HSA 3111—The U.S. Healthcare System

1. HSA 3111—The U.S. Healthcare System Dr. Larry West http://systems.cohpa.ucf.edu/lwest Write This Down

2. Topics • Motivations • The Healthcare System • Ten Characteristics • Why Should We Care? • Trends and Directions • Healthcare in Other Countries • Course Administration “We have now just enshrined, as soon as I sign this bill, the core principle that everybody should have some basic security when it comes to their healthcare.” Barack Obama “This is a big f*****g deal” Joe Biden

3. What Is the U.S. Healthcare System? • What are the major components listed in the book? • Consider a routine and common medical procedure such as a knee replacement • Name each type of person that participates in the delivery of the procedure • Name each type of institution that participates in the delivery • Name individuals and institutions that could have a financial stake in the procedure

4. Motivations • What are the motivations for each participant in the procedure we just discussed?

5. Motivations (cont.) • Economists argue that the behavior of an economic system is best explained when assuming that each participant makes decisions that provide the best payoff to the decision maker. • Whenever the structure and conduct of an industry is studied, this assumption holds the greatest explanatory power.

6. Motivations (cont.) • The U.S. healthcare system consists of individuals and institutions (companies and governments) that deliver healthcare. • We want to know: • What forces shaped the roles, practices, and institutions? • What are the decision rights each participant has? • What are the costs and benefits faced by each decision maker? • How do decisions impose or create costs and benefits for other participants?

7. Motivations (cont.) • List the types of decisions that a physician will make over the course of their career • For each type of decision list the cost and benefit to the physician of the different possible choices

8. Healthcare in the U.S. • “Most developed countries have national health insurance programs run by the government and financed through general taxes. Almost all citizens in such countries are entitled to receive health care services” (p. 2) • “Such is not the case in the United States, where not all Americans are automatically covered by health insurance.” (p 2) • Why do you think this is?

9. The Healthcare “System” • “Hence, it may be somewhat misleading to talk about the American health care delivery “system” because a real system does not exist.” (p. 2) • “The US health care system is unnecessarily fragmented, which is perhaps its central feature.” (p. 2) • System (definition) (dictionary.com) • an assemblage or combination of things or parts forming a complex or unitary whole • a coordinated body of methods or a scheme or plan of procedure; organizational scheme

10. The Healthcare “System” (cont.) • “US health care does not consist of a network of interrelated components designed to work together coherently, which one would expect to find in a veritable system. To the contrary, it is a kaleidoscope of financing, insurance, delivery, and payment mechanisms that remain unstandardized and loosely coordinated.” (p 4) • Once again, why do you think this is? • What are the consequences to all parties? • Can you name a system that does work together coherently?

11. The Healthcare “System” (cont.) • “The market-oriented economy in the United States attracts a variety of private entrepreneurs driven by the pursuit of profits in carrying out the key functions of health care delivery.” (p 4) • “Each individual and corporate entity within a predominantly private entrepreneurial system seeks to manipulate financial incentives to its own advantage without regard to its impact on the system as a whole.” (p. 5) • Is this good or bad? Justify your answer!!!

12. The Healthcare “System” (cont.) • The blend of public and private involvement in the delivery of health care has resulted in (p. 5): • A multiplicity of financial arrangements that enable individuals to pay for health care services • Numerous insurance agencies • Multiple payers that make their own determina-tions regarding how much to pay for service • A large array of settings where medical services are delivered • Numerous consulting firms offering expertise

13. The Healthcare “System” (cont.) • “Such a system is not subject to overall planning, direction, and coordination from a central agency, such as the government. Due to the missing dimension of system-wide planning, direction, and coordination, there is duplication, overlap, inadequacy, inconsistency, and waste leading to complexity and inefficiency.” (p. 5) • Name another large system that is centrally planned and controlled. • Is the efficiency any better? • Again, what are the trade-offs?

14. The Healthcare “System” (cont.) • What are the roles of governments in the healthcare system as described? • Name other ways in which the government is involved in the economy and society • What are the motivations for government involvement? • (What is the motivation for having government at all?)

15. Size of the Healthcare System • The Kaiser Family Foundation reports that in 2008 healthcare expenditures in the United States topped $2.3 trillion to represent over 16% of the Gross Domestic Product (GDP) * • Total employment 10 million • 744k physicians – 2.2 million nurses • 168k dentists – 226k pharmacists • 700k administrators – 325k therapists • 5,760 hospitals • 150 medical schools • 56 dental schools • 91 pharmacy schools • 1,500 nursing programs * http://www.kaiseredu.org/topics_im.asp?imID=1&parentID=61&id=358

16. The Text’s Four Components • Financing • Insurance • Delivery • Payment • What are the differences in purpose between Financing, Insurance, and Payment?

17. The Disenfranchised • What is the status of a destitute U.S. citizen who needs a readily available medical procedure to save their life but who cannot afford to pay for it? • What groups in the U.S. are disenfranchised or underenfranchised from the healthcare system? • We know the impacts on these individuals—what are the impacts on the rest of us? • Who decides?

18. Transitions to Managed Care • What is “managed care”? • What are the differences between HMOs and PPOs? • What are the goals of managed care? • Who receives the benefits?

19. Ten Characteristics • No central agency governs the system • Access to health care services is selective based on ability to pay • Health care is delivered uner imperfect market conditions • Third-party insurers act as intermediaries between financing and delivery • Existence of multiple payers makes the system cumbersome

20. Ten Characteristics (cont.) • Balance of power among players prevents domination by any one • Legal risks influence practice behavior • Development of new technology creates an automatic demand for its use • New service settings have evolved along a continuum • Quality is no longer accepted as an unachievable goal in the delivery of health care

21. Characteristics—No Central Agency • Note the reference to other nations with a “global healthcare budget” • How is care allocated? • What happens when the money runs out? • Global prioritization also gives global control • The U.S. is decentralized • Private financing accounts for 55% of payments • Government finances other 45% (much delivered through states) • Some government standards

22. Characteristics—Partial Access • Book cites Universal Access for countries with national healthcare programs • What economic behavior might we see with universal access? • Do we see it? • What are the consequences of partial access? • Individuals • Social • Providers

23. Characteristics—Imperfect Market • What is a perfect market? • What are the “imperfections” in the healthcare market? • Who sets prices and availability? • Information problems (many)? • Quality problems? • Moral hazard • Why do insurance programs have deductables and copays? • Physicians as agents setting demand • (Who is the “customer” for textbooks?)

24. Characteristics—Third-Party Payers • How do insurers interject themselves as ‘third-party’ participants in a healthcare transaction? • How is the transaction different because of insurers than it might have been if only the patient and provider were involved? • What is the insurers motivation? • What decisions do each party to the transaction make? • What are your options?

25. Characteristics—Multiple Payers • “Multiple payers often represent a billing and collection nightmare for the providers of services.” (p. 16) • What are the consequences of having many independent reimbursing agencies involved in healthcare?

26. Characteristics—Balance of Power • In the retail supply chain from providers to customers WalMart is large enough to be able to dictate terms to the other participants. • There is no corresponding 900 lb. gorilla in the healthcare field, “One positive effect of these opposing forces is that they prevent any single entity from dominating the system.” (p. 17) • “On the other hand…In an environment that is rife with motivations to protect conflicting self-interests, achieving comprehensive systemwide reforms is next to impossible…” (p. 17)

27. Characteristics—Legal Risks • How many advertisements do you see on a weekly basis from attorneys seeking clients for medical malpractice suits? • How much does one of these attorneys make for a successful claim? • What is defensive medicine? • What other consequences does the risk of legal action create for the system?

28. Characteristics—Technology • Name a medical technology that didn’t exist 100 years ago. • Does a patient have a right to a new technology? • What is a “capital investment” and what are the implications for the healthcare system? • What are the incentives for the inventors of new technologies? • (What are the incentives for the inventors of new procedures that don’t involve new physical artifacts or equipment?)

29. Characteristics—Continuum of Service • New settings and specializations have arisen for providing healthcare services along a continuum. • Cradle-to-grave services by a single provider is almost nonenxistent

30. Characteristics—Quality • Why are there increasing pressures for not only delivering quality care but for measuring quality of care?

31. Trends and Directions • Trends in healthcare—explain the motivations • Illness → Wellness • Acute care → Managed care • Inpatient → Outpatient • Individual health → Community well-being • Fragmented care → Managed care • Independent institutions → Integrated systems • Service duplication → Continuum of services

32. Why do we Care? • Understanding the healthcare delivery system is critical for a number of participants • Practitioners • Policy makers • Managers • Patients • Participating companies • Non healthcare employers

33. Healthcare in Other Countries • The variety of healthcare delivery approaches around the world provides a laboratory for exploration. • Understanding the motivations and outcomes of different approaches helps us to understand what might come about here or what we may be able to change • Policy makers • Voters—get beyond the rhetoric

34. Course Administration • Tour of the web site • Syllabus and grading • Schedule • Registration • Quizzes • What you need • Attendance, etc. • How to succeed