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The US Health Care System Essay Sample

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The US Health Care System Essay Sample

As the third largest country in the world with an estimated population of over 296,000,000 the United States health care industry is the largest single market today. Some 545,000 health care establishments make up the industry. These are the hospitals (public and private), nursing and residential care facilities, home health care services, outpatient care centers, medical and diagnostic laboratories, offices of physicians, dentists and other health practitioners. Hospitals represent only 2% of all health organizations but employ 40% of all workers. Total U.S. health care expenditures are projected to increase from $1.9 trillion in 2005 to $3.6 trillion in 2014, with annual increases averaging about 7%. Health spending in the U.S., at about 16% of Gross Domestic Product (GDP) in 2005, will grow to about 18.7% by 2014. (Plunkett, 2006, ¶1). Many considered the system to be technologically advanced and the best with state-of-the-art facilities. However, others pose issues that challenge the system to undergo improvement.

The organization of the U.S. health care system is made up of public and private insurers. What makes this system unique is the dominance of the private over the public. Public health insurance is composed of Medicare, Medicaid, the State Children’s Health Insurance Program (SCHIP), and the Veterans Administration. Medicare is a single payer program administered by the government where it reimburses, using federal income taxes, the health expenses of its 43 million beneficiaries. It primarily covers people whose age is 65 and above, disabled, and with permanent kidney failure requiring dialysis or transplant. Medicare has two parts: Part A (Hospital Insurance) and Part B (Medical Insurance). Part A pays for care services rendered in hospitals as an inpatient, hospice and home care as well as access to skilled nursing facilities and critical areas. Most people do not pay premiums since payment is acquired through payroll taxes while working. Part B, on the other hand, compensates for doctors’ services, outpatient hospital care, services of physical and occupational therapists. There is a monthly premium. In addition, there is the prescription drug coverage implemented last January 2006 making medicines readily available to all beneficiaries. A member has to choose a drug plan and pay a monthly premium. This lowers drug costs and protects future increases in prescription drugs.

Medicaid is designed to give health care services to the indigent population. It covers some 39.7 million beneficiaries of low-income families, pregnant women, the disabled, parents meeting specific income thresholds, and children. Responsible for administering this health insurance are the states that can expand the eligibility as they see fit. This insurance includes a variety of benefits like laboratory and x-ray, nursing home and home health care, family planning, drug costs, inpatient and outpatient hospital, services of physicians, midwife and certified nurse practitioner. There are 51 Medicaid programs in the country financed by both federal and state governments.

Set up in 1997, the State Children’s Health Insurance Program is a 10-year health plan that will cater to uninsured children with a budget of $24 billion. In 2005, more than six million children benefited from the program. This targets children whose families cannot afford to purchase private insurance. Another federally controlled program is the Veteran’s Administration that delivers health care to veterans of the military in government-owned hospitals and clinics. Funded through income tax, it offers very affordable health services to the veterans.

At present, most health care insurance are ran by private organizations. Collectively this is called the Managed Care plans. Managed care is used as a general term for the activity of organizing doctors, hospitals, and other providers into groups in order to enhance the quality and cost-effectiveness of health care. (Torreblanca, Friend & Oosterom, 2003, p. 53, ¶3, line 5). The system reduces pharmaceutical spending in many ways such as securing discounts, fix prices in advance of medication, offer the most cost-effective treatments, and control expenditures for their members by managing the provisions of their services. The most popular form of this system is the Health Maintenance Organization (HMO), an entity that gives prepaid and comprehensive health coverage for the services of both hospitals and physicians. Since July 2005, there are around 411 HMOs in the country with more than 69,000,000 members. HMOs are paid through monthly premiums. Other managed care companies are the Preferred Provider Organization, Exclusive Provider Organization, Physician-Hospital Organization, Integrated Delivery Systems, Accountable Health Plan, Point-of-Service Plan, and Individual Practice Association. These organizations have a cumulative membership of about 200 million.

The Employer-Sponsored plan causes employers to provide health insurance as part of the benefits package for employees. Administered by private companies, this insurance requires employers to shoulder majority of the premium while the employees pay the remaining amount. Last year, employers averaged $4,024 for single coverage and $10,880 for a family of four annually. Benefits vary according to specific policies given by companies.

Historical Perspective. Originally, physicians treated patients and charged them. However this system did not provide economic security for both patients and doctors. Plans were drafted by hospitals and doctors only to protect and enhance their income. In 1929, the Baylor University Hospital in Texas provided 1,500 school teachers with 21 days of hospital care at a premium of $6 per person a year. This plan was called the Blue Cross.

Soon after the coverage expanded to other groups and hospitals began practicing the same plan. The American Hospital Association, in early 1933, approved hospital insurance and established guidelines to resolve the costs of hospital care. While hospital insurance plans became rampant, some prepaid contracts were also developing among employee and physician groups. Dr. Sidney Garfield together with his associates initiated prepaid medical care services to construction workers. In 1937, his group began servicing the workers of Henry J. Kaiser and the Kaiser Construction company. The event gave birth to the Kaiser Foundation Health Plans serving over eight million members in more than 12 states at that time. During the Second World War, many employers offered health insurance as a benefit to attract workers. When the war ended, labor unions began bargaining for health benefits wherein the Supreme Court in 1940 ruled that such benefits be included in the conditions of employment.

In the middle of the 1950s more than 60% of Americans have hospital insurance that includes surgical and medical. Employers were then paying 35% of the net cost of their workers’ health care insurance. By 1965 the Medicare and Medicaid social plans were enacted to make health care accessible to the poor and the elderly. The term Health Maintenance Organization was coined to call all groups practicing prepaid insurance and in 1973 the federal HMO Act was signed to provide grants and loans for the start-up of new and expansion of existing HMOs, and it also allowed federally qualified HMOs to form in states that restricted the development of HMOs. (Radich, 2006, p. 5, ¶6). In the 1980s Preferred Provider Organization PPO came into existence. It is composed of hospitals and physicians that render particular health care services to a group of people and differs from HMOs because PPO does not accept capitation risks. It is the insurance company or the self-insured employer that takes all the responsibilities. During the 1990s, the beneficiaries of managed cares rose considerably and keep on growing. Today, 90% of the health care industry is controlled by managed cares.

Issues and Problems. The biggest problem facing the U.S. health care system is its high cost of services where most people believe is becoming too profit-driven. Consumers are troubled of not being able to afford needed care anymore and may loose their insurance coverage. Many companies are becoming frustrated of providing expensive insurance for their workers and workers are burdened with high premiums who contend to having lower wage hike. Americans spend a considerable amount of their income to get quality health care. Federal budget is continuously stretched to accommodate delivery of services. There is an unprecedented increase in health care costs over the last 30 years. In 1960, the government only spent 5% of its GDP to health care. In 2003 it reached 15% and by 2004 it hit 16% and still rising. Among members of the Organization of Industrialized Countries, the U.S. health care system is the highest compared to other members who has only 8.6%. Attributing to high costs are also high salaries of physicians and too much dependency on private health insurance. Technologies has greatly improved delivery of health services but likewise increased its costs.

As a result of costly health services, many people could no longer access basic health care. Coverage has become inadequate. In 2003, 45 million Americans were uninsured. In 2004 the number increased to 45.8 million and in 2005 it went up to 46 million. Between 2000 and 2004, nearly six million people were unable to get health insurance. Over 80% of uninsured come from working families while 34% of Hispanics and over 20% of African-Americans have no insurance. Many have access to employer-based health insurance but could not afford to get one. According to the National Academy of Sciences’ Institute of Medicine, around 18,000 uninsured adults die each year. Despite the various choices of insurance coverage provided by the system, people can only depend on the ones that they can afford

Another problem is workforce shortage. The demand of registered nurses and health professionals keeps on growing. The Department of Health and Human Services said that there is a need of 2.8 million nurses by 2020. Many hospitals reported vacant positions for nurses since 2000. If the trend continues, there will be serious implications on the ability of hospitals to care for patients and communities. There is a similar shortage of pharmacists, with 6,500 vacancies. An estimated 21% of hospital pharmacy positions are unfilled. Only 25 of the 50 states have an adequate number of dentists. In many areas, there is only one practicing dentist for 2,000 people. (Uretsky, 2004, ¶18). Due to this shortage, many physicians complain of job pressure in dealing with so many patients in limited time making them unfocused to treat patients properly.

Key Stakeholders. The U.S. health care system represents a wide range of stakeholders that are mainly categorized as health providers, payers or insurers, employers, and patients. The role of health providers is to deliver the necessary health services and resources in treating patients with their illnesses. These are the hospitals, clinics, home care services and other health facilities. Through the physicians and other health professionals, health providers give the ultimate quality care to people. Payers or insurers are insurance companies that offer various affordable health policies so that people will have easy access to health care. As a third party, they serve as the liaison between health providers and the patient.

They fall under the managed care system that administers and processes the payment of patients’ health expenses. Employers are company owners who have purchased health insurance for their employees. They subsidized payment of insurance premiums of their workers. Subsidy varies accordingly to company policies. Most employers pay half of the premium of their employees’ policies. Lastly, the patients are the direct beneficiaries of the health care system. Without them, there could be no health care. The system revolves around the patients’ needs and all other aspects of health care are centered on how to treat patients with utmost quality of care. They are the most important factor in the health industry as they supply all other stakeholders the knowledge on how to run and improve efficiently the system. Knowing what the patients need and want will lead to better understanding of the health care system and implement changes accordingly.

Major Developments. “Keeping America competitive requires affordable health care. Our government has a responsibility to provide health care for the poor and the elderly, and we are meeting that responsibility. For all Americans, we must confront the rising cost of care, strengthen the doctor-patient relationship, and help people afford the insurance coverage they need.” (President George W. Bush, State of the Union Address, January 31, 2006). With this major steps were undertaken in order to meet this challenge and make health care more transparent. An executive order was signed this August 22, 2006 empowering consumers to save on quality care so that Americans can spend wisely on health care. To spend their health care dollars wisely, Americans need to know their options in advance, know the quality of doctors and hospitals in their area, and know what procedures will cost. (White House, 2006, ¶2). The new directive will increase transparency in pricing, quality, encourage adoption of health information technology standards, and provide options that promote quality and efficiency in health care.

To make health care affordable, small businesses, civic and community groups will be allowed to form Association Health Plans so they could purchase health insurance at par with big companies. Congress is set to pass the medical liability reforms that will help injured patients received compensation quickly and reduced lawsuits. The expansion of health information technology (Health Informatics) will make electronic health records available to most Americans within the next 10 years. The technology will increase efficiency, reduce medical errors, and enhance quality of care. The potential benefits of technology will help consumers access their health records online, research for health information, and medical literature. It will assist clinical care in remote and virtual surgery, monitor patients in home settings, and transfer medical records and images in an instant. In addition, health informatics will hasten financial transactions, give consumers access to information about health plans and participating providers. Consultation among physicians will be handy through videoconferencing with real-time sharing of opinion and records at the same time continuous professional education through distance learning with real-time transmission of lectures and videos that create virtual classrooms as well as simulate surgical procedures. Restructuring the system has been geared towards a health care that is safe, effective, patient-centered, timely, efficient, and equitable.


Plunkett Research, Ltd. (2006). Introduction to the Health Care Industry. Health Care Trends. Industry Statistics, Trends and In-depth Analysis of Top Companies. Retrieved Sept. 5, 2006, from http://www.plunkettresearch.com/Industries/HealthCare/HealthCareTrends/tabid/294/Default.aspx

Torreblanca, M., Friend, S. & Oosterom, W. (2003). An insight into the US healthcare system. Regulatory Affairs. PricewaterhouseCoopers, UK. Retrieve September 5, 2006, from http://pwchealth.com/pdf/insight.pdf 

Uretsky, S. D., PharmD. (2004). Healthcare in the United States. Article Section. Retrieve September 5, 2006, from http://www.medhunters.com/printArticle/healthcareInTheUsa.html

The White House. (2006). Strengthening Health Care. InFocus. Retrieved September 5, 2006, from http://www.whitehouse.gov/infocus/healthcare/

Radich, A. E. (2006). A Brief History of the Healthcare Industry in America. Ohio University College of Osteopathic Medicine. Retrieve September 5, 2006, from http://www.ooanet.org/pdf/OUCOMManagedCare.pdf

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