
• 1,200 not-for-profit and for-profit insurance
companies
• 36% of all health care spending
• 55% of Americans have insurance through jobs
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State-Licensed
Insurance Organizations
• Commercial health insurers
– Most are owned by stockholders or stock companies
– Mutual insurance companies are owned by their
policyholders
• BlueCross BlueShield
– Association of 39 different companies in 50 states
– Locally operated; some are for-profit
– Largest insurer, covering 1 in 3 Americans
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State-Licensed
Insurance Organizations (cont’d)
• Managed care organizations
– Combine health insurance and health care services
– Cost control and utilization control
– Some hire their own doctors and have their own
facilities
– 3 main types:
• Health maintenance organizations (HMOs)
• Preferred provider organizations (PPOs)
• Point-of-service (POS) plans
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Self-Funded Employer Plans
• Health benefit plans regulated by federal law
• Created by employers, employee organizations,
or a combination
• Employer assumes risk for workers and pays for
care directly
• Employer may choose to have a third-party
administrator administer the plan
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Publically Funded Health Care
• Government programs, some of them funded
through income taxes and payroll taxes
• Begin in federal legislation
• Voted into law by Congress
• Help specific population groups
• Run by federal government and federal-state
partnerships
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Examples of Government
Health Care Programs
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Medicare
Medicaid
Children’s Health Insurance Program
Veterans Health Administration
TRICARE
Indian Health Service
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Roles of U.S. Government
• 3 key roles: provider, funder, lawmaker
• Provider of health care services
– Veterans Health Administration and TRICARE
– Indian Health System
– Supports research into new models of health care
• Funder of third-party services
– Outsourcing of health care services
– Outsourcing of claims paperwork
– Outsourcing of grants
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Roles of Government (cont’d)
• Lawmaker role 1: Ensure fair competition
– Sherman Anti-Trust Act, 1890
• Prohibits monopolies and restraint of trade
– Clayton Act, 1914
• Prohibits price-fixing and exclusive dealings
• Lawmaker role 2: Protect the public
– Food, Drug, and Cosmetic Act created FDA, 1938
– Hatch-Waxman Act, 1984
– American with Disabilities Act, 1990
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Social Security Act
• Passed in 1935, part of the New Deal
• Established a system of old-age benefits for
workers
• Also created:
– Benefits for victims of industrial accidents
– Unemployment insurance
– Aid for dependent mothers and children, the blind,
and the physically handicapped
– Vocational training
– Funds for family health programs
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Hill-Burton Act
• Hospital Survey and Construction Act, passed in
1946
• Stimulated construction of facilities
• Foundation of today’s infrastructure for hospitals
and other health care organizations
• Continues to authorize funding for hospitals,
nursing homes, health centers, rehabilitation
facilities
• Imposes anti-discrimination rules
• Requires participation in Medicare and Medicaid
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Stark Laws
• Named for Congressman Pete Stark
• Govern ability of physicians to refer patients to
facilities in which they have a financial interest
(“self-referral”)
• Bans self-referrals to clinical laboratories and certain
other services under Medicare and Medicaid
• Major exception: a physician within a group practice
may refer a patient for certain imaging services
provided by that practice, as long as the patient
receives written notice of other imaging clinics
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Summary
• The U.S. spends nearly one fifth of GDP on health care
• The health care job market is growing
• 2 main types of health insurance:
– Privately funded health care insurance
• State-licensed insurers
• Self-funded employer-sponsored plans
– Publically funded (government) programs
• The federal government has 3 roles in health care:
provide services, fund services, and pass laws that
ensure fair competition and protect the public
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