How does healthcare work in america

Throughout U. During the U. Civil War, the federal government and individual states began to build hospitals in each state to tend to sick and wounded soldiers. The government also began public health provisions such as clean water, sanitation services and tuberculosis control, which began to have a significant effect by the beginning of the twentieth century. Since then, health care in the U. In , the Medicare and Medicaid systems, which insure senior citizens and people whose earnings fall under the poverty line, were enacted by President Lyndon Johnson.

This created a large federal healthcare system that covers millions of Americans. It is difficult to expand these programs to cover more people, though, because it is always a controversial issue, which most politicians do not want to broach. The debate over whether the government should provide health care support and how much should be provided is a long one. Despite passing in both houses of Congress, the bill was vetoed by President Franklin Pierce, who argued that social welfare should not rest in the hands of the federal government.

In the s, when many European countries were passing legislation to nationalize medical care for their citizens, President Theodore Roosevelt tried to push the same type of legislation through in the U. However, he was defeated in his attempts by politicians from both main parties.

The main arguments of the debate continue to be based on similar ideas today. Those that are for universalized health care in the U. In addition, the money the federal government spends now to cover emergency care for those without insurance is so high that it would be more efficient if they could have a formal system that covers everyone.

One unified system would have a much greater ability to bargain with pharmaceutical companies, hospitals and equipment providers allowing them to bring down the costs of care. On the other hand, because Medicaid is the only public program that finances long-term nursing home care, a significant number of middle-class elderly have become eligible for Medicaid-covered nursing home care by intentionally transferring assets to their children and exhausting their income on nursing home expenses Burwell, About 43 percent of Medicaid expenditures are spent on skilled nursing facilities and intermediate care facilities Ruther et al.

The uninsured receive fewer health services than insured individuals with comparable health status Freeman et al. Services for the uninsured are provided through a variety of sources, the amount and scope of which vary by community. Federal, State, and local governments support public health clinics and hospitals with a primary mission of providing care to the indigent. In some cases they pay private providers to care for the indigent as well.

Public health expenditures support preventive health measures such as vaccinations, cancer screening programs, and well-child care. The services are often available to all, although a fee which varies according to income may be charged.

Providers sometimes subsidize the costs of services to uninsured individuals from operating margins. Charity care and bad debt represented 5 percent of hospital expenses in Prospective Payment Assessment Commission, Estimates of physician charity care are difficult to make because, unlike hospitals, physicians do not submit detailed cost reports to the Federal Government. However, as insurers and employers try to control their own costs, the ability of hospitals and other providers to cross-subsidize care for the uninsured, by cost-shifting to insurers and employers, may decrease.

In , about Health expenditures have been growing rapidly both as a share of GNP and in absolute terms. For example, health expenditures in accounted for 9. One reason for this rapid growth is the sluggish U. However, inflation in medical prices has long been significantly higher than general inflation Levit et al. Public budgets accounted for 42 percent of health spending in , and private sector spending accounted for 58 percent Figure 2 Levit et al. The proportion of total health care expenditures covered by public sources is lower in the United States than in all but one of the OECD member countries Schieber, Poullier, and Greenwald, The Federal budget paid for 29 percent of all health spending, primarily through the Medicare and Medicaid programs, but also through health spending by the Departments of Defense and Veterans Affairs for current and retired military personnel and their dependents.

Of the 13 percent State and local share of health spending, approximately 5 percent was for Medicaid, and 8 percent was for other State and local health programs Levit et al.

Health expenditures comprise a growing share of public budgets. In , health represented 15 percent of the Federal budget and 11 percent of State and local budgets. By contrast, health expenditures in comprised 12 percent of the Federal budget and 9 percent of State budgets. Medicare alone is now 9 percent of the Federal budget Levit et al. Of the 58 percent of all health spending that was not financed by public budgets, 33 percent was paid for by private insurance payments, 20 percent by individuals out-of-pocket, and 5 percent by other private payments, including philanthropy Levit et al.

In , approximately 39 percent of total health spending was for hospital care, 19 percent for physician services, 8 percent for nursing home care, 22 percent for other personal health care spending, and 12 percent for other non-personal health care items such as research and construction Levit et al.

The annual growth rate of health spending in the s was about Hospital spending grew by about 15 percent per year in the early s, slowed to about 7 percent in the mids, and increased to about 10 percent by the end of the decade. Physician spending growth through the decade averaged about 15 percent per year, but moderated somewhat toward the end of the decade Levit et al. The share of all health spending accounted for by private health insurance and government programs rose slightly over the s, while out-of-pocket spending marginally declined Levit et al.

The increased use of cost sharing as a cost-containment measure, described later, has not kept pace with rapidly rising health care costs. Insurance coverage varies by service. Hospital care is the best insured, and nursing home care and dental care are the least well insured. Out-of-pocket payments for hospital care cover only 6 percent of total hospital spending, public programs Medicare and Medicaid 40 percent, other State and local programs 14 percent, private insurance 36 percent, and private charity care the remaining 4 percent.

On the other hand, out-of-pocket payments for nursing home expenditures finance 44 percent of total nursing home spending, Medicaid covers 43 percent, Medicare and other non-Medicaid State and local funds cover 7 percent, private charity covers 2 percent, and private insurance covers only 1 percent Levit et al.

Most employer-sponsored group health plans cover outpatient prescription drugs as does Medicaid, while Medicare does not. As employers and insurers try to contain costs, patient cost sharing is becoming a more common feature of almost all U.

The RAND Corporation national health insurance experiment found that the use of cost sharing as a cost-containment tool reduced utilization without adversely affecting health status, except for low-income individuals with hypertension, vision, or dental problems Newhouse et al.

The impact on the health status of the low-income and the exclusion of the elderly and chronically ill from the experiment suggest some caution about the general use of cost sharing as a cost-containment tool. The proportion of private health plans with limits on out-of-pocket spending increased steadily during the last decade. Nevertheless, as previously noted, many policies still do not offer full protection against catastrophic expenses U.

Bureau of Labor Statistics, , There are about 6, hospitals in the United States, including 5, community, acute care hospitals, specialty hospitals e. Of the 5, community hospitals, non-profit hospitals represent 59 percent, local government hospitals 27 percent, and for-profit hospitals 14 percent.

There are 3. There were 33 million hospital admissions in with an average length of stay per admission of 9. The average hospital occupancy rate, 66 percent, is lower in the United States than in other OECD countries, however this rate varies and may be 40 percent or lower in rural areas American Hospital Association, ; National Center for Health Statistics, Hospitals finance capital purchases through a variety of means including savings, tax-exempt bond issues, and philanthropy.

Although Federal and State mortgage loan guarantee programs assist some hospitals to secure financing for construction and renovation projects, it is more common for hospitals to secure private mortgage insurance when floating a construction bond.

Some States require prior approval before certain capital projects can be undertaken, while other States have no prior approval procedures. Because physicians in the community admit their patients to hospitals, hospitals must be attractive to physicians in order to obtain patients.

This makes it difficult for hospitals to deny physician requests to purchase expensive equipment, because purchasing such equipment is a way that hospitals attempt to attract physicians. As a result, hospitals engage in what has been called a medical arms race, in which each competes to own state-of-the-art technology. The United States has 8 times more magnetic resonance imaging machines MRIs per capita, 6 times more lithotripsy centers, and 3 times more cardiac catheterization and open heart surgery units than Canada Rublee, There were more than , physicians in active practice in , or 2.

In the early s, a national physician surplus was forecasted for the s U. Department of Health and Human Services, Now this forecast is being debated. A physician surplus causes concern because some argue that physicians can create demand and thereby add to rising health costs Rice and LaBelle, Nonetheless, problems exist in the geographic and specialty distribution of physicians.

For instance, the physician-to-population ratio averages 0. Office of Technology Assessment, Of those in active practice, about 33 percent are primary care physicians family practice, general pediatrics, and internal medicine and the remainder are specialists Politzer et al.

There is concern that the proportion of primary care physicians will continue to fall in the coming decade. Individuals can access specialists directly except in some coordinated care settings described later.

Some specialists e. Compensation arrangements with hospital-based physicians vary but often include a salary as well as FFS billings of which the physician retains a percentage. In the past, most high-technology equipment was purchased by hospitals. Recently, however, physicians, either alone or in joint ventures, have been purchasing high-technology equipment outside the traditional confines of the hospital.

Joint ventures are arrangements where investors pool capital to purchase expensive equipment and build facilities such as ambulatory surgery centers. Some argue that these practices rapidly diffuse high technologies, create competition with hospitals for ambulatory procedures, increase utilization, and fuel health inflation Florida Health Care Cost Containment Board, Medical education is financed by a combination of student tuition payments, Federal and State education programs, and private funds.

Public funds support medical education through State-supported medical schools about 60 percent of all medical schools , Federal and State student loan programs, Federal health education programs, and Medicare payments for graduate medical education in teaching hospitals. High-paid specialties are more attractive to medical students than the lower paid family and general practice for a variety of reasons Colwill, Reform of medical education financing, in order to influence new physicians' choice of specialty and geographic location, is an important public policy goal.

Proposals include reducing Medicare payments to new physicians who locate in overserved areas, and increasing funds for the current Federal program the National Health Service Corps which forgives student debt in return for practicing in underserved areas. In recent years, coordinated care arrangements have become increasingly popular as a way to control costs in both the private and public sectors.

The term coordinated care refers to a diverse and rapidly changing set of alternative health care delivery models. These models differ from traditional FFS medicine by integrating the financing and delivery of health services with the goal of controlling costs by managing utilization and provider payment levels.

The oldest model of coordinated care is the health maintenance organization HMO ; several have existed for decades, although most have been formed in recent years. Individuals who enroll in an HMO receive a comprehensive benefit package available only from a defined network of providers for a fixed payment, usually a monthly or yearly premium.

To compensate for the restricted choice of providers, enrollees often face lower cost sharing and have little billing paperwork compared with FFS medicine. HMOs themselves range from long-established organizations that employ physicians, build their own hospitals and clinics, and only serve HMO enrollees, to recent affiliations of solo practice physicians and hospitals who may also practice traditional FFS medicine.

A more recent model is the preferred provider organization PPO which selectively contracts with or arranges for a network of doctors, hospitals, and others to provide services at a discounted price schedule. Individuals pay lower coinsurance rates if they visit physicians who have agreed to accept a lower price.

Similar to HMOs, the PPO model includes utilization review, and formal standards are used to select and maintain network providers and physicians. PPO enrollment grew from only 1 percent of participants in medium and large employer health plans in to 10 percent in U. Department of Labor, A recent development is the point-of-service POS network. Enrollees are encouraged to use HMO doctors by paying a higher coinsurance charge if they use doctors not affiliated with the HMO.

By contrast, in a PPO, the doctor simply accepts a lower price for certain patients with no equivalent HMO structure with its emphasis on coordinated care. It is expected that the features of POS networks will continue to evolve.

Studies suggest that HMOs can save about percent compared with FFS insurance, primarily by reducing inpatient hospital days Manning et al. However, in some instances these savings are the result of favorable selection of enrollees rather than more cost effective use of health services. Quality assurance at HMOs is an important issue.

There is concern that HMOs, and especially for-profit HMOs, have economic incentives to underserve their enrollees in order to live within the capitated payment. On the other hand, HMOs may need to offer care of at least reasonable quality in order to be attractive to enrollees. Coordinated care, as used broadly, includes not only HMOs and PPOs but also a variety of other cost-control techniques, influencing patient care decisions before services are provided.

These techniques, increasingly imposed by third-party payers, include prior approval of hospital admissions, management of high-cost patient care, control of referrals to specialists through primary care physicians, selective contracting with hospitals and other providers, required second opinions for surgical procedures, profile analysis of provider utilization and practice patterns, and screening of claims prior to payment to avoid duplicate and inappropriate payments.

Although the evidence on utilization review is not complete, some of these techniques, such as preadmission certification and review during an inpatient hospital stay, are cost effective Scheffler, Sullivan, and Ko, Despite the highest health expenditures in the world, the United States does not perform particularly well in terms of gross health outcome measures.

For instance, in the United States had a life expectancy at birth of Compared with the other OECD countries, it ranked 17th in male life expectancy, 16th in female life expectancy, and 20th in infant mortality Schieber, Poullier, and Greenwald, However, direct comparisons of U. The 20, annual U. There are assaults reported by U. The U. These costs may increase as new drugs are developed to prolong the life of AIDS patients. AIDS is putting budget pressures on inner-city hospitals and emergency rooms because many AIDS patients do not have adequate insurance.

Health outcomes for some minority groups are significantly worse than the U. The infant mortality rate for Native Americans is 1. Life expectancy has been significantly higher for white people than for black people for the last 20 years. Homicide is the leading cause of death for black people between 15 and 44 years of age, with the rate for black males more than 8 times the rate for white males of the same age National Center for Health Statistics, When evaluating health services, the United States is both data rich and poor.

Compared with health systems where there is a single payer, U. However, the United States also requires detailed diagnostic and procedural information on each bill paid in an FFS system. Moreover, hospital admissions and major surgery often require preadmission review. Consequently, a great deal of information that is unavailable in systems which do not require detailed bills is produced at the patient level.

Various systems to improve data and to coordinate data systems are under development. The Institute of Medicine of the National Academy of Sciences has issued several reports calling for more health outcomes research and improved data systems, including computerized patient records Institute of Medicine, The Federal Government publishes uniform mortality statistics for hospitals based on Medicare billing records and quality information on nursing homes based on periodic inspections. The Medicare program is also developing a uniform clinical data set to evaluate the quality of care and outcomes of Medicare patients.

The Federal research effort on medical outcomes, including the development of medical practice guidelines, is coordinated by the Agency for Health Care Policy and Research. Data are also used by commercial firms in order to evaluate providers for inclusion in managed care networks. Such firms analyze companies' claims experience, health utilization, and outcomes.

These data help to identify efficient providers with whom the purchasers should contract, and inefficient providers who should be excluded. Other firms analyze drug prescription data to identify over-prescribers, as well as potential adverse drug interactions which may produce avoidable hospitalizations.

The first nationwide hospital insurance bill was introduced in Congress in , but failed to pass. Discussions of various forms of national health insurance over the next two decades culminated in the enactment of Medicare and Medicaid in Medicare and Medicaid were a compromise between those who wanted national health insurance for everyone, and those who wanted the private sector to continue to be the source of insurance coverage.

The elderly and the poor were at high risk for health expenses beyond their means and were less likely than other population groups to have health insurance. The elderly were generally considered to be uninsurable or bad risks by the private insurance market.

In , 75 percent of adults under age 65 had hospital insurance compared with 56 percent of people 65 years of age or over. In , following passage of Medicare, about 19 million elderly people, or 10 percent of the population, received health insurance coverage.

This nearly doubled the number of insured 65 years of age or over. Medicare coverage was extended to the under age 65 population with disabilities or end stage renal disease, about 2 million new enrollees, in Cohen, ; Gornick et al. Medicaid initially covered about 10 million people, adding an unknown number of recipients to those covered under other State and local welfare programs. By , there were This large expansion of third-party coverage combined with generous payment methods both Medicare and Medicaid originally paid hospitals their costs and Medicare largely paid physicians their charges was one of the principal engines of health care cost growth in the s and s.

In addition, the passage of Medicare and Medicaid gave the Federal Government an institutional interest in health care cost containment as it suddenly became the single largest health insurer. The s were characterized by rapid expansions in health care costs, and the development of strategies for their containment.

Cost-control strategies emphasized regulation and planning. The National Health Planning Act of created a system of State and local health planning agencies largely supported by Federal funds. States passed certificate-of-need laws designed to limit investment in expensive hospital and nursing home facilities.

The Carter Administration advocated direct Federal controls on hospital spending, however, Congress failed to enact them.

With the installation of the Reagan Administration in , a pro-competitive approach to cost containment was advanced and the health planning legislation was repealed in by Public Law Significant expansion of government support for medical education was designed to address a perceived shortage of physicians. Medical school enrollment doubled over the course of the decade. Government funds also supported a growing biomedical research and development community, with its hub at the National Institutes of Health.

The legislation was passed to regulate corporate use of pension funds, but it also pre-empted State regulation of self-insuring employee benefit plans generally. Growing numbers of larger employers were already moving to self-insured health benefits as a cost-control mechanism prior to ERISA's passage. The ERISA pre-emption provided further incentives to employers to convert their employee health benefit plans to self-insurance.

Employers now have a large stake in the ERISA Federal pre-emption because many have structured their health benefit plans to take advantage of its provisions and exemptions. As frequently noted, the U. These problems coexist with widely acknowledged strengths such as providing the vast majority of the population with state-of-the-art care, offering consumers freedom of choice among a variety of highly skilled providers using the latest technology, and promoting a vigorous biomedical research and development sector.

There are sophisticated quality assurance and data systems, and virtually no queues for elective surgery for those with insurance. Growth in U. The fragmented U. Although coordinated care arrangements encourage provision of services within fixed budgets, they have only recently become more widespread. Moreover, coordinated care itself may have difficulty in controlling utilization in a system whose basic structure continues to reward increased FFS billings.

In contrast to the United States, other OECD countries control health costs through central control of budgets and all-payer ratesetting. Health care costs are perceived as reducing the international competitiveness of American business, however, there is debate on this issue. This, of course, reflects health benefits provided in lieu of past and present wages to retirees and current workers, and the aging labor force of the industrial sector.

Annual deductible : The annual deductible is amount you pay each plan year before the insurance company starts paying its share of the costs. Copayment or 'Copay' : The copay is a fixed, upfront amount you pay each time you receive care when that care is subject to a copay.

Plans with higher premiums generally have lower copays and vice versa. Plans that do not have copays typically use other methods of cost sharing. Coinsurance : Coinsurance is a percentage of the cost of your medical care.

Plans with higher premiums typically have less coinsurance. Annual out-of-pocket maximum : The annual out-of-pocket maximum is the most cost-sharing you will be responsible for in a year.

It is the total of your deductible, copays, and coinsurance but does not include your premiums. Once you hit this limit, the insurance company will pick up percent of your covered costs for the remainder of the plan year. Most enrollees never reach the out-of-pocket limit but it can happen if a lot of costly treatment for a serious accident or illness is needed. Plans with higher premiums generally have lower out-of-pocket limits.

What is means to be a 'Covered Benefit' : The terms 'covered benefit' and 'covered' are used regularly in the insurance industry, but can be confusing.

Student Affairs. Contact Us Campus Drive. Stanford, CA Campus Map. It's often included as a fringe benefit in job packages. But some aren't as lucky. According to the US Census Bureau, in almost 46 million people in America didn't have health insurance. It's thought the figure's rising as the country copes with a recession and many continue to lose their jobs.

A recent study published in the American Journal of Medicine says the biggest reason for bankruptcy is medical debt. Not having health insurance doesn't mean people are turned away if they get sick though. Hospitals and doctors must treat those needing help but often at the end of the procedure patients are asked for their details so an invoice can be mailed to them.