Chapter 1

A Distinctive System of Health

Care Delivery

Class Objectives
At the end of the class, you should:
Understand the basic nature of the U.S.
health care system
Be able to outline the four key components
of the health care delivery system
Discuss the primary characteristics of the
U.S. health care system
Have an overview of health care systems in
other countries
Understand the systems model as applied
to health care delivery

The U.S. Health Care Delivery

or
Health Services Delivery
System
Broadly Defined:
major components of the system and
processes that enable people to receive
health care.

Restricted definition:
the act of providing health care to
patients (i.e. in a hospital or a
physicians clinic)

Primary Objectives
of a Health Care System
1. To enable all citizens to receive
health care services
2. To deliver services that are costeffective and meet established
standards of quality.

The U.S. Health Care System

The health care workforce employs
approximately 16 million people
822,000 active MDs (doctors of medicine)
70,480 DOs (osteopathic physicians)
2.5 million nurses
5,815 hospitals
15,730 nursing homes
1,131 health centers
300+ medical, dental and pharmacy schools
1,500+ nursing programs

The U.S. Health Care

System
More numbers:
200.9 million Americans with private
insurance
43 million Medicare beneficiaries
42.6 million Medicaid recipients
46.3 million (15.4%) uninsured

Q: What are some ways

people receive private
insurance?

Employers
Self

Financing and Insurance

Mechanisms
Employer-based health insurance
(private)

Privately-purchased health insurance

(private)

Government programs (public)

State Employees Group
employees
Medicare
elderly and certain disabled people
Medicaid and CHIP
indigent, poor (if they meet the eligibility criteria),
children

The U.S. Health Care System

Leads the world in:

medical
technology
medical training
research
sophisticated
institutions
products
processes

But fails in:

coordination
cost containment as a
whole
The amount of

duplication
overlap
inadequacy
inconsistency
waste
complexity
inefficiency
financial manipulation
fragmentation

Ten Characteristics that

Differentiate
the U.S. Health Care System

1. No central agency governs a system

2. Access is selective based on insurance
3. Health care offered under imperfect market activity
4. Third party insurers are intermediaries between
finance and delivery
5. Multiple payers are cumbersome
6. Balance of power, no domination
7. Legal risk affects practice behavior
8. New technology creates demand for its use
9. New service settings along a continuum
10.Quality is achievable

Ten Characteristics that

Differentiate
the U.S. Health Care System

1) No Central Agency
Most developed nations have a national health care
program where every citizen is entitled to receive a
set of service
To control costs, use global budget to determine
total health care expenses
Government usually controls frequency of
health care services, especially expensive
medical technology use
The U.S. has mostly private financing and delivery
Private financing through employers at 55%
and government at 45%

Ten Characteristics that

Differentiate
the
U.S.
Health
Care
System
1) No Central Agency
Private health care, hospitals, physicians are independent
of government
No one monitors total expenses through global
budgets and utilization
U.S. does determine public-sector expenses and
reimbursement rates for Medicare and Medicaid
Government sets standards of participation through policy
and regulations
providers must comply with standards to be
certified to provide Medicaid & Medicare patients
regarded as minimum standards of quality

Q: What is access?
Access: the ability to obtain health care
when needed

Four Factors that Affect

Access
Ability to pay
do you have health insurance?

Availability of services (delivery)

rural and remote areas lack adequate
services

Payment
many providers dont accept Medicaid

Enablement barriers
transportation, racial, cultural and
language barriers

Access to Health Care

Key predictors of access:
Financing and insurance
Delivery and payment
indirectly

Ten Characteristics that

Differentiate
the U.S. Health Care System

2) Partial access

Universal access: Health care is available

to all citizens
In U.S., access restricted to those who:
a) have health insurance through an
employer
b) are covered under a government
health care plan
c) can afford to buy insurance out of
pocket
d) can pay at time of service privately
Health insurance helps ensure access

Ten Characteristics that

Differentiate
the U.S. Health Care System

2) Partial access

Those unable to pay wait until a health problem

arises then receive health care at the
emergency room
hospital does not receive payment
a form of catastrophic health care insurance?
Primary Care: basic and routine care
Lack of access to prim care a big reason
for U.S. lag in population health (i.e.
infant mortality, life expectancy)

Ten Characteristics that

Differentiate
the U.S. Health Care System

3) Imperfect Market
In national health care, economic markets do not
exist
U.S. has a quasi-market where health care is partially
managed by free markets

patients (buyers) and providers (sellers) act independently

prices set by interaction of supply and demand
unrestrained competition on basis of price and quality
patients must have info of availability of different services
(technology too complicated, skills too advanced)
patients have info on price and quality on each provider
patients must bear cost of services received
patients make decisions about the purchase of health care services

Where we left off: Ten

Characteristics that
Differentiate
U.S.Market
Health Care System
3) the
Imperfect
Item pricing
obtain fees charged for service (surgeons
price)
services cant be determined prior to procedure

Package pricing
bundled fee for a group of related services

Capitation
all health care services include one set
fee per person, more all-encompassing

Ten Characteristics that

Differentiate
the U.S. Health Care System

Phantom providers

bill for services separately

anesthesiology, pathologist, supplies, hospital
facility use

Supplier/provider-induced demand
Physicians have influence on creating
demand for their financial benefit
Physicians receive care beyond what is
necessary
(i.e. follow-up visits, tests, unnecessary surgery)

Ten Characteristics that

Differentiate
the U.S. Health Care System

4) Third-Party Insurers and Payers

Patient is first party

Provider is second party
Intermediary is third party
(insurance company and other
payers)
a wall of separation between financing
and delivery
quality of care is a secondary concern

Ten Characteristics that

Differentiate
the U.S. Health Care System

5) Multiple Payers
The U.S. has many payers,
company can choose different
plans

a billing and collection nightmare

system becomes more cumbersome

Single-payer system
a national health care system that is
usually the primary payer-government

Ten Characteristics that

Differentiate
the U.S. Health Care System

6) Power Balancing
Multiple Players

Physicians, administration, insurance, government,

employers

Fragmented self-interests

prevents an entity from dominating

7) Legal Risks
The U.S. is a litigious society
Practioners engage in defensive medicine
prescribe diagnostic tests, return checkups, documentation

8) High Technology
The U.S., a hotbed of research and innovations
Creates demand for new services despite high costs
With capital investments, must have utilization
Legal risks for providers denying new technology

Q: What are some types of

Health services?

Preventative care
Primary care
Specialized care
Chronic care
Long-term care
Subacute care
Acute care
Rehabilitative care
End-of-life care

Ten Characteristics that

Differentiate
the U.S. Health Care System

9) Continuum of Services
Medical services has three broad
categories:
curative
restorative
preventative

Health care is not confined to the

hospital
10) Quest for Quality
Continuous Quality Improvement
Higher expectations
Quality standards with compliance

Governments Roles in the U.S.

Health Service System
Major financier of health care
delivery
Determine reimbursement rates to
providers who render Medicare /
Medicaid services
Regulates through licensing
personnel and health care
establishments
Health policy

Major Players in the U.S. Health

Service System
Who does these functions?
Physicians
Administrators
Insurance executives
Large employers
Government
See figure 1-1, page 6

A Disenfranchised Segment
In the U.S., insurance is employer-based
the unemployed usually have no insurance

Even if employed, employees do not have

insurance because:
1) Employers not mandated to offer insurance
premium cost sharing
rarely paid at 100% if at all
benefit: group rate or availability of insurance

2) Participation in health insurance is voluntary

Q: Why Are People Uninsured?

Unemployed
Employers not required to offer health
insurance
Employees not required to buy health
insurance
Dont fit eligibility of government
programs

Traditional Insurance to Managed

Care
Utilization (determined by):
the quantity of health care consumed
Previously determined by individuals and physicians

Managed Care
Controls utilization of medical services and price where
services are purchased
Determine price for services purchased and how much
providers get paid

Costs managed by controlling utilization

Plan underwrites risk
Risk sets premium
Plan pays providers through capitation and discounts
Delivery mostly through contracts with external providers

Traditional Insurance to Managed

Care
Fee arrangements negotiated through contract
with providers, based on either:
Capitation
payment where all health care services include under
one set fee per person
predetermined fixed payment per member per
month (PMPM)
used primarily by Health Maintenance Organizations

Discounts
against providers customary fees
used primarily by Preferred Provider Organizations

The move to national Health Care

Programs
Theoretically, no one is uninsured
Universal access:
is managed by the government
provides a defined set of health care
services to all citizens

Cost Control in
National Health Care Programs
Global budgets
determine the national health care
expenditures

Health care resources are allocated

in the budgetary:
availability and dissemination of service
and technology
reimbursement levels