Financing Health-Care Delivery in the United States

by

Candyce S. Berger

• LAST REVIEWED: 06 May 2015
• LAST MODIFIED: 30 September 2013
• DOI: 10.1093/obo/9780195389678-0135

Introduction

The literature on health-care financing follows two distinct lines of inquiry. One is business oriented, focusing on financial systems within health-care organizations. The second line of inquiry focuses on the financing of the health-care delivery, which is the focus of this article. With the introduction of Medicare and Medicaid in 1965, a meteoric growth of the health-care delivery system (called the medical industrial complex) occurred by improving access to care for the elderly and poor. This contributed to a commensurate growth in US health-care spending, resulting in double-digit inflation while the general inflation rate hovered around 3 percent. With the United States spending more on health care than any other industrialized nation, nonpartisan agreement emerged that controlling health-care costs was essential to the stability of the US economy. However, beyond the shared goal of controlling costs and spending patterns, there continues to be little common ground about how to achieve savings. Financing health-care delivery is characterized by a pluralistic system of payer sources and reimbursement mechanisms to providers of health-care services. Attempts to control costs while maintaining standards for access and quality of care have promoted continual health-care reform efforts, culminating in passage of President Obama’s Patient Protection and Affordable Care Act of 2010. Social workers will need a fundamental understanding of health-care spending priorities, provider reimbursement strategies, and health reform initiatives to ensure that priorities such as quality of care and access to services are not lost in the struggle to control health-care spending.

Introductory Works

Familiarity with the structure of the health-care delivery system, health policy, health economics, and financing mechanisms is essential to effective participation in shaping health policy. It is particularly important to understand the structure and functioning of the delivery system in order to assess the impact of various financing strategies on the delivery of care at the acute (e.g., hospitals), ambulatory (e.g., physician offices, clinics) and community-based (e.g., home care services) levels of care. This section presents publications that provide a general overview of fundamental issues relevant to health-care financing. Both Shi and Singh 2013 and Sultz and Young 2011 provide a thorough review of the health-care delivery system, critically examining the structure and processes of the multiple levels of health-care delivery. The latter book is particularly effective in providing a historical context for the evolution of health-care delivery, policy, and financing. Barr 2011 establishes an ecosystem perspective, proposing that the shaping of health policy is multifactorial and discussing the way health care is organized, financed, and delivered. Starr 2011 provides an excellent overview of the history of health-care reform in the United States, highlighting key reform movements and events, from the development of health insurance through the Patient Protection and Affordable Care Act of today. Berger 2008 provides a more focused discussion of the basic elements in health-care financing: who pays for health care, how providers are reimbursed, and where the money is spent. Henry J. Kaiser Family Foundation 2012 provides more-specific information about health-care expenditures. This primer also provides an international comparison, contrasting the efficiency and effectiveness of the US health-care delivery system to other industrialized countries. Moving beyond merely the structure of the financing system, this primer explores the impact of health-care costs on all stakeholders. The US federal government is the single-largest payer of health-care services, distributed primarily through the three largest programs: Medicare, Medicaid, and Children’s Health Insurance Program (CHIP). Medicare is an entitlement program that does not require an assessment of assets (means test), which is available to individuals who are over the age of sixty-five or are disabled. Medicaid is a state-operated program that is financed through cost sharing by the federal and state government. Individuals must meet established financial eligibility requirements (means test) to qualify. CHIP also is a federal-state cost-sharing program that is administered at the state level. It is similar to Medicaid in many of its structures and processes but focuses on extending health-care benefits to children who do not qualify for Medicaid. Like Medicaid, participants must meet established financial-eligibility criteria (means test). National Health Policy Forum 2011 provides an outstanding introduction to the components of each program, with content on the financing mechanisms and cost analysis.

• Barr, D. A. 2011. Introduction to U.S. health policy: The organization, financing, and delivery of health care in America. 3d ed. Baltimore: Johns Hopkins Univ. Press.

  This book utilizes an ecosystem perspective, acknowledging how psychosocial factors shape the development and implementation of health policy. It provides a balanced assessment both of market-based ideologies as well as more-universal approaches that emphasize equal access to care. It would be a good text both for undergraduate- and graduate-level students. First published in 2002 (San Francisco: Benjamin Cummings).

• Berger, C. 2008. Health care financing. In Encyclopedia of social work. 20th ed. Vol. 2, D–I. Edited by T. Mizrahi and L. E. Davis, 332–340. Oxford: Oxford Univ. Press, 2008.

  This chapter provides an overview of health-care financing, examining the payers (e.g., government, private insurance, and out-of-pocket) for health-care services, and the different mechanisms for reimbursing providers. The chapter also discusses health-care spending patterns across the various health-care sectors.

• Henry J. Kaiser Family Foundation. 2012. Health care costs: A primer. Washington, DC: Henry J. Kaiser Family Foundation.

  This document introduces the concepts of health-care cost, care utilization patterns, expenditures in the United States, and cost containment strategies. It emphasizes the impact of costs on individuals, families, and employers. International comparisons highlight US spending patterns in relation to achieved health outcomes.

• National Health Policy Forum, George Washington Univ. 2011. Health policy essentials: The fundamentals of Medicare, Medicaid, and CHIP. Washington, DC: National Health Policy Forum.

  This web-based document is a compilation of briefings that were prepared for the 112th Congress to bring them current on health-care issues. It is an excellent introduction to the big-three government insurance programs.

• Shi, L., and D. A. Singh. 2013. Essentials of the US health care system. 3d ed. Burlington, MA: Jones and Bartlett.

  This book provides an overview of the health-care delivery system, covering structural, policy, and workforce topics. The chapter on health-care financing provides a clear explanation of the system of payers and reimbursement mechanisms that would be easily understood by undergraduate students.

• Starr, P. 2011. Remedy and reaction: The peculiar American struggle over health care reform. New Haven, CT: Yale Univ. Press.

  Starr presents the historical evolution of health-care reform in America, starting with the development of health insurance in the early 20th century and continuing through the Patient Protection and Affordable Care Act of today. He examines how ideology, politics, and the media shaped the course of health-care reform.

• Sultz, H. A., and K. M. Young. 2011. Health care USA: Understanding its organization and delivery. 7th ed. Sudbury, MA: Jones and Bartlett.

  This is a very good analysis of the health-care delivery system. The chapter on financing is strong, with an excellent second chapter that reviews the history and evolution of health-care delivery in the United States.