Characteristics of the U.S. Health Care
System
DRAFT – Private and Confidential
Learning Objectives
 Understand the importance of health and health care to American
life
 Identify and analyze defining characteristics of the US health care
system
 Identify major issues and concerns with the current system
2
The Importance of Health and Healthcare to American Life
 Good health care is an essential foundation for being able to
function in society and to enjoy life
 Millions of Americans work in health care delivery and depending
of the healthcare industry for jobs
• Equipment suppliers
• Pharmaceuticals
• Supplies
• Construction industry
• Kitchen workers, Drivers and delivery workers, Computer
specialists
• Accountants, lawyers, maintenance and laundry personnel,
security staff
3
Historical Perspective
Historical Perspective
DRAFT – Private and Confidential
History of Healthcare in the U.S.: 1912 – 1953… Laying the Groundwork
1915: Draft of first bill for
mandatory health
insurance
1912: Teddy Roosevelt
promises national
health insurance
coverage
1921: Sheppard-Towner Act
is passed to provide state
matching funds for prenatal
and child health centers
1929: Baylor hospital creates
pre-paid hospital insurance
for a group of teachers
(forerunner of Blue Cross
plans)
1939: Department of
Health & Human Services
is born as the Federal
Security Agency
1934: FDR forms working
groups to discuss national
health insurance, but no
legislation considered
1944: FDR establishes
“economic bill of rights”
including right to adequate
medical care
1945: Harry Truman continues
push for compulsory
coverage… Hill-Burton Act to
fund construction of hospitals
passes
1947: Truman continues
push… Wagner-Murray-Dingell
bill and Taft bill both
reintroduced
1952: Federal Security Agency
proposes enactment of health
insurance for Social Security
beneficiaries
1951: Joint Commission
on the Accreditation of
Hospitals formed to
improve quality of care
1949: Supreme Court upholds
National Labor Relations
Board decision to allow
benefits to be included in
collective bargaining
DRAFT – Private and Confidential
History of Healthcare Reform: 1954 – 1989… Creating the Framework
1954: Revenue Act of 1954
excludes employers'
contributions to employee's
health plans from taxable
income
1971: Richard Nixon backs a
proposal requiring employers
to provide a minimal level of
insurance to employees...
Senator Edward Kennedy
counters with single-payer plan
1972: Supplemental Security
Income (SSI) program
begins providing cash
assistance to elderly and
disabled
1986: COBRA enacted to
provide coverage for up to 18
months for employees who
lose their jobs
1960: Federal Employees
Health Benefit Plan (FEHBP)
initiated to provide health
insurance coverage to federal
workers
1965: Medicare and
Medicaid programs are
signed into law by Lyndon
Johnson
1973: Nixon signs the Health
Maintenance Organization Act,
setting aside $375 million to
finance demonstration projects
1986: Emergency Medical
Treatment and Active Labor
Act (EMTALA) is enacted
requiring hospitals
participating in Medicare to
treat all ER patients
regardless of ability to pay
1960: Kerr-Mills Act passes,
using federal funds to support
state programs providing
medical care to the poor and
elderly; a precursor to the
Medicaid program
1962: Kennedy’s plan stalls
in Congress with the help of
powerful lobbying by the
medical industry
1976: Jimmy Carter is elected
president and calls for a
“comprehensive national
health insurance system with
universal and mandatory
coverage
1983: DRGs are introduced as a
prospective payment system for
hospitals
DRAFT – Private and Confidential
History of Healthcare Reform: 1990 – Present… Filling the Gaps
1993: Bill Clinton
convenes White House
Task Force on Health
Reform within first week
in office, and appoints
First Lady Hillary Clinton
as chair
2008: Presidential
campaign focuses early on
national health reform
2009: Barack Obama
establishes Office of Health
Reform to coordinate
administrative efforts on
national health reform
1996: HIPAA is enacted to
restrict use of preexisting conditions as
determinant in coverage
2007: Bush announces health reform
plan that would replace the current tax
preference for employer-sponsored
insurance with a standard health care
deduction
2009: Senator Kennedy
issues Health Care Bill
proposing that all Americans
have access to “essential
health benefits”
1997: SCHIP is enacted
as part of Balanced
Budget Act
2003: George W. Bush signs the
Medicare Drug, Improvement, and
Modernization Act (MMA), creating a
voluntary, subsidized prescription
drug benefit under Medicare,
administered exclusively through
private plans
2009: The Children's
Health Insurance Program
(CHIP) is reauthorized
DRAFT – Private and Confidential
Who Are the Stakeholders in Healthcare Who Constrain or Propel Change?
Providers
Patients
In Healthcare, the definition of quality can be complex
and controversial because of the different views of
the various stakeholders
Employers
Payers
8
Following the Money: Who Pays for Healthcare?
Payers
(Insurance Companies
and Government)
Pharmaceutical
Companies
$
$
$
Providers
Employers / Tax
Payers
$
(Doctors, Clinics and
Hospitals)
Medical
Technology
Companies
$
$
Patients
$
9
Other HC
Service
Providers
So What’s Next? Identifying Key Issues and Solutions
Reducing Medical
Costs and Waste
Paying for Reform
Mandates and Tort
Reform
Healthcare
Reform: The
Discussion
Continues
Improving Quality and
Access
Aligning Stakeholder
Incentives
Public Option
Insurance Market
Rules and Reform
10
Major Issues and Concerns Facing the Health Sector
 Improving quality – medical errors; substance abuse, mental
health, asthma, diabetics receive ineffective care
 Improving access and coverage - 50.7 million American lacked
insurance coverage in 2009 and millions more had inadequate
coverage.
 Slowing the growth of health care costs – health care costs are
growing much more rapidly than the rest of the economy.
 Encouraging healthy behavior – health behavior can help people
avoid diseases and injury or prevent disease or disability from
worsening.
 Improving the coordination, transparency, and accountability
of local system of care – problems of quality, cost, and access
are largely attributable to the fragmentation and lack of
coordination with the system.
 Health disparities – inequalities in health status among various
income groups, social classes, and ethnic groups
 https://www.youtube.com/watch?v=5Lul6KNIw_8
11
Defining Characteristics of the U.S. Health Care System
 The first defining characteristic of the health care system is the line
between activities directed at keeping people healthy and those
directed at restoring health once a disease or injury occurs.
 Additional defining features of the U.S. health care system:
• The importance of institutions in delivering care
• The roles of professionals in running the system
• Medical technology, electronic communication, and new drugs
that fuel change in health care delivery
• Tension between “the free market” and “government control.”
• The dysfunctional financing and payment system
–How we pay health care providers does not provide
adequate incentives to emphasize quality, value, and
efficiency
12
Defining Characteristics of the U.S. Health Care System
 No central governing agency and little integration and coordination
 Technology-driven deliver system focusing on acute care
 High in cost, unequal in access, and average in outcome
 Delivery of health care under imperfect market conditions
 Government as subsidiary to the private sector
 Fusion of market justice and social justice
 Multiple players and balance of power
 Quest for integration and accountability
 Access to health care services selectively based on insurance
coverage
 Legal risks influence practice behaviors
13
Defining Characteristics of the U.S. Health Care System
 No central governing agency and little integration and
coordination
• U.S. is not centrally controlled
–Financed both publicly and privately; variety of of payment,
insurance, and delivery mechanisms
–Private payers account for 54%; Gov’t 46%
• Centrally controlled healthcare systems are less complex; less
costly
14
Defining Characteristics of the U.S. Health Care System
 Technology-driven deliver system focusing on acute care
• U.S. research and innovation in new technology creates a
demand for new services
• The latest innovations are believed to provide the best care
• Many physicians want to try the latest innovations
• Technology causes competition between hospitals
• Legal risks for providers play a role in the reluctance to deny
new technology.
15
Defining Characteristics of the U.S. Health Care System
 High in cost, unequal in access, and average in outcome
• U.S. spends more money than any other country on healthcare
• Many residents still do not have access to care
• Access is restricted to:
–Having health insurance
–Those covered under government programs
–Those who can afford to buy insurance
–Those able to pay privately
–Those who can obtain services through safety net providers
16
So How Much Are We Spending?
 The cost of healthcare services continues to rise at a rate much faster than inflation
 Rising healthcare costs have resulted in considerable increases in health insurance premiums for employers and out-ofpocket costs for patients
 Americans with employer-based insurance paid 79% more in 2003 than in 1996, while employers paid 89% more
$5,000
50%
$4,353
$4,000
40%
(billions)
$3,098
$3,000
30%
$1,973
$2,000
$1,000
$2,106
20%
10%
$714
$28
$75
$253
$0
0%
1960
1970
Source: National Health
Statistics Group
National
Health
1980
1990
Expenditures
17
2005
2006
2012
2018
Percent of Obese Adults
Defining Characteristics of the U.S. Health Care System
 Delivery of health care under imperfect market conditions
• In U.S. healthcare is only partially govern by free markets;
hence the quasi market or imperfect market
• Payors set the price of healthcare, not the patient
• There is restrain competition among providers on the basis of
price and quality.
• Patients are not always aware of choices involving technology,
pharmaceuticals, diagnostic methods
• Current pricing methods for healthcare make it difficult to
gauge expense
18
Defining Characteristics of the U.S. Health Care System
 Government as subsidiary to the private sector
• In the U.S., the private sector plays the dominant role; the
government the lesser role
–American wants less government intervention
19
Defining Characteristics of the U.S. Health Care System
 Legal risks influence practice behaviors
 Americans are quick to engage in lawsuits
 Patients are persuaded easily to go to court if harm is perceived to
have incurred
 Provider engage in defensive medicine that can lead to higher cost
20
Defining Characteristics of the U.S. Health Care System
 No central governing agency and little integration and coordination
 Technology-driven deliver system focusing on acute care
 High in cost, unequal in access, and average in outcome
 Delivery of health care under imperfect market conditions
 Government as subsidiary to the private sector
 Fusion of market justice and social justice
 Multiple players and balance of power
 Quest for integration and accountability
 Access to health care services selectively based on insurance
coverage
 Legal risks influence practice behaviors
21
Defining Characteristics of the U.S. Health Care System
 No central governing agency and little integration and coordination
 Technology-driven deliver system focusing on acute care
 High in cost, unequal in access, and average in outcome
 Delivery of health care under imperfect market conditions
 Government as subsidiary to the private sector
 Fusion of market justice and social justice
 Multiple players and balance of power
 Quest for integration and accountability
 Access to health care services selectively based on insurance
coverage
 Legal risks influence practice behaviors
22
Defining Characteristics of the U.S. Health Care System
 No central governing agency and little integration and coordination
 Technology-driven deliver system focusing on acute care
 High in cost, unequal in access, and average in outcome
 Delivery of health care under imperfect market conditions
 Government as subsidiary to the private sector
 Fusion of market justice and social justice
 Multiple players and balance of power
 Quest for integration and accountability
 Access to health care services selectively based on insurance
coverage
 Legal risks influence practice behaviors
23
Defining Characteristics of the U.S. Health Care System
 No central governing agency and little integration and coordination
 Technology-driven deliver system focusing on acute care
 High in cost, unequal in access, and average in outcome
 Delivery of health care under imperfect market conditions
 Government as subsidiary to the private sector
 Fusion of market justice and social justice
 Multiple players and balance of power
 Quest for integration and accountability
 Access to health care services selectively based on insurance
coverage
 Legal risks influence practice behaviors
24
Group Discussion Topics
DRAFT – Private and Confidential