Health care system (Health system)

Abstract

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

Medicare

  • Eligibility
  • Subdivided into 4 parts: Which parts individuals qualify for determines the extent of 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: all services covered by parts A and B, including preventive care
      • This plan allows people to enroll in a private health insurance plan.
      • Medicare pays other organizations, such as insurance companies, hospital systems, or managed care organizations, to provide care.
    • Part D: prescription drugs

Medicaid

  • 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, and procedures).
    • Incentivizes health care providers to overtreat patients because compensation is based on the quantity 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).
  • Bundled payment
    • A health care organization is compensated 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
  • 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
  • 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

Common types of 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
  • Coverage for out-of-network providers
  • High out-of-pocket payments
  • Specialist 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
  • Coverage for out-of-network providers
  • High out-of-pocket payments
  • 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
  • No coverage for out-of-network providers
  • Specialists can be seen without a referral from a primary care physician
  • Low
last updated 02/07/2019
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