Financing Health Care - Research Paper Example

Financing Health Care Number: Introduction Healthcare is not a gift from God. It has to be financed so as to cater for its day to day activities and long term planning. The government is the primary healthcare financier and provider in most countries (Cichon, 2008). It is the role of the government to ensure that its citizens enjoy quality and affordable healthcare. It is the responsibility of every citizen to contribute to the development of a country. This can only be done when they are healthy. The theory of human capital asserts that healthy human beings are capable of contributing towards the economy by working for others, state corporations or being entrepreneurs. Different healthcare packages favor different age groups and citizens; there is no one whole package that caters for every citizen in the country. For example, in the U.S, the government funds Medicare, which caters for the elderly and the disabled and Medicaid, a package for the low income earning citizens. The different methods of financing healthcare have their own pros and cons and are, thus, suitable in different circumstances, hence, individuals can choose the ones they want. This paper analyzes different approaches of financing healthcare including Medicare, Medicaid and social security programs, and their suitability. Market-based systems In this structure, health care is generally offered by private organization and the system is prone to high levels of business competition. The people insured can have their own will to choose which company serves their needs best and the ones that are pocket friendly to them. Doctors are the ones who decide when and whom the treatment should be used for and are at will to make the decisions of case basis in view of the needs of every individual that is in need of these health care facilities. The first disadvantage of this system, where the patient and their physician have freedom of choosing these services that would best suit their client, is that there may raise a case of service duplication since care coordination will be hard to achieve. The biggest advantage of market-based system is improvement is mostly superior and new discoveries are easily available to patient after a short while, as these system mainly offer financial incentives for coming up with new medical improvements. Some people may not have admission to the health care system and services they need since there may not be an adequate provision that ensures a more basic level of covering the health of an individual. As a result, this system offers a safety net curriculum that includes the government-funded treatment to those individuals who cannot afford to buy the private package of health insurance. For example, the disabled, the poor in the society and the elderly members of the community (Cichon, 2008). Government-financed systems They tend to offer everyone who lives in the country a basic coverage that gives access to average level of health care. The government is able to sustain these services as it levies taxes and other charges to its citizens. In the system of government- financed, it can opt to hire a private sector that will ensure the smooth running of the program, where the government would be responsible for funding the program, like in the case of Japan and Germany, and the known U.S government programs, Medicaid and Medicare. The government program is not expensive as the availability of the government system is easily accessible, and it takes a while for new advances in the program to be adopted and offered to patients. As a result, the quality of the services offered may not be the same with that offered by the market-based system. An example is in the U.S, where the market-based systems have cancer diagnostic tests conducted earlier which are not the same in European Countries. Fewer incentives are offered in the government-based programs in an attempt to persuade innovative medical advancements (Cleverley, 2010). Managing Health Care Costs Both these health care systems strive to control the overall health care costs that are offered to the receiver. The difference is seen in the way they approach to this procedure. On one hand, the market-based depends primarily on the weight of the companies competing in the market to try and offer the best services to the customers as a whole by bringing new and innovative products. It is upon the customer to choose which company to go for depending on different variables such as, quality, cost, convenience and the service offered by these companies. On the other hand, majority of government programs are not faced with competition, but rather adopt other tools that tend to keep the cost of operation and services down, so that it is easily offered and accessed by each individual. These tools usually come in handy as they are very useful and reliable when it comes to cost control of the services offered, while maintaining the quality of the services given to the patients. The overall effect and outcome depends on the nature of the approach and execution of these eservices. There are a few things that can cut off the innovations progress of these programs, they include: Rigid budget heights that reduces the resources the government would set aside for the health care during the budget cycle. Profit caps, and also express charge confines on new treatments. It can also be by importing low cost medicines that have not been approved by the manufactures or appropriate authorities (Cleverley, 2010). There can also be the high restraining formulas of medicines that are to be reimbursed, and by imposing tough penalties on physicians who exceed the given amount of spending put aside. Countries tend to use health care programs that do not harm the quality of services offered by designing them in a way that will constrain the overall spending without doing harm to the innovation. The methods to mobilize resources mostly include a mixture of taxation and offering to public health system and the private insurance projects. The main method for financing these projects include the private insurance, out-of-pocket payments, community based insurance, national health insurance and the general revenue (Cleverley, 2010). The financial burden, amount of resources and its availability is determined by the choice of method that has been applied. The best approach to financing should cater for the collective pooling of catastrophes that would meet the need of equity, affordability and solidarity. There is equity at different levels like in financing, health care access and the equality in health protection offered. In addition, the elements of health care finance are funded are allocated to health service providers. Then the resources are fully mobilized to categories them according to their respective health service provision. This mode of allocating resources must be fully accepted b the public. The choice of financing health care should be controlled by the degree to which it is preferred to let the government take part and open way for the social partners to implement the national health system (Goodman, 2010). Types of financing Social insurance financing – it cannot be clearly defined as it is complex in nature and operations, for example the retirement social program scheme. Social financing that is based on payroll taxation may be thinner than the general revenue financing. Money collected through the social service should cater for the fully insured health program’s cost. The level of contribution is hence tied to the expense of providing the necessary health service. This service may vary with the choice of the plan that is at hand. The social insurance system can adopt the pre-funding and building trust funds for its future costs and operations where trust funds are rare to encroach. Private insurance financing operates under employers and other insurance offering organization. The price of the related coverage to be offered is related to the expectation of the health expenditure. For example older member of the community or the sick and disabled are incurred high cost for the coverage since their health is gradually deteriorating as they grow old and the sick as they weaken due the prevailing illness, in case of cancer patient. The impression of moving forward does not bring about a vivid and clear analogue in the private pay case. In regard to the private coverage, the individuals are the one who make decision on which coverage to take and pay from their share of income. Even in conditions where there is no health insurance, health care exploitation rises less than proportionately with income (the income elasticity of health care utilization is, at the micro level, less than one) (Goodman, 2010). The first-class paid by lower income people are only slightly lower than those charged to higher income people, a circumstances that would be viewed as regressive if the premiums were taxes. A special impediment of private financing arises through the favorable tax treatment of private employer-sponsored health insurance premiums, which exists in many countries including, example Canada, the United States, the UK, Denmark, France, and Australia. In these countries, the tax subsidy is evenly distributed in the context of otherwise privately financed health insurance. Practically all pragmatic private health insurance contracts are of short duration which mostly runs for about one year. This makes it easier said than done to pre- fund the health insurance care, except through savings mechanisms outside the health system (Goodman, 2010). The other method of paying for these insurance programs is the out-of-pocket payments; these are payments that are incorporated direct into the health care system at the point of service. In this category, individuals take account of full payments, as in the case of pharmaceuticals or nursing home care for those individuals who do not have any insurance coverage, there are also subjected to copayments and deductions from their salaries or income. A system with only out-of-pocket payment would finance health care regressively, since health service use rises less than proportionately with income. The revenue-raising and benefit-disbursing components of these systems work differently over the lifecycle than they do at a point in time. In regard to a point in time, income taxes tend to be more continuous than social insurance taxes which in turn, are generally more prolonged and continuous than consumption and VAT taxes. When costs and benefits are cumulated over the lifecycle however, comparative continuity can change since those people who earn higher income generally live longer than those who earn lower income in the society. Therefore, consumption taxes are paid throughout the lifetime of the individual and reflect consumption where on most occasions among the older people, it generally exceeds income. This means that those people who have higher lifetime incomes, on average will end up paying more in lifetime consumption taxes than those who have lower lifetime incomes, also referred to as decedents, hence making this tax more continuous in its nature (Baker, 2011). On the other hand, income and in particular social insurance taxes appear less continuous in the lifecycle context. More over, younger people end up paying relatively higher taxes than older people, but those with lower incomes may inexplicably fail to endure and collect reimbursement at older ages of their lives. In most countries, insurance covers about 80% of health care costs, with the remainder being accounted for the out-of-pocket spending. The configuration of out-of-pocket spending nonetheless varies significantly among countries. For example, In the United States, where there are no universal insurance coverage for those under 65, there is a small number of individuals who account for the large share of out-of-pocket costs. Whereas in other countries, major certain services are disqualified from public insurance coverage, and out-of-pocket spending accounts for the large share of costs for that scrupulous service. In contrast, few countries include a broader range of services in the health insurance package, but extensive copayments are required for all services (Baker, 2011). Medicare program The Medicare program was enacted in 1965, and was the basic health insurance protection for hospital care, and physician services were ex-tended to nearly all elderly Americans who were unable to pay for the out-of-pocket insurance program. The widespread nature of Medicare coverage means that virtually no elderly person is without insurance. Medicare facilitates access to physician services and guarantees admission to a hospital when needed. It means that coverage for the elderly does not vary by State of residence and does not limit the orderly’s choice of providers in the mainstream of American medical care. In the last thirty years that Medicare has been in existence, it has provided insurance services to the elderly Americans specifically the poor and elderly, with the individuals having to benefit from the numerous advances of American medical technology, most notably treatment for heart disease, chemotherapy and cataract surgery whereas gaining the overall improved access to the health care system (Baker, 2011). For many elderly people, Medicare thus provides essential, but incomplete, protection against medical expenses. In addition to the required premiums and cost sharing, Medicares benefit package does not cover the full range of health services needed by many elderly people. Particularly absent from the Medicare benefit package is coverage of outpatient prescription drugs, vision care, and dental services. In addition, Medicare does not cover chronic LTC needs, most notably nursing home care for the disabled elderly. On the other hand, Out-of-pocket spending on acute care medical services and insurance premiums for both Medicare and private supplemental policies are significant expenses in the budgets of elderly Americans. The average dollar amount of out-of-pocket spending increases with in-come, averaging to nearly $3000 for non-poor elderly and $1500 for poor elderly people (Goodman, 2010). Medicaid program Medicaid provides Medicare coverage affordable for over millions of low-income elderly Medicare beneficiaries by helping as heir media policy for those who succeed for assistance from the Medicaid program. Medicaid coverage is an important source of health care financing, which pays the Medicare beneficiaries with average incomes of below 120 percent of FPL Elderly cash assistance recipients and others covered at State option can also receive additional benefits from Medicaid to supplement Medicare, including prescription drugs and LTC coverage. The low-income earning elderly people on Medicaid qualify for assistance by various means. Over one-half of the elderly with Medicaid coverage obtain eligibility as they are categorically needy since they are recipients of cash assistance and are eligible for assistance under the Supplementary security Income program. Other individuals are covered at the option of the State as eligible. These individuals, account for about 20 percent of elderly Medicaid beneficiaries, and have incomes above welfare cash assistance levels, but incur expenses for health services that reduce their available income to below the income standard for eligibility. Both the categorically needy and medically needy groups receive Medicaid to harmonize Medicares benefit package, as well as assistance with Medicare premiums and cost-sharing. The elderly in nursing homes with Medicaid coverage are included in both the categories and medically needy groups (Goodman, 2010). Conclusion The different approaches to healthcare financing include Medicare, Medicaid and social security programs. Each of these has its own suitability and application. In all these, it is evident that a diverse financial system is primarily the only way to balance effectiveness and fairness in the health care. The low-income elderly Americans have more health problems and rely mostly on the wider use of health services with the related cost for treatment and medication than the higher income earning elderly. It is important to maintain assistance with financial obligations and additional benefits that Medicaid provides today in order to ensure Medicares adequacy for coverage is incorporated in the future. References Cichon, M. (2008). Modelling in health care finance. Geneva: International Labour Organization. Eastaugh, S. R. (2009). Health care finance and economic. Massachusetts: Jones & Bartlett Learning. Hilary Goodman, C. W. (2010). Financing health care. New York: Oxfam. Jonsson, E. (2008). Financing Health Care: New Ideas for a Changing Society. New York: John Wiley & Sons. Judith J. Baker, R. W. (2011). Financing health care. Massachusetts: Jones & Bartlett Publishers. Ulrich Laaser, R. R. (2009). Health care finance. Detroit: Jacobs. William Cleverley, J. O. (2010). Essentials of Health Care Finance. Massachusetts: Jones & Bartlett Learning. Read More