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Chapter 1
Major Characteristics of U.S.
Health Care Delivery
INTRODUCTION
The United States has a unique system of health care delivery. For the
purposes of this discussion, “health care delivery” and “health services
delivery” can have slightly different meanings, but in a
oad sense, both
terms refer to the major components of the system and the processes that
enable people to receive health care. In a more restricted sense, the terms
efer to the act of providing health care services to patients. The reader can
identify which meaning is intended by paying attention to context.
In contrast to the United States, most developed countries have national
health insurance programs that are run by the government and financed
through general taxes. Almost all of the citizens in such countries are enti-
tled to receive health care services that include routine and basic health
care. These countries have what is commonly refe
ed to as universal
access. All American citizens, on the other hand, are not entitled to routine
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2 Chapter 1 • Major Characteristics of U.S. Health Care Delivery
and basic health care services. Although the U.S. health care delivery sys-
tem has evolved in response to concerns about cost, access, and quality, the
system has been unable to provide universally a basic package of health
care at an affordable cost. One ba
ier to universal coverage is the unneces-
sary fragmentation of the U.S. delivery system, which is perhaps its central
feature (Shortell et al., 1996); however, the enormous challenge of expand-
ing access to health care while containing overall costs and maintaining
expected levels of quality continues to intrigue academics, policy makers,
and politicians.
To make learning the structural and conceptual bases for the delivery of
health services easier, this book is organized by the systems framework,
which is presented at the end of this chapter. One of the main objectives of
Chapter 1 is to provide a
oad understanding of how health care is deliv-
ered in the United States.
The following overview introduces the reader to several concepts that
are treated more extensively in later chapters. The U.S. health care delivery
system is complex and massive. Interestingly, it is not actually a system in
the true sense, although it is called a system when its various features, com-
ponents, and services are referenced. Hence, it may be somewhat mislead-
ing to talk about the American health care delivery “system” (Wolinsky,
1988, p. 54), but the term will nevertheless be used throughout this book.
Organizations and individuals involved in health care range from edu-
cational and research institutions, medical suppliers, insurers, payers, and
claims processors to health care providers. Total employment in various
health delivery settings is almost 14.4 million, including professionally
active doctors of medicine (MDs), doctors of osteopathy (DOs), active
nurses, dentists, pharmacists, and administrators. Approximately 382,000
physical, occupational, and speech therapists provide rehabilitation services.
The vast a
ay of institutions includes 5,700 hospitals, 15,900 nursing
homes, almost 2,900 inpatient mental health facilities, and 11,000 home
health agencies and hospices. Close to 800 programs include basic health
services for migrant workers and the homeless, community health centers,
lack lung clinics, human immunodeficiency virus (HIV) early interven-
tion services, and integrated primary care and substance abuse treatment
programs. Various types of health care professionals are trained in
144 medical and osteopathic schools, 56 dental schools, 109 schools of
pharmacy, and more than 1,500 nursing programs located throughout the
country.
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Subsystems of U.S. Health Care Delivery 3
There are 201.7 million Americans with private health insurance
coverage, 40.3 million Medicare beneficiaries, and 38.3 million
Medicaid recipients. Health insurance can be purchased from approxi-
mately 1,000 health insurance companies and 70 Blue Cross/Blue Shield
plans. The managed care sector includes approximately 405 licensed
health maintenance organizations (HMOs) and 925 prefe
ed provide
organizations (PPOs). A multitude of government agencies are involved
with the financing of health care, medical and health services research,
and regulatory oversight of the various aspects of the health care deliv-
ery system (Aventis Pharmaceuticals, 2002; Bureau of Primary Health
Care, 1999; National Center for Health Statistics, 2007; U.S. Bureau of
the Census, 1998; U.S. Census Bureau, 2007; Bureau of Labor Statistics,
2008).
SUBSYSTEMS OF U.S. HEALTH CARE DELIVERY
The United States does not have a universal health care delivery system
enjoyed by everyone. Instead, multiple subsystems have developed, eithe
through market forces or the need to take care of certain population seg-
ments. Discussion of the major subsystems follows.
Managed Care
Managed care is a system of health care delivery that (1) seeks to
achieve efficiency by integrating the basic functions of health care delivery,
(2) employs mechanisms to control (manage) utilization of medical services,
and (3) determines the price at which the services are purchased and, conse-
quently, how much the providers get paid. It is the most dominant health care
delivery system in the United States today and is available to most Americans
(for more details on managed care, please refer to Chapter 9).
The employer or government is the primary financier of the managed
care system. Instead of purchasing coverage from a traditional insurance
company, the financier contracts with a managed care organization (MCO),
such as an HMO or a PPO, to offer a selected health plan to employees. In
this case, the MCO functions like an insurance company and promises to
provide health care services contracted under the health plan to the
enrollees of the plan.
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4 Chapter 1 • Major Characteristics of U.S. Health Care Delivery
The term enrollee (member) refers to the individual covered under the
plan. The contractual a
angement between the MCO and the enrollee—
including the collective a
ay of covered health services that the enrollee is
entitled to—is refe
ed to as the health plan (or “plan” for short). The
health plan uses selected providers from whom the enrollees can choose to
eceive routine services. Primary care providers or general practitioners
typically manage routine services and determine appropriate refe
als fo
higher level or specialty services, often earning them the name of gate-
keeper. The choice of major service providers, such as hospitals, is also
limited. Some of the services may be delivered through the plans own hired
physicians, but most are delivered through contracts with providers such as
physicians, hospitals, and diagnostic clinics.
Although the employer finances the care by purchasing a plan from an
MCO, the MCO is then responsible for negotiating with providers.
Providers are typically paid either through a capitation (per head) a
ange-
ment, in which providers receive a fixed payment for each patient o
employee under their care, or a discounted fee. Providers are willing to dis-
count their services for MCO patients in exchange for being included in the
MCO network and being guaranteed a patient population. Health plans rely
on the expected cost of health care utilization, which always runs the risk
of costing more than the premiums collected. By underwriting this risk, the
plan assumes the role of insurer.
Figure 1.1 illustrates the basic functions and mechanisms that are nec-
essary for the delivery of health services within managed care. The key
functions of financing, insurance, delivery, and payment make up the quad-
function model. Managed care a
angements integrate the four functions to
varying degrees.
Military
The military medical care system is available free of charge to active-
duty military personnel of the U.S. Army, Navy, Air Force, and Coast
Guard and also to certain uniformed nonmilitary services such as the
Public Health Service and the National Oceanographic and Atmospheric
Association (NOAA). It is a well-organized, highly integrated system. It is
comprehensive and covers preventive as well as treatment services that are
provided by salaried health care personnel, many of whom are themselves
in the military or uniformed services. This system combines public health
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Subsystems of U.S. Health Care Delivery 5
with medical services. Routine ambulatory care is provided close to the
military personnel’s place of work at the dispensary, sick bay, first-aid sta-
tion, or medical station. Routine hospital services are provided at base dis-
pensaries, in sick bays aboard ship, and at base hospitals. Complicated
hospital services are provided in regional military hospitals. Long-term
care is provided through Veterans Administration (VA) facilities to certain
etired military personnel. Although patients have little choice regarding
how services are provided, in general, the military medical care system
provides high-quality health care.
Families and dependents of active-duty or retired career military per-
sonnel are either treated at the hospitals or dispensaries or are covered by
Employers
Government–Medicare, Medicaid
Individual self-funding
FINANCING
Insurance companies
Blue Cross/Blue Shield
Self-insurance
INSURANCE
Insurance companies
Blue Cross/Blue Shield
Third-party claims processors
PAYMENT
Physicians
Hospitals
Nursing homes
Diagnostic centers
Medical equipment vendors
Community health centers
DELIVERY (Providers)
Access
Risk
underwriting
Capitation
or
discounts
Utilization
controls
Integration of functions through managed care (HMOs, PPOs)
Figure 1.1 Managed Care: Integration of Functions
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6 Chapter 1 • Major Characteristics of U.S. Health Care Delivery
TRICARE, a program that is financed by the military. This insurance plan
permits the beneficiaries to receive care from private medical care facilities
as well as military ones.
The VA health care system is available to retired veterans of previous
military service, with priority given to those who are disabled. The VA sys-
tem focuses on hospital care, mental health services, and long-term care. It
is one of the largest and oldest XXXXXXXXXXformally organized health care sys-
tems in the world. Its mission is to provide medical care, education and
training, research, contingency support, and emergency management fo
the Department of Defense medical care system. It provides health care to
more than 5.5 million persons at over 1,100 sites, including 153 hospitals,
732 ambulatory and community-based clinics, 135 nursing homes, 209
counseling centers, 47 domiciliaries (residential care facilities), 73 home
health care programs, and various