Overview of the U.S. Health Care System and Key Concepts

Health

state of complete physical, mental and social well-being

Health care

specific things that people do: see a patient or prescribe a medication

Healthcare

industry, the system by which people get the health care they need

Health care system

quality services to all people, when and where they need them. The exact configuration of services varies from country to country but in all cases requires a robust financing mechanism, a well-trained and adequately paid workforce, reliable info on which to base decisions and policies

Uncertainty in health care markets

leads to insurance

Information asymmetries

when one party has more info than the other. Can be exacerbated by times when individual is vulnerable or cognitively impaired

Externalities

occur when someone who is neither the buyer nor the seller is affected by the transaction. E.g. herd immunity with vaccines or pollution

Restrictions on competition

barriers to entry (e.g. patent protection in big pharma, advertising restrictions)

Equity and Need

considerations in health care

Presence of Nonprofits

some health care providers are non-profit

Medicare

a U.S. government program providing health coverage to individuals aged 65 and older, and some younger people with disabilities

Medicaid

a U.S. government program providing health coverage to low-income individuals and families

Affordable Care Act

a U.S. law aimed at improving health care quality and affordability

Cost-Minimization Analysis (CMA)

Compares costs of two or more interventions with proven equivalent outcomes to determine the least costly option.

Cost-Benefit Analysis (CBA)

Compares costs and benefits of an intervention, both measured in monetary terms, to assess whether the benefits outweigh the costs.

Cost-Effectiveness Analysis (CEA)

Compares costs with health outcomes, typically measured in natural units (e.g., life years gained, reduction in symptoms).

Cost-Utility Analysis (CUA)

A specialized form of CEA where outcomes are adjusted for quality of life, often using measures like quality-adjusted life years (QALYs).

CMA Advantages

Simple when outcomes are equivalent, focuses only on costs.

CMA Disadvantages

Limited applicability since it requires evidence of equivalent outcomes.

CBA Advantages

Comprehensive; allows for direct comparison between different interventions.

CBA Disadvantages

Difficulty in assigning monetary values to health outcomes.

CEA Advantages

Useful for comparing interventions with the same health outcome.

CEA Disadvantages

Does not incorporate quality of life, making comparisons across different outcomes challenging.

CUA Advantages

Incorporates both quality and quantity of life, providing a broader perspective on outcomes.

CUA Disadvantages

Requires complex measurements and tools like QALYs, which may not be universally accepted.

Public health

community efforts that are aimed at the prevention of disease and promotion of health on society, increasing quality of life.

Epidemiology

The study of the distribution of a disease or a physiological condition in human population and of the factors that influence its distribution.

Measuring outcomes in public health

Monitoring health status & diagnose and investigate problems, Inform people about health issues and develop policies, Enforce Laws to protect health. Evaluate effectiveness of health services.

Prevalence

measurement of all individuals affected by disease. Measures burden of disease and used in planning medical care services.

Incidence

The number of new individuals who contract a disease during a period of time.

Prevalence rate (P)

Incidence rate (I) * Duration of disease (D)

Healthy People 2030 Goal 1

Attain high quality, longer lives free of disease

Healthy People 2030 Goal 2

Achieve health equity and improve health of all groups

Healthy People 2030 Goal 3

Create social and physical environments that promote good health

Healthy People 2030 Goal 4

Promote QoL development and health behaviors across all stages of life

Healthy People 2030 Goal 5

Engage leadership and the public to take action and design policies that improve health of all

US Dept of Health and Human Services (DHHS)

Largest public health agency in the world

National Institutes of Health (NIH)

Public health agency focused on medical research

Food and Drug Administration (FDA)

Agency responsible for regulating food and drug products

CDC

Centers for Disease Control and Prevention, a public health agency

Centers for Medicare and Medicaid Services (CMS)

Agency that administers the nation's major healthcare programs

Administration for Children and Families (ACF)

Agency focused on improving the economic and social well-being of families

Administration of Aging (AoA)

Agency that supports older adults and their families

Health Literacy

The degree to which individuals have the capacity to process and understand basic health info

Provider strategies for low-literate patients

Use simpler language, teach back method, visual aids, speak slow and clearly, create a shame-free environment, involve family to repeat information

Improving patient education materials

Use simple language, aim for 4th-6th grade reading level, use visual aids, repeat information

At-risk groups for poor health literacy

Elderly, minorities, low-income individuals, homeless, prisoners, Limited English Proficiency (LEP) patients

Techniques to improve communication with low-literacy patients

Use less medical jargon, IHS technique, 'Ask Me 3' method

Association between health literacy and understanding medical information

Pts with low literacy can't comprehend medication instructions (42%), 43% didn't understand Medicaid application rights & responsibilities, 60% did not understand informed consent documents

National health expenditures

Total Spending: $4.9 trillion in 2023, projected to be $6.2 trillion by 2028

Per Capita Spending

$14,570 per person in 2023

Percentage of GDP for health spending

Health spending was 17.6% of GDP in 2023, projected to reach 20% by 2026

Growth Factors for health expenditures

Aging population, increased prices for medical goods/services, and a shift from private insurance to Medicare

Technological advancements

Expensive tests and imaging that contribute to rising healthcare costs.

Expensive drugs

High costs associated with pharmaceuticals that increase overall healthcare expenses.

Higher and better quality of care

More effective but costly treatments that lead to increased healthcare spending.

Aging population

A demographic trend contributing to higher healthcare costs due to increased demand for services.

Increased spending due to COVID

Additional healthcare expenditures resulting from the pandemic.

Private Health Insurance

Accounts for 30% ($1.46 trillion) of healthcare funding.

Out-of-pocket payments

Constitutes 10% of healthcare funding, including copays and deductibles.

Other private sources

Represents 18% of healthcare funding.

Public funding

Accounts for 44% of healthcare funding.

Medicare

A public program that constitutes 21% ($1.03 trillion) of healthcare funding.

Medicaid

A public program that accounts for 18% ($871.7 billion) of healthcare funding.

Other government programs

Includes VA and public health programs, accounting for 6% of healthcare funding.

Hospitals

The top area of fund usage in the US, accounting for 30% ($1.52 trillion) in 2023.

Physicians

Account for 20% ($978 billion) of healthcare fund usage in the US.

Prescription drugs

Make up 9% ($449 billion) of healthcare fund usage in the US.

Out-of-pocket spending trend

Increased from $418 billion in 2019 to $505 billion in 2023.

Flow of Funds in the Early 1900s

Characterized by direct patient-provider payments and out-of-pocket spending as the main source (81% in 1929).

Flow of Funds Today (2023)

Mostly third-party transactions with government and private insurance covering 83% of costs.

Insurance

A financial mechanism designed to reduce the financial risk of illness by pooling funds and redistributing them to those who need care.

Private Health Insurance

Insurance purchased by individuals or provided by employers.

Public Health Insurance

Government-funded programs such as Medicare, Medicaid, and VA Healthcare.

Employer-Sponsored Insurance (ESI)

Insurance provided as a workplace benefit.

Managed Care Plans

Organizations that control costs and utilization of healthcare.

Health Maintenance Organizations (HMOs)

Require patients to use a specific network of providers.

Preferred Provider Organizations (PPOs)

Offer more flexibility in choosing providers but higher costs for out-of-network care.

Catastrophic Insurance

High-deductible plans for emergencies or severe illnesses.

Speculative risk

Not insurable (gambling, stock market investments)

Pure risk

Insurable (medical expenses, disability, accidents)

Moral hazard

When insured individuals overuse services because they are not directly bearing the full costs (e.g. choosing brand-name over generic because insurance covers it)

Adverse Selection

Occurs when high-risk people enroll in insurance while healthier people avoid coverage leading to higher costs

Provider Incentives

Fee-for-service models encourage excessive care since providers are paid per service (e.g. doctor orders unnecessary MRI to general revenue)

Cost-sharing mechanisms

Solutions for Moral Hazard

Deductibles

A cost-sharing mechanism in health insurance

Co-Pays

A cost-sharing mechanism in health insurance

Coinsurance

A percentage based cost sharing system (pt pays 20% of cost)

Coverage limitations

Restricting coverage for non-essential treatments

Pre-existing condition clauses

Limit coverage in early months to curb Adverse Selection

Risk pooling

Employers offering group plans to spread risk

Tiered insurance premiums

A solution for Adverse Selection

Diagnosis-related groups (DRGs)

Hospitals receive a fixed amount based on patient diagnosis

Capitation

Providers receive a fixed payment per patient rather than per service

Anti-kickback laws

Prevent physicians from profiting by overprescribing

Managed Care strategies

Cost controls in healthcare

Patient cost-sharing

Reduces overuse of healthcare services and encourages responsible spending

Lengths of Stay

Classification of hospitals based on duration of patient care (Short, longer-term acute care, long stay)

Ownership

Classification of hospitals as public, private, or nonprofit

Teaching affiliation

Classification of hospitals based on association with medical schools (with med school or non-teaching)