Health Care Breakdown: What’s available, who pays for it, who’s covered?

America has been discussing health care, insurance, taxpayer-funded plans and out-of-pocket costs for months. Actually, we’ve been talking about it for decades and the conversation is nowhere near the end. I believe it is our right and responsibility to know how, where and why our tax dollars are spent. Let’s start with an overview of health care that is somewhat of a cross between the classic college CliffsNotes and the Drunk History version of how our current system evolved.

Before about 1920, insurance did not exist. If you were sick, you had four options:

  1. Hope you get better.
  2. Buy the elixir of the day from the self-appointed healer and pray it doesn’t kill you.
  3. Check in to a poorhouse or hospital; they were viewed about the same.
  4. Suffer and die.

With the progression of medicine, health care improved, more and better doctors were trained, longevity increased, and hospital beds were…empty. Here’s a brief timeline:

  • The Great Depression hits in 1929, hundreds of hospitals close, people can’t afford to pay for their hospital care and the remaining hospitals are struggling. That is, until a group of 1,500 teachers in Texas offers to pre-pay Baylor Hospital for up to 21 days of future care. This deal plants the seed for Blue Cross.
  • Fast forward to 1935. FDR attempts to add a compulsory health care component to the newly-formed Social Security Act. It fails. In 1942, with America in the midst of WWII, Congress passes The Stabilization Act which basically freezes wage increases during wartime. Industry panics. Already challenged to find workers, industry says: “OK, since we can’t pay more to attract the best workers, let’s up the ante with bigger and better benefits, like pensions! And employer paid health insurance!” Seemed like a good idea, unless you were unable to work, worked part-time, had a lower-wage job without benefits or aged out of the workforce.
  • Fast forward again. JFK advocates for “Medical Care for the Aged.” After his death, new president Lyndon B. Johnson carries the torch until 1965 when Medicaid and Medicare are passed. Add in lots of changes, re-writes and expansions and there are now four basic health care options:


Medicare:

What is it? Federal program available to all U.S. citizens 65+ regardless of income. Also covers certain disabled individuals. The federal government determines eligibility and criteria.

Who pays for it? Fifteen percent of the federal budget goes to Medicare. If you’ve been employed, you’ve paid into it. The four-part program is funded from a combination of payroll taxes, deductions from Social Security income and some out-of-pocket options for supplemental services and prescription drug coverage.

How many? One in six, or 55 million Americans, virtually all of the 65+ population, including 1.9 million Michiganders are Medicare recipients.

What else? Medicare is the primary payer for all inpatient hospital and long-term care for the elderly.

Medicaid (as expanded by the ACA):

What is it? Joint state and federal program available to low-income individuals under age 64. Eligibility depends on income, household size, and state rules. There are federal guidelines but each state determines its own criteria, so there really are 50 different Medicaid programs. Michigan criteria: Income at or below 133 percent of the federal poverty level ($16,000/single person or $33,000/family of four). Federal law requires certain groups are covered including: children 19 and under, parents/caretaker relative of minor children, certain disabled individuals, pregnant women, seniors, youth aging out of foster care.

Who pays for it? The federal and state government share the cost of Medicaid. States are reimbursed by the federal government for a portion of each state’s Medicaid program costs with no cap and a reimbursement that fluctuates based on a ratio of the average personal income in the state versus the nation. The federal government matches $1.91 of every $1 spent by Michigan. In FY 2015, Michigan received more than $11 billion in federal funds. Of this, $4.1 billion in federal funds were under the Affordable Care Act. Fifty-six percent of all federal funds received by Michigan are for Medicaid and 26 percent of Michigan’s general fund spending is for Medicaid.

How many? One in five, or 74 million Americans including 2.3 million Michiganders, have Medicaid. Children make up about half of all covered individuals.

What else? Twenty-nine percent of Michigan’s population is low income. Two out of five children and three out of five nursing home residents are on Medicaid. A key point in the repeal and replace arguments are about how states receive these Medicaid dollars and if they should continue to receive the same amount or an amount via a block grant or a per-capita grant.

Employer-Sponsored Health Plans:

What is it? Traditional, private insurance benefit offered by an employer to an employee as part of compensation.

Who pays for it? Typically an employer will pay a percent of the premium and the employee will pay the balance through payroll deductions. In Michigan, the average annual single premium paid by an employee is $1,091; employer, $4,680; for a total of $5,771.

How many? 150 million Americans participate in employer-sponsored programs, including 5.8 million Michiganders.

What else? Numbers do not reflect companies that offer a stipend in lieu of insurance.

Individual Market (including ACA insurance marketplace and subsidiaries):

What is it? Part of the Patient Protection and Affordable Care Act (ACA or ObamaCare) signed into law in 2010 with the intent of providing access to health care for the uninsured, improving system efficiency and eliminating pre-existing condition clauses.

Who pays for it? Combination of the federal government and individual. In Michigan, the average single premium paid by the individual is $2,446; federal government pays $2,796, for a total of $5,242.

How many? An estimated 11.5 million participate in the ACA Marketplace, including 313,000 Michiganders.

What else? None of these options address the estimated 25 million uninsured Americans who still have, and need, access to health care. Whatever version happens – Repeal; Repeal and Replace; or Repeal and Repair – it will certainly have great impact on all of us.

I encourage you to contact your legislators and share your thoughts and solutions.

Bonnie Alfonso is president of Alfie Logo Gear in Traverse City. She serves as the Chair of the Traverse City Chamber of Commerce and on the Legislative Action Committee of the Small Business Association of Michigan.

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