It also may be creating analogous problems to subprime mortgages. Last year, Business Week reported the emergence of credit cards designed solely to pay for health costs. Interest rates for some of these accounts can be as high as 27 percent, and a number of major as well as smaller banks are entering the market.
Universal, Effective and Affordable Health Insurance: An Economic Imperative
As unemployment rises, health cost and access problems rise, too. A percentage-point increase in unemployment could raise the number of uninsured by 1. The weak economy could also speed the erosion of employer-based insurance. The number of non-elderly Americans covered by employer-based health insurance fell to 61 percent from 66 percent between and The percent of both firms offering insurance and workers enrolling in it fell.
This will further strain businesses struggling to make payroll while maintaining benefits. The dual health and economic problems also affect seniors.
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Health costs are considered a major threat to our future economy. If rapid health cost growth persists, the Congressional Budget Office estimates that the fraction of the economy dedicated to health spending will be 25 percent in , and 49 percent in The health problems affect our budget as well as our economic outlook.
Medicare, Medicaid, and other health program spending comprise about one-fourth of the federal budget.
Benefits of Providing Coverage | Health Coverage Guide by Small Business Majority
Their rapid projected growth accounts for the entire long-run federal fiscal deficit. There is also a jobs and competitiveness issue at stake. New industries and businesses are struggling to offer coverage in the first place. While manufacturers are one-third more likely to offer health benefits than service industry employers, service-providing industries are projected to generate approximately Currently, no viable alternative exists. While the facts speak for themselves, it is instructive to listen to what some economic leaders say. It is now the principal fiscal issue facing the federal government, too.
In the short run, this committee could reconsider some of the policies proposed during the last economic slowdown. Preventing people from losing their insurance when they lose their jobs could stop the downward spiral in health and economic well-being that typically occurs during recessions. Temporarily raising the federal share of these program costs, plus enacting the bipartisan SCHIP reauthorization bill that was vetoed by the president last year, will protect health coverage for millions of vulnerable Americans.
Given the immediacy of the threat, I urge you to pass these policies during the lame-duck session. In , this committee and the new Congress should consider health reform as part of comprehensive economic reform. It is necessary, as just described. Job growth, savings, and public investments in other priorities such as education will continue to be stifled if health system problems continue unchecked.
It is also an opportunity to put the nation on a path to prosperity.
Health Policy and the Economic Crisis
The return on the investment—slowing the long-run rate of health care cost growth through system improvements and seamless coverage—would arguably be the most significant economic achievement in decades. A wide range of visions and detailed plans have been developed to fix the broken health system. There is a general consensus on the need to improve quality, efficiency, and access through tools such as better managing chronic disease, promoting prevention, investing in and using comparative effectiveness research, and providing assistance to those with low-income or high-risk.
But rather than discussing these ideas in depth, I will end by making two points on approaches to reform. The first is the importance of addressing the coverage and cost problems simultaneously. Coverage will continue to erode, even with expansions, if the cost of coverage continues its rapid increase. The same is true in reverse: The unsustainable cost curve cannot be lowered without ensuring coverage for all Americans. Some fraction of uncollected bills for care for the uninsured gets added to the bills for the insured. Moreover, gaps in coverage limit the potential of policies to bend the growth curve in health costs.
However, the full potential of these policies to realize savings may be constrained or even reversed if one-third of the population cycles in and out of insurance over the course of two years. Second, solutions should be bold but pragmatic. Important changes to the health system are needed to improve its performance.
For example, under federal law, small employers that purchase health insurance cannot be denied coverage for sick workers. However, plans can adjust premiums based on medical history or other factors. Generally, the law guarantees the right to renew health coverage, but does not restrict the premiums that insurers may charge.
HIPAA also requires the collection of certain health care information by providers and sets rules designed to protect the privacy of that information. An HRA may be used by an employee to pay for medical coverage until funds are exhausted. Once the deductible is reached, normal coverage begins. Any unused funds are rolled over at the end of the year, but do not follow the employee once he or she changes jobs.
An HSA is a tax-preferred savings account and is paired with a high-deductible health plan. Any employer can offer an HSA or a self-employed individual can set one up on his or her own , and both employers and employees can contribute to it.
The worker can withdraw money from the HSA to pay for medical services under the deductible. Any unused funds are rolled over at the end of the year. MEDICAID — Public health insurance program that provided coverage for an estimated 60 million low-income persons for acute and long-term care at some point during It is financed jointly by state and federal funds the federal government pays at least 50 percent of the total cost in each state , and is administered by states within broad federal guidelines.
MEWAs are sometimes exempt from state benefit mandates, taxes and other regulations. Insurers may choose not to cover treatment for such a condition, at least for a period, may raise rates because of it, or may deny coverage altogether. This model would require general categories of health services to be covered, but benefits could be added or deleted within limits.
The employer or government would then contribute a set amount of the premium for the purchased plan. Plans could set premiums at whatever dollar level they choose, with beneficiaries liable for any costs above the employer or government contribution. A Medicare demonstration designed to test a model similar to premium support is scheduled to begin in RATING — The process of evaluating, or underwriting, a group or individual to determine a health insurance premium rate relative to the financial risk of needing healthcare the person or group presents.
Key components of the rating formula include age, sex, location and plan design. All states have laws regulating insurer rating practices, and many states periodically update these laws with small group market reform proposals to restrict or loosen allowable variations.
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If a person owes no tax, the government sends the person or a third party a check for the amount of the refundable tax credit. RISK — The probability of financial loss, relative to the probability of having to provide services to a patient or patient population at a cost that exceeds the payments received. Under capitation payment systems, providers share the risk that is borne by insurers.
In contrast, indemnity plans assume all risk of providing care paid for through insurance premiums which belong solely to the insurance company. Canadian provinces operate health insurance coverage for residents under this system.
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