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Understanding the US. Health Care Reform: Necessity, Challenges, and Implementation

The healthcare system is a complex of all organizations, institutions and resources whose primary purpose is to improve health. A good health system significantly improves the daily lives of people. Within the health system, services for the people should be provided. So, researching health services is a rationale and characteristic for the US health care reform in 2010. But the US healthcare system had several issues that affected and influenced the lives of people in the country. Because of this, the proposed research on the reform and health services problems is so substantial. It is confirmed by such studies as articles and reports of policy-makers involved in the preparation of the reform and implementation of pilot projects and data from the reports of experts of the 9th Annual World Health Care Congress, which was held on 16-18 April in 2012 in the United States, Washington DC. They are: Burritt, J., Steckel, C., Wallace, P., Edmonds, M. , Greenfield, S., Kaplan, S., Ware, J. Jr., Hsiao, W.C., Kappel, S., Gruber, J. , Orszag, P., Patel, K., Wells, K., Ralston, J. D., Carrell, D., Hereford, J., Ross, S. E., Chen-Tan, L., Samitt, C., Walters, B., Zucker, M., Smith, M., Halvorson, G., and Kaplan, G.

It is necessary to highlight the key issues that prompted the US government to begin health care reform and study the reform program in terms of its main sections: financing constraints of market relations and expansion of government regulation.

A Substantiation of the Necessity of US Healthcare Reform

At the beginning of the 21st century, the US healthcare system faced two major challenges. The first one is a high rate of uninsured people (or 16% of the population) and, consequently, significant differences in the availability of medical care to uninsured citizens. The second challenge is the uncontrolled growth of the cost of the health care system. It is 17.5% of GDP (or $ 2.6 trillion per year), in contrast to the EU countries, where these costs are, on average, 8.3% of GDP. If healthcare costs in the United States continue to show growth at the average rate of 0.5% of GDP per year, in 70 years, the costs of healthcare in the United States will be accounted for 40% of GDP.

Public insurance programs Medicare and Medicaid, which are paid for medical assistance of pensioners and low-income citizens, constitute the largest part of expenditure for the federal government. It is 1,2 trillion US dollars per year.

If the US health care system costs would not restrained, the federal budget will require substantial additional funds in the next decade. This will lead to the need for taxes to increase, and, ultimately, it means that one-third of the total income of citizens will be given only to the health system.

The problem with uninsured people in the United States today has serious consequences, as about 20 thousand deaths (or 0.8% of all deaths) are related to the lack of citizens’ health insurance. The necessity of paying medical bills without health insurance is the leading cause of bankruptcy in the United States. Moreover, the rising cost of health care forces insurance companies to raise tariffs on voluntary medical insurance. In their turn, employers who have to pay these inflated prices either reduce the level of coverage of the insurance plan of their employees, reduce wages of employees to cover the cost of their health insurance, or deprive some workers of insurance. Thus, directly or indirectly, the shifting of the cost of health insurance on the workers or reduction of their wages occurs.

In their turn, healthcare providers guaranteeing medical assistance to those who cannot pay for it have to raise the rates for their services. So, cross-cost coverage of medical services for uninsured people from the funds of insured citizens occurs. It supports conditions for the continued growth of tariffs for medical care.

The disintegration process of patient care, which is associated with free choice of the patients of general practitioners and hospitals, as well as the lack of unified standards of care at all stages and levels of care, should be added to the problems mentioned above of the US health care. It leads to unnecessary and repetitive doctor appointments and complicates the efficient organization of the patient care process. All of these lead to the fact that the third part of the money spent on health is used inefficiently; from 3% to 10% of funds are wasted intentionally.

Thus, in addition to the general inefficiency, the US healthcare system has low access to healthcare for the population (16% uninsured), uncontrolled growth of healthcare costs and disintegration of the patient care process.

Characteristics of the US Healthcare Reform and its Administration: The Main Provisions

To solve the above problems, the Government of Democrats, led by US President Obama, in the spring of 2010, prepared a program for reforming the health care system and the corresponding law, “Patient Protection and Affordable Care Act – PPACA”. This law was accepted by the democratic fraction of the US Congress and signed by the President. However, its acceptance met strong opposition from the Republican Party. The main argument of opponents: the United States is a country of free enterprise, and there should not be any government regulation of prices, as this may lead to the nationalization of healthcare and socialism. Another argument of opponents was the objection that the rich and middle class would not have to pay additional taxes to cover the cost of health insurance for the uninsured.

As a result of these more political debates, one of the most important provisions of the law, the duty of every citizen to be insured, has been declared unconstitutional. The question of the possibility of a rule requiring health insurance for every citizen was considered by the US Supreme Court in June 2012, and the result of it was a positive decision. Thus, this rule came into effect in 2013; other provisions of the reform were implemented in 2011, and some of them will be implemented in 2014.

Four main areas of the reform can be distinguished:

• Mandatory insurance for all citizens
• State regulation of insurance contributions and the amount of insurance coverage
• Facilitating the process of selecting an insurance plan for the citizens
• Regulating prices for medical services and improving the quality of care.

Development of the System of Mandatory Insurance for all Citizens

All citizens must have health insurance. A citizen can buy insurance if it costs no more than 8% of his/her annual revenue. If a citizen is uninsured, he/she will have to pay a penalty from 1 to 2,5% of his/her income. If the insurance costs more than 8% of the income and less than 14,400 US dollars per person per year, or less than 29,330 dollars per family of 4 people, the state ensures such citizens through a program of Medicaid. People with incomes from 14,400 to 43,320 US dollars per person per year or 29,330 to 88,200 dollars per family of 4 persons have fiscal subsidies. Young people aged 19 to 26 years previously uninsured can stay within their parents’ insurance plan. Small businesses (25 people or less), if they decide to insure their employees according to group insurance plans, are also provided with tax subsidies. Employers with more than 50 employees have a choice – either compulsory insurance for all the workers or paying an additional tax of 2,000 US dollars per year for each employee. This amount is about one-third of the annual premium for the insurance of one employee. It is the average rate. Employees of small and medium businesses have the right to remain in the employer’s group health insurance plan.

Regulation of Insurance Rates and the Volume of Coverage

• Insurance companies are not allowed to refuse to cover anyone and set larger insurance rates for those at high risk of a disease developing or its availability, so the transition to compulsory risk-free insurance is occurring.
• The insurance plan must cover the necessary medical measures for disease prevention and early diagnosis of diseases, hospital care, drug coverage in outpatient services and long-term care. It means the state establishes the “basic package” of health insurance.
• The state sets limits of 6,000 US dollars a year on “co-payments” of insured for medical care. The state also regulates the income of insurance companies – they have to spend at least 80-85% of the number of funds (collected insurance premiums) to pay the bills for care and no more than 15-20% of the funds they need to remain for administrative costs and profits.

Facilitating the Process of Selecting an Insurance Plan for Citizens

The “exchange” insurance plans are created, so both citizens and employers can competitively select an insurance plan and get advice. These activities will be supported through the Internet and call centers.

The Regulation of Prices for Medical Services and Improving the Quality of Care

The following tools were offered for these purposes:

• Tax on “Cadillac”

Today, most employers in the USA have tax deductions for health insurance. It encourages them to form generous deductions for insurance and not to worry about the cost of medical care. On the one hand, this reduces tax revenues to the state budget. Conversely, insurance companies and healthcare providers may form high rates for their services. An additional tax was implemented for companies with the highest insurance premium rates to avoid this situation.

• Creation of “IPAB – Independent Payment Advisory Board”

Decisions of this council should always be considered in Congress.

• Creation of a commission that will make “CET – Comparative Effectiveness Research”.

The inclusion of health care organizations in the “ACO – Accountable Care Organization” plan. If a medical organization or private medical practitioner enters this program, it must report to the state for the quality and outcomes of care for established indicators (33 indicators). If the values of these indicators are within limits (and the organization was able to save from 2 to 4% of the established rates for services), it will receive from 60 to 70% of the savings as a bonus. It is assumed that savings can be achieved by introducing standards, reducing the duplication of procedures, and integrating patient care. Thus, this model is motivated by healthcare providers to save money on the state programs provided to maintain the high-quality level.

Total funding of reform is supposed to carry out mainly due to the federal budget (90%), and only the remaining 10% will be spent from the states’ budgets. The total planned cost of reform is about 940 billion US dollars over 10 years. Additional sources of funding the system are the tax on the rich – those who receive incomes of more than 200 million dollars a year. Moreover, the basis for the calculation of the tax will not be only waged but also investment income. Despite the enormous cost, this is the only reform that, in 10 years, will reduce the US federal budget deficit by 1 trillion dollars.

Conclusion

Thus, the health care system in the United States has several disadvantages, so the reform was substantial. Experts have conducted calculations according to which the expected effects of the reform on the public are the following: 32 million Americans will be further insured by 2019, older Americans will have an increased amount of drug supply in the outpatient setting, and there will be reducing the size of so-payments for these drugs, as they will be provided with the inclusion of insurance plans in the possibility of screening of diseases. The state will avoid the growth of the federal deficit. It means that the reform was necessary and substantial.