Understanding the US Healthcare System

Understanding the US Healthcare System

Understanding the Healthcare system can be a challenging task in the United States. Many people find it hard to navigate the intricacies of the US Healthcare system because the US does not adopt a clearly defined Healthcare model like the rest of the industrially developed nations of the world.

To know about the Healthcare Models in place around the world, see our article “Understanding Healthcare: An overview of the healthcare models around the world

With various insurance options, healthcare providers, and patient rights to consider, it’s crucial for individuals to have a comprehensive understanding of the healthcare landscape. This article aims to provide US audiences with a detailed overview of the healthcare system, offering valuable insights to help readers navigate this intricate domain, make informed decisions about their health, and access the care they need.

Facts about the US Healthcare System

US Healthcare spending was about $4.3 trillion, which comes up to about 18% of its GDP1. With spending like $12, 900 per person (higher than the most developed national average,) one would assume the US Healthcare to be among the best. But the United States has one of the least effective healthcare systems in the developed world. The United States is the only industrialized nation in the world with no universal health coverage. According to a Harvard study published in 2005, half of the bankruptcies in the United States were due to medical costs-related issues. Many people struggle in managing the costs of medical care. One of the reasons for this issue is the general population’s lack of insight into the healthcare system. Furthermore, Chargemaster allows hospitals to charge extraordinary costs for medical procedures, usable items, drugs, and disposable items. Medical billing and administrative costs are too high in the United States due to the complexities of the process.

According to the Kaiser Family Foundation research, 72.5 percent of Insured US citizens have difficulty paying their medical bills, 63 percent of US citizens spend all of their savings on medical bills, and 42 percent of citizens had to get a second job to pay off their debt arising from medical costs. A CNBC report said that only 39 percent of US nationals had enough savings to pay $1000 in medical bills.

Here are some key facts about the US Healthcare system:

  1. United States citizens experience the worst medical outcomes out of all developed nations of the world2.
  2. United States spent 17.8 percent of its GDP on healthcare3, which is far higher than that of the average OECD country.
  3. In 2021, life expectancy in the United States was 77 years4. This is three years less than that of the average OECD country.
  4. An average US citizen visits a physician’s office just four times a year5. This number is less than that of the average OECD country.
  5. According to a Commonwealth Fund article, “The average length of a hospital stay in the U.S. for all inpatient care was 4.8 days, far lower than the OECD average. The U.S. had 2.8 hospital beds per 1,000 population, lower than the OECD average of 4.36.

Healthcare Model in the United States

The Healthcare model in the United States is a public-private hybrid one, meaning that the source of funds paying for the medical costs of the population can either be the taxes collected by the government, premiums paid by individuals privately, or bills paid out of the individuals’ own pockets. Medical care in the United States is provided non-uniformly depending upon four different ways that the population is categorized:

  1. People eligible for Government Health Insurance Schemes
  2. Private health insurance.
  3. Senior Citizens
  4. Veterans
  5. Uninsured

health insurance

People eligible for Government Health Insurance Schemes:

These are different Government programs providing health care coverage to the population based on certain criteria:

  • Medicare: For senior citizens over the age of 65, people of different abilities, and those suffering from End-stage renal disease.
  • Medicaid: Serves people of low income, pregnant, and people over the age of 65 requiring certain benefits not covered by Medicare.
  • Childrens’ Health Insurance Program: CHIP helps those with incomes greater than those eligible for Medicaid to have their children covered through CHIP.
  • Veterans’ Health Administration and Tricare: For uniformed personnels and retirees to get health coverage for themselves and their dependents.
  • Indian Health Service: A government funded scheme to provide health care coverage to Federally recognized Native American Tribes and Alaska Natives through its own network of hospitals and healthcare providers.

Private health insurance:

More than half of the health insurance coverage held by US citizens is employer-provided, whether it be government or private organizations, the rest is through private health insurance plans. But as stated earlier, many US citizens do not opt-in for a health insurance plan due to unemployment or other financial reasons.

And those covered by a health insurance plan may still have to bear some or most of the costs of medical care they receive out of their pocket. In some cases, patients attending the hospital have no knowledge of the additional costs they will have to bear by themselves because their insurance plan does not cover them. Therefore, choosing the right plan for yourself and your dependents is a task to be taken seriously as it could be the difference between a stress-free recovery and bankruptcy. Many of us need to have a grasp of the terms such as Deductibles, Copayments, Coinsurance, and Premiums.

To know more about these terms, the Health Insurance models and plans, and their intricate workings, read our article: “Health Insurance: How it works & How to choose“.

Complexities of the Health Insurance Systems in the United States

As discussed earlier, US citizens are offered health coverage through employer-provided health insurance or Private Health Insurance. But in certain situations, it is just not feasible for individuals to afford premiums on these health insurance plans. In 2021, 27.5 million American citizens lacked medical insurance7. Most of those uninsured cited unaffordability as the reason for not opting in for an insurance plan. Health insurance premiums are already much higher in the US as compared to other countries. And on top of it, companies are likely to charge individuals more if they have a pre-existing health condition. In certain situations, the insurance company refuses to provide health coverage for those suffering from a medical condition. This is a result of the capitalistic approach of the health insurance companies as health insurance companies are for-profit rather than non-profit (as is the case of the Bismarck Model in Germany.)

Senior Citizens:

Senior Citizens along with people of different abilities and those suffering from end-stage renal disease are compensated for their medical care costs by the government of the United States through Medicare. 70 percent of the costs rendered as a result of medical care provided to this group are paid by Medicare, while 30 percent of the costs are paid by the patients themselves or through private medical insurance. This model helps to alleviate some burden of medical care costs from the citizens falling in this category. But, with medical care costs reaching sky-high, individuals in this category can still face difficulties affording their portion of the medical bill as these individuals are the most financially unstable. Medicaid comes into play for this category of population in cases where certain benefits are not covered by Medicare. These benefits include Personal care services and Nursing Home services.

Veterans:

Veterans are served through two programs called Veterans Health Administration and Tricare, which are socialized healthcare plans where healthcare is funded and delivered through a network of Government owned Hospitals and Government employed Healthcare Providers.

Uninsured:

With nearly 30 million US citizens without an insurance plan, this category is at the most risk of bankruptcy or other financial problems arising from the cost of medical care. There are certain Government funded schemes to help those who are unable to help themselves. But only those falling short of certain socioeconomic criteria are eligible for such schemes. Most people still have no way of affording medical care, but out of their pocket.

It does not mean, that in case of an emergency, these people cannot get necessary medical care. “Emergency Medical Treatment and Labor Act of 1986, prohibits healthcare facilities from turning down patients in case of an emergency. Hypocritic Oath requires a doctor to uphold certain ethical principles, one of which is to help a patient in need whatever the circumstances may be. Whatever, the case, a patient entertained by the healthcare facilities is served with the medical bill which ultimately turns into debt and can ruin an individual’s life.

However challenging and complex the US Healthcare system may appear to be, there are always new strategies developed and new laws applied to improve the quality and efficiency of the medical care provided. One such law is Affordable Care Act (ACA, also known as Obama Care.)

Affordable Care Act:

The Affordable Care Act allows a low-cost premium for households with incomes between 100 percent and 400 percent of the Federal Poverty Level (FPL). This helps low-income individuals and their dependents to afford health insurance which otherwise would not be possible. It further enables employers to provide health coverage for their employees easily. According to this law, employers can provide their employees with pre-tax funds to purchase their private insurance. Employers are now able to help their employees, get maximum time limits for their short-term insurance plans. This relief, in particular, helps those transitioning from one job to another or having a part-time job. In return, ACA makes it mandatory for every US citizen to have a health insurance plan. To read more about ACA, click here.

In summary, the US Healthcare system is in need of new strategies and policies that alleviate the overall burden of medical care delivery and improves the quality of life of US citizens. For example, The Inflation Reduction Act, which will help reduce the high cost of certain drugs and cap out-of-pocket costs for older Americans, is a step in the right direction7. By, reducing medical costs, improving healthcare administration, lowering the incentive for profit among medical insurance companies and healthcare facilities, and developing government schemes, the US healthcare system can improve beyond measure and enable citizens to have quality healthcare affordably.


Sources:
  1. WHY ARE AMERICANS PAYING MORE FOR HEALTHCARE?. Web Blog Post. Peter G. Peterson Foundation, January 30, 2023.
  2. Roosa Tikkanen and Melinda K. Abrams, U.S. Health Care from a Global Perspective, 2019: Higher Spending, Worse Outcomes. Commonwealth Fund, Jan. 2020.
  3. Source: Munira Z. Gunja, Evan D. Gumas, and Reginald D. Williams II, U.S. Health Care from a Global Perspective, 2022: Accelerating Spending, Worsening Outcomes. Commonwealth Fund, Jan. 2023.
  4. National Center for Health Statistics, “Life Expectancy in the U.S. Dropped for the Second Year in a Row in 2021,” news release, Centers for Disease Control and Prevention, Aug. 31, 2022
  5. Munira Z. Gunja, Evan D. Gumas, and Reginald D. Williams II, U.S. Health Care from a Global Perspective, 2022: Accelerating Spending, Worsening Outcomes. Commonwealth Fund, Jan. 2023.
  6. Munira Z. Gunja, Evan D. Gumas, and Reginald D. Williams II, U.S. Health Care from a Global Perspective, 2022: Accelerating Spending, Worsening Outcomes. Commonwealth Fund, Jan. 2023.
  7. Lovisa Gustafsson and Sara R. Collins. The Inflation Reduction Act Is a Milestone Achievement in Lowering Americans’ Health Care Costs.  To the Point (blog), Commonwealth Fund, Aug. 15, 2022
Dr. Muhammad Hussain
Dr. Muhammad Hussain

MD, Entrepeneur & Administrator. Six years of experience, working in the field of clinical care, medical administration, and healthcare business.

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