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.
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
- Individuals ≥ 65 years old
- Patients with or
- Individuals with permanent disabilities irrespective of age
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, 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
- Part D: prescription drugs
- 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
- 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., , ). 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.
- 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
- 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)|| || || || |
|Preferred provider organization (PPO)|| || || || |
|Point-of-service (POS)|| || || || |
|Exclusive provider organization|| || || || |
|Accountable care organization|| || || || |