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Health care system

Last updated: November 30, 2020

Summary

The US health care system consists of a multitude of subsystems with significant variation between states. There is no universal health care coverage, and a significant number of individuals do not have health insurance. Health insurance can be funded by the state (e.g., Medicare), employers, individuals, or a combination thereof.

Health insurance funding and payment models

Government-funded health insurance

  • Definition: federal social healthcare programs enacted with the revisions of the Social Security Act to provide health insurance to specific groups of people

Medicare [1]

  • Eligibility
  • Parts: The two main coverage options are Original Medicare (part A and part B) and Medicare Advantage (part C). Individuals also have the option of adding part D to their main coverage.
    • Part A: hospital care, hospice care for terminal patients, skilled nursing facility care (if services are needed daily after a minimum 3-day stay in a hospital)
    • Part B: doctor’s fees, emergency department visits, diagnostic tests, rehabilitation
    • Part C (Medicare Advantage Plan): all services covered by parts A and B, plus a private insurance plan
      • “All in one” plan that allows people to enroll in a private health insurance plan approved by Medicare
      • Medicare pays other organizations, such as insurance companies, hospital systems, or managed care organizations, to provide care.
    • Part D: prescription drugs

Medicaid [2]

  • Funds: jointly funded by the state and federal governments
  • Eligibility: individuals with low income
  • Coverage: hospital care, laboratory tests, diagnostic tests (such as x-rays), doctors' visits, skilled nursing care, vaccinations, home health care

Children's health insurance program (CHIP)

  • Eligibility: uninsured children of families with low income, but not low enough to qualify for Medicaid

Private health insurance

  • Used by more than half of the American population
  • It can be employer-sponsored (most common) , college-sponsored, or purchased individually.

Health care payment models

  • Fee-for-service
    • Health care providers are compensated for each individual service provided (e.g., individual laboratory tests, imaging studies, procedures).
    • Incentivizes health care providers to overtreat patients because compensation is based on the number of services provided
    • Associated with high overall health care costs
    • A fixed payment schedule with discounted prices can be negotiated between health care providers and payers (i.e., discounted fee-for-service).
      • A health care organization is compensated with a fixed amount for all services provided for a clinically-defined episode of care; (e.g., hip replacement, cholecystectomy). Payment is then distributed to the health care providers.
      • Incentivizes health care providers to deliver efficient care (e.g., health care providers avoid unnecessary procedures)
      • Carries the risk that patients will be undertreated because compensation does not rely on the quantity or quality of services provided for each clinically-defined episode of care (e.g., physicians may be pressured to prematurely discharge patients from the hospital because the compensation received for each admission is unaffected by an early discharge.
  • Global payment
    • Health care providers are compensated with a single payment for all the services included in a single episode of care.
    • Often used for nonurgent surgery, with the coverage extended to all the pre- and postoperative visits
  • Capitation
    • Health care providers are compensated a fixed amount per patient during each payment period, regardless of the actual amount of health care utilized by the patient.
    • Incentivizes health care providers to deliver efficient care (e.g., cost-effective preventive health care to avoid larger downstream costs)
    • Carries the risk that patients will be undertreated because compensation is not based on the quantity or quality of services provided
    • Often used by health maintenance organizations (HMOs)
  • Per diem payment
    • A health care organization is compensated a fixed amount per patient per day for a specific care service provided, regardless of the actual costs involved in providing services for any particular patient.
    • Often used for reimbursement of inpatient services: A hospital and payer can negotiate a fixed per diem rate for most routine inpatient services (e.g., common medical and surgical conditions) based on the average daily cost of admission.

Common types of health insurance plans

Health insurance plans
Common health insurance plans Health care delivered through Coverage Specialist care Member costs
Health maintenance organization (HMO)
  • Network of doctors, specialists, and hospitals
  • Primary care physician is the first contact person.
  • No coverage for out-of-network providers, except emergency visits that are covered at in-network rates
  • Referral needed from primary care physician to see a specialist
  • Women have direct access to obstetric and gynecological care.
  • Low
Preferred provider organization (PPO)
  • Network of doctors, specialists, and hospitals
  • No primary care physician needed
  • Specialists can be seen without a referral from a primary care physician.
  • High
Point-of-service (POS)
  • Network of doctors, specialists, and hospitals
  • Primary care physician is the first contact person.
  • Referral needed from primary care physician to see a specialist
  • Moderate
Exclusive provider organization
  • Network of doctors, specialists, and hospitals
  • No primary care physician needed
  • Specialists can be seen without a referral from a primary care physician.
  • Low
Accountable care organization
  • Coordinated network of doctors, specialists, and hospitals that are voluntarily enrolled
  • Enrollment of specialists on a voluntary basis
  • Varies

References

  1. Medicare - The official US Government site. https://www.medicare.gov/. . Accessed: August 23, 2020.
  2. Medicaid - The Centers for Medicare & Medicaid Services.. https://www.medicaid.gov/. . Accessed: August 23, 2020.