Financing

The means of financing healthcare, perhaps more than any other aspect of a healthcare system, mirror the values and priorities of a society. As was noted above, unlike the case in the majority of the OECD countries, healthcare financing in the United States is mostly private. There is also little public financing of healthcare in most low-income countries. Because of the high cost of many interventions and the unequal distribution of healthcare costs among individuals, lack of a broad-based system of public financing creates a system in which healthcare is rationed on the basis of the ability to pay.

Beginning with Germany in 1883, most industrialized nations have implemented a government-coordinated or government-controlled system of financing for personal healthcare services. This varies from the systems in countries such as Great Britain and the former Soviet Union, in which virtually all healthcare is financed through general tax revenues collected by the national government, to systems, such as Canada's, that are financed from both state and national revenues, to those of Germany, France, Belgium, and the Netherlands, in which financing is mandated by the national government through required participation in a community-or employment-based insurance funds.

In the third type of system most funds are obtained through required contributions based on wages. All countries with strong central control have at least a small market of privately financed healthcare that is used predominantly by the rich and the politically connected. For example, in Germany and the Netherlands the most affluent people are not required to purchase health insurance, and most choose to purchase private health insurance, which gives them better access to medical services. Some countries with mixed systems (e.g., Japan and Australia) have a small market for private health insurance that complements the public-sector benefits.

The proportion of public financing of healthcare in the United States has been increasing steadily, rising from about 23.3 percent in 1960 to nearly 44.3 percent in 2000 (OECD). In spite of these increases, there is no universal government-guaranteed or compulsory health insurance. Employer-based or individually purchased private insurance is the most common way people obtain health insurance coverage. A variety of publicly financed programs (e.g., Medicare and Medicaid) provide insurance to persons over age sixty-five and some poor people. They are financed by a spectrum of public financing mechanisms, including federal and local government revenues, the use of income and employment-based taxes, and in some states the revenues from a lottery.

Financing for active-duty military personnel, veterans, and Native Americans mirrors the centrally controlled healthcare systems of Great Britain and the former Soviet Union. Revenues come from the federal income tax, and services are provided by public-sector employees. The Medicare program is financed primarily from a wage tax, whereas Medicaid (for certain categories of disabled and low-income persons) is financed from a combination of state and federal general tax revenues. Financing for some care for the poor who are not eligible for Medicaid comes from general tax revenues at the state or local level that are paid to city and county public hospitals and state mental hospitals.

The dominance of a private system of financing in the United States is a reflection of not only that nation's values but also of a number of historical events. The Blue Cross program began in Texas when Baylor Hospital enrolled schoolteachers in an insurance system during the Great Depression as a method to guarantee that hospitalized patients could pay their health bills. Private health insurance grew slowly during the 1930s.

The real spread of private health insurance occurred during World War II, when wages but not fringe benefits were frozen as a wartime price-control measure. As more firms began to offer health insurance as a benefit, private insurance companies saw the potential for expanding their markets and encouraging those enrolled in health-insurance plans to buy their other insurance products. Another impetus to the market was the decision by the federal government to exempt healthcare benefits from federal income tax. The large number of insurance plans in the United States, each with its own marketing, benefit packages, premiums, deductibles or copayments, billing, and payment requirements, together with the thousands of private physicians, clinics, and hospitals, has created an immense administrative bureaucracy with aggregate administrative spending of $89.7 billion in 2001 (Center for Medicare and Medicaid Services; Levit et al.).

Diabetes 2

Diabetes 2

Diabetes is a disease that affects the way your body uses food. Normally, your body converts sugars, starches and other foods into a form of sugar called glucose. Your body uses glucose for fuel. The cells receive the glucose through the bloodstream. They then use insulin a hormone made by the pancreas to absorb the glucose, convert it into energy, and either use it or store it for later use. Learn more...

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