Health care in the United States

Health care in the United States is provided by many separate legal entities. The U.S. spends more on health care, both as a proportion of gross domestic product (GDP) and on a per-capita basis, than any other nation in the world. Current estimates put U.S. health care spending at approximately 15% of GDP, the world's highest.^[1] The health share of GDP is expected to continue its historical upward trend, reaching 19.6 percent of GDP by 2016.^[2]

The U.S. is one of the world's few industrialized nations that does not guarantee access to health care.^[3] In the United States, around 84% of citizens have health insurance, either through their employer (60%), purchased individually (9%), or provided by government programs (27%; there is some overlap in these figures).^[4] Certain publicly-funded health care programs help to provide for the elderly, disabled, children, veterans, and the poor, and federal law ensures public access to emergency services regardless of ability to pay. U.S. government programs accounted for over 45% of health care expenditures, making the U.S. government the largest insurer in the nation. Per capita spending on health care by the U.S. government placed it among the top ten highest spenders among United Nations member countries in 2004.^[5] When public and private spending are added together, the U.S. spends more per capita than any other nation.^[6] Americans without health insurance coverage at some time during 2006 totalled about 16% of the population, or 47 million people.^[4] Health insurance is expensive, and medical bills are overwhelmingly the most common reason for personal bankruptcy in the United States.^[7]

The debate about U.S. health care concerns questions of access, efficiency, and quality purchased by the high sums spent. The World Health Organization (WHO) in 2000 ranked the U.S. health care system first in both responsiveness and expenditure, but 37th in overall performance and 72nd by overall level of health (among 191 member nations included in the study).^[8][9] The WHO study has been criticized by conservative commentators because "fairness in financial contribution" was used as an assessment factor, marking down countries with high per-capita private or fee-paying health treatment.^[10] The CIA World Factbook ranked the United States 41st in the world for lowest infant mortality rate^[11] and 45th for highest total life expectancy.^[12] The National Health Interview Survey, released annually by the Centers for Disease Control's National Center for Health Statistics reported that approximately 66% of survey respondents said they were in "excellent" or "very good" health in 2006.^[13]

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Health care providers

American health care is provided by a diverse array of individuals and legal entities. Individuals offer inpatient and outpatient services for commercial, charitable, or governmental entities. The healthcare system is not fully-publicly funded but is a mix of public and private funding. In 2004, private insurance paid for 36% of personal health expenditures, private out-of-pocket payments were 15%, while federal, state, and local governments paid 44%.^[14]

Services

"Ambulatory care" refers to health care delivered without a stay in the hospital; most health care in the United States occurs in the outpatient setting. "Home health care services" are generally nursing enterprises, but are usually ordered by physicians. Private sector outpatient medical care is provided by personal primary care physicians (specialists in internal medicine, family medicine, and pediatric medicine), subspecialty physicians (gastroenterologists, cardiologists, or pediatric endocrinologists are examples) or non-physicians (including nurse practitioners and physician assistants). In 1996, concierge medicine emerged, where enhanced care and services are provided by primary care physicians for a retainer fee.

Facilities

There are for-profit hospitals, which are usually operated by large private corporations and there are nonprofit hospitals, which may be operated by county governments, state governments, religious orders, or independent nonprofit organizations. Hospitals provide some outpatient care in their emergency rooms and specialty clinics, but primarily they exist to provide inpatient care. Hospital emergency departments and urgent care centers are sources of sporadic problem-focused care. "Surgicenters" are examples of specialty clinics. Hospice services for the terminally ill who are expected to live six months or less are most commonly subsidized by charities and government. Prenatal, family planning, and "dysplasia" clinics are government-funded obstetric and gynecologic specialty clinics respectively, and are usually staffed by nurse practitioners.

Medical products, research and development

Companies provide medical products such as pharmaceuticals and medical devices. The nation spends a substantial amount on medical research, mostly privately funded. As of 2000, non-profit private organizations (such as the Howard Hughes Medical Institute) funded 7%, private industry funded 57%, and the tax-funded National Institutes of Health supported 36% of medical research in the U.S.^[15] However, by 2003, the NIH provided only 28% of medical research funding; finance from private industry increased 102% from 1994 to 2003.^[16] Research and development for applications is primarily done in commercial labs, while the government and universities fund the majority of general research.^{[citation needed]} Much of this basic research is funded or conducted by governmental research institutes such as the NIH and NIMH.

Health care payment

Most Americans (59.7%), receive their health insurance coverage through an employer, although this percentage is declining. Costs for employer-paid health insurance are rising rapidly: since 2001, premiums for family coverage have increased 78%, while wages have risen 19% and inflation has risen 17%, according to a 2007 study by the Kaiser Family Foundation.^[17] Workers with employer-sponsored insurance also contribute; in 2007, the average percentage of premium paid by covered workers is 16% for single coverage and 28% for family coverage.^[17] In addition to their premium contributions, most covered workers face additional payments when they use health care services, in the form of deductibles and copayments.

The government subsidizes employer-paid health care by exempting employer contributions from taxation as income. The value of this tax subsidy is an estimated $150 billion a year.^[18]

About 9% of the population purchases health care insurance directly from the market.^[4] Government sources cover 27% of the population (80.3 million).^[4] In 2006, 47 million people in the U.S. (15.8% of the population) were without health insurance for at least part of the year. Among the uninsured population, nearly 38 million were employment-age adults (ages 18 to 64), and more than 27 million worked at least part time. About 37% of the uninsured live in households with incomes over $50,000.^[4] According to the Census Bureau, 36.7 million of the uninsured are legal U.S citizens. Another 10.2 million are non-citizens, but the Census Bureau does not distinguish in its estimate between legal non-citizens and illegal immigrants.^[4] It has been estimated that nearly one fifth of the uninsured population is able to afford insurance, almost one quarter is eligible for public coverage, and the remaining 56% need financial assistance (8.9% of all Americans).^[19]

A 2003 study in Health Affairs estimated that uninsured people in the U.S. received approximately $35 billion in uncompensated care in 2001.^[20] The study noted that this amount per capita was half what the average insured person received. The study found that various levels of government finance most uncompensated care, spending about $30.6 billion on payments and programs to serve the uninsured and covering as much as 80–85 percent of uncompensated care costs through grants and other direct payments, tax appropriations, and Medicare and Medicaid payment add-ons. Most of this money comes from the federal government, followed by state and local tax appropriations for hospitals. Another study by the same authors in the same year estimated the additional annual cost of covering the uninsured (in 2001 dollars) at $34 billion (for public coverage) and $69 billion (for private coverage). These estimates represent an increase in total health care spending of 3–6 percent and would raise health care’s share of GDP by less than one percentage point, the study concluded.^[21] Another study published in the same journal in 2004 estimated that the value of health forgone each year because of uninsurance was $65–$130 billion and concluded that this figure constituted "a lower-bound estimate of economic losses resulting from the present level of uninsurance nationally."^[22]

Commercial

The "fee-for-service" business model is the default legal situation where the patient must pay out-of-pocket in full for all services rendered, similar to other service industries.^[23]

Insurance payments are a form of cost-sharing and risk management where each individual or their employer pays predictable monthly premiums. This cost-spreading mechanism often picks up much of the cost of health care, but individuals must often pay up-front a minimum part of the total cost (a ‘’deductible’’), or a small part of the cost of every single procedure (a copayment).

Managed care includes preferred provider organizations, in which insurers negotiate discounted rates with contracted providers, health maintenance organizations such as Kaiser Permanente, which run their own hospital and clinic networks to control costs, and a few employers who employ an in-house physician or even operate their own outpatient clinics. Managed care is controversial, because cost control requires that treatments be authorized by a third party, intervening between doctors and their patients. Managed care frequently denies treatment options considered too costly for their benefits. Managed care is a form of non-price "rationing" (as distinguished from price rationing); this explicit rationing is frequently criticized as one of the drawbacks of some national health care systems.

Public

Many individuals not covered by private insurance are covered by government insurance programs such as Medicare and Medicaid, various state and local programs for the poor, and TRICARE and the Veterans Administration, which provide care to veterans, their families, and survivors through medical centers and clinics.^[24][25] In 2006, Medicaid provided health care coverage for 38.3 million low-income Americans and Medicare provided health care coverage for 40.3 million elderly and disabled Americans.^[4] One study estimates that about 25% of the country's uninsured, or roughly another 11 million people, are eligible for government health care programs but unenrolled. However, extending coverage to all who are eligible remains a fiscal challenge.^[26] It has been reported that the number of physicians accepting Medicaid has decreased in recent years due to relatively high administrative costs and low reimbursements.^[27] In 1997, the federal government also created the State Children's Health Insurance Program (SCHIP), a joint federal-state program to insure children in families that earn too much to qualify for Medicaid but cannot afford health insurance.^[28] SCHIP covered 6.6 million children in 2006,^[29] but the program is already facing funding shortfalls in many states.^[30] The government has also mandated access to emergency care regardless of insurance status and ability to pay through the Emergency Medical Treatment and Labor Act (EMTALA), passed in 1986,^[31] but EMTALA is an unfunded mandate.^[32]

Role of government in health care market

The cost impact of a mixed public-private system is subject to debate. Free-market advocates point out that there is direct correlation between government's health care spending and intervention in the health care market and increases in health care costs. Government intervention contributes to a "dysfunctional system of third-party payments" that removes the patient as a major participant in the financial and medical choices that affect costs.^[33] Increased utilization is indeed the primary driver of rising health care costs in the U.S., according to a recent study by PriceWaterhouseCoopers.^[34] The study cites numerous causes of increased utilization, including rising consumer demand, new treatments, more intensive diagnostic testing, lifestyle factors, the movement to broader-access plans, and higher-priced technologies.^[34] The study also mentions cost-shifting from government programs to private payers. Low reimbursement rates for Medicare and Medicaid have increased cost-shifting pressures on hospitals and doctors, who charge higher rates for the same services to private payers, which eventually affects health insurance rates.^[35]

As an example of how government intervention has had unintended consequences, in 1973, the federal government passed the Health Maintenance Organization Act , which heavily subsidized the HMO business model — a model that was in decline prior to such legislative intervention. The law was intended to create market incentives that would lower health care costs, but HMOs have never achieved their cost-reduction potential.^[36] Piecemeal market-based reform efforts are complex. One study evaluating current popular market-based reform policy packages concluded that if market-oriented reforms are not implemented on a systematic basis with appropriate safeguards, they have the potential to cause more problems than they solve.^[37]

Health care regulation and oversight

There are government institutes such as the Centers for Disease Control and Prevention that identify threats to public health. In addition there are regulatory bodies such as the FDA that identify and approve drugs for medical use and sale. Many health care organizations also voluntarily submit to inspection and certification by the Joint Commission on Accreditation of Hospital Organizations, JCAHO.

States regulate the content of health insurance policies and often require coverage of specific types of medical services or health care providers.^[38] State mandates generally do not apply to the health plans offered by large employers, due to the pre-emption clause of the Employee Retirement Income Security Act.

System inefficiencies and inequities

Inefficiencies

Delays in seeking care and increased use of emergency care

Uninsured Americans are less likely to have regular health care and use preventive services. They are more likely to delay seeking care, resulting in more medical crises, which are more expensive than ongoing treatment for such conditions as diabetes and high blood pressure. A 2007 study published in JAMA concluded that uninsured people were less likely than the insured to receive any medical care after an accidental injury or the onset of a new chronic condition. The uninsured with an injury were also twice as likely as those with insurance to have received none of the recommended follow-up care, and a similar pattern held for those with a new chronic condition.^[39] Uninsured patients are twice as likely to visit hospital emergency rooms as those with insurance; burdening a system meant for true emergencies with less-urgent care needs.^[40]

Shared costs of the uninsured

The costs of treating the uninsured must often be absorbed by providers as free care, passed on to the insured via cost shifting and higher health insurance premiums, or paid by taxpayers through higher taxes.^[41]

Administrative costs

The health care system in the U.S. has a vast number of players — there are hundreds, if not thousands, of insurance companies in the U.S.^[42][18] This system has considerable administrative overhead, far greater than in nationalized, single-payer systems, such as Canada's. An oft-cited study by Harvard Medical School and the Canadian Institute for Health Information determined that some 31% of U.S. health care dollars, or more than $1,000 per person per year, went to health care administrative costs, nearly double the administrative overhead in Canada, on a percentage basis.^[43]

According to the insurance industry group America's Health Insurance Plans, administrative costs for private health insurance plans have averaged approximately 12 percent of premiums over the last 40 years. There has been a shift in the type and distribution of administrative expenses over that period. The cost of adjudicating claims has fallen, while insurers are spending more on other administrative activities, such as medical management, nurse help lines, and negotiating discounted fees with health care providers.^[44]

A 2003 study published by the Blue Cross Blue Shield Association also found that health insurer administrative costs were approximately 11% to 12% of premiums, with Blue Cross and Blue Shield plans reporting slightly lower administrative costs, on average, than commercial insurers.^[45] For the period 1998 through 2003, average insurer administrative costs declined from 12.9% to 11.6% of premiums. The largest increases in administrative costs were in customer service and information technology, and the largest decreases were in provider services and contracting and in general administration.^[46]

Inequities

Coverage gaps

Enrollment rules in private and governmental programs result in millions of Americans going without health care coverage, including children. The most recent data available from the U.S. Census Bureau indicates that 47 million Americans (about 15.8% of the total population) had no health insurance coverage at some point during 2006.^[4] Most uninsured Americans are working-class persons whose employers do not provide health insurance, and who earn too much money to qualify for one of the local or state insurance programs for the poor, but do not earn enough to cover the cost of enrollment in a health insurance plan designed for individuals. Some states (like California) do offer limited insurance coverage for working-class children, but not for adults; other states do not offer such coverage at all, and so, both parent and child are caught in the notorious coverage "gap." Although EMTALA [1] certainly keeps alive many working-class people who are badly injured, the 1986 law neither requires the provision of preventive or rehabilitative care, nor subsidizes such care, and it certainly does nothing about the difficulties in the American mental health system.

Coverage gaps also occur among the insured population — one study by the Commonwealth Fund published in Health Affairs estimated that 16 million U.S. adults were underinsured in 2003. The study defined underinsurance as characterized by at least one of the following conditions: annual out-of-pocket medical expenses totaling 10% or more of income, or 5 percent or more among adults with incomes below 200% of the federal poverty level; or health plan deductibles equaling or exceeding 5% of income. The underinsured were significantly more likely than those with adequate insurance to forgo health care, report financial stress because of medical bills, and experience coverage gaps for such items as prescription drugs. The study found that underinsurance disproportionately affects those with lower incomes — 73% of the underinsured in the study population had annual incomes below 200% of the federal poverty level.^[47]

Coverage gaps and affordability also surfaced in a 2007 international comparison by the Commonwealth Fund. Among adults surveyed in the U.S., 37% reported that they had foregone needed medical care in the previous year because of cost; either skipping medications, avoiding seeing a doctor when sick, or avoiding other recommended care. The rate was even higher — 42% — among those with chronic conditions. The study reported that these rates were well above those found in the other six countries surveyed: Australia, Canada, Germany, the Netherlands, New Zealand, and the UK.^[48] The study also found that 19% of U.S. adults surveyed reported serious problems paying medical bills, more than double the rate in the next highest country.

Medical underwriting and the uninsurable

In most states in the U.S., people seeking to purchase health insurance directly must undergo medical underwriting. Insurance companies seeking to mitigate the problem of adverse selection and manage their risk pools screen applicants for pre-existing conditions. Insurers may reject some applicants or quote increased rates for those with pre-existing conditions. Diseases that can make an individual uninsurable include serious conditions, such as arthritis, cancer, and heart disease, but also such common ailments as acne, being 20 pounds over or under weight, and old sports injuries.^[49]

Proponents of medical underwriting argue that it ensures that individual health insurance premiums are kept as low as possible.^[50] Critics of medical underwriting believe that it unfairly prevents people with relatively minor and treatable pre-existing conditions from obtaining health insurance.^[51]

One large industry survey found that 13 percent of applicants for individual health insurance who went through medical underwriting were denied coverage in 2004. Declination rates increased significantly with age, rising from 5 percent for those under 18 to just under one-third for those aged 60 to 64.^[52] Among those who were offered coverage, the study found that 76% received offers at standard premium rates, and 22% were offered higher rates.^[53] The frequency of increased premiums also increased with age, so for applicants over 40, roughly half were affected by medical underwriting, either in the form of denial or increased premiums. In contrast, almost 90% of applicants in their 20s were offered coverage, and three-quarters of those were offered standard rates. Seventy percent of applicants age 60-64 were offered coverage, but almost half the time (40%) it was at an increased premium. The study did not address how many applicants who were offered coverage at increased rates chose to decline the policy. A study conducted by the Commonwealth Fund in 2001 found that, among those aged 19 to 64 who sought individual health insurance during the previous three years, the majority found it unaffordable, and less than a third ended up purchasing insurance. However, this study did not distinguish between consumers who were quoted increased rates due to medical underwriting and those who qualified for standard or preferred premiums.^[54] Some states have outlawed medical underwriting as a prerequisite for individually purchased health coverage.^[55] These states tend to have the highest premiums for individual health insurance.^[56]

Health disparities among minorities

Main article: Health disparities

In the United States, health disparities are well documented in minority populations such as African Americans, Native Americans, Asian Americans, and Hispanics.^[57] When compared to whites, these minority groups have higher incidence of chronic diseases, higher mortality, and poorer health outcomes. Among the disease-specific examples of racial and ethnic disparities in the United States is the cancer incidence rate among African Americans, which is 25% higher than among whites.^[58] In addition, adult African Americans and Hispanics have approximately twice the risk as whites of developing diabetes. Minorities also have higher rates of cardiovascular disease, HIV/AIDS, and infant mortality than whites.^[58]

Racism and health

Main article: Race and health

Individual and institutional racism, along with the stigma of inferiority, can adversely affect health for minorites. Racism can also directly affect health in multiple ways. Residence in poor neighborhoods, racial bias in medical care, the stress of experiences of discrimination and the acceptance of the societal stigma of inferiority can have deleterious consequences for health.^[59]

There is a great deal of research into inequalities in health care. In some cases these inequalities are a result of income and a lack of health insurance a barrier to receiving services.^[60] In other cases inequalities in health care reflect a systemic bias in the way medical procedures and treatments are prescribed for different ethnic groups. Raj Bhopal writes that the history of racism in science and medicine shows that people and institutions behave according to the ethos of their times.^[61] Nancy Krieger wrote that racism underlies unexplained inequities in health care, including treatment for heart disease,^[62] renal failure,^[63] bladder cancer,^[64] and pneumonia.^[65] Raj Bhopal writes that these inequalities have been documented in numerous studies. The consistent and repeated findings were that black Americans received less health care than white Americans —particularly when the care involved expensive new technology. ^[66]

Regulatory inefficiencies and inequities

Healthcare regulatory costs

The healthcare industry is likely the most heavily regulated industry in the United States.^[67] A Cato Institute study suggests that this regulation provides benefits in the amount of $170 billion but costs the public up to $340 billion.^[67] The study found that the majority of the cost differential arises from medical malpractice, FDA regulations, and facilities regulations. Part of the cost arises from regulatory requirements that prevent technicians without medical degrees from performing treatment and diagnostic procedures that carry little risk.^[68]

Emergency Medical Treatment and Active Labor Act (EMTALA)

Main article: Emergency Medical Treatment and Active Labor Act

EMTALA, enacted by the federal government in 1986, requires that hospital emergency departments treat emergency conditions of all patients regardless of their ability to pay and is considered a critical element in the "safety net" for the uninsured. However, the federal law established no direct payment mechanism for such care. Indirect payments and reimbursements through federal and state government programs have never fully compensated public and private hospitals for the full cost of care mandated by EMTALA. In fact, more than half of all emergency care in the U.S. now goes uncompensated.^[69] According to some analyses, EMTALA is an unfunded mandate that has contributed to financial pressures on hospitals in the last 20 years, causing them to consolidate and close facilities, and contributing to emergency room overcrowding. According to the Institute of Medicine, between 1993 and 2003, emergency room visits in the U.S. grew by 26 percent, while in the same period, the number of emergency departments declined by 425.^[70] Hospitals attempt to bill uninsured patients directly under the fee-for-service model, but most such people cannot pay their hospital bills, and escape into bankruptcy when hospitals seek legal process against them.

Mentally ill patients present a unique challenge for emergency departments and hospitals. In accordance with EMTALA, mentally ill patients who enter emergency rooms are evaluated for emergency medical conditions. Once mentally ill patients are medically stable, regional mental health agencies are contacted to evaluate them. Patients are evaluated as to whether they are a danger to themselves or others. Those meeting this criterion are admitted to a mental health facility to be further evaluated by a psychiatrist. Typically, mentally ill patients can be held for up to 72 hours, after which a court order is required. Since the late 1970s, the community-based care model has been encouraged within the U.S. rather than institutionalization.^{[citation needed]}

Political issues

Prescription drug coverage

During the 1990s, the price of prescription drugs became a major issue in American politics as the prices of many new drugs increased exponentially, and many citizens discovered that neither the government nor their insurer would cover the cost of such drugs. In absolute currency, the U.S. spends the most on pharmaceuticals per capita in the world. However, national expenditures on pharmaceuticals accounted for only 12.9% of total healthcare costs, compared to an OECD average of 17.7% (2003 figures).^[71] Some 25% of out-of-pocket spending by individuals is for prescription drugs.^[72]

The U.S. government has taken the position (through the Office of the United States Trade Representative) that U.S. drug prices are rising because U.S. consumers are effectively subsidizing costs which drug companies cannot recover from consumers anywhere else (because many other countries use their bulk-purchasing power to aggressively negotiate drug prices).^{[citation needed]} The U.S. position is that the governments of such countries should either deregulate their markets or directly remit the difference (between what the companies would earn in an open market versus what they are earning now) to drug companies or to the U.S. government. In turn, those companies would be able to lower prices for U.S. consumers. Currently, the U.S., as a purchaser of pharmaceuticals, negotiates some drug prices but is forbidden by law from negotiating drug prices for the Medicare program.^{[citation needed]} Approximately one in five drugs that begin testing make it through the full approval process.^[73]

Health care debate

Main articles: Universal health care, Health care reform, Health policy analysis

The United States is the only wealthy, industrialized nation that does not ensure universal coverage.^[3] There is currently an ongoing debate on the need to achieve universal coverage as well as the best methods for improving the U.S. health care system.

See also

• Health insurance
• America’s Health Insurance Plans
• School health services
• Canadian and American health care systems compared
• Health care in the United Kingdom
• Health care industry
• Health care systems
• Sicko
• Medicare (United States)
• National Association of Insurance Commissioners

References