U.S. Healthcare System Research Paper Starter

U.S. Healthcare System

Although about half of current medical expenses in the United States are currently paid for through government programs such as Medicare (for the elderly), Medicaid (for the very poor and disabled), and the Children’s Health Insurance Program (CHIP)for children, the American health care system can best be described as a patchwork of public and private programs (such as employer-based coverage). A mixture of public programs and private programs is common among nations that essentially cover all residents, but the American system is unique — and often uniquely inefficient in economic terms.

Keywords Accessibility; Adverse Selection; HMO (Health Maintenance Organization); Medicaid; Medicare; Medicare Modernization Act of 2003 (Part D); Managed Care; "Play or Pay" State Health Care Tax Policies; Rationing Health Care; Single-Payer Health Care System; CHIP (Children’s Health Insurance Program); Socialized Medicine; Two-Tiered Health Care System; VA (United States Department of Veterans Affairs)

The US Health Care System

Social Issues


Health Care Systems

The medical business defies the normal laws of economics in at least three important ways:

  • Government-run programs are often cheaper, more administratively efficient, and even of superior quality than privately-run programs at the national level.
  • Medical insurance functions poorly by market principles unless potential policy holders most in need of health insurance are either denied coverage or are denied the right to redeem policies — both of which result in high administrative costs;.
  • Improved medical technology results in higher rather than lower operating costs — unlike the corresponding relationship in most other businesses.

Other factors in the inefficiency of the American health care system are not specifically related to the nature of the medical business. American medical professionals, doctors in particular, earn larger salaries than medical professionals in other countries. The profit levels for American pharmaceutical companies and insurance companies are high by international standards. The cost of medical training and insurance rates for medical practitioners in the US are also high (Krugman & Wells, 2006).

US Health Care

The quality of the health care system in the United States — for those with publicly funded or private-pay medical insurance — compares well with that of other developed nations, but the availability of medical services in the US does not in relation to adequate medical treatment for the majority of the nation’s population. Most developed, nations have universal health care systems that are more cost-efficient per capita than the patchwork American system (Singer, 2008).

Per capita spending in the United States is twice that of France and more than twice that of Britain, and yet key indicators such as infant mortality and life expectancy are significantly worse. Spending on private care is very high, as is spending on emergency room procedures. Emergency rooms are obligated by law to provide life-saving care, and then the hospital in question can attempt to bill uninsured patients. The huge investment in technology contributes to quality, but it also adds to the expense and therefore the inefficiency of the US health care system (Krugman & Wells, 2006). Most developed nations with universal health care, by contrast, sacrifice technological sophistication — and usually speed of service — for broader coverage (Cutler & Mas, 2003). Most advanced health care systems also use an extensive form of rationing. In the United States, rationing primarily takes on the economic form of administrative managed care (or "explicit rationing") through private employer-based programs, whereas other developed nations often use a physician-based form (or "implicit rationing") based on pressing medical necessity. Germany and Japan offer a form of health care through employers, but everyone is covered; cost and quality in those nations are also increasingly strained (LaFrance, 2007).

Health Care Spending

The national expenditure on medical services was over $2.7 trillion in 2011, or $8,680 per person. (Centers for Medicare and Medicaid Services, 2012). Spending on health care during that year was over 17 percent of the Gross Domestic Product (GDP). This figure is expected to rise to 20 percent by the year 2021 (Wayne, 2012). The average rate for developed, capitalist countries is under 12 percent of the GDP. In the 1960s, that figure was 5.2 percent of the GDP in the US. Since 2000, the rate of citizens covered by employer-based health insurance has fallen from about 70 percent to about 55 percent in 2011, and premiums have been increasing rapidly for both employers and employees — as have the deductibles for policy holders. The number of the uninsured individuals in the United States in 2012 was approximately 48 million people, or about 15 percent of the population. This figure is up from 2006 when approximately 47 million citizens were uninsured, or 16 percent of the population (Krugman & Wells, 2006; Singer, 2008). Forty-two percent of workers who earn minimum wage receive health-care benefits, in contrast with about 90 percent of workers making three times the minimum wage or more (LaFrance, 2007). The average age of the uninsured worker is 31, and the average age of the insured worker is 37. The uninsured are more likely to be minorities, single, little-educated, or self-employed or employed by a small company; they are also less likely to have regular check-ups, vaccinations, annual physicals, and preventative cancer tests than the insured (Blakely, 2000).

The Uninsured/Underinsured

Of the uninsured in 2012, 35.1 million were native-born Americans, 3.3 million were naturalized citizens, and 9.5 million were foreign-born noncitizen residents. Among adults aged eighteen to sixty-four, 15.3 million full-time workers were uninsured as compared to 13.1 million part-time workers who were uninsured—together representing 28.4 million, or more than half, of the uninsured that year (DeNavas-Walt, Proctor & Smith, 2013). This likely suggests that a high percentage of employers do not provide health care insurance to their employees.

Smith (2008) suggests there is a strong correlation between lack of insurance and poor health: "While it is difficult to separate the consequences of being uninsured from the factors that contribute to being uninsured (e.g., lack of employment, lower income), evidence indicates a strong correlation between not having insurance and not receiving regular health care and thus having poor health" (p. 147).

The problem of being uninsured creates a cycle of social problems. An uninsured person tends to avoid going to the doctor because of the lack of inability to pay. As a result, any nascent condition the individual may have in its infancy will likely be far worse by the time he or she does see a doctor. This creates the necessity for complicated testing and treatment that is far more expensive than if it had been dealt with at the beginning. Thus, the patient ends up in a vicious cycle in which he or she cannot pay for insurance but ends up owing hundreds and possibly thousands of dollars for medical care. He or she may be put on a public plan, supplemented by private insurance company premiums, a pattern that ultimately contributes to rates increasing.

As mentioned earlier, one of the reasons many go uninsured is due to a decline in employers providing health care benefits. "The recent drop in ESI coverage was due partly to a decline in health benefit offers by small employers, but also to fewer workers being '"eligible"' for coverage or electing to participate in employers' plans" (Smith, 2008, p. 41). Many of the uninsured are employed and earn too much to qualify for Medicaid (Abelson & Freudenheim, 2008). Others are considered underinsured, which means they are unlikely to receive necessary treatment and face financial strain comparable to the uninsured. The gains in "comprehensive coverage" achieved in the 1990s have largely been reversed (Schoen, Doty, Collins, & Holmgren, 2005). Wages are increasing at a rate lower than the rising rates for medical expenses. The amount spent by employers on employee health care programs halved between 1986 and 2005. A 2013 survey, however, concluded that corporate employers plan to spend an additional 13 percent on employee wellness programs such as weight-loss programs and onsite flu shots.


Medicaid is a federal program that provides health insurance coverage to qualifying very low-income Americans, particularly among those over age sixty-five and children under eighteen. Medicare is the program that provides people over sixty-five with medical care. It also provides support for persons with certain disabilities and people of all ages who have end-stage renal disease (kidney failure). Medicare has become far more complicated than it was in its original form. There are four sections to Medicare: A, B, C, and D. Respectively, they cover hospital insurance, medical insurance, advantage plans, and prescription drug coverage. One of the ongoing problems for the Medicare program has been to continue to provide the health insurance required by seniors and persons with disabilities at the same time as trying to contain costs. Like Medicaid, Medicare also has variations in practice among states, which also leads to some confusion over and frustration with the program

Medicare is represented by a powerful lobby group and influential voters — the elderly. Medicaid, by contrast, is poorly funded, important to a demographic that does not vote at a high rate, and dependent on politicians to maintain it (Krugman & Wells, 2006). In April 2008, Congress placed a one-year moratorium on the federal government's attempt to cut Medicaid funding by $13 billion over the next five years (New York Times, 2008).


There is some evidence that greater accessibility to health care coverage through a socialized medical system or a single-payer system saves money in the broadest sense because it results in healthier workers who are more productive, and healthier citizens use fewer medical resources over the course of their lives, but this evidence is not overwhelming. In sociological terms, this idea can be described as an investment in social capital (Turner, 2006, p. 264). It has been argued that anxiety over the absence of any or adequate medical coverage and pending medical bills results in a lowered sense of well-being and lower worker productivity. Blakely (2000) observes that improved health accounts for 18 percent of improvements in employee efficiency among male workers and 9 percent among females workers. On the whole, however, the evidence suggests that the economic and resource-based inefficiency of the American system is the primary force driving health care reform.

Woolhandler, Campell, and Himmelstein (2003) conclude that as of 1999, per capita medical costs were $1,059 in the United States and $357 in Canada. In 2012, the per capita medical costs in the United States had risen to $8,233 and to $4,445 in Canada. Well before 2000, the Canadian single-payer system was shown to be more economically efficient. Redelmeier and Fuchs (1993) observe that a per capita comparison of the Canadian and American health care systems during 1885 1985 reveals that $30 billion would have been saved in the US if the Canadian model had been used based on lower administrative costs and greater efficiency through centralized technology and medical staffing. And yet, the Canadian system featured substantially more hospital admissions, significantly longer stays in hospitals, and slightly more hospital beds per capita. Most significantly, emergency room visits were lower in Canada by more than 100 percent (Redelmeier & Fuchs, 1993). A Canadian study illustrates a relatively strong connection between poor health and low income: Higher prescription drugs costs led to more emergency room admissions for the elderly and welfare recipients. Somewhat less conclusively, a recent US study found a decline in use of necessary drugs (for diabetes, for example) with increased co-payment expectations (Schoen, Doty, Collins, & Holmgren, 2005).

In the United States, the unpaid hospital bills of the uninsured amounted to nearly $49 billion a year (Kennedy, 2011). Even uninsured families with incomes 400 percent above the poverty line could only pay an average of 37 percent of their hospital bills. According to a 2003 study, medical expenses have been the primary cause of filing for bankruptcy in 25.1 percent of cases, and the exact same percentage identified unemployment as the primary cause; surprisingly, nearly half of those who filed for bankruptcy according to this study earned more than $35,000 a year (Levitt, 2003). About half of all bankruptcies are now estimated to be partially or largely related to medical expenses (Singer, 2008). Uninsured individuals who use emergency room services and cannot pay the full fees typically pass those costs on to the insured, businesses, and taxpayers (Blakely, 2000). A study commissioned by the Pennsylvania state government concludes that 6.5 percent of the money spent on private health insurance is allocated to pay for emergency room visits by the uninsured (Sack, 2007).

The Patient Protection and Affordable Care Act (PPACA) of 2010—commonly called the Affordable Care Act or Obamacare, after its major backer, US president Barack Obama—sought to reform a number of aspects of the US health insurance policy, as well as improve the access to and quality of health care services. Since the passage of PPACA, insurers have been required to cover preventive services without deductible, copayment, or other out-of-pocket expense; extend coverage to...

(The entire section is 6118 words.)