Health Care in America – a brief tutorial

Let’s start with some background. Why did we even need health care reform? What was driving the passage of this legislation? What does health care in American look like?

Health care in the U.S. is a patchwork of different institutions, at different times in a person’s life. Children are usually covered under their parent’s health insurance, if their parents have it, or a child-only policy. As with all health insurance the benefits of these policies can vary widely. Before PPACA, many of these policies would have both annual and lifetime caps.

If a child’s parents cannot afford health care insurance, either through work, if it is offered, or individually, states have lower-income health insurance plans that are available for small premiums, typically called CHIP or SCHIP plans. These plans are intended to cover those families that are not eligible for Medicaid.

When a child is from a family that meets the low-income and other qualifications for Medicaid, then they are eligible for this program, which is jointly funded by the federal government and the states.

Even with all of these programs, 11% of the nation’s children were uninsured in 2010.

In 2010, most insurance plans allowed children to stay on their parent’s insurance until they were 19, or 23 if they were enrolled in college. After that, you were responsible for your own health insurance. Most adults who have health insurance have it through their employer. There were no laws requiring employers to offer health insurance. The prevalence of employer-based health insurance arose during WWII, when wages were restricted. As any economist would tell you, this lead to non-wage offerings in order to entice workers. One of these was the employer paying for some or all of a health insurance policy. This was supported by the tax-deductibility, for the employer only, mind you, of this cost.

If your employer doesn’t choose to offer health insurance you have to either get it independently, which is usually more expensive due to the concept of adverse selection (the fact that people who need insurance are more likely to want to buy it) or go without. In 2010, 16% of the adult population did just that, and had no health insurance.

If you make it to 65, then you are eligible for the social insurance program known as Medicare. This federally run program guarantees medical care for all citizens over the age of 65. As of 2010, this program accounted for 3.6% of GDP. This was about 75% of what US defense spending was in 2010. It was also more than the GDP of all but 19 of the countries in the world. Because this is an age-based system, no person over 65 is technically without health insurance, although they don’t have to use it if they don’t want to.

What does it matter if people are uninsured? When people aren’t insured, they don’t go to the doctor regularly. This can lead to illnesses that are more expensive to treat, resulting in higher bills overall, when they do finally go to the emergency room, where they are required to be treated. It can lead to higher public health costs, as they are sick and continue to work rather than treating illness. It also forces them to spend money on health care that they could be spending on new cars and sweaters, which can lead to lower employment. Plus there’s the human suffering. But that’s harder to put a number on (but we can try!)

So there you have it, the basic motivation for why health care needed reforming, in 600 words or less.

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Filed under Economics, General, PPACA

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