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  • 8/8/2019 Compara Report


    PAMANTASAN NG LUNGSOD NG MAYNILAUniversity of the City of Manila

    Intramuros, Manila

    Graduate School of Arts, Science and Education




    Submitted to:

    Vina Grace C.Belaya, MSN,MANProfessor

    Submitted by:

    Mariane S. Montemayor R.N.

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    U.S. healthcare expenditures are expected to be more than $1.4 trillion in 2004, representing 14

    percent of the Gross Domestic Product (GDP) and making healthcare the largest industry in the

    United States. This figure corresponds to $41,000 expended per second and more than $4,400

    spent per capita per year. Despite such large spending and the largest amount per capita in the

    world, many Americans remain uninsured and do not have access to healthcare services.

    Furthermore, the industry employs more than 10 million people in settings ranging from nursing

    homes to academic medical centers. While our country has the most formidable medical

    workforce in the world, and develops and uses the most modern medical technologies, the World

    Health Organization (WHO) (2000) recently ranked the overall performance of the U.S.

    healthcare systems 37th out of 191 countries worldwide. While one may argue with the set of

    criteria employed by WHO to compare international healthcare systems, as described in a report

    yet to be released (forthcoming, 2004) by the National Academy of Engineering in collaboration

    with the Institute of Medicine, it remains true that the industry has devoted relatively little

    technical talent and intellectual effort to optimizing its operations (particularly at higher levels of

    systems hospitals, regional networks, etc.), or to measuring its performance in terms of quality

    and productivity. This neglect has contributed to the development of a high-cost delivery systemwith poor operational processes and performance measures that provides highly uneven quality

    of care and limited coverage/reach of quality care. It has also contributed to the development of a

    great cultural divide between physicians focused on patient relationships and improvements in

    individual quality-of-care and healthcare administrators focused on cost control and the

    productivity of the business; a divide that has undermined the performance of both parties.

    Engineering ENTERPRISESummer 2004

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    Health care in the United States is provided by many separate legal entities. Health care

    facilities are largely owned and operated by the private sector. Health insurance is primarily

    provided by the private sector, with the exception of programs such

    as Medicare, Medicaid,TRICARE, the Children's Health Insurance Program and the Veterans

    Health Administration.

    At least 15.3% of the population is completely uninsured, and a substantial additional portion of

    the population (35%) is "underinsured", or not able to cover the costs of their medical

    needs. More money per person is spent on health care in the United States than in any other

    nation in the world,and a greater percentage of total income in the nation is spent on health care

    in the U.S. than in any United Nations member state except for East Timor. Despite the fact that

    not all citizens are covered, the United States has the third highest public healthcare expenditure

    per capita. A 2001 study in five states found that medical debt contributed to 62% of all personal

    bankruptcies. Since then, health costs and the numbers of uninsured and underinsured have


    Active debate about health care reform in the United States concerns questions of a right to

    health care, access, fairness, efficiency, cost, and quality. Many have argued that the system does

    not deliver equivalent value for the money spent. The US pays twice as much yet lags behind

    other wealthy nations in such measures as infant mortality and life expectancy, though therelation between these statistics to the system itself is debated. Currently, the U.S. has a higher

    infant mortality rate than most of the world's industrialized nations. The United States life

    expectancy lags 42nd in the world, after most rich nations, lagging last of the G5 (Japan, France,

    Germany, UK, USA) and just after Chile (35th) and Cuba (37th).

    The USA's life expectancy is ranked 50th in the world after the European Union

    (40th).The World Health Organization (WHO), in 2000, ranked the U.S. health care system as

    the highest in cost, first in responsiveness, 37th in overall performance, and 72nd by overall level

    of health (among 191 member nations included in the study). The Commonwealth Fund ranked

    the United States last in the quality of health care among similar countries,and notes U.S. care

    costs the most by far.

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    According to the Institute of Medicine of the United States National Academies, the United

    States is the "only wealthy, industrialized nation that does not ensure that all citizens have

    coverage" (i.e. some kind of insurance). The same Institute of Medicine report notes that "Lack

    of health insurance causes roughly 18,000 unnecessary deaths every year in the United States

    while a 2009 Harvard study published in the American Journal of Public Health found a much

    higher figure of more than 44,800 excess deaths annually in the United States due to Americans

    lacking health insurance.More broadly, the total number of people in the United States, whether

    insured or uninsured, who die because of lack of medical care was estimated in a 1997 analysis

    to be nearly 100,000 per year.

    On March 23, 2010, the Patient Protection and Affordable Care Act became law, providing for

    major changes in health-insurance procedures.

    Health care spending

    U.S. healthcare costs exceed those of other countries, relative to the size of the economy or GDP.

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    Total U.S. healthcare spending as a percent of U.S. GDP (gross domestic product), Click on chart for data.

    Current estimates put U.S. health care spending at approximately 16% of GDP, second highest

    to East Timor (Timor-Leste) among all United Nations member nations. The Health and Human

    Services Department expects that the health share of GDP will continue its historical upward

    trend, reaching 19.5% of GDP by 2017. ]Of each dollar spent on health care in the United States

    31% goes to hospital care, 21% goes to physician services, 10% to pharmaceuticals, 8%

    to nursing homes, 7% to administrative costs, and 23% to all other categories

    (diagnostic) laboratory services, pharmacies, medicaldevice manufacturers, etc.

    The Office of the Actuary (OACT) of the Centers for Medicare and Medicaid Services publishes

    data on total health care spending in the United States, including both historical levels and future

    projections. In 2007, the U.S. spent $2.26 trillion on health care, or $7,439 per person, up from

    $2.1 trillion, or $7,026 per capita, the previous year. Spending in 2006 represented 16% of GDP,

    an increase of 6.7% over 2004 spending. Growth in spending is projected to average 6.7%

    annually over the period 2007 through 2017.

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    In 2009, the United States federal, state and local governments, corporations and individuals,

    together spent $2.5 trillion, $8,047 per person, on health care. This amount represented 17.3% of

    the GDP, up from 16.2% in 2008. Health insurance costs are rising faster than wages or

    inflation, and medical causes were cited by about half of bankruptcy filers in the United States in


    The Congressional Budget Office has found that "about half of all growth in health care spending

    in the past several decades was associated with changes in medical care made possible by

    advances in technology." Other factors included higher income levels, changes in insurance

    coverage, and rising prices. Hospitals and physician spending take the largest share of the health

    care dollar, while prescription drugs take about 10%. The use of prescription drugs is increasing

    among adults who have drug coverage.

    One analysis of international spending levels in the year 2000 found that while the U.S. spends

    more on health care than other countries in the Organisation for Economic Co-operation and

    Development (OECD), the use of health care services in the U.S. is below the OECD median by

    most measures. The authors of the study concluded that the prices paid for health care services

    are much higher in the U.S. Economist Hans Sennholz has argued that the Medicare and

    Medicaid programs may be the main reason for rising health care costs in the U.S.

    Health care spending in the United States is concentrated. An analysis of the 1996 Medical

    Expenditure Panel Survey found that the 1% of the population with the highest spending

    accounted for 27% of aggregate health care spending. The highest-spending 5% of the

    population accounted for more than half of all spending. These patterns were stable through the

    1970s and 1980s, and some data suggest that they may have been typical of the mid-to-early 20th

    century as well.

    One study by the Agency for Healthcare Research and Quality (AHRQ) found significant

    persistence in the level of health care spending from year to year. Of the 1% of the population

    with the highest health care spending in 2002, 24.3% maintained their ranking in the top 1% in

    2003. Of the 5% with the highest spending in 2002, 34% maintained that ranking in 2003.

    Individuals over age 45 were disproportionately represented among those who were in the top

    deciles of spending for both years.

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    Health care cost rise based on total expenditure on health as % ofGDP. Countries

    are USA, Germany, Austria, Switzerland, United Kingdom and Canada.

    Seniors spend, on average, far more on health care costs than either working-age adults or

    children. The pattern of spending by age was stable for most ages from 1987 through 2004, with

    the exception of spending for seniors age 85 and over. Spending for this group grew less rapidly

    than that of other groups over this period.

    The 2008 edition of the Dartmouth Atlas of Health Care found that providing Medicare

    beneficiaries with severe chronic illnesses with more intense health care in the last two years of

    lifeincreased spending, more tests, more procedures and longer hospital staysis not

    associated with better patient outcomes. There are significant geographic variations in the level

    of care provided to chronically ill patients. 4% of these is explained by differences in the numberof severely ill people in an area. Most of the differences are explained by differences in the

    amount of "supply-sensitive" care available in an area. Acute hospital care accounts for over half

    (55%) of the spending for Medicare beneficiaries in the last two years of life, and differences in

    the volume of services provided is more significant than differences in price. The researchers

    found no evidence of "substitution" of care, where increased use of hospital care would reduce

    outpatient spending (or vice versa).

    Increased spending on disease prevention is often suggested as a way of reducing health care

    spending. Research suggests, however, that in most cases prevention does not produce

    significant long-term costs saving. Preventive care is typically provided to many people who

    would never become ill, and for those who would have become ill is partially offset by the health

    care costs during additional years of life.

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    In September 2008 The Wall Street Journalreported that consumers were reducing their health

    care spending in response to the current economic slow-down. Both the number of prescriptions

    filled and the number of office visits dropped between 2007 and 2008. In one survey, 22% of

    consumers reported going to the doctor less often, and 11% reported buying fewer prescription


    In 2009, the average private room in a nursing home cost $219 daily. Assisted living costs

    averaged $3,131 monthly. Home health aides averaged $21 per hour. Adult day care services

    averaged $67 daily.

    Impact on U.S. economic productivity

    On March 1, 2010, billionaire investorWarren Buffett said that the high costs paid by U.S.companies for their employees health care put them at a competitive disadvantage. He compared

    the roughly 17% of GDP spent by the U.S. on health care with the 9% of GDP spent by much of

    the rest of the world, noted that the U.S. has fewer doctors and nurses per person, and said,

    [t]hat kind of a cost, compared with the rest of the world, is like a tapeworm eating at our

    economic body.

    Health care payment

    Doctors and hospitals are generally funded by payments from patients and insurance plans in

    return for services rendered.

    Around 84.7% of citizens have some form of healthinsurance; either through their employer or

    the employer of their spouse or parent (59.3%), purchased individually (8.9%), or provided by

    government programs (27.8%; there is some overlap in these figures). All government health

    care programs have restricted eligibility, and there is no government health insurance company

    which covers all citizens. Americans without health insurance coverage at some time during2007 total about 15.3% of the population, or 45.7 million people.

    Among those whose employer pays for health insurance, the employee may be required to

    contribute part of the cost of this insurance, while the employer usually chooses the insurance

    company and, for large groups, negotiates with the insurance company.

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    In 2004, private insurance paid for 36% of personal health expenditures, private out-of-pocket

    15%, federal government 34%, state and local governments 11%, and other private funds 4%.

    Due to "a dishonest and inefficient system" that sometimes inflates bills to ten times the actual

    cost, even insured patients can be billed more than the real cost of their care.

    Insurance for dental and vision care (except for visits to ophthalmologists, which are covered by

    regular health insurance) is usually sold separately. Prescription drugs are often handled

    differently than medical services, including by the government programs. Major federal laws

    regulating the insurance industry include COBRA and HIPAA.

    Individuals with private or government insurance are limited to medical facilities which accept

    the particular type of medical insurance they carry. Visits to facilities outside the insurance

    program's "network" are usually either not covered or the patient must bear more of the cost.

    Hospitals negotiate with insurance programs to set reimbursement rates; some rates for

    government insurance programs are set by law. The sum paid to a doctor for a service rendered

    to an insured patient is generally less than that paid "out of pocket" by an uninsured patient. In

    return for this discount, the insurance company includes the doctor as part of their "network",

    which means more patients are eligible for lowest-cost treatment there. The negotiated rate may

    not cover the cost of the service, but providers (hospitals and doctors) can refuse to accept a

    given type of insurance, including Medicare and Medicaid. Low reimbursement rates havegenerated complaints from providers, and some patients with government insurance have

    difficulty finding nearby providers for certain types of medical services.

    Charity care for those who cannot pay is sometimes available, and is usually funded by non-

    profit foundations, religious orders, government subsidies, or services donated by the employees.

    Massachusetts and New Jersey have programs where the state will pay for health care when the

    patient cannot afford to do so. The City and County of San Francisco is also implementing

    a citywide health care program for all uninsured residents, limited to those whose incomes and

    net worth are below an eligibility threshold. Some cities and counties operate or provide

    subsidies to private facilities open to all regardless of the ability to pay, but even here patients

    who can afford to pay or who have insurance are generally charged for the services they use.

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    The Emergency Medical Treatment and Active Labor Act requires virtually all hospitals to

    accept all patients, regardless of the ability to pay, for emergency room care. The act does not

    provide access to non-emergency room care for patients who cannot afford to pay for health care,

    nor does it provide the benefit of preventive care and the continuity of a primary care physician.

    Emergency health care is generally more expensive than an urgent care clinic or a doctor's office

    visit, especially if a condition has worsened due to putting off needed care. Emergency rooms are

    typically at, near, or over capacity. Long wait times have become a problem nationally, and in

    urban areas some ERs are put on "diversion" on a regular basis, meaning that ambulances are

    directed to bring patients elsewhere.

    Share by insurance coverage type, for those under 65 years of age

    Most Americans (59.3%) receive their health insurance coverage through an employer (which

    includes both private as well as civilian public-sector employees) under group coverage,

    although this percentage is declining. Costs for employer-paid health insurance are rising

    rapidly: since 2001, premiums for family coverage have increased 78%, while wages have risen

    19% and inflation has risen 17%, according to a 2007 study by the Kaiser Family

    Foundation. Workers with employer-sponsored insurance also contribute; in 2007, the average

    percentage of premium paid by covered workers is 16% for single coverage and 28% for family

    coverage. In addition to their premium contributions, most covered workers face additional

    payments when they use health care services, in the form of deductibles and copayments.

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    Just less than 9% of the population purchases individual health care insurance. Insurance

    payments are a form of cost-sharing and risk management where each individual or their

    employer pays predictable monthly premiums. This cost-spreading mechanism often picks up

    much of the cost of health care, but individuals must often pay up-front a minimum part of the

    total cost (a deductible), or a small part of the cost of every procedure (a copayment). Private

    insurance accounts for 35% of total health spending in the United States, by far the largest share

    among OECD countries. Beside the United States, Canada and France are the two other OECD

    countries where private insurance represents more than 10% of total health spending.

    Provider networks can be used to reduce costs by negotiating favourable fees from providers,

    selecting cost effective providers, and creating financial incentives for providers to practice more

    efficiently. A survey issued in 2009 by America's Health Insurance Plans found that patients

    going to out-of-network providers are sometimes charged extremely high fees.

    Defying many analysts' expectations, PPOs have gained market share at the expense of HMOs

    over the past decade.

    Just as the more loosely managed PPOs have edged out HMOs, HMOs themselves have also

    evolved towards less tightly managed models. The first HMOs in the U.S., such as Kaiser

    Permanente in Oakland, California, and the Health Insurance Plan (HIP) in New York, were

    "staff-model" HMOs, which owned their own health care facilities and employed the doctors and

    other health care professionals who staffed them. The name health maintenance organization

    stems from the idea that the HMO would make it its job to maintain the enrolee's health, rather

    than merely to treat illnesses. In accordance with this mission, managed care organizations

    typically cover preventive health care. Within the tightly integrated staff-model HMO, the HMO

    can develop and disseminate guidelines on cost-effective care, while the enrolees primary care

    doctor can act as patient advocate and care coordinator, helping the patient negotiate the complex

    health care system. Despite a substantial body of research demonstrating that many staff-model

    HMOs deliver high-quality and cost-effective care, they have steadily lost market share. They

    have been replaced by more loosely managed networks of providers with whom health plans

    have negotiated discounted fees. It is common today for a physician or hospital to have contracts

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    with a dozen or more health plans, each with different referral networks, contracts with different

    diagnostic facilities, and different practice guidelines.


    Government programs directly cover 27.8% of the population (83 million), including the elderly,

    disabled, children, veterans, and some of the poor, and federal law mandates public access to

    emergency services regardless of ability to pay. Public spending accounts for between 45% and

    56.1% of U.S. health care spending. Per-capita spending on health care by the U.S. government

    placed it among the top ten highest spenders among United Nations member countries in 2004.

    Government funded programs include:

    y Medicare, generally covering citizens and long-term residents 65 years and older and the


    y Medicaid, generally covering low income people in certain categories, including

    children, pregnant women, and the disabled. (Administered by the states.)

    y State Children's Health Insurance Program, which provides health insurance for low-

    income children who do not qualify for Medicaid. (Administered by the states, with

    matching state funds.)

    y Various programs for federal employees, including TRICARE for military personnel

    (for use in civilian facilities)

    y The Veterans Administration, which provides care to veterans, their families, and

    survivors through medical centers and clinics.

    y National Institutes of Health treats patients who enrol in research for free.

    y Government run community clinics

    y Medical Corps of various branches of the military.

    y Certain county and state hospitals

    The exemption of employer-sponsored health benefits from federal income and payroll taxes

    distorts the health care market. The U.S. government, unlike some other countries, does not treat

    employer funded health care benefits as a taxable benefit in kind to the employee. The value of

    the lost tax revenue from benefits in kind tax is an estimated $150 billion a year. Some regard

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    this as being disadvantageous to people who have to buy insurance in the individual market

    which must be paid from income received after tax.

    Health insurance benefits are an attractive way for employers to increase the salary of employees

    as they are non- taxable. As a result, 65% of the non-elderly population and over 90% of the

    privately insured non-elderly population receives health insurance at the

    workplace. Additionally, most economists agree that this tax shelter increases individual demand

    for health insurance, leading some to claim that it is largely responsible for the rise in health care


    In addition the government allows full tax shelter at the highest marginal rate to investors in

    Health Savings Accounts. Some have argued that this tax incentive adds little value to national

    health care as a whole because the most wealthy in society tend also to be the most healthy.

    Furthermore there is no control over which medical expenses qualify for tax exemption, which

    could be used to fund non-essential care such as cosmetic dentistry and plastic surgery. Also it

    has been argued; HSAs segregate the insurance pools into those for the wealthy and those for the

    less wealthy which thereby makes equivalent insurance cheaper for the rich and more expensive

    for the poor.

    There are also various state and local programs for the poor. In 2007, Medicaid provided health

    care coverage for 39.6 million low-income Americans (although Medicaid covers approximately

    40% of America's poor), and Medicare provided health care coverage for 41.4 million elderly

    and disabled Americans. Enrolment in Medicare is expected to reach 77 million by 2031, when

    the baby boom generation is fully enrolled.

    It has been reported that the number of physicians accepting Medicaid has decreased in recent

    years due to relatively high administrative costs and low reimbursements. In 1997, the federal

    government also created the State Children's Health Insurance Program (SCHIP), a joint federal-

    state program to insure children in families that earn too much to qualify for Medicaid but cannot

    afford health insurance. SCHIP covered 6.6 million children in 2006, but the program is already

    facing funding shortfalls in many states. The government has also mandated access to emergency

    care regardless of insurance status and ability to pay through the Emergency Medical Treatment

    and Labor Act (EMTALA), passed in 1986, but EMTALA is an unfunded mandate.

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    Main article: Uninsured in the United States

    Some Americans do not qualify for government-provided health insurance, are not provided

    health insurance by an employer, and are unable to afford, cannot qualify for, or choose not to

    purchase, private health insurance. When charity or "uncompensated" care is not available, they

    sometimes simply go without needed medical treatment. This problem has become a source of

    considerable political controversy on a national level.

    According to the US Census Bureau, in 2007, 45.7 million people in the U.S. (15.3% of the

    population) were without health insurance for at least part of the year. This number was down

    slightly from the previous year, with nearly 3 million more people receiving governmentcoverage and a slightly lower percentage covered under private plans than the year

    previous. Other studies have placed the number of uninsured in the years 20072008 as high as

    86.7 million, about 29% of the US population.

    Among the uninsured population, the Census Bureau says, nearly 37 million were employment-

    age adults (ages 18 to 64), and more than 27 million worked at least part time. About 38% of the

    uninsured live in households with incomes of $50,000 or more. According to the Census Bureau,

    nearly 36 million of the uninsured are legal U.S citizens. Another 9.7 million are non-citizens,

    but the Census Bureau does not distinguish in its estimate between legal non-citizens and illegal

    immigrants. Nearly one fifth of the uninsured population is able to afford insurance, almost one

    quarter is eligible for public coverage, and the remaining 56% need financial assistance (8.9% of

    all Americans). Extending coverage to all who are eligible remains a fiscal challenge.

    A 2003 study in Health Affairsestimated that uninsured people in the U.S. received

    approximately $35 billion in uncompensated care in 2001. The study noted that this amount per

    capita was half what the average insured person received. The study found that various levels of

    government finance most uncompensated care, spending about $30.6 billion on payments and

    programs to serve the uninsured and covering as much as 8085% of uncompensated care costs

    through grants and other direct payments, tax appropriations, and Medicare and Medicaid

    payment add-ons. Most of this money comes from the federal government, followed by state and

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    local tax appropriations for hospitals. Another study by the same authors in the same year

    estimated the additional annual cost of covering the uninsured (in 2001 dollars) at $34 billion

    (for public coverage) and $69 billion (for private coverage). These estimates represent an

    increase in total health care spending of 36% and would raise health cares share of GDP by

    less than one percentage point, the study concluded. Another study published in the same journal

    in 2004 estimated that the value of health forgone each year because of uninsurance was $65

    $130 billion and concluded that this figure constituted "a lower-bound estimate of economic

    losses resulting from the present level of uninsurance nationally."

    Role of government in health care market

    Numerous publicly funded health care programs help to provide for the elderly, disabled,

    military service families and veterans, children, and the poor, and federal law ensures public

    access to emergency services regardless of ability to pay; however, a system of universal health

    care has not been implemented nation-wide. However, as the OECD has pointed out, the total

    U.S. public expenditure for this limited population would, in most other OECD countries, be

    enough for the government to provide primary health insurance for the entire

    population. Although the federal Medicare program and the federal-state Medicaid programs

    possess some monopolisticpurchasing power, the highly fragmented buy side of the U.S. health

    system is relatively weak by international standards, and in some areas, some suppliers such aslarge hospital groups have a virtual monopoly on the supply side. In most OECD countries, there

    is a high degree of public ownership and public finance. The resulting economy of scale in

    providing health care services appears to enable a much tighter grip on costs. The U.S., as a

    matter of oft-stated public policy, largely does not regulate prices of services from private

    providers, assuming the private sector to do it better.

    Massachusetts has adopted a universal health care system through the Massachusetts 2006

    Health Reform Statute. It mandates that all residents who can afford to do so purchase health

    insurance, provides subsidized insurance plans so that nearly everyone can afford health

    insurance, and provides a "Health Safety Net Fund" to pay for necessary treatment for those who

    cannot find affordable health insurance or are not eligible.

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    In July 2009, Connecticut passed into law a plan called SustiNet, with the goal of achieving

    health-care coverage of 98% of its residents by 2014.

    Health Care Regulation and Oversight

    Further information: American Board ofMedical Specialties, United States Medical Licensing

    Examination, and National Association of Insurance Commissioners

    In the federal government of the United States, the United States Department of Health and

    Human Services is the executive department responsible for overseeing healthcare legislation. It

    is managed by the Secretary of Health and Human Services, a member of the Cabinet. The

    agencies of the Public Health Service are the Health Administration, which regulates health care

    to people without health care, the Food and Drug Administration, which certifies the safety offood, effectiveness of drugs and medical products, the Centers for Disease Prevention, which

    prevents disease, premature death, and disability, the Agency of Health Care Research and the

    Agency Toxic Substances and Disease Registry, which regulates hazardous spills of toxic


    State governments maintain state health departments, and local governments

    (counties and municipalities) often have their own health departments, usually branches of the

    state health department. Regulations of a state board may have executive and police strength to

    enforce state health laws. In some states, all members of state boards must be health care

    professionals. Members of state boards may be assigned by the governor or elected by the state

    committee. Members of local boards may be elected by the mayor council.

    Many health care organizations also voluntarily submit to inspection and certification by

    the Joint Commission on Accreditation of Hospital Organizations, JCAHO.

    A report issued by Public Citizen in April 2008 found that the number of serious disciplinaryactions against physicians by state medical boards declined from 2006 to 2007. This was the

    third yearly decline in a row. The authors concluded that additional action is needed to improve

    the oversight provided by state medical boards.

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    The Centers for Medicare and Medicaid Services (CMS) publishes an on-line searchable

    database of performance data on nursing homes. CMS also publishes a list of Special Focus

    Facilities - nursing homes with "a history of serious quality issues." The Government

    Accountability Office (GAO) has found that state nursing home inspections understate the

    number of serious nursing home problems that present a danger to residents. The GAO

    concluded that while CMS oversight has improved, there are still weaknesses in its oversight of

    nursing homes.

    The U.S. has a joint federal/state system for regulating insurance, with the federal government

    ceding primary responsibility to the states under the McCarran-Ferguson Act. States regulate the

    content of health insurance policies and often require coverage of specific types of medical

    services or health care providers. State mandates generally do not apply to the health plans

    offered by large employers, due to the pre-emption clause of the Employee Retirement Income

    Security Act.

    Overall system effectiveness compared to other countries

    The CIA World Fact book ranked the United States 41st in the world for lowest infant mortality

    rate and 46th for highest total life expectancy. A study found that between 1997 and 2003,

    preventable deaths declined more slowly in the United States than in 18 other industrialized

    nations. Life expectancy can be affected by factors other than health care. For example, the

    United States was listed as 37th for life expectancy and 41st in low birth weight. Similarly, the

    proportion of low birth weight babies may be affected by factors other than health care.

    The Organisation for Economic Co-operation and Development (OECD) found that the United

    States ranked poorly in terms of Years of potential life lost (YPLL), a statistical measure of years

    of life lost under the age of 70 that were amenable to being saved by health care. Among OECD

    nations for which data are available, the United States ranked third last for the health care of

    women (after Mexico and Hungary) and fifth last for men (Slovakia and Poland were also

    worse). See the table and source at YPLL for details.

    Recent studies find growing gaps in life expectancy based on income and geography. Life

    expectancy declined from 1983 to 1999 for women in 180 counties, and for men in 11 counties.

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    Most of the declines occurred in the Deep South, Appalachia, along the Mississippi River, in the

    Southern Plains and in Texas. The life expectancy gap between counties with the highest and

    lowest life expectancies grew by 2 years for men and 10 months for women. The gap is growing

    between rich and poor and by educational level, but narrowing between men and women and by

    race. A study published in May 2008 found that the mortality gap between the well-educated and

    the poorly educated widened significantly between 1993 and 2001 for adult ages 25 through 64.

    Premature death is increasing for people who drop out of high-school, while death rates are

    dropping among college graduates. Mortality increased most rapidly for white, female drop-outs,

    and declined the most for African-American college graduates. While the study did not directly

    examine the underlying causes, the authors speculate that risk factors such as smoking, obesity

    and high blood pressure may lie behind these disparities.

    On the other hand, the National Health Interview Survey, released annually by the Centers for

    Disease Control's National Center for Health Statistics reported that approximately 66% of

    survey respondents said they were in "excellent" or "very good" health in 2006. In an analysis

    of breast cancer, colorectal cancer, and prostate cancer diagnosed during 19901994 in 31

    countries, the United States had the highest five-year relative survival rate for breast cancer and

    prostate cancer, although survival was systematically and substantially lower in black U.S. men

    and women.

    The debate about U.S. health care concerns questions of access, efficiency, and quality

    purchased by the high sums spent. The World Health Organization (WHO) in 2000 ranked the

    U.S. health care system first in both responsiveness, but 37th in overall performance and 72nd by

    overall level of health (among 191 member nations included in the study). The WHO study has

    been criticized by the free market advocate David Gratzer because "fairness in financial

    contribution" was used as an assessment factor, marking down countries with high per-capita

    private or fee-paying health treatment. The WHO study has been criticized, in an article

    published in Health Affairs, for its failure to include the satisfaction ratings of the general

    public. The study found that there was little correlation between the WHO rankings for health

    systems and the stated satisfaction of citizens using those systems. Some countries, such as Italy

    and Spain, which were given the highest ratings by WHO were ranked poorly by their citizens

    while other countries, such as Denmark and Finland, were given low scores by WHO but had the

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    highest percentages of citizens reporting satisfaction with their health care systems. WHO staff,

    however, say that the WHO analysis does reflect system "responsiveness" and argue that this is a

    superior measure to consumer satisfaction, which is influenced by expectations.

    A report released in April 2008 by the Foundation for Child Development, which studied the

    period from 1994 through 2006, found mixed results for the health of children in the U.S.

    Mortality rates for children ages 1 through 4 dropped by a third, and the percentage of children

    with elevated blood lead levels dropped by 84%. The percentage of mothers who smoked during

    pregnancy also declined. On the other hand, both obesity and the percentage of low-birth weight

    babies increased. The authors note that the increase in babies born with low birth weights can be

    attributed to women delaying childbearing and the increased use of fertility drugs.



    Enrolment rules in private and governmental programs result in millions of Americans going

    without health care coverage, including children. The U.S. Census Bureau estimates that

    45.7 million Americans (about 15.3% of the total population) had no health insurance coverage

    at some point during 2007. Most uninsured Americans are working-class persons whose

    employers do not provide health insurance, and who earn too much money to qualify for one of

    the local or state insurance programs for the poor, but do not earn enough to cover the cost of

    enrolment in a health insurance plan designed for individuals. Some states (like California) do

    offer limited insurance coverage for working-class children, but not for adults; other states do not

    offer such coverage at all, and so, both parent and child are caught in the notorious coverage

    "gap." Although EMTALA certainly keeps alive many working-class people who are badly

    injured, the 1986 law neither requires the provision of preventive or rehabilitative care, nor

    subsidizes such care, and it does nothing about the difficulties in the American mental health


    Coverage gaps also occur among the insured population. Johns Hopkins University professor

    Vicente Navarro stated in 2003, "the problem does not end here, with the uninsured. An even

    larger problem is the underinsured" and "The most credible estimate of the number of people in

    the United States who have died because of lack of medical care was provided by a study carried

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    out by Harvard Medical School Professors Himmelstein and Woolhandler (New England Journal

    ofMedicine 336, no. 11, 1997). They concluded that almost 100,000 people died in the United

    States each year because of lack of needed care." Another study by the Commonwealth

    Fund published in Health Affairsestimated that 16 million U.S. adults were underinsured in

    2003. The study defined underinsurance as characterized by at least one of the following

    conditions: annual out-of-pocket medical expenses totalling 10% or more of income, or 5% or

    more among adults with incomes below 200% of the federal poverty level; or health plan

    deductibles equalling or exceeding 5% of income. The underinsured were significantly more

    likely than those with adequate insurance to forgo health care, report financial stress because of

    medical bills, and experience coverage gaps for such items as prescription drugs. The study

    found that underinsurance disproportionately affects those with lower incomes73% of the

    underinsured in the study population had annual incomes below 200% of the federal poverty

    level. Another study focusing on the effect of being uninsured found that individuals with private

    insurance were less likely to be diagnosed with late-stage cancer than either the uninsured or

    Medicaid beneficiaries. A study examining the effects of health insurance cost-sharing more

    generally found that chronically ill patients with higher co-payments sought less care for both

    minor and serious symptoms while no effect on self-reported health status was observed. The

    authors concluded that the effect of cost sharing should be carefully monitored.

    Coverage gaps and affordability also surfaced in a 2007 international comparison by the

    Commonwealth Fund. Among adults surveyed in the U.S., 37% reported that they had foregone

    needed medical care in the previous year because of cost; either skipping medications, avoiding

    seeing a doctor when sick, or avoiding other recommended care. The rate was even higher

    42%among those with chronic conditions. The study reported that these rates were well above

    those found in the other six countries surveyed: Australia, Canada, Germany, the Netherlands,

    New Zealand, and the UK. The study also found that 19% of U.S. adults surveyed reported

    serious problems paying medical bills, more than double the rate in the next highest country.

    Mental Health

    A lack of mental health coverage for Americans bears significant ramifications to the U.S

    economy and social system. A report by the U.S. Surgeon General found that mental illnesses are

    the second leading cause of disability in the nation and affect 20% of all Americans. It is

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    estimated that less than half of all people with mental illnesses receive treatment due to factors

    such as stigma and lack of access to care.

    The Paul Wellstone Mental Health and Addiction Equity Act of 2008 mandates that group health

    plans provide mental health and substance-related disorder benefits that are at least equivalent to

    benefits offered for medical and surgical procedures. The legislation renews and expands

    provisions of the Mental Health Parity Act of 1996. The law requires financial equity for annual

    and lifetime mental health benefits, and compels parity in treatment limits and expands all equity

    provisions to addiction services. Up to 2008 insurance companies used loopholes and, though

    providing financial equity, they often worked around the law by applying unequal co-payments

    or setting limits on the number of days spent in in-patient or out-patient treatment facilities.

    Medical Underwriting and the Uninsurable

    In most states in the U.S., people seeking to purchase health insurance directly must

    undergo medical underwriting. Insurance companies seeking to mitigate the problem of adverse

    selection and manage their risk pools screen applicants for pre-existing conditions. Insurers may

    reject some applicants or quote increased rates for those with pre-existing conditions. Diseases

    that can make an individual uninsurable include serious conditions, such as arthritis, cancer, and

    heart disease, but also such common ailments as acne, being 20 pounds over or under weight,

    and old sports injuries. An estimated 5 million of those without health insurance are considered

    "uninsurable" because of pre-existing conditions.

    Proponents of medical underwriting argue that it ensures that individual health insurance

    premiums are kept as low as possible. Critics of medical underwriting believe that it unfairly

    prevents people with relatively minor and treatable pre-existing conditions from obtaining health


    One large industry survey found that 13% of applicants for individual health insurance who went

    through medical underwriting were denied coverage in 2004. Declination rates increased

    significantly with age, rising from 5% for those under 18 to just under one-third for those aged

    60 to 64. Among those who were offered coverage, the study found that 76% received offers at

    standard premium rates, and 22% were offered higher rates. The frequency of increased

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    premiums also increased with age, so for applicants over 40, roughly half were affected by

    medical underwriting, either in the form of denial or increased premiums. In contrast, almost

    90% of applicants in their 20s were offered coverage, and three-quarters of those were offered

    standard rates. Seventy percent of applicants age 6064 were offered coverage, but almost half

    the time (40%) it was at an increased premium. The study did not address how many applicants

    who were offered coverage at increased rates chose to decline the policy. A study conducted by

    the Commonwealth Fund in 2001 found that, among those aged 19 to 64 who sought individual

    health insurance during the previous three years, the majority found it unaffordable, and less than

    a third ended up purchasing insurance. This study did not distinguish between consumers who

    were quoted increased rates due to medical underwriting and those who qualified for standard or

    preferred premiums. Some states have outlawed medical underwriting as a prerequisite for

    individually purchased health coverage. These states tend to have the highest premiums for

    individual health insurance.

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    The healthcare industry is a very large, complex, and inefficient industry. Growing costs are a

    critical concern. In addition, the Institute of Medicine (2001) puts forth four key underlying

    reasons for inadequate quality of care in the U.S. healthcare system today: (1) the growingcomplexity of science and technology, (2) the increase in chronic conditions, (3) a poorly

    organized delivery system, and (4) constraints on exploiting the revolution in information

    technology. In addition, a growing trend toward consumerism is building up as a major force in

    shaping the future organization of the healthcare industry. The six trends, detailed further below,

    are shaping the future of healthcare in the United States.

    Growing costs concerns:

    Until the 1980s or 1990s, while healthcare costs escalated in absolute terms and relative to GDP,

    most Americans seemed to think they were getting value for money. That perception has

    changed. Americans might be willing to see healthcare costs rise more or less continuously

    relative to other expenditures, provided that genuinely better health longer lives and better

    quality of life resulted; and provided that costs were shared in ways viewed as equitable.

    Today, approximately 90 percent of insured individuals are enrolled in managed care plans. Ten

    years ago it was hoped that managed care would be the answer to both cost control and quality

    improvement by creating a competitive set of intermediaries. The current healthcare system is

    not meeting these expectations, however, and costs continue to rise at a double digit rate.

    Complexity of Science and Technology:

    The sheer volume of new healthcare science and technologies--the knowledge, skills,

    interventions, treatments, drugs, and devices is very large today and has advanced much more

    rapidly that our ability to use and deliver them in a safe, effective, and efficient way.

    Government, as well as private, investments in pharmaceutical, medical, and biomedical research

    and development have increased steadily. Medicine itself is a high-technology, science-based

    profession, constantly enriched by inflows of knowledge from the biological sciences, new drugs

    and treatments, and engineered innovations from the medical equipment industry. Indeed, few

    would dispute the scientific and technological leadership of U.S. companies, research

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    universities, and teaching hospitals in the areas of human therapeutics; medical instruments,

    devices, and equipment; and medical research and training. The industry achieved primacy in

    these areas by focusing resources on life and physical sciences, and the engineering of devices,

    instruments, and equipment in service to individual patients (i.e., customized service).With this

    focus, the industry excelled in providing the highest quality care at a high cost to those who can

    afford it. The healthcare delivery system, however, has not kept up with phenomenal

    advancements in science and technology and with the proliferation of knowledge, treatments,

    drugs, and devices. With current advances in genomics (offering promise in diagnosis as well as,

    possibly, treatment), sensor technologies (offering promise in automated detection,

    measurement, and monitoring), nanotechnologies (offering promise in diagnosis, treatment, and

    control), and information and communication technologies (enabling remote delivery,

    telemedicine, e-health, and patient empowerment), the complexity of science and technology in

    healthcare is only going to increase.

    Chronic Conditions:

    As noted by the Institute of Medicine (2001), "because of changing mortality patterns, those age

    65 and over constitute an increasingly large number and proportion of the U.S. population, "as

    shown in Figure 2. Individuals age 65 and over consume 35 percent of all healthcare services

    provided in the U.S., yet constitute only 13 percent of the U.S. population. This percentage isexpected to grow to 25 percent of the population by 2050. As a consequence, there is an increase

    in both the incidence and prevalence of chronic conditions. Hoffman et al. (1996) estimate that

    patients with chronic conditions make up 80 percent of all hospital bed days, 83 percent of

    prescription drug use, and 55 percent of emergency room visits. As opposed to acute illnesses,

    effectively treating chronic conditions requires disease management and control over long

    periods of time; collaborative processes between providers and patient; as well as patient

    involvement, self-management, and empowerment.

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    The healthcare delivery system in the United States is a highly complex system that is nonlinear,

    dynamic, and uncertain. The system is further complicated by a large number of agents and

    multiple stakeholders, each with multiple, sometimes conflicting, goals, aspirations, and

    objectives. As a result, the entire system leads to a lack of accountability; it has frequently

    misaligned reward as well as incentive structures, and it suffers from inefficiencies embedded in

    multiple layers of processes. The healthcare product or service is often ill-defined or difficult

    to define and evaluate. The processes involved in delivering healthcare services are complex, ill-

    specified, and difficult to measure, monitor, and control. Health outcomes are difficult to

    measure, manage, and analyze. The system experiences growing cost pressures, faces potential

    insurance premium increases, and is extremely fragmented. In a recent article, Porter and

    Olmsted Teisberg (2004), eloquently put forth that competition is the root of the problem with

    the U.S. healthcare performance. They pointed that the current healthcare system has:

    The wrong level of competition

    The wrong objective

    The wrong forms of competition

    The wrong geographic market

    The wrong strategies and structure

    The wrong information

    The wrong incentives for payers

    The wrong incentives for providers

    They propose that a reform should be designed to address these fundamental issues and allow a

    well-structured competitive market to improve the system. In addition, Wagner et al. (1996)

    identify five elements needed to improve patients outcomes in an increasing population afflicted

    by chronic conditions:

    Evidence-based, planned care

    Reorganization of practices to meet the needs of patients, who require more time and/orresources,

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    Systematic attention to patients need for information and behavioural change

    Ready access to necessary clinical knowledge and expertise

    Supportive information systems

    Regarding this last point, the Institute of Medicine points to the fact that healthcare

    organizations are only beginning to apply information technology to manage and improve patient

    care. A great deal of medical information is stored on paper. Communication among clinicians

    and with patients does not generally make use of the Internet or other contemporary information

    technology. Hospitals and physician groups operate independently of one another, often

    providing care without the benefit of complete information on the patients condition or medical

    history, services provided in other settings, or medications prescribed by other providers.

    Citation: engineering ENTERPRISESummer 2004

    Defining Characteristics of the U.S. Health Care System

    The health care system in the United States encompasses a sprawling set of activities and

    enterprises. Using the word system, in fact, is a stretch, because in many ways the enterprise

    involves many actors working non-systematically to achieve diverse aims. But, like the hidden

    hand that economists claim guides our general economic system, many fundamental forces keep

    individual actors working somewhat in tandem to produce and maintain health in our population.

    Perhaps the first defining characteristic of the health enterprise is the distinction between

    activities directed at keeping people healthy and activities directed at restoring health once a

    disease or injury occurs. Keeping people healthy is the domain of the public health care system

    and the activities associated with behavioural health . Public health involves activities that work

    at the population level to keep us healthy: protecting the environment, making sure water

    supplies and restaurants and food are safe, and providing preventive health services, for example.

    Behavioral health focuses on people make behavioral choices that improve or protect health: for

    example, not smoking, eating well, exercising, and reducing stress. Once people become ill, the

    medical care sector takes over and delivers a wide variety of services and interventions to restore

    health. All too often, the medical care part of the system which dwarfs the public health and

    behavioral health parts ignores its potential to promote and maintain health. One perplexing

    part of our health sector is that changing an individuals behavior has much greater impact on

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    health and mortality than does spending money on medical care. Despite excellent research

    evidence documenting the importance of healthy lifestyles, we spend nine times more on medical

    care than on public health and behavioral health.

    Additional defining features of the U.S. health care system include:

    1. The importance of institutions in delivering care. Hospitals, nursing homes, community

    health centers, physician practices, and public health departments all are complex institutions

    that have evolved over the past century to meet various needs Each type of institution has its

    traditions, strengths, weaknesses, and a defined role in the health enterprise.

    2. The role ofprofessionals in running the system. Many different types of professionals make

    the system work, and each type has distinct roles. Physicians, nurses, administrators, policyleaders, researchers, technicians of many types, and business leaders focused on technology and

    pharmaceuticals all play essential roles.

    3. Developments in medical technology, electronic communication, and new drugs that fuel

    changes in service delivery. Over the past 20 years, advances in technology and technique have

    exploded, making it possible to aggressively intervene to restorehealth in ways that were not

    dreamed of a generation ago. New techniques in imaging, electronic communication,

    pharmaceuticals, and surgical proceduresare remarkable. These advances, however, have added

    costs tothe system and have made health care unaffordable for a growingpercentage of the U.S.


    4. Tension between caring and big business that shapes the systems culture. Americans

    are divided about whether they want a health care system that is more a social good, run by non-

    profit organizations with benevolent missions, or whether they want health care to operate more

    like a big business, driven by market forces, profits, and efficiency. Many of the people who

    choose health care as a career are motivated at least in part by the potential to be a caring person.

    Yet, driving the system are many for-profit corporations from pharmaceutical companies to

    medical device manufacturers, to insurance companies, to for-profit hospitals and nursing homes.

    Salaries are relatively high in the health sector, especially for physicians, administrators, and

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    corporate executives. Although money clearly is an important shaper of the system, Americans

    want the caring aspect of health care to be central when they need services.

    5. The dysfunctional financing and payment system. The U.S. health care system is expensive

    to maintain; we spent $1.988 trillion on health care in 2005one out of every six dollars spent

    in the economy. Most people have health insurance to pay for services when they become ill, but

    some 45 million Americans do not. These uninsured (and the substantial number of

    underinsured) face tremendous financial risk if they become ill or injured. In addition, the way

    hospitals, physicians, and other providers are paid has become very complex because of the role

    of insurance. Remarkably, efficient, effective care is not rewarded. For example, fee-for-service

    payment systems reward unnecessary diagnostic tests and treatments; further, there is almost no

    reimbursement incentive for providers to adopt electronic communication or implement

    electronic patient records.

    These defining characteristics make the health care system a dynamic part of our lives, a key part

    of our economy, and a constant source of contention in our political system addressing the

    challenges of this system is worth the effort and deserves the attention of the best and brightest

    of each generation. Major Issues and Concerns

    The defining characteristics of the health sector, described above, suggest the key challenges that

    have been the focus of health care leaders attention in recent years. Briefly, they are:

    1. Improving quality: Despite the large investments we make in the health care system, serious

    concerns about the quality of care have emerged in recent years. Reliable studies indicate that

    between 44,000 and 98,000 Americans die each year because of medical errors. Other well-

    regarded studies show that fewer than half of people with mental health or substance abuse

    problems, asthma, or diabetes receive care known to be effective. Too often providers do not

    seem to have the knowledge or information they need to prescribe the correct treatment for their

    patients, even those with definite diagnoses. At times, people become lost in the large,

    cumbersome system we have constructed and do not receive the care they need. At other times,

    the lack of coordination between providers means that people receive duplicative and even

    counterproductive services.

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    2. Improving access and coverage: Too many Americans are uninsured, making care virtually

    unaffordable if they have a serious illness (discussed in chapter 16). People fail to get insurance

    coverage for many reasons, and political consensus about how to resolve this problem has not

    emerged over the past 20 years. Lack of coverage, however, is a peculiarly American problem.

    All other developed countries have public systems of insurance coverage or similar approaches

    to assuring that everybody can have the care they need (discussed in chapter 6). Many health

    leaders see the insurance challenge as the most important health issue facing our nation today.

    But even when people have insurance coverage, access to health care is not always easy. Many

    rural areas have shortages of health care professionals especially doctors and dentists and

    some services especially specialist care, long-term care, and even hospital care. Some

    services, such as mental health care, are woefully underfunded. Immigrants face language

    barriers to getting effective care, and low-income groups, even when covered by public

    insurance programs have a difficult time finding the services they need. As the country becomes

    more diverse, these types of access problems will become more acute.

    3. Keeping costs under control:

    Expenditures on health care have been increasing much more quickly than expenditures in the

    balance of the economy over the past 30 years. The explosion of expensive technology, the aging

    of the population, inflating salaries, and the growing prevalence of chronic conditions has madehealth care less and less affordable over time. A key challenge is determining which new

    technology we can afford (and is worth the cost) and how to keep costs from growing too

    quickly. Cost increases clearly are at the heart of the access and coverage challenges outlined

    above. Unfortunately, leaders have not identified effective ways to keep costs under control.

    Reining in health care inflation remains one of the key challenges of the next 10 yearsand not

    just for health care managers. The problem has become so acute that every sector of the U.S.

    economy has to be concerned about the impact of rising health care costs.

    4. Encouraging healthy behavior:

    Avoiding illness and injury is the best way to keep health costs under control. Healthy behaviour

    choices can help people avoid disease and injury. Using seat belts, getting preventive services,

    eating well, exercising, avoiding tobacco, and not using drugs or overusing alcohol are all central

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    to health maintenance. It remains a challenge, however, to encourage healthy behavior. Most

    noticeably, we are in the middle of a disturbing obesity epidemic that has led to ever-increasing

    rates of diabetes and heart disease.

    5. Improving the public health care system:

    We too often take for granted the safety of our water, food, and restaurants. And we fail to

    recognize the important roles the public health care system can play in preventive health, health

    education, environmental health, and prevention of bioterrorism. Perhaps because public health,

    when done effectively, is invisible (it avoidsproblems rather than fixes them), the United States

    has historically underinvested in public health. Making the case for better public health,

    providing adequate funding, and inspiring leading thinkers to take up public health careers is an

    ongoing challenge.

    6. Addressing social determinants of health:

    Substantial inequalities in health status rates of disease and death exist across income

    groups, social classes, and ethnic groups. Given that most Americans believe we should have an

    equal opportunity approach to health maintenance, inequalities in health status are a key current

    challenge facing the health sector. In essence, however, the health care system can only help

    address inequalities to a certain degree. Some of the inequality is driven by social factors such as

    poverty and ineffective education systems.

    7. Strengthening the health workforce:

    Recent years have seen acute shortages of nurses, primary care physicians, and long-term care

    providers. The health care system must train and recruit the large and diverse cadre of workers

    that are needed to run health institutions. And diverse not only describes the number of roles

    within health care, but also the goal of achieving more ethnic and racial diversity in theworkforce. Without talented and caring people agreeing to devote their careers to health services,

    the system cannot function.

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    8. Encouraging more realistic expectations:

    Consumers should expect and demand better quality and better efficiency from the delivery

    system. People also should recognize that their health is, to some degree, their own

    responsibility. To make this point, some analysts recommend that people should have to pay out

    of pocket for health problems caused by their own recklessness and should be rewarded for good

    health behavior. Some insurance companies already do this, offering lower premiums to people

    who do not smoke, are not obese, and have good driving records.



    Below are some ofthe key provisions that will take effect immediately, under the legislative

    package the House will consider later this week (the Senate health bill as amended by the

    reconciliation bill). The reconciliation bill is based largely on the improvements put forward by

    the Presidents proposal moving towards the House bill in certain critical areas.

    1. SMALL BUSINESS TAX CREDITSOffers tax credits to small businesses to make

    employee coverage more affordable. Tax credits of up to 35 percent of premiums will be

    immediately available to firms that choose to offer coverage.Effective beginning for calendar

    year 2010. (Beginning in 2014, the small business tax credits will cover 50 percent of



    rebate to Medicare beneficiaries who hit the donut hole in 2010.Effective for calendar year

    2010. (Beginning in 2011, institutes a 50% discount on brandname drugs in the donut hole; also

    completely closes the donut hole by 2020.)

    3. FREEPREVENTIVECARE UNDER MEDICAREEliminates copayments for

    preventive services and exempts preventive services from deductibles under the Medicare

    program.Effective beginning January 1, 2011.

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    4. HELP FOREARLY RETIREESCreates a temporary reinsurance program (until the

    Exchanges are available) to help offset the costs of expensive health claims for employers that

    provide health benefits for retirees age 5564.Effective 90 days after enactment

    5. ENDS RESCISSIONSBans insurance companies from dropping people from coverage

    when they get sick.Effective 6 months after enactment.


    CONDITIONSProhibits health insurers from denying coverage to children with preexisting

    conditions.Effective 6 months after enactment. (Beginning in 2014, this prohibition would apply

    to all persons.)

    7. BANS LIFETIME LIMITS ON COVERAGEProhibits health insurance companies fromplacing lifetime caps on coverage.Effective 6 months after enactment.


    plans use of annual limits to ensure access to needed care. These tight restrictions will be

    defined by HHS.Effective 6 months after enactment. (Beginning in 2014, the use of any annual

    limits would be prohibited for all plans.)


    plans to cover preventive services with no copayments and with preventive services being

    exempt from deductibles.Effective 6 months after enactment. (Beginning in 2018, this

    requirement applies to all plans.)

    10. NEW, INDEPENDENT APPEALS PROCESSEnsures consumers in new plans have

    access to an effective internal and external appeals process to appeal decisions by their health

    insurance plan.Effective 6 months after enactment.

    11. ENSURING VALUE FORPREMIUM PAYMENTSRequires plans in the individual

    and small group market to spend 80 percent of premium dollars on medical services, and plans in

    the large group market to spend 85 percent. Insurers that do not meet these thresholds must

    provide rebates to policyholders.Effective on January 1, 2011.

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    (INTERIM HIGHRISKPOOL)Provides immediate access to insurance for Americans who

    are uninsured because of a preexisting condition through a temporary highrisk pool.Effective

    90 days after enactment.


    THROUGH PARENTS INSURANCE Requires health plans to allow young people up to

    their 26th birthday to remain on their parents insurance policy, at the parents choice.Effective 6

    months after enactment.

    14. COMMUNITY HEALTH CENTERSIncreases funding for Community Health Centers

    to allow for nearly a doubling of the number of patients seen by the centers over the next 5 years.

    Effective beginning in fiscal year 2010.


    in training programs to increase the number of primary care doctors, nurses, and public health

    professionals.Effective beginning in fiscal year 2010.


    plans from establishing any eligibility rules for health care coverage that have the effect of

    discriminating in favor of higher wage employees.Effective 6 months after enactment.


    establishing offices of health insurance consumer assistance in order to help individuals with the

    filing of complaints and appeals.Effective beginning in FY2010.


    PROGRAMCreates a longterm care insurance program to be financed by voluntary payroll

    deductions to provide benefits to adults who become functionally disabled.Effective on January1, 2011.


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    Understanding the New Health Reform Law

    From Families USA April 2010

    What Will the New Health Reform Law Do in the First Year?

    The President signed a historic package of health reforms into law in March 2010. In the first

    year, consumers will gain new protections from insurance company abuses and sky-high

    premiums, small businesses will get significant subsidies to help with cost of providing coverage

    to their workers, and people on Medicare will see the first step toward closing the prescription

    drug coverage gapthe doughnut hole.

    Provide immediate help for people with pre-existing conditions.

    In the first year, the new law will create a new, temporary insurance program for people who

    have been uninsured for six months and who have a pre-existing condition. Premiums will be the

    same as those that individuals without a pre-existing condition pay for the same coverage. This

    interim program will operate until the exchanges are available. The new law will also, in the firstyear, prohibit insurers from denying coverage for children based on pre-existing conditions.

    End unfettered insurance premium increases.

    In the first year, insurance companies will be required to report and justify their premium rates

    and any requests to increase premiums. They must report these data to state insurance

    commissioners and federal authorities under new, uniform standards (thus providing immediate

    sunshine on insurance company price gouging). And states can apply for grants to help them

    implement this new rate review process starting in the first year.

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    Guarantee that premiums pay for health care services.

    In the first year, insurance companies will be required to spend at least 80 percent (individual

    market) or 85 percent (employer market) of the premium dollars they collect on health care

    services and improvements in the quality of care. If they fail to do so, they must provide a

    premium rebate to consumers.

    Provide free prevention benefits.

    In the first year, all newly sold insurance plans will be required to cover prevention and wellness

    benefits with no deductibles or cost-sharing. This requirement applies to both private and public

    insurance coverage.

    End arbitrary limits on coverage.

    In the first year, insurance companies will be prohibited from imposing lifetime limits on

    benefits. They will also be tightly restricted in the use of annual limits in new plans (annual

    limits will be prohibited entirely starting in 2014 for all plans offering essential benefits).

    Help small businesses with insurance costs.

    In the first year, the new law will establish new tax credits of up to 35 percent of premiums. Thistax credit will be available to qualifying small businesses that choose to provide insurance

    coverage to their workers. (Starting in 2014, two-year credits of up to 50 percent of premiums

    will be available to qualifying small businesses.)

    End unfair rescissions.

    In the first year, insurance companies will be prohibited from arbitrarily revoking coverage for

    people (who have paid their premiums) when they file a claim for benefits.

    Help young adults stay insured.

    In the first year, young adults who do not have an offer of coverage through an employer will be

    allowed to stay on their parents health insurance policy until their 26th birthday.

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    Reduce the Medicare doughnut hole.

    Medicare beneficiaries (seniors and people with disabilities) who fall into the Medicare Part D

    prescription drug coverage gap, or doughnut hole, in 2010 will receive a $250 rebate on

    prescription drug costs. Starting in January 2011, beneficiaries in the doughnut hole will receive

    a 50 percent discount on brand-name drugs and other discounts on generic drugs. These

    discounts will increase every year until the doughnut hole is closed.

    Add new Medicare benefits.

    In the first year, preventive services will be covered in Medicare with no copayments or

    deductibles. Additional help with out-of-pocket costs will also be available to more low-income

    Medicare beneficiaries.

    Help early retirees keep their insurance coverage..

    In the first year, a re-insurance program will be established to help protect coverage while

    reducing premiums for employer-based and retiree coverage for people aged 55-64.

    Increase funding for community health centers.

    In the first year, the new law will increase funding for community health centers to allow them toincrease the number of patients they serve.

    Increase the number ofprimary care doctors.

    In the first year, the new law will fund training programs to increase the number of primary care

    doctors, nurses, and public health professionals.

    Improve consumer appeal rights and patient protections.

    In the first year, consumers will gain the right to appeal insurance decisions both to the plan and

    to an independentreviewer. Consumers also will gain other important protections, such as access

    to pediatricians and OB/GYNE without a referral, and when emergency care is required, it will

    be covered at in-network rates.

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    Guarantee clear, comparable information about health insurance plans.

    In the first year, consumers and small businesses will have a new consumer-friendly Web portal

    that will use a simple, standard format so that consumers can make an apples-to-apples

    comparison when choosing a health insurance plan.

    Provide health insurance consumer assistance programs.

    In the first year, the new law will provide funding for states to establish offices of health

    insurance consumer assistance or health insurance ombudsman programs.

    Grants to start exchanges.

    No later than one year after the bill passes, states will be able to receive grants to help establish

    new health insurance exchanges.

    New Long-TermCare Insurance Program.

    Starting in January 2011, a new insurance program for long-term services, the Community

    Living Assistance Services and Supports program (CLASS), will begin. The program will be

    financed by voluntary payroll deductions. Enrolment dates for CLASS have not yet been