The U.S. health care system is a complex mix of contradictions. We are the envy of the rest of the world for pharmaceutical research and innovation, availability of advanced diagnostic imaging, and world-renowned specialists at academic medical centers. Yet we remain the only industrialized country without guaranteed access to health care for its citizens, with 10.4% of Americans uninsured. We spend twice as much as other economically advantaged nations and have worse health outcomes. What are the historic origins of this situation?
Health care was a cottage industry from revolutionary times to the turn of the 20th century, when the Flexner report denounced many medical schools as for-profit diploma mills. With the shuttering of these proprietary schools, medicine began to evolve to a science, with resulting specialization of physicians. While Germany and other European countries created national systems of health insurance, the United States relied mostly on fee for service, although Henry Kaiser in California and Baylor University in Dallas created mutual aid societies to assure care for patients with illnesses and injuries.
After World War II, wage freezes caused industry to seek other ways to recruit workers. Health insurance was a desirable benefit, and employer-based health insurance quickly became widespread. This had a profound and lasting effect on the U.S. health care system, tying the availability of health care coverage to employment.
In 1965, the passage of Medicare for seniors and disabled individuals and Medicaid coverage for poor individuals was a watershed event that expanded health insurance and put pressure on the system to improve access to health care. It is no coincidence that physician assistants and nurse practitioners were born that same year.
The Health Maintenance Organization (HMO) Act was passed in 1973, sponsored by Senator Edward Kennedy of Massachusetts and signed into law by President Richard Nixon. It was a move to try to control health care costs while providing a more comprehensive package of benefits for members of the HMO. The concept relied on capitation, in which the health plan is paid “per member per month,” to provide a more comprehensive package of benefits but with restrictions requiring patients to go through the HMO for all care. The plans have been popular in some markets but have been the subject of backlash in others. Later approaches at health care reform would place greater emphasis on patients’ experience of care (see later discussion of the Triple Aim).
In 2010, health insurance remained tied to employment; Medicare coverage was limited to people with disabilities and those 65 years of age and older; and Medicaid focused on the abject poor, pregnant women, children, and those with no financial assets requiring nursing home care. There were nearly 50 million uninsured Americans, or 16.3% of the population. Bankruptcy because of catastrophic illness was burgeoning. Leaders from both parties agreed that something had to be done, but their views of the ideal solution could not have been further apart.
President Barack Obama signed the Patient Protection and Affordable Care Act (PPACA) into law in 2010 after it passed the House and Senate by the slimmest of margins. Legal challenges ensued, including a battle over the mandate that Americans purchase insurance coverage or pay a fine. The U.S. Supreme Court upheld the mandate in 2012 but ruled against the PPACA’s provision requiring states to expand Medicaid to cover more low-income individuals.
The number of uninsured people dropped to 32 million in 2014, the first year of full implementation of the PPACA, a decrease of 9 million. The Gallup organization found the percentage of uninsured decreased to 11.9% in 2015, from 17.1% just before implementation of the PPACA in 2013.
What Is a Health System?
A health system is made up of the people and organizations that have the primary intent of promoting, maintaining, or restoring health. The World Health Organization (WHO) has provided a framework for understanding health systems ( Fig. 40.1 ). All health systems share common functions, including preventive, diagnostic, and treatment services in a range of facilities and settings. To provide services, health systems must develop key resources, including health workforce, information, and medical technologies. A strong financial structure with effective oversight and coalition building are necessary components of any health system. All of these system building blocks are needed for a health system to accomplish its goals.
Health systems also share common goals. By providing access to high-quality, safe care, health systems aim to improve the health of their members in a responsive and equitable fashion. Complementary goals include efficient provision of services and providing quality care while assuring financial stability.
Describing National Health Systems: United Kingdom, Canada, and the United States
Despite similarities in building blocks and goals, health system designs vary significantly among nations. Three questions promote understanding of a health care system: What patient population is included? Who delivers care? How is care financed? There are several common models. The first is the national health service (NHS) or Beveridge model used in the United Kingdom. The second is the national health insurance model used in Canada. The third is the Bismarck model used in countries such as Germany and Japan, with a mandatory insurance system financed by employers and employees through payroll deductions. Finally, there is the out-of-pocket model in which individuals pay for their care from their own funds; this is commonly used in poor nations. The United Kingdom, Canada, and the United States will be discussed as national examples for each of these ( Fig. 40.2 ).
How Is Care Financed?
Different health system models use different approaches to financing. In Beveridge models, such as the United Kingdom’s NHS, health care is financed by the government through taxes. The government directly pays for care and patients do not pay out of pocket. Because there is a single payer, the government can set the cost of care and decide what services are included.
In national health insurance models such as Canada’s Medicare system, there is a government-run insurance program to which every citizen contributes. Because it is a nonprofit organization without competition, there is no financial incentive for marketing or denying claims, reducing administrative costs. With a single payer, the government can determine what services will be covered and can negotiate pricing.
The United States uses a combination financial model. For military veterans who qualify, the Veterans Health Administration is similar to the Beveridge model in that it finances care through taxes. For citizens older than 65 years of age, the U.S. Medicare system is a government-run insurance program similar to Canada’s. For this group, the government does set prices. However, it does not have the legal authority to negotiate for lower pharmaceutical costs, and it does require that its members pay some out-of-pocket costs called copayments. Private insurance plans that are funded through employee and employer contributions finance some employed adults and their families, similar to the Bismarck model. However, unlike the Bismarck model, many private U.S. insurance companies are for-profit organizations with high administrative costs and a profit motive. For families with low incomes, the Medicaid system is a health insurance program that is jointly funded by the federal government and the states. Unfortunately, in 2014, 32 million American citizens were uninsured and did not have access to any of these systems. Any care received by the uninsured is paid for by their personal finances, so they experience the out-of-pocket model. The United States has a limited safety net system of federally qualified health centers (FQHCs), nonprofit clinics that receive federal funding to support care for underserved populations, including uninsured individuals and people living in rural areas. These clinics also receive funding from other sources, including copayments that are set according to the patient’s ability to pay.
Who Delivers Care?
Health care services can be delivered directly by the government or by private companies and individuals. In the NHS in the United Kingdom, most health care is delivered by the government. Most hospitals and clinics are owned by the government, and many health care professionals are government employees. This approach removes the profit motive from individual health care providers and provides an added layer of cost control. In Canada, health care is delivered by private sector providers that are paid by the government insurance program. In the United States, there is a combination delivery system, depending on the population. Adults and children with private insurance, Medicaid, and Medicare, and uninsured people largely use private sector providers. Those in the military or Veterans Administration are served by government organizations and employees. Some uninsured people may receive services from FQHCs.
The final step in understanding a system is identifying the population served. A universal system serves all residents of a nation. The United Kingdom and Canada have universal systems. The United States does not have a universal system; different patient populations are covered by different insurance systems. Individuals frequently move between systems, are covered by multiple systems, or are covered by none at all (see Fig. 40.2 ). Many adults with full-time employment and their children are covered by a private health system (Bismarck model). Adult citizens older than 65 years of age are in the Medicare system, and some poor families are covered by the Medicaid system (national health insurance model). Members of the military are served by the Department of Defense, and some veterans are served by the Veterans Administration (national health service model).
The U.S. Health Care System: Challenges and Innovations
It is clear that the United States has a patchwork of health systems. The U.S. health system can be conceptualized as having four levels ( Fig. 40.3 ). The center of the model is the individual patient. The system is defined by the characteristics of the individual and varies within his or her lifetime. The focus on the individual reflects other important forces, especially the increasing emphasis on patient-centered care. By encouraging clinicians to view patients as partners in medical decision making, patients begin to play a more active role in their care. The increase in patient participation reflects the move to consumer-driven health care.
The second level of the health system is the care team, which includes patients and their families as well as health care professionals. Ideally, the types of health care providers included in the care team reflect the needs and preferences of the individual patient. These teams provide accessible, continuous, coordinated, effective care while using the skills of each team member efficiently. Although the concept of care teams is embraced, implementation of teams is far from universal and sometimes ineffective.
Teams are supported by organizations, which are the third level of the U.S. health system. Health delivery organizations such as hospitals, nursing homes, and clinics provide the resources to support the work of teams. Multiple organizations may come together to form various types of integrated systems .
The term “integrated health system” refers to “a network of organizations that provides or arranges to provide a coordinated continuum of services to a defined population and is willing to be held clinically and fiscally accountable for the outcomes and health status of the population served.” A more descriptive definition of integrated systems refers to structures formed with the goals of providing high-quality, low-cost care to populations of patients in broad geographic areas, eliminating duplication of services and providing care across the continuum (referred to as “seamless” health care). Because there are multiple health systems within the United States, it is no surprise that there are multiple types of integrated health delivery systems.
Horizontally Integrated Systems
Horizontally integrated systems were created to allow private practices to increase the number of patients seen, create a centralized billing process, acquire technology such as electronic health records, implement marketing, and create more efficient call systems. In some settings, these horizontally integrated systems were configured and managed by regional hospitals as a strategy to retain community physicians in their practices but also as a feeder system for the hospital’s services.
Some horizontally integrated systems were organized and led by physicians. These independent practice associations (IPAs) moved on to partner with insurance companies to create HMO products for their patients. Physicians and organized medicine were fond of IPAs and other structures that kept physicians in charge. A major advantage of the early IPAs was that individual physicians did not have to negotiate contracts with insurance companies. Things got confusing, however, when individual practices (which were still owned by individual physicians or physician groups) joined more than one IPA and attempted to sort out the requirements of multiple insurance contracts. Practices with physician assistants (PAs) and nurse practitioners (NPs) faced additional complexities because not all insurers paid for the care they provided.
Some horizontal systems took on a more structured form by becoming integrated medical groups, buying up individual practices, and making the physicians employees. Similar to IPAs, these groups managed contracts from multiple payers and ultimately became the building blocks for the vertically integrated or virtually integrated systems, which now define large segments of the U.S. health care system.
Both IPAs and integrated medical groups rely on gatekeepers: physicians, PAs, or NPs who manage care and make referrals to specialists. These systems benefit from insurance contracts that designate them as “preferred providers,” opening their doors to larger numbers of patients. In exchange, the systems give discounted rates for the care of the insurance company’s subscribers. By this arrangement, only uninsured patients pay full price for health care services.
There are advantages to large medical groups. Describing the situation in California, where IPAs and Integrated Medical Groups (IMGs) are well developed, Robinson and Casalino say that “small independent practices cannot stand alone in California; the advantages of belonging to a large integrated medical group or IPA are overwhelming . . . [due to] economies of scale; ability to spread the financial risk of capitation payment; reduction in the transaction costs of negotiating, monitoring, and enforcing agreements; and creation of an organizational context for continuous process innovation.”
Vertically Integrated Systems
Vertical integration consolidates all care under one organizational roof, from primary care to tertiary care, and encompasses the facilities and staff necessary to provide this full spectrum of care. Despite advantages for patients, a major incentive for the development of vertically integrated systems is the creation of “market share” made up of loyal consumers who are used to receiving their care continuously over time by a familiar system.
Virtually Integrated Systems
Although the primary differences between vertically and virtually integrated systems relate to their structure, the ideal unifying feature for both groups is a shared electronic health record. The PPACA provided incentives for effective use of a certified medical record through meaningful use , which provides financial incentives for health professionals and hospitals to use the medical record to coordinate care and improve quality.
Many of the forces that influence how organizations behave occur at the fourth level of the U.S. health care system: the environment. This environment is dictated by a wide variety of policies from insurers, payors, other stakeholders, and regulators. One of the key regulatory forces that influences how organizations behave is scope of practice (SOP). SOP can influence organizational decisions regarding how PAs are incorporated into teams and what medical tasks they may perform.
Scope of practice laws are interventional laws whose primary purpose is to protect the public from incompetent providers and would ideally reflect the clinical capacities of professionals to provide competent care. Although legal SOP is determined by state laws and regulations, professional SOP (or professional competencies) are the services that a profession is trained and licensed to perform. Although consistency in professional competencies between states for both NPs and PAs is assured through national certification, there is considerable state variation in legal SOP within each profession. All states require physician supervision for PA practice, with variation in requirements for physician availability to the PA and degree of physician oversight and prescribing.
Although each type of health system results in its own challenges, having a mix of systems adds more complexity. When national health care systems in high-income countries are compared, the United States routinely ranks highest in cost but among the lowest for outcomes such as quality, access, and equity ( Fig. 40.4 ).