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Healthcare Systems Assignment 1
Please choose and answer 1 question from each Chapter among the following questions. You may include copied material from our textbook or from other published materials in your answers, but you must cite your sources to avoid plagiarism. The answers must include the relevant facts, not just your own opinions.
Chapter 1
1. Give at least 3 reasons for lack of integration of essential components of healthcare in the United States (US).
2. Define free market healthcare.
Chapter 2
1. How is public health different from clinical medicine?
2. Define market justice and social justice.
Delivering Health Care in America
A SYSTEMS APPROACH SEVENTH EDITION
Leiyu Shi, DrPH, MBA, MPA Professor, Bloomberg School of Public Health
Director, Johns Hopkins Primary Care Policy Center Johns Hopkins University
Baltimore, Maryland
Douglas A. Singh, PhD, MBA Associate Professor Emeritus of Management
School of Business and Economics Indiana University, South Bend
South Bend, Indiana
JONES & BARTLETT LEARNING
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Library of Congress Cataloging-in-Publication Data Names: Shi, Leiyu, author. | Singh, Douglas A., 1946- author. Title: Delivering health care in America : a systems approach / Leiyu Shi, Douglas A. Singh. Description: Seventh edition. | Burlington, Massachusetts : Jones & Bartlett Learning, [2019] | Includes bibliographical references and index. Identifiers: LCCN 2017015329 | ISBN 9781284124491 (pbk.) Subjects: | MESH: Delivery of Health Care | Health Policy | Health Services | United States Classification: LCC RA395.A3 | NLM W 84 AA1 | DDC 362.10973— dc23 LC record available at https://lccn.loc.gov/2017015329
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Contents Preface
List of Exhibits
List of Figures List of Tables
List of Abbreviations/Acronyms
Chapter 1 An Overview of U.S. Health Care Delivery Introduction
An Overview of the Scope and Size of the System
A Broad Description of the System
Basic Components of a Health Care Delivery System
Insurance and Health Care Reform
Role of Managed Care
Major Characteristics of the U.S. Health Care System
Trends and Directions
Significance for Health Care Practitioners
Significance for Health Care Managers
Health Care Systems of Other Countries
Global Health Challenges and Reform
The Systems Framework
Summary
Test Your Understanding
References
PART I System Foundations
Chapter 2 Beliefs, Values, and Health Introduction
Significance for Managers and Policymakers
Basic Concepts of Health
Quality of Life
Risk Factors and Disease
Health Promotion and Disease Prevention
Disease Prevention Under the Affordable Care Act
Public Health
Health Protection and Preparedness in the United States
Determinants of Health
Measures Related to Health
Anthro-Cultural Beliefs and Values
Integration of Individual and Population Health
Summary
Test Your Understanding
References
Chapter 3 The Evolution of Health Services in the United States Introduction
Medical Services in the Preindustrial Era
Medical Services in the Postindustrial Era
Medical Care in the Corporate Era
Globalization of Health Care
The Era of Health Care Reform
Summary
Test Your Understanding
References
PART II System Resources
Chapter 4 Health Services Professionals Introduction
Physicians
Issues in Medical Practice, Training, and Supply
International Medical Graduates
Dentists
Pharmacists
Other Doctoral-Level Health Professionals
Nurses
Advanced Practice Nurses
Midlevel Providers
Allied Health Professionals
Health Services Administrators
Global Health Workforce Challenges
Summary
Test Your Understanding
References
Appendix 4-A List of Professional Associations
Chapter 5 Medical Technology Introduction
What Is Medical Technology?
Information Technology and Informatics
The Internet, E-Health, M-Health, and E-Therapy
Telemedicine, Telehealth, and Remote Monitoring
Innovation, Diffusion, and Utilization of Medical Technology
The Government’s Role in Technology Diffusion
The Impact of Medical Technology
The Assessment of Medical Technology
Directions and Issues in Health Technology Assessment
Health Care Reform and Medical Technology
Summary
Test Your Understanding
References
Chapter 6 Health Services Financing Introduction
The Role and Scope of Health Services Financing
Financing and Cost Control
The Insurance Function
Private Health Insurance
Private Coverage and Cost Under the Affordable Care Act
Public Health Insurance
The Payment Function
National Health Care Expenditures
Current Directions and Issues
Summary
Test Your Understanding
References
PART III System Processes
Chapter 7 Outpatient and Primary Care Services Introduction
What Is Outpatient Care?
The Scope of Outpatient Services
Primary Care
Primary Care and the Affordable Care Act
New Directions in Primary Care
Primary Care Providers
Growth in Outpatient Services
Types of Outpatient Care Settings and Methods of Delivery
Complementary and Alternative Medicine
Utilization of Outpatient Services
Primary Care in Other Countries
Summary
Test Your Understanding
References
Chapter 8 Inpatient Facilities and Services Introduction
Hospital Transformation in the United States
The Expansion Phase: Late 1800s to Mid-1980s
The Downsizing Phase: Mid-1980s Onward
Some Key Utilization Measures and Operational Concepts
Factors That Affect Hospital Employment
Hospital Costs
Types of Hospitals
Expectations for Nonprofit Hospitals
Some Management Concepts
Licensure, Certification, and Accreditation
The Magnet Recognition Program
Ethical and Legal Issues in Patient Care
Summary
Test Your Understanding
References
Chapter 9 Managed Care and Integrated Organizations Introduction
What Is Managed Care?
Evolution of Managed Care
Growth of Managed Care
Efficiencies and Inefficiencies in Managed Care
Cost Control in Managed Care
Types of Managed Care Organizations
Trends in Managed Care
Impact on Cost, Access, and Quality
Managed Care Backlash, Regulation, and the Aftermath
Organizational Integration
Basic Forms of Integration
Highly Integrated Health Care Systems
Summary
Test Your Understanding
References
Chapter 10 Long-Term Care Introduction
The Nature of Long-Term Care
Long-Term Care Services
Users of Long-Term Care
Level of Care Continuum
Home- and Community-Based Services
Institutional Long-Term Care Continuum
Specialized Care Facilities
Continuing Care Retirement Communities
Institutional Trends, Utilization, and Costs
Insurance for Long-Term Care
Summary
Test Your Understanding
References
Chapter 11 Health Services for Special Populations Introduction
Framework to Study Vulnerable Populations
Racial/Ethnic Minorities
The Uninsured
Children
Women
Rural Health
Migrant Workers
The Homeless
Mental Health
The Chronically Ill
HIV/AIDS
Summary
Test Your Understanding
References
PART IV System Outcomes
Chapter 12 Cost, Access, and Quality Introduction
Cost of Health Care
Reasons for Cost Escalation
Cost Containment: Regulatory Approaches
Cost Containment: Competitive Approaches
Cost Containment Under Health Reform
Access to Care
The Affordable Care Act and Access to Care
Quality of Care
Dimensions of Quality
Quality Assessment and Assurance
Public Reporting of Quality
The Affordable Care Act and Quality of Care
Summary
Test Your Understanding
References
Chapter 13 Health Policy Introduction
What Is Health Policy?
Principal Features of U.S. Health Policy
The Development of Legislative Health Policy
The Policy Cycle
Policy Implementation
Critical Policy Issues
Summary
Test Your Understanding
References
PART V System Outlook
Chapter 14 The Future of Health Services Delivery Introduction
Forces of Future Change
The Future of Health Care Reform
The Health Care Delivery Infrastructure of the Future
The Future of Long-Term Care
Global Threats and International Cooperation
New Frontiers in Clinical Technology
The Future of Evidence-Based Health Care
Summary
Test Your Understanding
References
Glossary
Index
© f11photo/Shutterstock
Preface With this Seventh Edition, we celebrate 20 years of serving instructors, students, policymakers, and others, both at home and overseas, with up-to-date information on the dynamic U.S. health care delivery system. Much has changed, and much will continue to change in the future, as the nation grapples with critical issues of access, cost, and quality. Indeed, much of the developing and developed world will also be contending with similar issues.
People in the United States, in particular, have just gotten a taste of a far-reaching health care reform through President Barack Obama’s signature Affordable Care Act (ACA), nicknamed “Obamacare.” To date, this law has produced mixed results that are documented in this new edition.
At the time this edition went to press, we were left with promises of another reform under the slogan “Repeal and replace Obamacare,” a move championed by President Donald Trump, who had made it one of the centerpieces of his presidential campaign. Much remains to be seen as to how this promise will play out.
On May 4, 2017, the U.S. House of Representatives passed the American Health Care Act (AHCA) by a vote of 217 to 213, with Republican support. The bill is likely to undergo significant changes
in the U.S. Senate. Hence, what the new law may eventually look like was unknown at the time this manuscript went to press. As was the case with the ACA, for which the Democratic Party played an exclusive role in its passage, contentious debates, partisanship, and deal making among both Republicans and Democrats have marked the progress in moving the new law through Congress.
Although we have chosen to sidestep any premature speculation about the fate of the ACA and the shape of its replacement, wherever possible, we have presented trends and facts that support certain conclusions. Mainly, experiences and outcomes under the ACA have been highlighted in this edition.
On his first day in office in January 2017, President Trump signed an executive order to “waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the [Affordable Care] Act that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, health care providers, health insurers, patients, recipients of health care services, purchasers of health insurance, or makers of medical devices, products, or medications.” This executive order effectively repealed small portions of the ACA that deal with taxation and fees.
Going forward, the issues of universal coverage and affordability of insurance and health care will be critical. Under the ACA, approximately 27 million people remained uninsured, even though the uninsurance rate in the United States dropped from 13.3% to 10.9% between 2013 and 2016. The majority of the newly insured individuals were covered under Medicaid, the nation’s safety net health insurance program for the poor.
Another thorny issue will be how to provide health care for the millions of illegal immigrants who obtain services mainly through hospital emergency departments, and through charitable sources to some extent. Is there a better, more cost-effective way to address their needs?
The affordability of health insurance in the non-employment-based private market was severely eroded under the ACA, mainly for those who did not qualify for federal subsidies to buy insurance. The reason for the rate hikes in this segment was that few young and healthy people enrolled in health care plans under the ACA. Consequently, for many people, premium costs rose to unaffordable levels in 2016. People who really needed to use health care enrolled in much larger numbers than healthier individuals. Such an adverse selection prompted the chief executive of Aetna Insurance, Mark Bertolini, to remark that the marketplace for individual health insurance coverage was in a “death spiral.” Some large insurance companies either pulled out of the government- sponsored health care exchanges or were planning to do so because of financial losses sustained under the ACA.
▶ New to This Edition This edition continues to reference some of the main features of the ACA wherever it was important to provide contextual discussions from historical and policy perspectives. Several chapters cover the main provisions of the 21st Century Cures Act, which, after a long delay, was finally passed by Congress and signed by President Obama in December 2016.
As in the past, this text has been updated throughout with the latest pertinent data, trends, and research findings available at the time the manuscript was prepared. Copious illustrations in the form of examples, facts, figures, tables, and exhibits continue to make the text come alive. Following is a list of the main additions and revisions:
Chapter 1 Updates the impact of the Affordable Care Act (ACA)
Critical global health issues and health care reforms in other countries
Chapter 2 Health insurance under the ACA Evaluation of progress made toward the Healthy People 2020 goals Information on global pandemics and infectious diseases
Chapter 3 Expanded section: Reform of mental health care Complete revision of the section: Era of health care reform
Chapter 4 Major issues related to the health care workforce Updated information on nonphysician providers
Chapter 5 New section: Electronic health records and quality of care Global trends in biomedical research and a new table on R&D expenditures New section: Drugs from overseas New section: Health care reform and medical technology
Chapter 6 New section: Private coverage and cost under the Affordable Care Act New section: Medicaid experiences under the ACA New section: Issues with Medicaid New section: Long-term care hospital payment systems
New section: Value-based reimbursement (discusses the MACRA and Medicare Shared Savings Program) Updated current directions and issues in financing
Chapter 7 Research findings using the Primary Care Assessment Tool Measurement and achievement of the patient-centered medical home The impact of community health centers
Chapter 8 New section: Comparative data from the Organization for Economic Cooperation and Development on hospital access and utilization Comparative hospital prices in selected countries New section: Factors that affect hospital employment New section: Rise in bad debts New section: State mental health institutions Update on physician-owned specialty hospitals Medicare designations of sole community hospitals and Medicare- dependent hospitals Patient outcomes at Magnet hospitals New section: Hospital costs
Chapter 9 “Any willing provider” and “freedom of choice” laws under managed care regulations The latest on accountable care organizations
Chapter 10 New section: Recent policies for community- based services
Chapter 11 Updated information on vulnerable subpopulations Expanded coverage on chronically ill patients
Chapter 12 Current issues in health care costs, access, and quality Pay-for-performance in health care Quality initiatives in both the public and private sectors
Chapter 13 Current critical policy challenges Future health policy issues in both the United States and abroad
Chapter 14 Almost all sections have been completely updated New section: No single payer New section: Reforming the reform New section: Universal coverage and access New section: Toward population health
As in the previous editions, our aim is to continue to meet the needs of both graduate and undergraduate students. We have attempted to make each chapter complete, without making it overwhelming for beginners. Instructors, of course, will choose the sections they decide are most appropriate for their courses.
As in the past, we invite comments from our readers. Communications can be directed to either or both authors:
Leiyu Shi Department of Health Policy and Management Bloomberg School of Public Health
Johns Hopkins University 624 North Broadway, Room 409 Baltimore, MD 21205-1996 lshi2@jhu.edu
Douglas A. Singh dsingh@iusb.edu
We appreciate the work of Hailun Liang and Megha Parikh in providing assistance in the preparation of selected chapters of this text.
© f11photo/Shutterstock
List of Exhibits Exhibit 3-1 Evolution of the U.S. Health Care Delivery System
Exhibit 3-2 Groundbreaking Medical Discoveries
Exhibit 4-1 Definitions of Medical Specialties and Subspecialties
Exhibit 4-2 Examples of Allied Health Professionals
Exhibit 6-1 Key Differences Between a Health Reimbursement Arrangement and a Health Savings Account
Exhibit 6-2 Medicare Part A Financing, Benefits, Deductible, and Copayments for 2017
Exhibit 6-3 Medicare Part B Financing, Benefits, Deductible, and Coinsurance for 2017
Exhibit 6-4 Medicare Part D Benefits and Individual Out-of-Pocket Costs for 2017
Exhibit 9-1 The Evolution of Managed Care
Exhibit 11-1 The Vulnerability Framework
Exhibit 11-2 Predisposing, Enabling, and Need Characteristics of Vulnerability
Exhibit 12-1 Regulation-Based and Competition-Based Cost- Containment Strategies
Exhibit 13-1 Key Health Care Concerns of Selected Interest Groups
Exhibit 13-2 Arguments for Enhancing States’ Role in Health Policy Making
© f11photo/Shutterstock
List of Figures Figure 1-1 Basic health care delivery functions.
Figure 1-2 External forces affecting health care delivery.
Figure 1-3 Relationship between price, supply, and demand under free-market conditions.
Figure 1-4 Trends and directions in health care delivery.
Figure 1-5 The systems model and related chapters.
Figure 2-1 The four dimensions of holistic health.
Figure 2-2 The Epidemiology Triangle.
Figure 2-3 WHO Commission on Social Determinants of Health conceptual framework.
Figure 2-4 Integrated model for holistic health.
Figure 2-5 Action model to achieve U.S. Healthy People 2020 overarching goals.
Figure 4-1 Ambulatory care visits to physicians according to physician specialty, 2012.
Figure 4-2 Supply of U.S. physicians, including international medical graduates (IMGs), per 100,000 population, 1985–2013.
Figure 4-3 Trend in U.S. primary care generalists of medicine.
Figure 4-4 IMG physicians as a proportion of total active physicians.
Figure 6-1 Influence of financing on the delivery of health services.
Figure 6-2 Health insurance status of the total U.S. population, 2015.
Figure 6-3 Sources of Medicare financing, 2015.
Figure 6-4 Medicare spending for services, 2015.
Figure 6-5 Medicaid spending for services, 2014.
Figure 6-6 Proportional distribution of U.S. private and public shares of national health expenditures.
Figure 6-7 The U.S. health dollar, 2015.
Figure 7-1 The coordination role of primary care in health care delivery.
Figure 7-2 Percentage of total surgeries performed in outpatient departments of U.S. community hospitals, 1980– 2013.
Figure 7-3 Growth in the number of medical group practices in the United States.
Figure 7-4 Ambulatory care visits in the United States.
Figure 7-5 Medical procedures by location.
Figure 7-6 Demographic characteristics of U.S. home health patients, 2013.
Figure 7-7 Estimated payments for home care by payment source, 2014.
Figure 7-8 Types of hospice agencies, 2014.
Figure 7-9 Coverage of patients for hospice care at the time of admission, 2014.
Figure 8-1 Trends in the number of U.S. community hospital beds per 1,000 resident population.
Figure 8-2 The decline in the number of U.S. community hospitals and beds.
Figure 8-3 Ratio of hospital outpatient visits to inpatient days for all U.S. hospitals, 1980–2013 (selected years).
Figure 8-4 Trends in average length of stay in nonfederal short- stay hospitals, selected years.
Figure 8-5 Average lengths of stay by U.S. hospital ownership, selected years.
Figure 8-6 Breakdown of U.S. community hospitals by size, 2013.
Figure 8-7 Change in occupancy rates in U.S. community hospitals, 1960–2013 (selected years).
Figure 8-8 Proportion of total U.S. hospitals by type of hospital, 2014.
Figure 8-9 Breakdown of U.S. community hospitals by type of ownership, 2013.
Figure 8-10 Hospital governance and operational structures.
Figure 9-1 Percentage of worker enrollment in health plans, selected years.
Figure 9-2 Integration of health care delivery functions through managed care.
Figure 9-3 Growth in the cost of U.S. health insurance (private employers), 1980–1995.
Figure 9-4 Care coordination and utilization control through gatekeeping.
Figure 9-5 Case management function in care coordination.
Figure 9-6 Percentage of covered employees enrolled in HMO plans, selected years.
Figure 9-7 The IPA-HMO model.
Figure 9-8 Percentage of covered employees enrolled in PPO plans, selected years.
Figure 9-9 Percentage of covered employees enrolled in POS plans, selected years.
Figure 9-10 Share of managed care enrollments in employer- based health plans, 2016.
Figure 9-11 Organizational integration strategies.
Figure 10-1 People with multiple chronic conditions are more likely to have activity limitations.
Figure 10-2 Medicare enrollees age 65 and older with functional limitations according to where they live, 2009.
Figure 10-3 Key characteristics of a well-designed long-term care system.
Figure 10-4 Range of services for individuals in need of long-term care.
Figure 10-5 Users of long-term care by age group.
Figure 10-6 Most frequently provided services to home health patients.
Figure 10-7 Sources of payment for home health care, 2014.
Figure 10-8 Changes in the percentages of nursing home residents with various conditions between 2005 and 2015.
Figure 10-9 Distinctly certified units in a nursing home.
Figure 10-10 Sources of financing nursing home care, 2014.
Figure 11-1 Percentage of U.S. live births weighing less than 2,500 grams by mother’s detailed race.
Figure 11-2 Percentage of U.S. mothers who smoked cigarettes during pregnancy according to mother’s race.
Figure 11-3 Alcohol consumption by persons 18 years of age and older.
Figure 11-4 Use of mammography by women 40 years of age and older, 2013.
Figure 11-5 U.S. life expectancy at birth, 1970–2014.
Figure 11-6 Age-adjusted maternal mortality rates.
Figure 11-7 Respondent-assessed health status.
Figure 11-8 Current cigarette smoking by persons 18 years of age and older, age adjusted, 2014.
Figure 11-9 Percentage of female students of total enrollment in schools for selected health occupations, 2013–2014.
Figure 11-10 Contraceptive use in the past month among women 15–44 years old, 2011–2013.
Figure 11-11 AIDS cases reported in the United States, 1987–2014.
Figure 11-12 Federal spending for HIV/AIDS by category, FY 2016.
Figure 12-1 Average annual percentage growth in U.S. national health care spending, 1960–2014.
Figure 12-2 Annual percentage change in CPI and medical inflation, 1975–2014.
Figure 12-3 Annual percentage change in U.S. national health care expenditures and GDP, 1980–2013.
Figure 12-4 U.S. health care spending as a percentage of GDP for selected OECD countries, 1985 and 2014.
Figure 12-5 Life expectancy of Americans at birth, age 65, and age 75, 1900–2014 (selected years).
Figure 12-6 Change in U.S. population mix between 1970 and 2014, and projections for 2030.
Figure 12-7 Increase in U.S. per capita Medicare spending, 1970– 2014 (selected years).
Figure 12-8 Framework for access in the managed care context.
Figure 12-9 The Donabedian model.
© f11photo/Shutterstock
List of Tables Table 1-1 The Complexity of Health Care Delivery
Table 1-2 The Continuum of Health Care Services
Table 2-1 Percentage of U.S. Population with Behavioral Risks
Table 2-2 Annual Percentage Decline in U.S. Cancer Mortality, 1991–2013
Table 2-3 Leading Causes of Death, 2014
Table 2-4 U.S. Life Expectancy at Birth—2002, 2007, and 2014
Table 2-5 Comparison of Market Justice and Social Justice
Table 2-6 Healthy People 2020 Topic Areas
Table 4-1 Persons Employed in Health Service Sites
Table 4-2 Active U.S. Physicians According to Type of Physician and Number per 10,000 Population
Table 4-3 U.S. Physicians According to Activity and Place of Medical Education, 2013
Table 4-4 Mean Annual Compensation for U.S. Physicians by Specialty, May 2016 (in Dollars)
Table 4-5 Percentage of Total Enrollment of Students in Programs for Selected Health Occupations, by Race, 2008–2009
Table 5-1 Examples of Medical Technologies
Table 5-2 MRI Units Available per 1,000,000 Population in Selected Countries, 2014
Table 5-3 Global Biomedical R&D Expenditures in Selected Regions, 2007 and 2012
Table 5-4 Summary of FDA Legislation
Table 6-1 Trends in Employment-Based Health Insurance, Selected Years
Table 6-2 Medicare: Enrolled Population and Expenditures in Selected Years
Table 6-3 Status of HI and SMI Trust Funds (Billions of Dollars), 2012–2015
Table 6-4 U.S. National Health Expenditures in Selected Years
Table 6-5 Percentage Distribution of U.S. National Health Expenditures, 2010 and 2015
Table 7-1 Owners, Providers, and Settings for Ambulatory Care Services
Table 7-2 Growth in Female U.S. Resident Population by Age Groups Between 1980 and 2014 (in Thousands)
Table 7-3 Selected Organizational Characteristics of U.S. Home Health and Hospice Care Agencies in the United States, 2014
Table 7-4 Home Health and Hospice Care Patients Served at the Time of the Interview, by Agency Type and Number of Patients in the United States, 2007
Table 7-5 U.S. Physician Characteristics, 2013
Table 7-6 Principal Reason for Visiting a Physician
Table 7-7 Primary Diagnosis Group
Table 8-1 Share of Personal Health Expenditures Used for Hospital Care
Table 8-2 Discharges, Average Length of Stay, and Average Cost per Stay in U.S. Community Hospitals, 2012
Table 8-3 Inpatient Hospital Utilization: Comparative Data for Selected OECD Countries, 2012 (or Nearest Year)
Table 8-4 Cost per Inpatient Day in Selected Countries, 2012
Table 8-5 Changes in Number of U.S. Hospitals, Beds, Average Size, and Occupancy Rates
Table 8-6 The Largest U.S. Multihospital Chains, 2014
Table 10-1 Trends in Number of Long-Term Care Facilities, Beds/Resident Capacity, and Prices, Selected Years
Table 11-1 Characteristics of U.S. Mothers by Race/Ethnicity
Table 11-2 Age-Adjusted Death Rates for Selected Causes of Death, 1970–2014
Table 11-3 Infant, Neonatal, and Postneonatal Mortality Rates by Mother’s Race (per 1,000 Live Births)
Table 11-4 Selected Health Risks Among Persons 20 Years and Older, 2011–2014
Table 11-5 Vaccinations of Children 19–35 Months of Age for Selected Diseases According to Race, Poverty Status, and Residence in a Metropolitan Statistical Area (MSA), 2014 (%)
Table 11-6 Mental Health Organizations, 2010
Table 11-7 Mental Health Providers by Discipline, Selected Years
Table 11-8 AIDS Cases Reported in the United States, 2010–2014 Cumulative and 2014
Table 12-1 Average Annual Percentage Increase in U.S. National Health Care Spending, 1975–2014
Table 12-2 Total U.S. Health Care Expenditures as a Proportion of GDP and per Capita Health Care Expenditures (Selected Years, Selected OECD Countries; per Capita Expenditures in U.S. Dollars)
Table 12-3 Visits to Office-Based Physicians, 2012
Table 12-4 Number of Health Care Visits According to Selected Patient Characteristics, 2014
Table 12-5 Dental Visits in the Past Year Among Persons 18–64 Years of Age, 2014
© f11photo/Shutterstock
List of Abbreviations/Acronyms
A AALL—American Association of Labor Legislation
AAMC—Association of American Medical Colleges
AA/PIs—Asian Americans and Pacific Islanders
AAs—Asian Americans
ACA—Affordable Care Act
ACNM—American College of Nurse-Midwives
ACO—accountable care organization
ACS—American College of Surgeons
ADA—American Dental Association
ADC—adult day care
ADLs—activities of daily living
ADN—associate’s degree nurse
AFC—adult foster care
AHA—American Hospital Association
AHRQ—Agency for Healthcare Research and Quality
AIANs—American Indians and Alaska Natives
AIDS—acquired immunodeficiency syndrome
ALF—assisted living facility
ALOS—average length of stay
AMA—American Medical Association
AMDA—American Medical Directors Association
ANA—American Nurses Association
APCs—ambulatory payment classifications
APN—advanced practice nurse
ARRA—American Recovery and Reinvestment Act
ASPR—Assistant Secretary for Preparedness and Response
B
BBA—Balanced Budget Act
BPCI—bundled payments for care improvement
BSN—baccalaureate degree in nursing
BWC—Biological and Toxin Weapons Convention
C CAH—critical access hospital
CAM—complementary and alternative medicine
CBO—Congressional Budget Office
CCAH—continuing care at home
CCRC—continuing care retirement center/community
CDC—Centers for Disease Control and Prevention
CDSS—clinical decision support system
CEO—chief executive officer
CEPH—Council on Education for Public Health
CER—comparative effectiveness research
CF—conversion factor
CHAMPVA—Civilian Health and Medical Program of the Department of Veterans Affairs
CHC—community health center
CHIP—Children’s Health Insurance Program
CMGs—case-mix groups
C/MHCs—community and migrant health centers
CMS—Centers for Medicare and Medicaid Services
CNA—certified nursing assistant
CNM—certified nurse-midwife
CNS—clinical nurse specialist
COBRA—Consolidated Omnibus Budget Reconciliation Act
CON—certificate of need
COPC—community-oriented primary care
COTA—certified occupational therapy assistant
COTH—Council of Teaching Hospitals and Health Systems
CPI—consumer price index
CPOE—computerized provider order entry
CPT—Current Procedural Terminology
CQI—continuous quality improvement
CRNA—certified registered nurse anesthetist
CT—computed tomography
D DC—Doctor of Chiropractic
DD—developmental disability
DDS—Doctor of Dental Surgery
DGME—Direct Graduate Medical Education
DHHS—U.S. Department of Health and Human Services
DHS—Department of Homeland Security
DMD—Doctor of Dental Medicine
DME—durable medical equipment
DO—Doctor of Osteopathic Medicine
DoD—Department of Defense
DPM—Doctor of Podiatric Medicine
DRA—Deficit Reduction Act
DRGs—diagnosis-related groups
DSM-5—Diagnostic and Statistical Manual of Mental Disorders, Fifth Edition
DTP—diphtheria/tetanus/pertussis (vaccine)
E EBM—evidence-based medicine
EBRI—Employee Benefit Research Institute
ECG—electrocardiogram
ECU—extended care unit
ED—emergency department
EHRs—electronic health records
EMT—emergency medical technician
EMTALA—Emergency Medical Treatment and Active Labor Act
ENP—Elderly Nutrition Program
ERISA—Employee Retirement Income Security Act
ESRD—end-stage renal disease
F FD&C Act—Federal Food, Drug, and Cosmetic Act
FDA—Food and Drug Administration
FMAP—Federal Medical Assistance Percentage
FPL—federal poverty level
FTE—full-time equivalent
FY—fiscal year
G GAO—General Accounting Office
GDP—gross domestic product
GP—general practitioner
H HAART—highly active antiretroviral therapy
HCBS—home- and community-based services
HCBW—home- and community-based waiver
HCH—Health Care for the Homeless
HCPCS—Healthcare Common Procedures Coding System
HDHP—high-deductible health plan
HDHP/SO—high-deductible health plan with a savings option
HEDIS—Healthcare Effectiveness Data and Information Set
HHRG—home health resource group
HI—hospital insurance
HIAA—Health Insurance Association of America
Hib—Haemophilus influenzae serotype b
HIO—health information organization
HIPAA—Health Insurance Portability and Accountability Act
HIT—health information technology
HITECH— Health Information Technology for Economic and Clinical Health Act
HIV—human immunodeficiency virus
HMO—health maintenance organization
HMO Act—Health Maintenance Organization Act
HPSAs—health professional shortage areas
HPV—human papillomavirus
HRA—health reimbursement arrangement
HRQL—health-related quality of life
HRSA—Health Resources and Services Administration
HSA—health savings account
HTA—health technology assessment
HUD—U.S. Department of Housing and Urban Development
I
IADLs—instrumental activities of daily living
ICF—intermediate care facility
ICF/IID—intermediate care facilities for individuals with intellectual disabilities
ICF/MR—intermediate care facilities for the mentally retarded
ID—intellectual disability
IDD—intellectual/developmental disability
IDEA—Individuals with Disabilities Education Act
IDS—integrated delivery systems
IDU—injection drug use
IHR—International Health Regulations
IHS—Indian Health Service
IME—Indirect Medical Education
IMGs—international medical graduates
IOM—Institute of Medicine
IPA—independent practice association
IRB—institutional review board
IRF—inpatient rehabilitation facility
IRMAA—Income-Related Monthly Adjustment Amount
IRS—Internal Revenue Service
IS—information systems
IT—information technology
IV—intravenous
L LPN—licensed practical nurse
LTC—long-term care
LTCH—long-term care hospital
LVN—licensed vocational nurse
M MA—Medicare Advantage
MA-PD—Medicare Advantage Prescription Drug Plan
MA-SNP—Medicare Advantage Special Needs Plan
MACPAC—Medicaid and CHIP Payment and Access Commission
MACRA—Medicare Access and CHIP Reauthorization Act
MBA—Master of Business Administration
MCOs—managed care organizations
MD—Doctor of Medicine
MDS—Minimum Data Set
MedPAC—Medicare Payment Advisory Com- mission
MEPS—Medical Expenditure Panel Survey
MERS—Middle East respiratory syndrome
MFP—Money Follows the Person
MHA—Master of Health Administration
MHS—multihospital system
MHSA—Master of Health Services Administration
MIPS—Merit-based Incentive Payment System
MLP—midlevel provider
MLR—medical loss ratio
MMA—Medicare Prescription Drug, Improvement, and Modernization Act
MMR—measles/mumps/rubella vaccine
MPA—Master of Public Administration/Affairs
MPFS—Medicare Physician Fee Schedule
MPH—Master of Public Health
MRHFP—Medicare Rural Hospital Flexibility Program
MRI—magnetic resonance imaging
MSA—metropolitan statistical area
MS-DRGs—Medicare severity diagnosis-related groups
MSO—management services organization
MSSP—Medicare Shared Savings Program
MUAs—medically underserved areas
N NAB—National Association of Boards of Examiners of Long-Term Care Administrators
NAPBC—National Action Plan on Breast Cancer
NCCAM—National Center for Complementary and Alternative Medicine
NCCIH—National Center for Complementary and Integrative Health
NCHS—National Center for Health Statistics
NCQA—National Committee for Quality Assurance
NF—nursing facility
NGC—National Guideline Clearinghouse
NHC—neighborhood health center
NHE—national health expenditures
NHI—national health insurance
NHS—national health system
NHS—U.K. National Health Service
NHSC—National Health Service Corps
NICE—National Institute for Health and Clinical Excellence
NIH—National Institutes of Health
NIMH—National Institute of Mental Health
NP—nurse practitioner
NPP—nonphysician practitioner
NRP—National Response Plan
O OAM—Office of Alternative Medicine
OBRA—Omnibus Budget Reconciliation Act
OD—Doctor of Optometry
OI—opportunistic infection
OPPS—Outpatient Prospective Payment System
OT—occupational therapist
OWH—Office on Women’s Health
P P4P—pay-for-performance
PA—physician assistant
PACE—Program of All-Inclusive Care for the Elderly
PAHPA—Pandemic and All-Hazards Preparedness Act
PASRR—Preadmission Screening and Resident Review
PBMs—pharmacy benefits managers
PCCM—primary care case management
PCGs—primary care groups
PCMH—patient-centered medical home
PCP—primary care physician
PDP—stand-alone prescription drug plan
PERS—personal emergency response system
PET—positron emission tomography
PFFS—private fee-for-service
PharmD—Doctor of Pharmacy
PhD—Doctor of Philosophy
PHI—personal health information
PHO—physician–hospital organization
PhRMA—Pharmaceutical Research and Manufacturers of America
PMPM—per member per month
POS—point-of-service (plan)
PPD—per-patient day (rate)
PPM—physician practice management
PPO—preferred provider organization
PPS—prospective payment system
PRO—peer review organization
PSO—provider-sponsored organization
PSRO—professional standards review organization
PsyD—Doctor of Psychology
PTA—physical therapy assistant
PTCA—percutaneous transluminal coronary angioplasty
PT—physical therapist
Q QALY—quality-adjusted life year
QI—quality indicator
QIO—quality improvement organization
R R&D—research and development
RBRVS—resource-based relative value scales
RN—registered nurse
RUGs—resource utilization groups
RVUs—relative value units
RWJF—Robert Wood Johnson Foundation
S SAMHSA—Substance Abuse and Mental Health Services Administration
SARS—severe acute respiratory syndrome
SAV—small area variations
SES—socioeconomic status
SGR—sustainable growth rate
SHI—socialized health insurance
SMI—supplementary medical insurance
SNF—skilled nursing facility
SPECT—single-photon emission computed tomography
SSI—Supplemental Security Income
STD—sexually transmitted disease
T TAH—total artificial heart
TANF—Temporary Assistance for Needy Families
TCU—transitional care unit
TEFRA—Tax Equity and Fiscal Responsibility Act
TPA—third-party administrator
TQM—total quality management
U UCR—usual, customary, and reasonable
UR—utilization review
V VA—Department of Veterans Affairs
VBP—Value-Based Purchasing
VHA—Veterans Health Administration
VISN—Veterans Integrated Service Network
W WHO—World Health Organization
WIC—Special Supplemental Nutrition Program for Women, Infants, and Children
Chapter opener photo: © f11photo/Shutterstock
CHAPTER 1 An Overview of U.S. Health Care Delivery
LEARNING OBJECTIVES
■ Understand the basic 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. ■ Discuss the primary characteristics of the U.S. health care system. ■ Emphasize why it is important for health care practitioners and managers to understand the
intricacies of 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 studying the health care system in the United
States.
The U.S. health care delivery system is a behemoth that is almost impossible for any single entity to manage and control.
▶ Introduction The United States has a unique system of health care delivery that is unlike any other health care system in the world. Almost all other developed countries have national health insurance programs run by the government and financed through general taxes. Nearly all citizens in such countries are entitled to receive health care services. Such is not yet the case in the United States, where Americans are not automatically covered by health insurance.
Though U.S. health care is often called a system because is has various features, components, and services, it may be misleading to talk about the American health care delivery “system,” because a true, cohesive system does not exist (Wolinsky, 1988). Indeed, a major feature of the U.S. health care system is its fragmented nature, as different people obtain health care through different means. The system has continued to undergo periodic changes, mainly in response to concerns regarding costs, access, and quality.
Describing health care delivery in the United States can be a daunting task. To facilitate an understanding of the structural and conceptual basis for the delivery of health care services, this text is organized according to the systems framework presented at the end of this chapter. Also, for the sake of simplicity, the mechanisms of health care delivery in the United States are collectively referred to as a system throughout this text.
The main objective of this chapter is to provide a broad understanding of how health care is delivered in the United States. Examples of how health care is delivered in other countries are also presented for the sake of comparison. The overview presented here introduces the reader to several concepts discussed more extensively in later chapters.
▶ An Overview of the Scope and Size of the System
TABLE 1-1 demonstrates the complexity of health care delivery in the United States. Many organizations and individuals are involved in health care. To name just a few: educational and research institutions, medical suppliers, insurers, payers, and claims processors to health care providers. A multitude of providers are involved in the delivery of preventive, primary, subacute, acute, auxiliary, rehabilitative, and continuing care. A large number of managed care organizations (MCOs) and integrated networks now provide a continuum of care, covering many of the service components.
TABLE 1-1 The Complexity of Health Care Delivery
Education/Research Suppliers Insurers Providers Payers Government
Medical schools Dental schools Nursing programs Physician assistant programs Nurse practitioner programs Physical therapy, occupational therapy, speech therapy programs Research organizations Private foundations U.S. Public Health Service (Agency for Healthcare Research and Quality, Agency for Toxic Substances and Disease Registry, Centers for Disease Control and Prevention, Food and Drug Administration, Health Resources and Services
Pharmaceutical companies Multipurpose suppliers Biotechnology companies
Managed care plans Blue Cross/Blue Shield plans Commercial insurers Self-insured employers Medicare Medicaid Veterans Affairs Tricare
Preventive Care Health departments Primary Care Physician offices Community health centers Dentists Nonphysician providers Subacute Care Subacute care facilities Ambulatory surgery centers Acute Care Hospitals Auxiliary Services Pharmacists Diagnostic clinics
Blue Cross/Blue Shield plans Commercial insurers Employers Third-party administrators State agencies
Public insurance financing Health regulations Health policy Research funding Public health
Administration, Indian Health Service, National Institutes of Health, Substance Abuse and Mental Health Services Administration) Professional associations Trade associations
X-ray units Suppliers of medical equipment Rehabilitative Services Home health agencies Rehabilitation centers Skilled nursing facilities Continuing Care Nursing homes End-of-Life Care Hospices Integrated Managed care organizations Integrated networks
The U.S. health care delivery system is massive, with total employment that exceeded 16.4 million people in 2010 in various health delivery settings. This number included more than 838,000 professionally active doctors of medicine (MDs), 70,480 osteopathic physicians (DOs), and 2.6 million active nurses (U.S. Census Bureau, 2012). The majority of health care and health services professionals (5.98 million) work in ambulatory health service settings, such as the offices of physicians, dentists, and other health practitioners, medical and diagnostic laboratories, and home health care service locations. Smaller proportions of these professionals are employed by hospitals (4.7 million) and nursing and residential care facilities (3.13 million). The vast array of health care institutions in the United States includes approximately 5,795 hospitals, 15,700 nursing homes, and 13,337 substance abuse treatment facilities (U.S. Census Bureau, 2012).
In 2015, 1,375 federally qualified health center grantees, with 188,851 full-time employees, provided preventive and primary care services to approximately 24.3 million people living in medically underserved rural and urban areas (Health Resources and
Services Administration [HRSA], 2015). Various types of health care professionals are trained in 180 medical and osteopathic schools (Association of American Medical Colleges, 2017), 66 dental schools (American Dental Association, 2017), 136 schools of pharmacy (American Association of Colleges of Pharmacy, 2017), and more than 1,500 nursing programs located throughout the country. Multitudes of government agencies are involved with the financing of health care, medical research, and regulatory oversight of the various aspects of the health care delivery system.
▶ A Broad Description of the System
U.S. health care delivery does not function as a rational and integrated network of components designed to work together coherently. To the contrary, it is a kaleidoscope of financing, insurance, delivery, and payment mechanisms that remain loosely coordinated. Each of these basic functional components represents an amalgam of public (government) and private sources. Government-run programs finance and insure health care for select groups of people who meet each program’s prescribed criteria for eligibility. To a lesser degree, government programs also deliver certain health care services directly to certain recipients, such as veterans, military personnel, American Indians/Alaska Natives, and some uninsured people. Nevertheless, the financing, insurance, payment, and delivery functions largely remain in private hands.
The market-oriented economy in the United States attracts a variety of private entrepreneurs that pursue profits by facilitating the key functions of health care delivery. Employers purchase health insurance for their employees through private sources, and employees receive health care services delivered by the private sector. The government finances public insurance through Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP) for a significant portion of the country’s low-income, elderly, disabled, and pediatric populations. However, insurance arrangements for many publicly insured people are made through private entities, such as health maintenance organizations (HMOs), and health care services are rendered by private physicians and hospitals. This blend of public and private involvement in the delivery of health care has resulted in the following characteristics of the U.S. system:
A multiplicity of financial arrangements for health care services Numerous insurance agencies or MCOs that employ various mechanisms for insuring against risk Multiple payers that make their own determinations regarding how much to pay for each type of service A diverse array of settings where medical services are delivered Numerous consulting firms offering expertise in planning, cost containment, electronic systems, quality, and restructuring of resources
There is little standardization in a system that is functionally fragmented, and in which the various system components fit together only loosely. Because a central agency such as the government does not oversee the overall coordination of such a system, problems of duplication, overlap, inadequacy, inconsistency, and waste occur. Lack of system-wide planning, direction, and coordination leads to a complex and inefficient system. Moreover, the system as a whole does not lend itself to standard budgetary methods of cost control. Individual and corporate entities within a predominantly private entrepreneurial system seek to manipulate financial incentives to their own advantage, without regard to their impact on the system as a whole. Hence, cost containment remains an elusive goal.
In short, the U.S. health care delivery system is like a behemoth that is almost impossible for any single entity to manage or control. The United States consumes more health care services as a proportion of its total economic output than any other country in the world. The U.S. economy is the largest in the world and, compared to other nations, consumption of health care services in the United States represents a greater proportion of the country’s total economic output. Although the system can be credited for delivering some of the best clinical care in the world, it falls short of delivering equitable services to every American. It certainly fails in terms of providing cost-efficient services.
An acceptable health care delivery system should have two primary objectives: (1) enable all citizens to obtain needed health care services; and (2) ensure that services are cost-effective and meet certain established standards of quality. While the U.S. health care delivery system falls short of both these basic ideals, the United States leads the world in providing the latest and the best in medical technology, training, and research. It offers some of the most sophisticated institutions, products, and processes of health care delivery.
▶ Basic Components of a Health Care Delivery System
FIGURE 1-1 illustrates that a health care delivery system incorporates four functional components—financing, insurance, delivery, and payment; hence, it is termed a quad-function model. Health care delivery systems differ depending on the arrangement of these components. The four functions generally overlap, but the degree of overlap varies between private and government-run systems, and between traditional health insurance and managed care–based systems. In a government-run system, the functions are more closely integrated and may be indistinguishable. Managed care arrangements also integrate the four functions to varying degrees.
FIGURE 1-1 Basic health care delivery functions.
Financing Financing is necessary to obtain health insurance or to pay for health care services. For most privately insured Americans, health insurance is employment based; that is, the employers finance health care as a fringe benefit for their employees. A dependent spouse or children may also be covered by the working spouse’s or working parent’s employer. Most employers purchase health insurance for their employees through an MCO or an insurance company selected by the employer. Small employers may or may not be in a position to afford health insurance coverage for their employees. In public programs, the government functions as the financier; the insurance function may be carved out to an HMO.
Insurance Insurance protects the insured against financial catastrophe by providing expensive health care services when needed. The insurance function determines the package of health services that the insured individual is entitled to receive. It specifies how and where health care services may be received. The MCO or insurance company also functions as a claims processor and manages the disbursement of funds to the health care providers.
Delivery The term “delivery” refers to the provision of health care services by various providers. The term provider refers to any entity that delivers health care services and either independently bills for those services or is supported through tax revenues. Common examples of providers include physicians, dentists, optometrists, and therapists in private practices, hospitals, and diagnostic and imaging clinics, and suppliers of medical equipment (e.g., wheelchairs, walkers, ostomy supplies, oxygen). With few exceptions, most providers render services to people who have health insurance and even those covered under public insurance programs receive health care services from private providers.
Payment The payment function deals with reimbursement to providers for services delivered. The insurer determines how much is paid for a certain service. Funds for actual disbursement come from the premiums paid to the MCO or insurance company. At the time of service, the patient is usually required to pay an out-of-pocket amount, such as $25 or $30, to see a physician. The remainder is covered by the MCO or insurance company. In government insurance plans, such as Medicare and Medicaid, tax revenues are used to pay providers.
▶ Insurance and Health Care Reform
The U.S. government finances health benefits for certain special populations, including government employees, the elderly (people ages 65 years and older), people with disabilities, some people with very low incomes, and children from low-income families. The program for the elderly and certain disabled individuals, which is administered by the federal government, is called Medicare. The program for the indigent, which is jointly administered by the federal government and state governments, is named Medicaid. The program for children from low-income families, another federal/state partnership, is called the Children’s Health Insurance Program (CHIP).
However, the predominant employment-based financing system in the United States has left some employed individuals uninsured for two main reasons. First, some small businesses simply cannot get group insurance at affordable rates and, therefore, are not able to offer health insurance as a benefit to their employees. Second, in some work settings, participation in health insurance programs is voluntary, so employees are not required to join. Some employees choose not to sign up, mainly because they cannot afford the cost of health insurance premiums. Employers rarely pay 100% of the insurance premium; instead, most require their employees to pay a portion of the cost. This is called premium cost sharing. Self- employed people and other individuals who are not covered by employer-based plans have to obtain health insurance on their own. Individual rates are typically higher than group rates available to employers. In the United States, working people earning low wages have been the most likely to be uninsured because most cannot afford premium cost sharing and are not eligible for public benefits.
In the U.S. context, health care reform refers to the expansion of health insurance to cover the uninsured—those without private or public health insurance coverage. The Patient Protection and Affordable Care Act of 2010, more commonly known as the Affordable Care Act (ACA), was the most sweeping health care reform in recent U.S. history. One of the main objectives of the ACA was to reduce the number of uninsured.
The ACA was rolled out gradually starting in 2010, when insurance companies were mandated to start covering children and young adults younger than age 26 under their parents’ health insurance plans. Most other insurance provisions went into effect on January 1, 2014, except for a mandate for employers to provide health insurance, which was postponed until 2015. The ACA required that all U.S. citizens and legal residents must be covered by either public or private insurance. The law also relaxed standards to qualify additional numbers of people for Medicaid, although many states chose not to implement the Medicaid expansion based on a 2012 ruling by the U.S. Supreme Court. Individuals without private or public insurance had to obtain health insurance from participating insurance companies through Web-based, government-run exchanges; if they failed to do so, they had to pay a tax. The exchanges—also referred to as health insurance marketplaces—would determine whether an applicant qualified for Medicaid or CHIP programs. If an applicant did not qualify for a public program, the exchange would enable the individual to purchase a government-approved health plan offered by private insurers through the exchange. Federal subsidies enabled low- income people to partially offset the cost of health insurance.
A predictive model developed by Parente and Feldman (2013) estimated that, at best, full implementation of the ACA would reduce the number of uninsured by more than 20 million. Nevertheless, by its own design, the ACA failed to achieve universal coverage that would enable all citizens and legal
residents to have health insurance. Possible future scenarios for health care reform are discussed later in this text.
By March 2015, approximately 16.5 million uninsured Americans had gained health insurance coverage due to the Affordable Care Act (“Impact of Obamacare on Coverage,” 2016). By 2016, an estimated 20 million had gained coverage (Uberoi et al., 2016), and by 2017, 31 states and the District of Columbia had expanded Medicaid through the ACA’s provisions (Kaiser Family Foundation, 2017). By March 2016, states that had expanded Medicaid experienced an 8.1% decline in their uninsured rate (from 18.2% to 10.1%). States that had not expanded Medicaid experienced a comparably smaller decline of 7.3%—from 23.4% to 16.1% (“Impact of Obamacare on Coverage,” 2016). The uninsured rate declined among all race/ethnicity categories, with the greatest decreases seen among African Americans and Hispanics, compared to whites (Uberoi et al., 2016). The uninsured rate declined from 22.4% to 10.6% among African Americans, from 41.8% to 30.5% among Hispanics, and from 14.3% to 7.0% among whites (Uberoi et al., 2016). Additionally, females experienced a greater decline in their uninsured rate (49.7% decline) compared to males (37.6% decline). Specifically, the uninsured rate among females decreased from 18.9% to 9.5%, whereas the uninsured rate among males decreased from 21.8% to 13.6% (Uberoi et al., 2016). Despite these gains, however, the ACA left more than 27.3 million Americans uninsured in 2016 (Cohen et al., 2016).
During his first week in office in January 2017, President Donald Trump signed an Executive Order to repeal and replace the ACA (commonly referred to as Obamacare) in an effort to minimize the ACA’s economic and regulatory burdens and to waive any requirement imposing a fiscal burden on states or families, individuals, health care providers, insurers, or other parties.
▶ Role of Managed Care Under traditional insurance, the four basic health delivery functions have been fragmented; with few exceptions, the financiers, insurers, providers, and payers have been different entities. However, during the 1990s, health care delivery in the United States underwent a fundamental change involving a tighter integration of the basic functions through managed care.
Previously, fragmentation of the four functions meant a lack of control over utilization and payments. The quantity of health care consumed refers to utilization of health services. Traditionally, determination of the utilization of health services and the price charged for each service had been left up to the insured individuals and the providers of health care. However, due to rising health care costs, current delivery mechanisms have instituted some controls over both utilization and price.
Managed care is a system of health care delivery that (1) seeks to achieve efficiency by integrating the four functions of health care delivery discussed earlier; (2) employs mechanisms to control (manage) utilization of medical services; and (3) determines the price of services and, consequently, how much the providers are paid. The primary financier is still the employer or the government. Instead of purchasing health insurance through a traditional insurance company, the employer contracts with an MCO, such as an HMO or a preferred provider organization (PPO), to offer a selected health plan to its employees. In this case, the MCO functions like an insurance company and promises to provide health care services contracted under the health plan to the enrollees of the plan. The term enrollee (member) refers to the individual covered under the plan. The contractual arrangement between the MCO and the enrollee—including the collective array of covered health services that the enrollee is entitled to—is
referred to as the health plan (or “plan,” for short). The health plan uses selected providers from whom the enrollees can choose to receive services.
Compared with health services delivery under fee-for-service plans, managed care was successful in accomplishing cost control and greater integration of health care delivery. By ensuring access to needed health services, emphasizing preventive care, and maintaining a broad provider network, managed care can implement effective cost-saving measures without compromising access and quality, thereby achieving a health care budget predictability unattainable by other kinds of health care delivery.
▶ Major Characteristics of the U.S. Health Care System
In any country, certain external influences shape the basic character of the health services delivery system. These forces consist of a national political climate, economic development, technological progress, social and cultural values, physical environment, population characteristics (i.e., demographic and health trends), and global influences (FIGURE 1-2). The combined interaction of these environmental forces influence the course of health care delivery.
FIGURE 1-2 External forces affecting health care delivery.
Ten basic characteristics differentiate the U.S. health care delivery system from most other countries:
1. No central agency governs the system. 2. Access to health care services is selectively based on insurance
coverage. 3. Health care is delivered under imperfect market conditions. 4. Insurers from a third party act as intermediaries between the
financing and delivery functions. 5. The existence of multiple payers makes the system cumbersome. 6. The balance of power among various players prevents any single
entity from dominating the system. 7. Legal risks influence the practice behavior of physicians. 8. Development of new technology creates an automatic demand for
its use. 9. New service settings have evolved along a continuum.
10. Quality is no longer accepted as an unachievable goal.
No Central Agency Unlike health care systems in most developed nations, the U.S. health care system is not administratively controlled by a department or agency. Most other developed nations have a national health care program in which citizens are entitled to receive a defined set of health care services. To control costs, these systems use global budgets that determine total health care expenditures on a national scale and allocate resources within budgetary limits. As a consequence, both availability of services and payments to providers are subject to such budgetary constraints. The governments of these nations also control the proliferation of health care services, especially costly medical technology. System-wide controls over the allocation of resources determine the extent to which government-sponsored health care services are available to citizens. For instance, the availability of specialized services is restricted.
By contrast, the United States has a mainly private system of financing and delivery. Private financing, predominantly through employers, accounts for approximately 52% of total health care expenditures; the government finances the remaining 48% (Centers for Medicare and Medicaid, 2015). Private delivery of health care means that the majority of hospitals and physician clinics are private businesses, which are independent of the government. No central agency monitors total expenditures through global budgets or controls the availability and utilization of services. Nevertheless, federal and state governments play important roles in health care delivery. They determine public-sector expenditures and reimbursement rates for services provided to Medicare, Medicaid, and CHIP beneficiaries. The federal government also formulates standards of participation through health policy and regulation, meaning providers must comply with the standards established by the government to be certified to provide services to Medicare, Medicaid, and CHIP beneficiaries. Certification standards are regarded as minimum standards of quality in most sectors of the health care industry.
Partial Access Access means the ability of an individual to obtain health care services when needed, which is not the same as having health insurance. Americans can access health care services if they (1) have health insurance through their employers; (2) are covered under a government health care program; (3) can afford to buy insurance with their own private funds; (4) are able to pay for services privately; or (5) can obtain charity or subsidized care. Health insurance is the primary means for ensuring access. Although the uninsured can access certain types of services, they often encounter barriers to obtaining needed health care. For example, while federally supported health centers provide physician services to anyone regardless of ability to pay, such centers and free clinics are located only in certain geographic areas and provide limited specialized services. However, under U.S. law, hospital
emergency departments (EDs) are required to evaluate a patient’s condition and render medically needed services for which the hospital does not receive any direct payments unless the patient is able to pay. Therefore, even uninsured are able to obtain medical care for acute illness. While one can say that the United States does have a form of universal catastrophic health insurance, it does not guarantee the uninsured access to continual basic and routine care, commonly referred to as primary care (Altman and Reinhardt, 1996).
Countries with national health care programs provide universal coverage. However, even in these countries, access to services may be restricted because no health care system has the capacity to deliver every type of service on demand. Hence, universal access—the ability of all citizens to obtain health care when needed—remains mostly a theoretical concept.
As previously mentioned, having coverage does not necessarily equate to having access. The cost of insurance and care and availability of services have continued to present barriers to receiving health care services in a timely manner.
Imperfect Market Though the U.S. health care delivery system is largely in private hands, this system is only partially governed by free-market forces. The delivery and consumption of health care in the United States does not quite pass the basic test of a free market, so the system is best described as a quasi-market or an imperfect market.
In a free market, patients (buyers) and providers (sellers) act independently, with patients able to choose services from any provider. Providers do not collude to fix prices, and prices are not fixed by an external agency. Rather, prices are governed by the free and unencumbered interaction of the forces of supply and demand (FIGURE 1-3). Demand—the quantity of health care purchased—is
driven by the prices prevailing in the free market. Under free-market conditions, the quantity demanded will increase as the price is lowered for a given product or service. Conversely, the quantity demanded will decrease as the price increases.
FIGURE 1-3 Relationship between price, supply, and demand under free-market conditions.
Note: Under free-market conditions, there is an inverse relationship between the quantity of medical
services demanded and the price of medical services. That is, quantity demanded goes up when the
prices go down, and vice versa. In contrast, there is a direct relationship between price and the
quantity supplied by the providers of care. In other words, providers are willing to supply higher
quantities at higher prices, and vice versa. In a free market, the quantity of medical care that patients
are willing to purchase, the quantity of medical care that providers are willing to supply, and the price
reach a state of equilibrium. This equilibrium is achieved without the interference of any nonmarket
forces. It is important to keep in mind that these conditions exist only under free-market conditions,
which are not characteristic of the U.S. health care market.
At first glance, it might appear that multiple patients and providers do exist. Most patients, however, are now enrolled in either a private health plan or one or more government-sponsored programs. These plans act as intermediaries for the patients, and the enrollment of patients into health plans has the effect of shifting the power from the patients to the administrators of the plans. The
result is that the health plans—not the patients—are the real buyers in the health care services market. Private health plans, in many instances, offer their enrollees a limited choice of providers rather than an open choice.
Theoretically, prices are negotiated between the payers and providers. In practice, prices are determined by payers, such as MCOs, Medicare, and Medicaid. Because prices are set by agencies external to the market, they are not governed by the unencumbered forces of supply and demand.
For the health care market to be free, unrestrained competition must occur among providers based on price and quality. However, the consolidation of buying power in the hands of private health plans has been forcing providers to form alliances and integrated delivery systems on the supply side. In certain geographic sectors of the country, a single giant medical system has taken over as the sole provider of major health care services, restricting competition. As the overall health care system continues to move in this direction, it appears that only in large metropolitan areas will there be more than one large integrated system competing to get the business of the health plans.
A free market requires that patients have information about the appropriateness of various services to their needs. Such information is difficult to obtain because technology-driven medical care has become highly sophisticated. Knowledge about new diagnostic methods, intervention techniques, and more effective drugs fall in the domain of the professional physician, not the patient. Moreover, because medical interventions are commonly required in a state of urgency, patients have neither the skills nor the time and resources to obtain accurate information when needed. Channeling all health care needs through a primary care provider can reduce this information gap when the primary care provider acts as the patient’s advocate or agent. In recent years, consumers have been seizing some measure of control over the flow of information: The Internet is becoming a prominent source of
medical information for patients, and medical advertising is influencing consumer expectations.
In a free market, patients must directly bear the cost of services received. The purpose of insurance is to protect against the risk of unforeseen catastrophic events. Since the fundamental purpose of insurance is to reimburse major expenses when unlikely events occur, having insurance for basic and routine health care undermines the principle of insurance. When you buy home insurance to protect your property against the unlikely event of a fire, you do not anticipate the occurrence of a loss. The probability that you will suffer a loss by fire is very small. If a fire does occur and cause major damage, insurance will cover the loss, but insurance does not cover routine wear and tear on the house, such as chipped paint or a leaky faucet. However, unlike other types of insurance, health insurance generally covers basic and routine services that are predictable. Coverage for minor services, such as colds and coughs, earaches, and so forth, amounts to prepayment for such services. In this sense, health insurance has the effect of insulating patients from the full cost of health care. This situation may also create a moral hazard in that, once enrollees have purchased health insurance, they may use more health care services than if they were to pay for these services on an out-of- pocket basis.
At least two additional factors limit the ability of patients to make decisions in the health care system. First, decisions about the utilization of health care are often determined by need rather than by price-based demand. Need has been defined as the amount of medical care that medical experts believe a person should have to remain or become healthy (Feldstein, 1993). Second, the delivery of health care can result in demand creation. This follows from self- assessed need, which, coupled with moral hazard, leads to greater utilization, creating an artificial demand because prices are not taken into consideration. Practitioners who have a financial interest in additional treatments also create artificial demand (Hemenway
and Fallon, 1985). This is referred to as provider-induced demand, or supplier-induced demand. Functioning as patients’ agents, physicians exert enormous influence on the demand for health care services (Altman and Wallack, 1996). Demand creation occurs when physicians prescribe medical care beyond what is clinically necessary. This can include practices such as making more frequent follow-up appointments than necessary, prescribing excessive medical tests, or performing unnecessary surgery (Santerre and Neun, 1996).
In a free market, patients have information on the price and quality of each provider. The current system, however, has drawbacks that obstruct information-seeking efforts. Item-based pricing is one such hurdle. Surgery is a good example to illustrate item-based (also known as fee-for-service) pricing. Patients can generally obtain the fees the surgeon would charge for a particular operation. But the final bill, after the surgery has been performed, is likely to include charges for supplies, use of the hospital’s facilities, and services performed by other providers, such as anesthesiologists, nurse anesthetists, and pathologists. These providers, sometimes referred to as phantom providers, function in an adjunct capacity and bill for their services separately. Item billing for such additional services, which sometimes cannot be anticipated, makes it extremely difficult to ascertain the total price before services have actually been received. Package pricing can help overcome these drawbacks, but it has made relatively little headway for pricing medical procedures. Package pricing refers to a bundled fee for a package of related services. In the surgery example, this would mean one all-inclusive price for the surgeon’s fees, hospital facilities, supplies, diagnostics, pathology, anesthesia, and postsurgical follow-up.
Third-Party Insurers and Payers Insurance often functions as the intermediary among those who finance, deliver, and receive health care. The insurance intermediary
does not have an incentive to be the patient’s advocate on either price or quality. At best, employees can air their dissatisfactions with the plan to their employer, who has the power to discontinue the current plan and choose another company. In reality, however, employers may be reluctant to change plans if the current plan offers lower premiums than a different plan.
Multiple Payers A national health care system is sometimes also referred to as a single-payer system because there is one primary payer, the government. When delivering services, providers send the bill to a government agency that subsequently sends payments to each provider. By contrast, the United States has a multiplicity of health plans. Multiple payers often represent a billing and collection nightmare for the providers of services. Multiple payers make the system more cumbersome in several ways:
It is extremely difficult for providers to keep tabs on numerous health plans. It is challenging for providers to keep up with which services are covered under each plan and how much each plan will pay for those services. Providers must hire claims processors to bill for services and monitor receipt of payments. Billing practices are not standardized, and each payer establishes its own format. Payments can be denied for not precisely following the requirements set by each payer. Denied claims necessitate rebilling. When only partial payment is received, some health plans may allow the provider to balance bill the patient for the amount the health plan did not pay, the difference between provider charges and insurance payment. Other plans prohibit balance billing. Even when the balance billing option is available to the provider, it triggers a new cycle of billings and collection efforts. Providers must sometimes engage in lengthy collection efforts, including writing collection letters, turning delinquent accounts over
to collection agencies, and finally writing off as bad debt amounts that cannot be collected. Government programs have complex regulations for determining whether payment is made for services actually delivered. Medicare, for example, requires that each provider maintain lengthy documentation on services provided. Medicaid is known for lengthy delays in paying providers.
It is generally believed that the United States spends far more on administrative costs—costs associated with billing, collections, bad debts, and maintaining medical records—than do the national health care systems in other countries.
Power Balancing The U.S. health care system involves multiple players, not just multiple payers. The key players in the system have traditionally been physicians, administrators of health service institutions, insurance companies, large employers, and the government. Big business, labor, insurance companies, physicians, and hospitals make up the powerful and politically active special-interest groups represented before lawmakers by high-priced lobbyists. Each set of players has its own economic interests to protect. Physicians, for instance, want to maintain their incomes and have minimum interference with the way they practice medicine; institutional administrators seek to maximize reimbursement from private and public insurers; insurance companies and MCOs are interested in maintaining their share of the health insurance market; large employers want to contain the costs they incur providing health insurance to their employees; the government tries to maintain or enhance existing benefits for those covered under public insurance programs and simultaneously contain the cost of providing these benefits. The problem is that the self-interests of different players are often at odds. For example, providers seek to increase government reimbursement for services delivered to Medicare, Medicaid, and CHIP beneficiaries, but the government wants to contain cost increases. Employers dislike rising health insurance
premiums. Health plans, under pressure from the employers, may limit fees for the providers, who then resent these cuts.
The fragmented self-interests of the various players produce competing forces within the system. In an environment that is rife with motivations to protect conflicting self-interests, achieving comprehensive system-wide reform has been next to impossible, and cost containment has remained a major challenge. Consequently, the approach to health care reform in the United States has been characterized as incremental or piecemeal, and the focus of reform initiatives has been confined to health insurance coverage and payment cuts to providers rather than focusing on the better provision of health care.
Litigation Risks The United States is a litigious society. Motivated by the prospects of enormous jury awards, many Americans are quick to drag an alleged offender into a courtroom at the slightest perception of incurred harm. Private health care providers, too, have become increasingly susceptible to litigation and the risk of malpractice lawsuits is a real consideration in the practice of medicine. To protect themselves against the possibility of litigation, practitioners may engage in what is referred to as defensive medicine by prescribing additional diagnostic tests, scheduling return checkup visits, and maintaining copious documentation. Many of these additional efforts may be unnecessary, costly, and inefficient.
High Technology The United States has been the hotbed of research and innovation in new medical technology. Growth in science and technology often creates demand for new services despite shrinking resources to finance sophisticated care. People generally equate high-tech care with high-quality care. They want “the latest and the best,” especially when health insurance will pay for new treatments.
Physicians and technicians want to try the latest gadgets. Hospitals compete on the basis of having the most modern equipment and facilities. Once capital investments in these new services are made, those costs must be recouped through utilization. Legal risks for providers and health plans may also play a role in discouraging denial of new technology. Thus, several factors promote the use of costly new technology once it is developed.
Continuum of Services Medical care services are classified into three broad categories: curative (i.e., drugs, treatments, and surgeries), restorative (e.g., physical, occupational, and speech therapies), and preventive (i.e., prenatal care, mammograms, and immunizations). Health care settings are no longer confined to the hospital and the physician’s office. Additional settings, such as home health, subacute care units, and outpatient surgery centers, have emerged in response to the changing configuration of economic incentives. TABLE 1-2 describes the continuum of health care services. The health care continuum in the United States remains lopsided, with a heavier emphasis on specialized services than on preventive services, primary care, and management of chronic conditions.
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