The Four Major Actors

The payers: in effecet the patients, but mostly buisness and government

The insurers: take money from the payers and give it to the providers, usually take on some risk

The providers: actually provide the care

The suppliers: manufacture equipment and drugs

The Years 1945-1970: The Provider-Insurer Pact

Many small institutions--not much competition because they were geographically based

Blue Cross and Blue Shield were founded by the hospitals and doctors--very close relationship--most private insureres followed their fee schedules--allowed for rapid price inflation

Great US economy (world dominance) and tax-deductions for buisness funded medical plans led to runaway cost inflation

The 1970s: Tensions Develop

OPEC--helath care is a dervived benefit and if the economy does poorly there is nothing to derrive it from

Attempts to prevent 25-50% per year rises in Blue Cross premiums but increases still kept way above inflation

BC and BS were seperated from teh physicians

Hospitals and physicians which had greatly increased now felt a derth of patitents

The 1980s: The Revolt of the Payers

Increasing costs and downturn in the economy encouraged employers to handel their own insurance plans--1991 40% were on self-insurance plans by their employers

Reduce costs: increase employee deductables, capitated reimbursemtne through managed care

Selective contracting--only work with physicians and hospitals which bring prices down

The 1990s: The Breakup of the Provider-Insurer Pact

Large organizations move in to areas to create an oligarchy of selective contracting and fighting for patients

First time

Driven by government and business payers

Estimated 1/3 of US hosptials will close

Census rates of 60% average

Insureres, hospitals, and physicians must be in big groups to have any leverage and survive

Hospital centered groups: help hospitals get patients, but they encourge unneeded hospital patient-days rather than reducing costs

Investor centered groups: help practices get managed care contracts

Hospitals can’t form insurance companies or bargin well with HMOs because their incentive is more hosptial-days not reduced costs.

1988 46^ of multihopital systems were for profit, but they charged 20% more per admission

For-profit institutions bring the excess money out of the medical system where it will not do research (not that it really stayed in it before...)

The Twenty-First Century

Summary