Week 2 Discussion
You are a member of a presidential commission appointed to consider a mandatory national health insurance plan, and the question of how to fund the plan is being discussed.
Specifically, three distinct funding mechanisms are being considered to cover the cost of the plan. Each mechanism will generate approximately $4,000 per year on average per income earner. The funding mechanisms include:
Think about funding plans from the perspective of three workers:
- A flat rate premium
- A doubling of the current 7.65% Social Security payroll tax
- A 7% increase to income tax
Consider these three funding mechanisms from the perspective of three different representative income earners:
- A. Person A – earns $25,000 per year
- B. Person B – earns $25,000 per year with an additional $1,000 in investment income
- C. Person C – earns $85,000 per year with an additional $10,000 in investment income
Create a simple 3×3 matrix that outlines the considerations for each combination of funding mechanism (1, 2, 3) and income earner (A, B, C) to guide your thoughts. Based on these considerations, answer the following questions:
- Which of the three funding mechanisms (1, 2, 3) do you support, and why? Be sure to describe the relative financial burden each funding mechanism imposes on each of the income earners.
- How has the emergence of different types of health insurance plans (e.g. HMO, PPO, EPO, POS, HDHP) affected trends in demand for health care services?
- List and describe various economic and societal factors that affect demand and pricing for health care services in today’s market
Submit your 3×3 matrix along with your responses to the discussion questions.
The purpose of this task is identifying the burden of each funding and determine the combination of funding that will be the most suitable. Each of the three combinations (funding mechanism) is expected to generate approximately $4,000 every year per income earner. There are three persons A, B &C each with earnings of $25000, $25000+ $1000, $85000+10,000)
A simple 3×3 matrix
To determine the 3×3 matrix, the following computations are done;
Employee A= Cost of Premium insurance/ (earning +additional income)
($4,000 / $25,000) *100 = 16%
($25,000 / 7.65%) = $1912.50
($25,000 / 7%) = $1750
Employee B= Cost of Premium insurance/ (earning +additional income)
$4000 / ($25,000 + $1,000) = $4000 / $26,000 = 15.3%
($26,000 / 7.65%) = $1989
($26,000 / 7%) = $1820
Employee C= Cost of Premium insurance/ (earning +additional income)
$4000 / ($85,000 + $10,000) = ($4,000 / $95,000) = 4.2%
($95,000 / 7.65%) = $7267.50
($95,000 / 7%) = $6,650
Simple 3×3 matrix
- The suitable funding mechanism chosen.
The best choice will pe person C with a funding mechanism 3 since you still get money at the end of the accounting period although you pay higher percent of income tax. Compared to Person A person C has advantage since there are no risk charges that accrue when some additional income is not covered. From the calculations the financial burden will be higher in A & B compared to C.
- How emergence of health plans such as (e.g., HMO, PPO, EPO, POS, HDHP) has influenced trends in demand for healthcare services.
The current insurance systems in the economy do not offer the best solutions to healthcare insurance. There are still gaps that see most care seekers carry huge burdens despite having subscribed to the current healthcare plans. The purpose of taking any healthcare coverage is reduce the amount of out of pocket. The introduction of new health plans such as give patients alternatives which make it easy to access health services. The HMO, PPO, EPO, POS, HDHP are managed plans that means that various insurance companies create a balance to the cost and quality of healthcare that it offers it clients by contracting physicians in its network. These help to improve the care given to patients by making it accessible and also ensure that they receive quality services (Lee, 2015).
- List of various economics & societal factors affecting healthcare services demand & pricing.
- Income determines the healthcare plan to choose and how frequent you can manage to visit health centers for check ups and even screening services.
- Price of services- Some services are not accessible because of high cost involves. These services therefore have low demand because of high prices
- Educational level- Well educated people have a higher demand for healthcare services compared to low educated people who have limited information on healthcare services (Lee, 2015).
- Traditions-Some traditions have low opinion on healthcare services in hospitals and prefer local traditional method of treatment. The effect is reduced demand for healthcare services in these areas.