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Healthcare System Explained

The US does not have one health system but rather a patchwork of systems that are not particularly cohesive.

This means that if you are a veteran of the armed services, you get access to one system that's run by the government.

If you're over the age of 65, then you get access to Medicare, a health insurance system that's federally funded.

If your income is below a certain threshold, then you might be eligible for Medicaid – another federally funded ad state-run system.

If you're employed, your benefits package may include health insurance, and you usually get to choose which insurer will cover you in the future year from a panel approved by your employer. There are a variety of insurance plans available, with the most common being fee-for-service and full-service plans.

More than half of all hospitals in the United States are not-for-profit, and their revenue is derived from contracts with various insurers.

More than half of all hospitals in the United States are not-for-profit, and their revenue is derived from contracts with various insurers.

Health insurers keep costs down by collecting out-of-pocket fees from their clients and by limiting the number of service providers covered by the plan. If you see a healthcare provider that isn't covered in your insurance plan, you are responsible for the entire bill.

Certain hospitals and healthcare facilities in the United States offer the best care in the world, but at a hefty expense.

To understand why the US healthcare system is so complicated, one must first understand the ideological and political climate of the country.

Compared to other developed nations, the dominant political ideology in the United States is significantly more individualistic and hostile to the provision of social services. Because of this, there is less government control and more gaps in the social security system.

Financing

The US spends more per person on health care than any other country in the OECD. These costs are covered by a complicated mix of public payers, private insurers, and individual contributions. Employers are generally responsible for providing health insurance coverage to their employees and dependents. Government programs are limited to the elderly, disabled, and some of the poor.

Because of the lack of coordination between public and private health insurance systems, some people have both types of plans while others have neither. Those who do not have health insurance, however, are not left completely without medical care. Many of them get access to medical care by using public hospitals and clinics funded through donations and by shifting the costs to other payers. Unfortunately, this also means that the medical services they do receive are fewer and less coordinated.

Organization

Healthcare is delivered through a loosely structured delivery system established at the local level. Hospitals can open or close depending on the resources and preferences of the community, as well as the requirements of a free market for hospital services. Also, medical professionals can practice wherever they like.

There is no health planning at the federal level, and state planning initiatives range from none to rigorous evaluations of hospital and nursing facility development projects. Federal and state-funded programs provide some primary care to people not normally serviced by the fee-for-service (FFS) system in places where private providers are scarce.

Municipal and county public health departments oversee sanitation, water supply, and environmental threats while also providing limited primary care services through public health clinics.

The majority of hospitals are owned by private non-profit organizations, while the rest are government-owned or privately owned by for-profit enterprises.

Approximately two-fifths of physicians work in solo practice and get paid on a fee-for-service basis. A small number of physicians work for the government, managed care networks, hospitals, or corporations rather than in the private sector.

Health-Insurance Sources

Private

Private health insurance covers most of the population - approximately 60%. People under 65 and their dependents get private health insurance through their employers (61%) or buy non-group health insurance directly (13%). Approximately 13% of the population has dual health insurance coverage, while 14% have no insurance. Not every employer provides health insurance, so about 75% of those uninsured are employees and their dependents.

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More than 1,000 private health insurance companies offer policies with varying benefits, premiums, and payment rules. State insurance commissioners control these companies. The federal government does not typically oversee insurance companies. Certain, usually precisely defined, benefits or providers are sometimes required to be covered by all health insurance policies offered in the state.

Although health insurance supplied by employers is optional, tax policy encourages it, and employer-paid health benefits are akin to cash wages. Health benefits paid by employers are exempt from both personal income tax and Social Security tax.

Most people with private health insurance are covered for inpatient hospital and physician care, but coverage varies for other services. Unionized industries offer the most comprehensive benefit packages. Service industries, on the other hand, may provide minimal coverage or no coverage at all.

Patient cost-sharing varies as well, and up to 55 million Americans with private health insurance are underinsured. This means they lack a cap on their out-of-pocket health spending and are at risk of financial ruin if they develop an illness that involves very expensive treatment. Most insurance policies provide home care following an acute illness to allow for a less expensive recovery.

Home care and long-term care for chronic illnesses and impairments associated with aging are typically not covered by public or private insurance. The majority of long-term care and home care is paid for out of pocket or supplied on an ad hoc basis by family and friends. Some private health insurers have been promoting long-term care policies in recent years, especially to upper-income people who can pay the premiums. Medicaid does, however, pay for long-term care and home care services for the poor, accounting for roughly half of the $53.1 billion in yearly nursing home spending.

Medicare

Medicare is a standardized national healthcare program for those over the age of 65 and people with disabilities or kidney failure. It is the second largest health insurer in the country, covering roughly 18% of the population. Payroll taxes, general federal revenues, and premiums all go toward funding the program.

Medicare is divided into parts that cover various healthcare services:

  • Medicare Part A - Hospital Insurance – This part covers lab tests, surgery, inpatient hospital care, skilled nursing facilities, hospice care, and some home medical services;
  • Medicare Part B – Medical Insurance – This part covers some physician services, medical supplies, outpatient treatment, and preventative care;
  • Medicare Part D – Prescription Drug Coverage – This part is a voluntary outpatient prescription drug benefit available to Medicare beneficiaries through federally approved private plans.

If you're eligible for Medicare, you have different options for receiving your benefits. The two main ones are Original Medicare and Medicare Advantage.

Part A and Part B are included in Original Medicare. You'll need to add Part D if you want coverage for prescription drugs. Original Medicare covers a substantial amount, but not all, of the cost of covered health care services and supplies. To make up for some of the remaining costs, Medicare patients can get a Medicare Supplement Insurance (Medigap) plan.

Private insurance companies offer Medicare Advantage as an alternative to Original Medicare, but the federal government must approve the plans. Medicare Advantage consists of various bundled plans that include Part A, B, and usually also D. They may also include additional benefits like vision, hearing, and dental care, which Original Medicare does not cover. Why Medicare Advantage Plans are Bad explains the differences between Original Medicare and Medicare Advantage, as well as the various Medicare Advantage plans.

Medicaid

Medicaid is a public health insurance program for some low-income groups. It covers 75 million people, or 22% of the population, for preventative, acute, and long-term care services. The federal and state governments both contribute to Medicaid funding. The federal government matches state Medicaid expenditures at varying rates. This ranges from 50% to 83% of overall spending, with the poorest states receiving a higher match.

Medicaid is handled by the states under extensive federal regulations governing service scope, provider compensation, and population groups covered.

Medicaid eligibility requirements include:

  • Having an income level below a certain threshold;
  • Being above a certain age;
  • Having a disability;
  • Being pregnant;
  • Being the parent of a dependent child.

Mothers and dependent children account for roughly 68% of Medicaid recipients, with older adults accounting for 13%, people with disabilities for 15%, and others accounting for 4%.

Individuals with assets beyond state-defined criteria and childless adults under 65 without disabilities are not eligible, regardless of how low or exorbitant their medical expenses are.

Since Medicaid is the only public program that provides funding for long-term nursing home care, a considerable number of middle-class older adults have become eligible for Medicaid-covered nursing home care by voluntarily transferring assets to their children and spending their income on nursing home bills. Skilled nursing facilities and intermediate care facilities account for about 43% of Medicaid spending.

Other

Uninsured people get less healthcare than insured people with similar healthcare needs, but they can get help through other resources, though this depends on the community. The federal, state, and municipal governments all subsidize public health clinics and hospitals that focus on providing care to the underprivileged. They also pay private providers to care for the underprivileged in some situations.

Preventive health initiatives such as immunizations, cancer screening programs, and child healthcare are supported by public health expenditures. The services are frequently offered to anybody, though a fee based on income may be applied. Operating margins are occasionally used to offset the expenses of services to uninsured people.

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In contrast to hospitals, physicians do not submit detailed cost reports to the federal government, making it difficult for analysts to estimate physician charity care. However, as insurers and employers try to keep costs under control, hospitals and other providers' capacity to cross-subsidize uninsured treatment by moving costs to insurers and employers may decline.