Health care in the UK and USA: welfare versus the market

CHAPTER 15 Health care in the UK and USA: welfare versus the market



Janice Lewis, Caroline Yates


When you finish this chapter you should be able to:


• describe the development of the United States (US) health care system

• describe the development of the United Kingdom (UK) health care system

• illustrate the differences between the concepts of market and welfare state models of health

• compare and contrast the key features of the US and the UK health care systems

• discuss the US and UK health care systems in terms of the Australian system.


Introduction


Countries throughout the world have developed different health care systems, shaped over time by the policy decisions of their particular governments. Generally, health care systems may be thought about as being either a welfare-based or public system where the government provides the health care system for all citizens, or a market-driven or private system where the services are run by private providers, and citizens pay for their own health care. Many health care systems such as Australia’s are mixed systems, with both public and private elements.


How much of a system should be public and how much should be private, however, is still being debated. Recently this debate has become more vigorous as the rising cost of health care has led governments to question their role in health care provision and to re-examine the role for public and private providers. In many countries there has been a move to privatisation, through government policies that attempt to shift a considerable portion of the increasing financial burden of providing health care to their population to the private sector.


The governments in most countries retain a leading place in health care due to their role in regulating the quantity and distribution of services and in public health, where government regulations ensure safe water and food, control quarantine for infectious diseases and legislate on environmental issues. The private sector is characterised by its market orientation and for-profit philosophy and is much more involved in areas of the health care system where a fee is paid for a particular service, such as hospital care, medical care, diagnostic services, pharmaceutical services and so on.


This chapter will describe the health care services provided in the United States (US) and in the United Kingdom (UK). The US is generally considered to have a predominantly private and market-led system, whereas the UK has a public health care system based on welfare-state principles.



Health care in the US: evolution of health services


Drawing on Weitz (1996), Sultz and Young (1997), Scott (1998), Scrambler (2002) and Saleh and Levin (2005) critical phases which have shaped the US health care system may be identified. Historically, health care in the US was dominated by the relationship between doctors and their patients in a private fee-for-service arrangement. Hospitals were established by community, religious and fraternal organisations and perceived to be charitable institutions. These hospitals were not expected to generate profits but they were expected to be self-supporting. Doctors charged fees for the services they personally provided. This arrangement separated the functions of the doctor and the hospital.




The ‘Blues’


The Great Depression of 1929 shook the financial security of both doctors and hospitals, with doctors’ incomes, hospital receipts and admission rates dropping dramatically as patients’ ability to pay for services declined. The American Hospital Association, alarmed at the prospect of hospital bankruptcies, founded a non-profit company, Blue Cross, to sell insurance to individuals to underwrite the payment of hospital bills. Blue Cross was designed to protect the hospitals, not the patients. At the same time, the American Medical Association founded Blue Shield, an insurance scheme to cover doctors’ bills. This, however, was a measure to safeguard doctors, not patients. Thus the ‘Blues’ set the direction for the US health care system by establishing a clear policy to protect the provider rather than the patient.



Commercial providers and for-profit insurers


Beginning in the 1940s, commercial for-profit insurance companies entered the health care market in competition with the Blues. The Blues had set their premiums on the basis of the level of risk in the community as a whole. This meant that the well and the sick paid the same rate. The new commercial insurers offered lower premiums than the Blues but those with poor health or in high-risk occupations either paid higher premiums or were excluded. Commercial health insurance grew rapidly and came to dominate the market. Health insurance came to be a commonly expected part of workers’ remuneration packages.


At the same time, the growing population required increased hospital services which the not-for-profit hospitals could not provide. This void was filled by investor-owned corporations which opened hospitals across the country. These corporations were focused on making a profit for their shareholders. They became efficient by managing expenses and adding profitable new services. These corporations became major players in the health care system and their profit orientation continued to have a major effect on services offered.



Health Management Organisations (HMOs)


The 1930s and 1940s also saw the arrival of Health Management Organisations (HMOs). The HMO originally was a social innovation to provide low-cost comprehensive care for a fixed annual fee to local communities. The HMOs relied on salaried doctors and the focus was on keeping patients healthy, with the HMO also paying the full cost of preventative care. Patients paid nothing beyond the cost of their insurance premiums providing they used only HMO doctors.



Medicare/Medicaid


Medicare/Medicaid were introduced in 1965 to meet the needs of those without access to insurance coverage, whether through the Blues, commercial insurers or HMOs. Medicare is a government-funded health insurance scheme and provides for all American citizens over the age of 65, as well as some with specific disabilities. Part A of the scheme is a hospital insurance program that covers all costs of hospitalisation for the first 60 days after which time co-payment is required. Part B is a medical insurance program based on optional deducted monthly payments. It covers 80% of the cost of medical care including outpatient hospital services and diagnostic tests. It does not cover such things as prescription drugs and long-term nursing care at home. Those who cannot afford to purchase the additional private insurance — ‘medigap policies’ — are vulnerable.


Medicaid provided coverage for those under the age of 65 and was conditional on income and physical disability. Low income is insufficient to guarantee cover and some 60% of those in relative poverty do not qualify. Medicaid is funded through a mix of Federal and state sources, which means that states can determine eligibility and benefits within broad Federal guidelines; therefore the definition of eligible disabilities vary from state to state.



More recent developments


During the 20th century the US health care system moved from a locally based, individually organised health care with not-for-profit institutions to an increasingly for-profit nationally orientated ‘corporatised system’ (Saleh & Levin 2005). Rising health care costs and a growing portion of the population who did not have access to health care insurance became a concern. The uninsured included the unemployed and lowly paid, casual and sessional workers whose employers did not provide health insurance and who could not afford to pay the premiums, and those with disabilities who did not meet the criteria for Medicaid, and the aged who could not meet the gap for Medicare.


In 1993 President Bill Clinton presented a comprehensive approach to reforming the complex health delivery system that included a government-sponsored system of universal health care insurance (Budetti 2004). For various reasons, this proposal failed and the responsibility for managing costs again fell to the private sector.


What followed was a rise in managed care, controlled by the insurance companies and newer models of HMOs. The HMOs offered various prepaid health plans for which the insured persons or families paid a fixed fee for designated health services. Costs for any services beyond the agreed health plan with the insurance company were met by the patient. Under managed care, insurers focused on setting limits for the individual medical encounter (‘managing care’). Insurers typically contract with a limited number of doctors and preferred provider organisations (PPOs), negotiating price discounts in exchange for guaranteed patient volume, thus excluding high-cost providers. Clinical decisions were subject to external review by the insurance providers with doctors having to seek permission to admit patients to hospital, or perform diagnostic tests or medical procedures. The HMOs were expected to hold down costs by changing the profit incentive from fee-for-service to promoting health and preventing illness. Despite inconclusive evidence about the anticipated savings, HMOs now functioned as corporatised for-profit businesses and are an important part of the US health insurance market.

Related posts:

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  2. The Pharmaceutical Benefits Scheme
  3. The profession of medicine
  4. Podiatry in Australia: past, present and future

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Mar 24, 2017 | Posted by in MEDICAL ASSISSTANT | Comments Off on Health care in the UK and USA: welfare versus the market

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