United States: One country, five different healthcare systems
By José Colucci Jr.
Each country is free to design the healthcare system that best meets the needs of its citizens. Some did exactly that. France, Italy, Singapore, Spain, New Zealand and UK — to quote a few — have diverse but highly rated healthcare systems. Others should try harder. The US, unfortunately, is among the latter.
Healthcare operates at three different levels:
- The individual patient
- The care team
- The organization
- Political and economic environment.
At Dell Medical School, value-based care is built into the core of our curriculum and clinical practice. While we have freedom to design at the three first levels to provide the best value, the fourth level — policy making — is a challenge that is beyond the scope of a single institution.
Charlie Munger famously said, “Show me the incentive and I will show you the outcome.” The outcomes we are getting from our healthcare are dictated by economic incentives put in place a long time ago. For instance, if you pay per procedure, you will get more procedures. One of our missions at Dell Med is to move care from transactional, episodic to integrated and human-centered. Understanding underlying economic and policy models driving the current state of affairs is the first step to designing a better future. Here we explain the various alternative models of care funding and delivery.
One of the challenges to improving the US healthcare system is the doctrine of American exceptionalism, which prevents any meaningful conversation about healthcare reform. While it is true that the United States is unique in some aspects, healthcare is not one of them. Successful universal experiences in healthcare can apply equally well to the US. The insistence on American exceptionalism prevents us from learning from positive experiences and policies around the globe. As unique as countries can be, healthcare systems tend to fall into one out of five different models. Maybe people would be less reluctant to consider a different system if they knew that we already have all these five different healthcare models operating concurrently in the US.
Veterans Affairs: Single payer, single provider
Also called Beveridge Model, after Sir William Beveridge, who established the system in Great Britain after World War II. Motivated by the havoc caused by the war, Beveridge defended the right of anyone to receive health care on the basis of need and regardless of ability to pay. It was essential for the post-war reconstruction of Great Britain.
In this model, most of the healthcare is paid for by the government and provided at government-owned facilities through the National Health Service. Most, but not all, physicians are government employees. The emphasis is on primary care and disease prevention. The system is also called socialized medicine.
Although the term “socialized medicine” makes many Americans uncomfortable, we have an almost identical system here in the US at the VA (Veterans Affairs). The VA, via the Veterans Health Administration, provides healthcare to military veterans at its own medical centers and clinics, runs its own hospitals, and employs its own doctors and other providers.
Medicare: Single payer, multiple providers
A single payer — generally the government — administers the healthcare system, sets premiums and reimburses providers. This is the Canadian system, where the government does not participate in the delivery of care nor collects any health information about individuals but is responsible for 70% of all healthcare spending. Many individuals have supplemental plans that cover prescription drugs, dental and eye care.
We have a similar system in the US for people in Medicare (65 years or older) and parts of Medicaid. People in Medicare can also buy a supplemental insurance called Medigap from private insurers.
Affordable Care Act: Multi-payer, multi-provider
Also called the Bismarck model, after Otto von Bismarck — the Prussian chancellor who invented the welfare state in Germany, back in the 19th century. It is the oldest social healthcare system in the world. In the Bismarck model, the insurance system, or “sickness funds”, are funded jointly by employees and employers through payroll deductions. Two or more providers are responsible for administering healthcare. The government, although not an active participant, sets the rules and monitors the system. The system offers patients freedom to choose the care they want, with very few restrictions. They can also opt out of the system, as many wealthy people do.
Co-pays in Germany are much smaller (about 10 euros per visit) and employees’ premiums are a percentage of their income. The more money you make, the more money you pay. In the US, people in the Affordable Care Act (ACA) enjoy similar benefits, with a few key differences. The US is (or was, I should say) moving to a multi-payer, compulsory, employment-based, regulated system. The program was designed to address the so-called “Medicaid gap”: people who make too much to qualify for state Medicaid programs and too little to qualify for federal government subsidies to buy health insurance.
Commercial Health Plans: Multi-payer with private insurance
A variety of payers, including state- and federal-level plus commercial health insurance companies reimburse healthcare providers on a fee-for-service basis. Most people have insurance through their employer. This is the US system for most people.
US is almost unique in the sense that health insurance is tied to employment. Historical circumstances led to that, not careful planning. In 1942, during WWII, the National War Labor Board established a wage cap, forbidding employers from raising their workers’ salaries to prevent workers from moving from one war job to another, which was not in the national interest. Except that health insurance was exempt from the cap. Moreover, the IRS decided that health insurance premiums were tax-free. With incentives like that, employers immediately started to offer health plans in order to attract the best and brightest. Employer-sponsored health insurance mushroomed. For no good reason other than that short-lived historical situation, the system persists to this date.
The poor: Out-of-pocket model
Sometimes called, euphemistically, I like to think, market-driven healthcare system. Healthcare systems are a luxury that many poor countries cannot afford. People in many parts of the world — including rural areas of India, China and South America — rarely, if ever, see a doctor in their lives. When they do, they have to pay out-of-pocket.
In the US, out-of-pocket is the only system available to the 28 million Americans who do not have health insurance.
In addition to the five models above, other small-scale systems combining features of two or more of these systems may be in place in certain locations of the US. In Travis County (essentially the greater Austin region), people who do not qualify for Medicaid or Medicare can enroll in MAP (Medical Access Program). MAP is not health insurance, it is an assistance program that provides access to healthcare through networks of established providers. Users are charged a small co-pay but the bulk of the cost is covered by the program, which is funded and administered by Central Health. Central Health, by its turn, receives funding from Travis County.
For people in MAP, healthcare looks like Canada — a single payer with multiple providers — except that the payer is at the county level, not federal level. A few other US cities have their own, separate healthcare system for the underserved.
In a democracy, said the economist and philosopher John Broome, healthcare should do as much good as possible. Sometimes, it is even necessary to sacrifice the overall good for the sake of fairness, since healthcare should also be judged by how it treats the poorest of society. The US, with its multiple health systems and mix of private and public healthcare funding, creates different classes of citizens according to employment status and ability to pay. Democracy is compromised. Design in health can work to improve care delivery at the patient, the team and the organization level. Improving it at the political and economic level will require all of us.
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