This document provides an overview of the US healthcare system and its key components. It discusses the four functional components of the system: financing, insurance, delivery of care, and payment. It outlines characteristics that differentiate the US system from other countries, including lack of universal coverage, an imperfect healthcare market, and the role of third-party payers. The document also summarizes different types of national healthcare systems used in other countries.

2. Chapter 1
An Overview of US Health Care
Delivery

3. Class Objectives
• At the end of the class, you should:
– Understand the basic nature of the U.S. health care
system
– Be able to outline the four key functional components
of the health care delivery system
– Discuss the primary characteristics of the U.S. health
care system
– Have an overview of health care systems in selected
countries
– Understand the systems model as applied to health
care delivery

4. The U.S. Health Care Delivery or
Health Services Delivery System
• Broadly Defined:
– major components of the system and processes
that enable people to receive health care.
• Restricted definition:
– the act of providing health care to patients (i.e. in
a hospital or a physician’s clinic)

5. Primary Objectives
of a Health Care System
1. To enable all citizens to receive health care
services
2. To deliver services that are cost-effective and
meet established standards of quality.

6. The U.S. Health Care System
• It’s Unique
– it’s not a system
– no universal health care financed by taxes
– no entitlement
– no other country operates like the U.S.
– critical issues related to cost, access and quality

7. The U.S. Health Care System
• The health care workforce employs over 16.4
million people
• 838,000 active MDs
• 70,480 DO’s
• 2.6 million nurses
• 5,795 hospitals
• 15,700 nursing homes
• 1,128 health centers
• 300+ medical, dental and pharmacy schools
• 1,500+ nursing programs

8. The U.S. Health Care System
• More numbers:
– 194.5 million Americans with private insurance
– 43.4 million Medicare beneficiaries
– 47.8 million Medicaid recipients
– 50.7 million (16.7%) uninsured

9. Financing and Insurance Mechanisms
• Employer-based health insurance
– (private)
• Privately-purchased health insurance
– (private)
• Government programs (public)
– State Employees Group
• employees
– Medicare
• elderly and certain disabled people
– Medicaid and CHIP
• indigent, poor (if they meet the eligibility criteria), children

10. The U.S. Health Care System
• There’s little or no:
–networking
–interrelated components
–standardization
–coordination
–cost containment as a whole
–planning, direction

11. The U.S. Health Care System
• Has:
– duplication
– overlap
– inadequacy
– inconsistency
– waste
– complexity
– inefficiency
– financial manipulation
– fragmentation

12. The U.S. Health Care System
• Leads the world in:
–medical technology
–medical training
–research
–sophisticated
• institutions
• products
• processes

13. Characteristics Of
the U.S. Health Care System
• Political climate
• Economic development
• Technological progress
• Social and cultural values
• Physical environment
• Population characteristics (demographics,
health trends)
• Global influences (see figure 1-2)

14. Ten Characteristics that Differentiate
the U.S. Health Care System
1. No central agency governs a system
2. Access is selective based on insurance
3. Health care offered under imperfect market activity
4. Third party insurers are intermediaries between finance
and delivery
5. Multiple payers are cumbersome
6. Balance of power, no domination
7. Legal risk affects practice behavior
8. New technology creates demand for its use
9. New service settings along a continuum
10. Quality is achievable

15. Ten Characteristics that Differentiate
the U.S. Health Care System
1) No Central Agency
– Most developed nations have a national health care
program where every citizen is entitled to receive a set
of service
– To control costs, use global budget to determine total
health care expenses
– Government usually controls frequency of health care
services, especially expensive medical technology use
– The U.S. has mostly private financing and delivery
– Private financing through employers at 55% and
government at 45%

16. Ten Characteristics that Differentiate
the U.S. Health Care System
1) No Central Agency
– Private health care, hospitals, physicians are independent of
government
– No one monitors total expenses through global budgets and
utilization
– U.S. does determine public-sector expenses and
reimbursement rates for Medicare and Medicaid
– Government sets standards of participation through policy
and regulations
– providers must comply with standards to be certified to
provide Medicaid & Medicare patients
– regarded as minimum standards of quality

17. 2) Partial access
– Universal access: Health care is available to all
citizens
– Access: the ability to obtain health care when
needed
– In U.S., access restricted to those who:
a) have health insurance through an employer
b) are covered under a government health care plan
c) can afford to buy insurance out of pocket
d) can pay at time of service privately
– Health insurance helps ensure access
Ten Characteristics that Differentiate
the U.S. Health Care System

18. 2) Partial access
– Those unable to pay wait until a health problem
arises then receive health care at the emergency
room
• hospital does not receive payment
• a form of catastrophic health care insurance?
– Primary Care: basic and routine care
– Lack of access to prim care a big reason for U.S.’
lag in population health (i.e. infant mortality, life
expectancy)
Ten Characteristics that Differentiate
the U.S. Health Care System

19. 3) Imperfect Market
–In national health care, economic markets
do not exist
–Private health care consolidating, forming
alliances and integrating delivery system
• networks of health care organizations
Ten Characteristics that Differentiate
the U.S. Health Care System

20. 3) Imperfect Market (cont’d)
– U.S. has a quasi-market where health care is
partially managed by free markets
• patients (buyers) and providers (sellers) act
independently
• prices set by interaction of supply and demand
• unrestrained competition on basis of price and quality
• patients must have info of availability of different services
(technology too complicated, skills too advanced)
• patients have info on price and quality on each provider
• patients must bear cost of services received
• patients make decisions about the purchase of health
care services
Ten Characteristics that Differentiate
the U.S. Health Care System

21. Ten Characteristics that Differentiate
the U.S. Health Care System
3) Imperfect Market (cont’d)
–U.S. has a quasi-market where health
care is partially managed by free
markets
• patients have info on price and quality on
each provider
• patients must bear cost of services received
• patients make decisions about the purchase
of health care services

22. 3) Imperfect Market (cont’d)
–Item pricing
• obtain fees charged for service (surgeon’s price)
• services can’t be determined prior to procedure
–Package pricing
• bundled fee for a group of related services
–Capitation
• all health care services include one set fee per
person, more all-encompassing
Ten Characteristics that Differentiate
the U.S. Health Care System

23. • Phantom providers
– bill for services separately
• anesthesiology, pathologist, supplies, hospital facility
use
• Supplier/provider-induced demand
– Physicians have influence on creating demand for
their financial benefit
– Physicians receive care beyond what is necessary
• (i.e. follow-up visits, tests, unnecessary surgery)
Ten Characteristics that Differentiate
the U.S. Health Care System

24. 4) Third-Party Insurers and Payers
– Patient is first party
– Provider is second party
– Intermediary is third party
• a wall of separation between financing and
delivery
• quality of care is a secondary concern
Ten Characteristics that Differentiate
the U.S. Health Care System

25. 5) Multiple Payers
–The U.S. has many payers, company can
choose different plans
• a billing and collection nightmare
• system becomes more cumbersome
–Single-payer system
• a national health care system that is usually the
primary payer-government
Ten Characteristics that Differentiate
the U.S. Health Care System

26. 6) Power Balancing
–Multiple Players
• Physicians, administration, insurance,
government, employers
–Fragmented self-interests
• prevents an entity from dominating
Ten Characteristics that Differentiate
the U.S. Health Care System

27. 7) Legal Risks
– The U.S. is a litigious society
– Practioners engage in defensive medicine
• prescribe diagnostic tests, return checkups,
documentation
8) High Technology
– The U.S., a hotbed of research and innovations
• Creates demand for new services despite high costs
• With capital investments, must have utilization
• Legal risks for providers denying new technology
Ten Characteristics that Differentiate
the U.S. Health Care System

28. 9) Continuum of Services
– Medical services has three broad categories:
• curative
• restorative
• preventative
– Health care is not confined to the hospital (See
table 1-2)
10) Quest for Quality
– Continuous Quality Improvement
– Higher expectations
– Quality standards with compliance
Ten Characteristics that Differentiate
the U.S. Health Care System

29. Government’s Roles in the U.S. Health
Service System
• Major financier of health care delivery
• Determine reimbursement rates to providers
who render Medicare / Medicaid services
• Regulates through licensing personnel and
health care establishments
• Health policy

30. The Blended Public and Private U.S.
Health Care System
• The results:
– multi financial arrangements
– many insurance company with different risk
mechanisms
– many payers with different determinates
– many consulting firms offering:
• planning,
• cost containment,
• quality,
• minimizing resources

31. The Quad-Function Model
• Functional components of health care
delivery:
1) Financing
• to buy insurance or to pay for health care services
consumed usually employer-based
2) Insurance
• to protect against catastrophic risk
• determine the package the individual is eligible to
receive

32. The Quad-Function Model
• Functional components of health care delivery:
3) delivery
• Provider: any entity that delivers health care services
and receives insurance payment directly for those
services
4) payment
• Reimbursement: the determination of how much to
pay for a service
• Funds come from premiums paid to insurance
company
• Patient usually pays co-pay, and the insurance company
pays remainder
• There’s some overlap dependent on private, government-

33. The Quad-Function Model
• Functional components of health care delivery:
4) payment
• Reimbursement: the determination of how much
to pay for a service
• Funds come from premiums paid to insurance
company
• Patient usually pays co-pay, and the insurance
company pays remainder
• There’s some overlap dependent on private,
government-run, insurance or managed care

34. Major Players in the U.S. Health
Service System
• Who does these functions?
– Physicians
– Administrators
– Insurance executives
– Large employers
– Government
– See figure 1-1

35. A Disenfranchised Segment
• In the U.S., insurance is employer-based
– the unemployed usually have no insurance
• Even if employed, employees do not have
insurance because:
1) Employers not mandated to offer insurance
• premium cost sharing
– rarely paid at 100% if at all
– benefit: group rate or availability of insurance
2) Participation in health insurance is voluntary

36. National and Social Insurance and
Systems
• National Health Insurance (NHI)
– Government finances health care through taxes
– Care provided by private providers
• National Health System
– Financing a tax supported NHI
– Government manages the infrastructure for
delivery
– Government operates medical institutions
• Providers are government employees or
organized

37. National and Social Insurance and
Systems
• Socialized Health Insurance
–Financed through government-mandated
contributions by employers and employees
–Health delivered by private providers
–Insurance and payment closely integrated
–Government exercises overall control

38. Cost Control in
National Health Care Programs
• Global budgets
– determine the national health care expenditures
• Health care resources are allocated in the
budgetary:
– availability and dissemination of service and
technology
– reimbursement levels

39. National Health Care Programs
• Theoretically, no one is uninsured
• Universal access:
– is managed by the government
– provides a defined set of health care services to all
citizens

40. National Health Insurance (NHI)
• Government finances health care through taxes, but
rendered by private providers
• National health care program (i.e., Canada) Requires
government consolidation of financial, insurance and
payment
• Government manages the infrastructure
– medical institutions are operated by government
– workers are government workers or organized (i.e.
physicians, nurses…)
• Tax-supported
• Great Britain

41. Socialized Health Insurance
• Germany, Israel, and Japan:
• Financed through government-mandated
contributions by employers and employees
• Health care delivered by private providers
• Financed through government-mandated
contributions by employers and employees
• Health care delivered by private providers

42. Socialized Health Insurance
• Private, not-for-profit insurance companies
–called sickness funds
–collect and pay physicians and hospitals
• Insurance and payment are closely integrated
• Financing integrated with insurance and
payment
• Government has overall control
–See Table 1-3

43. Implications for Health Services
Managers
• Understand changes/shifts in the system
• Take advantage of new market opportunities
and minimize threats
• Evaluate need for training
• Understand the impact of new regulations

44. Implications for Health Services
Managers
• Position the organization
– know where you fit in the macro environment
• Handle Threats & Opportunities
– be proactive with changes in reimbursement,
insurance, delivery
• Evaluate Implications
– Look at policy changes

45. Implications for Health Services
Managers
• Plan
– strategic thinking re: services to be added or
discontinued
• Capture New Markets
– know emerging trends before market is
overcrowded
• Comply with Regulations
• Follow your mission

46. Systems Framework
• See Figure 1-4
–System Foundations
–System Resources
–System Processes
–System Outcomes
–System Outlook

47. ACA Takeaway
• Goal: increase access to health care and make
it more affordable
• All US citizens and legal residents are required
to have health insurance or pay a fine.
• Avenues for covering the uninsured: Medicaid
expansion and government-run exchanges.
• Insurance companies are required to include
coverage for a variety of health care Services.