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Health Care System in the US: An Overview

Yaseen Hayajneh, PhD

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What is a System

System: “a set or arrangement of things so connected or related to form a unity or organic whole” Source: Webster’s New World Dictionary, 3rd edition

System: “a collection of components organized to accomplish a specific function or set of functions” Source: [IEEE STD 610.12]

A healthcare system is the organization by which health care is provided.

What are the components of the health care system?

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Health System

The people, institutions and resources, arranged together in accordance with established policies, to improve the health of the population they serve, while responding to people's legitimate expectations and protecting them against the cost of ill-health through a variety of activities whose primary intent is to improve health.

Set of elements and their relations in a complex whole, designed to serve the health needs of the population.

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Components

There are four major components that make up the Healthcare Delivery System: Providers Purchasers Insurers Suppliers

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Major Actors in Any Health Care System

1. Purchasers Supply the funds. Individuals, businesses, and government. Ultimately individuals are the purchasers. Government and businesses are major player as the

organize purchasers of health care

2. Insures Receive money from the purchasers and reimburse the

providers. Assume risk Government and businesses assume the rule of insurer

when they pay providers directly.

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Major Actors in Any Health Care System

3. Providers Hospitals, physicians, nurses and others.. who

actually provide the care. HMOs may be viewed as Insurer and provider Government as provider.

4. Suppliers Pharmaceutical and medical supply industries Manufacture equipment, supplies and

medications.

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Health Care System Evolution..2

Stage One: 1800-1900 Service needs : infectious epidemics Facilities : inadequate & unsafe hospital care Technology : minimal Labor : experience-based training

Stage Two: 1900-1945 Service needs : acute infections, trauma Facilities : specialty hospitals emerge Technology : therapeutic advances Labor : shift to science-based training

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Health Care System Evolution..1

Stage Three: 1945-1984 Service needs : chronic diseases Facilities : increasing numbers & types of facilities Technology : therapeutic & diagnostic technologies Labor : medical specialties, new care givers

Stage Four: 1984 - Present Service needs : new & old infectious diseases Facilities : mergers, integration Technology : informatics, super drugs Labor : primary care, multidisciplinary teams, turf issues,

managed care

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National Health Expenditures as a Share Gross Domestic Product (GDP)

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10

12

14

16

18

20

1980 1985 1990 1995 2000 2005 2010

Per

cen

t o

f G

DP

Source: CMS, Office of the Actuary, National Health Statistics Group.

Between 2001 and 2011, health spending is projected to grow 2.5 percent per year faster than GDP, so that by 2011 it will constitute 17 percent of GDP.

Buyer’s RevoltDRG

s

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US Spending (NCHS, 2000)

Other Spending24%

Nursing HomeCare 7%

Prescription Drugs

9%

Program Administration

andNet Cost

6%

HospitalCare32%

Physician and Clinical Services

22%

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Expenditures for Health Services, All Payers

36.5

25.2

1.8

5.87.6

23.1

31.7

25

2.5

9.4

7.1

24.3

0

5

10

15

20

25

30

35

40

Hospital Phys. & OtherProfessionals

Home Health PrescriptionDrugs

Nursing HomeCare

All Other

1990 2000

In recent years, the hospital share of total spending has decreased while the prescription drug share has

increased.

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Rising HC Costs: Reasons …USA

Health insurance coverage Prescription drug use is rising, and the cost of new drugs is

increasing rapidly National prescription drug spending rose 11.1 percent between 1998

and 2001 Utilization of hospital services and medical technology is rising

Outpatient hospital care spending grew 15% from 1998-2001 Inpatient hospital care jumped 5.9 % during the same period

Medical technologies and treatments are becoming more advanced…and more expensive

Use of specialty care is on the rise Specialty physician services increased 6.7 % in 2001

Emergency rooms are over utilized for non-emergency care

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Implications of Rising HC Costs

Direct Implications Increased spending burden on the government

(taxpayers and other resources) Increased competitive pressures on businesses Increased financial burden on families and

individuals

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Implications of Rising HC Costs

Indirect Implications Slower workforce growth Additional part-time versus full-time workers Reduction in health coverage and other benefits Slower cash-wage growth Additional off-shoring pressures (weaker economy)

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Uninsured

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Key Stakeholders

Who has a vested interest in medical practice? What does each player want?

Physicians and care providers Insurers/ Managed care providers/ Administrators Government Employers Public Corporate Suppliers: drugs, equipment, hospitals

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Physicians

Desire Dominance / income – focus on quality of care. Past strategies:

Unbundle services when reimbursed for each; reduce or concentrate services when paid per capita. Expand services, substitute (radiology, labs, personnel), create complementary services (MD-induced demand)

Care was a social contract- Now more commercialized

When unregulated, mal-distributions in practice Desire specialty training with about 80 percent in specialties.

Currently have an oversupply. Desire urban, metropolitan practice (Boston- Washington belt)

- 20% public lives in shortage area

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Government Policy-makers

Mainly focus on cost and quality concerns Work by regulatory action: incentive, command, oversight. Initiated DRGs, examine/compare hospital mortality rates, fund

research, clinical trials Less concern about access to care Influenced by other “players”

Regulated? issues Who oversees regulators? Political appointees vs. staff may differ in policy People flow into regulatory positions from other interest groups-

create bias in policy? May be increasingly starved for funds, role minimized in “weak state”

environment

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Managed care providers/insurers

Early insurers community based: served middle class Acted as a safety valve by reducing clamor for national health care

1970s –first managed care-with long term case management- can reduce costs, increase quality.

Financially managed care tries to limit liability for care and costs, increase margins (profits) Monitor medical providers’ excess usage – withhold pay Shift clientele -“cherry pick” healthy clients Shift to obedient practitioners- > 2/3 new MDs under contract Factor substitution, stop unprofitable services where possible Short-term prevention not often cost-effective; do not benefit in future

from better health, lower costs Short term employer/MD/client contacts (much flux) reduce long term

management, preventive care.

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Employers

Have been main provider of family health care, with exception of elderly and poor

Want to reduce/eliminate health care costs Shift employee profile (younger/healthier) Ask employees pay more of the cost Reduce health coverage for workers, family In their best interest to have flexible contracts

negotiated with providers

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A costly Benefit

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Public

Want quality, affordable, continuity of care Erosion of trust: are providers competent, act in our interest?

Social trust: is health care alienating? Interpersonal trust:

Increasing number of uninsured Right to care?: where there is a shortfall of a necessary condition

of life, public welfare served by providing assistance: food, shelter Public good? Generally public apathy

Individual externalities- one benefits from care of neighbor Economies of scale: small areas (ex: post offices subsidized) Market avoids pre-existing conditions; workers stop changing jobs U.S. one of two industrialized countries without some commitment to

publicly- supported health care