Why Health Care Costs Have Risen So Rapidly

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Why Health Care Costs Have Risen So Rapidly

• Rising incomes
• Increased government involvement in health care
• Cost of Medicare in 1967 3.3 billion
• Cost in 1990 100 billion (in 1965 gov. had
  estimated cost to be 9 billion in 1990)
• Cost in 1999 220
• Cost of Federal part of Medicaid in 1999 76
  billion

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• Less than full cost pricing
• We only pay about .21 of each 1 spent on health
  care this encourages increased usage.
• Cost of advanced medical technology

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• Aging of America
• 1900About 1 in 25 were 65 or older
• 1994About 1 in 8 were 65 or older
• 2030About 1 in 5 will be 65 or older

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Types of Health Insurance
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Hospital expense

• Pays room and board.
• Limited to so much per day for a given number of
  days.

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Physician expense

• Normally covers visits to the doctor, x-rays, and
  lab tests
• Only pays up to a certain limit

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Surgical expense

• Pays surgeons fees for an operation
• May pay so much per type of operation
• Or what is reasonable and customary in the area

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Major medical

• Catastrophe insurance
• Covers most medical costs not covered by basic
  insurance
• Has deductible, coinsurance clause, cap
  (ceiling), and lifetime limit

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Traditional Health Insurance

• Must either pay and then file for reimbursement,
  or have the provider file a claim each time a
  service is rendered

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Advantage of Traditional Health Insurance

• Can go to any doctor or hospital

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Disadvantages of Traditional Health Insurance

• Deductible and copayment must be paid by patient
• Normally more expensive that managed care, unless
  you raise your deductible and copayment
• Claim forms may have to be completed
• Some services limited or not covered

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Health Maintenance Organizations (HMOs)

• An organization which provides comprehensive
  health care for a monthly premium
• Care is provided by HMO doctors and hospitals and
  other professionals under contract
• Except in an emergency, you must use HMO doctors
  and hospitals

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Advantages of HMOs

• Only 5 to 15 copayments made when you visit a
  doctor
• No or very low hospital deductibles
• No claim forms to complete
• Normally covers pre-existing conditions
• Emphasize preventive care

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Disadvantages of HMOs

• Must choose a primary care doctor (gate keeper)
• Primary care doctor must refer you to a
  specialist
• Cannot go out of the network
• Only the primary care doctor or a physician he
  has referred you to in the network can give you a
  prescription

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• Tend to have a fairly small network of physicians
• In an attempt to control costs, treatment a
  patient needs may be denied

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Preferred Provider Organizations (PPOs)

• Combine characteristics of traditional health
  care and an HMO
• Negotiate with doctors and hospitals for
  discounted rates for members

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Advantages of PPOs

• Can go to any doctor in the network at any time
  without a referral
• Very small copayments (5-15) on doctors visits
• Can go out of the network to see a top specialist
• No claim forms
• Low or no hospital deductible

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• Can get prescription from any doctor whether in
  or out of the network
• Provides more choice than HMOs

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Disadvantages of PPOs

• Must pay more out-of-pocket if you go outside the
  network
• May have to pay a deductible and coinsurance for
  some services
• Premiums are normally 15-25 more than HMOs

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Point of Service Plans (POS Plans)

• Combines the characteristics of HMOs and PPOs

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Advantages of POS Plans

• You pay little or nothing if you stay within the
  network
• Can see out-of-network service providers

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Disadvantages of POS Plans

• Primary care physician must refer you to a
  specialist
• Higher copayment and deductible for
  out-of-network services
• Cost more than HMOs