Health Care System Currently

INTRODUCTION
Understanding health care reform requires a basic knowledge of the U.S. health care system as it exists currently. The following overview covers two main topics:

  • HEALTH INSURANCE in the UNITED STATES
  • FINANCING the U.S. HEALTH CARE SYSTEM

 

HEALTH INSURANCE in the UNITED STATES
From a health insurance standpoint, there are three main groups of people1:

  1. People insured by private insurers (~58% of the population)
  2. People insured by public (government) insurers (~27% of the population)
  3. The uninsured (~15% of the population)
  1. Private insurance can be employer-sponsored insurance or individual insurance2:
    • Employer-sponsored insurance
      • Employers provide insurance as part of an employee benefits package
      • Private companies administer the health insurance plan; benefits vary widely
    • Individual insurance (also known as "private non-group" insurance)
      • Individuals purchase insurance from a private company to cover their own health care costs. Premiums often depend on the individual's health
      • This form of insurance is common for people who are self-employed or retired, as well as people who cannot get insurance through their employer
  2. Public insurance comes mainly from Medicare, Medicaid, S-CHIP, and the VA
    • Medicare3:
      • Medicare is a federally run program that covers the vast majority of individuals aged 65 and over, as well as some disabled individuals
      • Medicare is financed by federal income taxes and a payroll tax that is shared by employers and employees
      • Medicare enrollees also pay a monthly premium for certain services
      • Medicare is an example of a single payer health care system
    • Medicaid4:
      • Medicaid covers many low-income and disabled individuals
      • The federal government and states share responsibility for funding Medicaid, but each state administers its own Medicaid program
      • State Medicaid programs are mandated to cover certain categories of people, such as low-income pregnant women and children; each state has the option of expanding eligibility if desired
      • Medicaid is an example of a single payer health care system
    • State Children's Health Insurance Program (S-CHIP)2:
      • S-CHIP covers children whose families make too much money to qualify for Medicaid
      • Like Medicaid, the federal government and states share responsibility for funding S-CHIP
    • Veterans Administration (VA)2:
      • The Veterans Administration delivers health care to veterans in government-owned VA facilities
      • The VA is funded by federal taxpayer dollars
      • The VA system is a socialized health care system
  3. The Uninsured:
    • There are currently over 43 million American (15% of the population) who are completely uninsured
    • A study by the Institute of Medicine concludes that all members of a community are affected when others lack health insurance


FINANCING the U.S. HEALTH CARE SYSTEM

The financing of health care involves two streams of money:

  • The collection of money for health care from individuals and employers (money going in) - this includes income and payroll taxes for public insurance programs, insurance premiums for private insurance, and out-of-pocket costs from individuals
  • The reimbursement of health service providers for health care (money going out) - public and private insurers use the money they collect to pay health care providers

Health care spending is approximately equal between private and public sources:

  • Specifically, 54% of health care spending came from private sources in 2007
  • Public spending (e.g. from Medicare/Medicaid) is expected to overtake private spending soon as more people become eligible for Medicare5

High and rising health care costs remain a critically important issue:

  • In 2009, the U.S. is projected to spend approximately $2.5 trillion on health care, which is $8,160 per US resident. This represents over a sixth of the gross domestic product, a percentage that is much higher than any other country in the world5
  • Over the past 10 years, health insurance premiums have risen at a rate far greater than inflation and salaries5. As a result, some employers have dropped health benefits, and employees have been forced to pay higher amounts for their premiums6
  • Health care costs are a source of financial hardship for many Americans. In one poll, approximately 1 out of 5 people reported difficulties paying family medical bills5

Recent health care reform efforts have been aimed at controlling health care costs, while simultaneously trying to extend health insurance to the uninsured.

Contributed by: Kao-Ping Chua, MD

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References

  1. Kaiser Commission on Medicaid and the Uninsured/Urban Institute Analysis of the March 2008 Current Population Survey. Accessed August 24, 2009. <http://facts.kff.org/chart.aspx?ch=477>
  2. Bodenheimer, Thomas and Grumbach, Kevin. Understanding Health Policy: A Clinical Approach, 4th Edition. New York: McGraw-Hill, 2005.
  3. Kaiser Family Foundation. "Medicare at a Glance." Accessed August 24, 2009. <http://www.kff.org/medicare/upload/1066_11.pdf>
  4. Kaiser Family Foundation. "Medicaid: A Primer." Accessed August 24, 2009. <http://www.kff.org/medicaid/upload/7334-03.pdf>
  5. Kaiser Family Foundation. "Trends in Health Care Costs and Spending." Accessed August 24, 2009. <http://www.kff.org/insurance/upload/7692_02.pdf>
  6. Kaiser Family Foundation. "Employer Health Benefits: 2008 Summary of Findings." Accessed August 24, 2009. <http://ehbs.kff.org/images/abstract/7791.pdf>