An Overview of U.S. Health Care Delivery

Learning Objectives

  • Understand the nature of the U.S. health care system.
  • Outline the key functional components of a health care delivery system.
  • Get a basic overview of the Affordable Care Act (ACA).
  • Discuss characteristics of the U.S. health care system.
  • Emphasize the importance for practitioners and managers to understand the health care delivery system.
  • Get an overview of health care systems in selected countries.
  • Point out global health challenges and reform efforts.
  • Introduce the systems model as a framework for understanding.

Introduction to the U.S. Health Care System

  • The U.S. health care delivery system is unique due to several factors:
    • Lack of Automatic Coverage: Americans are not automatically covered by health insurance.
    • Fragmented System: A true, integrated system does not exist, leading to fragmentation.
    • Continuous Change: The system is not static and undergoes periodic changes.

Overview of the Scope and Size of the U.S. Health Care System

  • Workforce: Employs over 16.8 million people.
    • 8 million health practitioners and individuals in technical occupations.
    • 6 million individuals in health care support occupations.
  • Facilities:
    • 13,944 hospitals.
    • 15,600 nursing homes.
    • 14,500 substance abuse treatment facilities.
    • 1,375 health centers.
  • Education:
    • 180 medical and osteopathic schools.
    • 1,500+ nursing programs.

A Broad Description of the U.S. Health Care System

  • Characteristics:
    • Multiplicity of Financial Arrangements: Features numerous insurance agencies and Managed Care Organizations (MCOs) employing various risk-insuring mechanisms.
    • Multiple Payers: Different payers make their own determinations about service costs.
    • Diverse Service Settings: Health care services are delivered in a wide array of settings.
    • Numerous Consulting Firms: A variety of firms offer expertise in planning, cost containment, electronic systems, quality, and resource restructuring.
  • Lack of Standardization and Inefficiencies:
    • There is little standardization, and a lack of system planning, direction, and coordination from a central agency.
    • This leads to inefficiencies such as:
      • Duplication of services.
      • Overlap in responsibilities.
      • Inadequacy in certain areas.
      • Inconsistency in care.
      • Waste of resources.
  • Cost Control and Financial Manipulation: These are significant challenges within the system.
  • Primary Objectives of an Acceptable Health Care Delivery System:
    1. Enable all citizens to obtain needed health care services.
    2. Ensure cost-effective services that meet quality standards.
  • Global Leadership: The U.S. leads the world in:
    • Medical technology.
    • Medical training.
    • Research.
    • Sophisticated institutions, products, and processes of health care delivery.

Financing and Insurance Mechanisms

  • Private Sources:
    • Employer-based health insurance (most common).
    • Privately purchased health insurance (individual market).
  • Government Programs (Public):
    • Medicare: Provides coverage for the elderly and certain disabled individuals.
    • Medicaid and Children's Health Insurance Program (CHIP): Covers the indigent, poor (if they meet eligibility criteria), and children.

Delivery and Payment

  • Provider: Any entity that delivers health care services and either bills for them independently or is supported by tax revenues.
  • Reimbursement: The payment made to providers for services rendered.
  • Insurer's Role: The insurer determines the amount paid for a specific service.

Insurance and Health Care Reform

  • Existing Public Programs: Medicare, Medicaid, and CHIP are significant government programs.
  • Reasons for Uninsured Status in Employment-Based System:
    • Small businesses often cannot obtain group insurance at affordable rates or offer it to employees.
    • Participation in employer-sponsored insurance programs may be voluntary.
    • Economic crises can lead companies to lay off employees, resulting in job loss and consequent loss of insurance coverage.
  • Affordable Care Act (ACA): Required all U.S. citizens and legal residents to be covered by public or private health insurance.

Role of Managed Care

  • Managed care is a system of health care delivery designed to:
    1. Achieve efficiency by integrating the four functions of health care delivery (financing, insurance, delivery, payment).
    2. Employ mechanisms to control (manage) the utilization of medical services.
    3. Determine the price of services and the amount providers are paid.

Major Characteristics of the U.S. Health Care System: External Forces

  • The U.S. health care system is influenced by several external forces:
    • Political climate.
    • Economic development.
    • Technological progress.
    • Social and cultural values.
    • Physical environment.
    • Population characteristics (e.g., demographics, health trends).
    • Global influences.

Ten Basic Characteristics Differentiating the U.S. Health Care Delivery System

1. No Central Agency Governs the System

  • Unlike most developed nations with national health care systems that use global budgets to control costs and government control over service proliferation, the U.S. has a mostly private financing and delivery system.
    • Private health insurance accounts for approximately 34\% of total health care expenditures, while the government finances another 37\%.
    • Private health care providers, hospitals, and physicians operate independently of the government.
  • No single entity monitors total expenses or utilization through global budgets.
  • The U.S. government primarily determines public-sector expenses and reimbursement rates for Medicare, Medicaid, and CHIP.
  • The government sets standards of participation, requiring providers to comply with these standards for certification to care for Medicare and Medicaid patients, which are regarded as minimum quality standards.

2. Access to Health Care Services is Selectively Based on Insurance Coverage (Partial Access)

  • Definition of Access: The ability to obtain health care when needed.
  • Avenues for Access in the U.S.: Americans can access health care services through:
    • Their employers (employer-sponsored insurance).
    • Government health care programs (e.g., Medicare, Medicaid).
    • Purchasing private insurance with their own funds.
    • Paying for services privately (out-of-pocket).
    • Obtaining charity or subsidized care.
  • Health insurance is a key factor in ensuring access.
  • Uninsured Americans: Although they can often obtain medical care for acute illnesses (a form of universal catastrophic health insurance), they typically forgo basic and routine care.
  • Universal Access: While countries with national health care programs aim for universal coverage, the ideal of all citizens obtaining needed health care is often a theoretical concept.

3. Health Care is Delivered Under Imperfect Market Conditions

  • Quasi-Market: The U.S. operates as a quasi-market, with health care partially managed by free-market principles.
  • Theoretical Free Market Conditions:
    • Multiple patients and providers act independently.
    • Providers do not collude to fix prices.
    • Prices are set by the interaction of supply and demand, with an inverse relationship between quantity demanded and price.
    • Equilibrium is achieved without external interference.
    • Unrestrained competition.
    • Patients possess adequate information about the appropriateness of services.
    • Patients bear the direct cost of services received.
  • Consumer Behavior: Consumers are increasingly seizing control, using resources like the internet for medical information.
  • Moral Hazard: Occurs when insurance reduces the incentive to avoid risky behavior.
  • Factors Limiting Patient Decisions:
    • Need: Clinical necessity outweighs pure economic demand.
    • Demand: Differs from need in that it's influenced by ability to pay and willingness to consume services.
  • Pricing Mechanisms:
    • Item-based pricing: Fees charged for individual services (e.g., surgeon's fee).
    • Phantom providers: Entities that bill for services separately from the primary provider.
    • Package pricing: A bundled fee for a group of related services.

4. Third-Party Insurers Act as Intermediaries Between the Financing and Delivery Functions

  • Parties Involved:
    • First party: The patient or consumer.
    • Second party: The provider of services.
    • Third party: The insurance intermediary.
  • Wall of Separation: A distinct separation exists between the financing of health care (insurance) and its delivery.
  • Lack of Advocacy: The insurance intermediary often lacks the incentive to act as the patient's advocate regarding either price or quality of care.

5. The Existence of Multiple Payers Makes the System Cumbersome

  • Single-Payer System (Contrast): A national health care system with one primary payer (e.g., the government).
  • U.S. Multiple-Payer System: The U.S. has numerous payers, allowing companies and individuals to choose from various plans. This leads to:
    • A