Question

How do national policies, sociodemographic elements, and the level of a country’s development affect the cost and delivery of health care in different countries?

Answer 1

Cost and delivery of Health care Comparisons of Health Care Systems in the United States, Germany and Canada

Cost and delivery of Health care in Canada:

Canada has a national health insurance program NHI (a government run health insurance system covering the entire population for a well defined medical benefits package). Health insurance coverage is universal. General taxes finance NHI through a single payer system (only one third-party payer is responsible for paying health care providers for medical services). Consumer co-payments are negligible and physician choice is unlimited. Production of health care services is private; physicians receive payments on a negotiated fee for service and hospitals receive global budget payments (Method used by third party payers to control medical care costs by establishing total expenditure limits for medical services over a specified period of time).

Canada’s health care system is known as Medicare (the term should not be confused with the Medicare program for the elderly in the U.S.) Canada’s population is about 31 million people and the country is divided into 10 provinces and two territories. Most of the population lives within 100 miles of the United States border. From the American point of view, Canada provides a good comparison and contrast in terms of the structure of its health care systems. U.S. and Canada share a similar heritage in terms of language and culture; the two countries also share a long border and have similar economic institutions (Folland et al 542).

The origins of the current Canadian health care system can be traced back to the 1940’s when some provinces introduced compulsory health insurance. The Canadian health care system began to take on its current form when the province of Saskatchewan set up a hospitalization plan immediately after WWII. The rural, low–income province was plagued by shortages of both hospital beds and medical practitioners. The main feature of this plan was the creation of the regional system of hospitals: local hospitals for primary care, district hospitals for more complex cases, and base hospitals for the most difficult cases. In 1956, the federal parliament enacted the Hospital and Diagnostic Services Act laying the groundwork for a nationwide system of hospital insurance. By 1961 all ten provinces and the two territories had hospital insurance plans of their own with the federal government paying one half of the costs. By 1971 Canada had a national health insurance plan, providing coverage for both hospitalization and physician’ services. As recently as 1971, both the United States and Canada spent approximately 7,5 % of their GDP’s on health care. Since 1971 the health care system has moved in different directions. While Canada has had publicly funded national health insurance, the United States has relied largely on private financing and delivery. During this period, spending in the United States has grown much more rapidly despite large groups that either uninsured or minimally insured.

Patients do not participate in the reimbursement process, and reimbursement exclusively takes place between the public insurer (the government) and the health care provider. The monetary exchange is practically non-existent between patient and health care provider. The ministry of health in each province is responsible for controlling medical costs. Cost control is attempted primarily through fixed global budgets and predetermined fees for physicians. Specifically, the operating budgets of hospitals are approved and funded entirely by the ministry in each province and an annual global budget is negotiated between the ministry and each individual hospital. Capital expenditures must also be approved by the ministry, which funds the bulk of the spending.

Physician fees are determined by periodic negotiations between the ministry and provincial medical associations (the Canadian version of the American Medical Association). With the passage of the Canada Health Act of 1984, the right to extra billing was removed in all provinces. Extra billing or balance billing refers to a situation in which the physician bills the patient some dollar amount above the predominated fee set by third party payer. For the profession as a whole, negotiated fee increases are implemented in steps, conditional on the rate of increase in the volume of services. If volume per physician arises faster than a predetermined percentage, subsequent fee increases are scaled down or eliminated to cap gross billings – the product of the fee and the volume of each service – at some predetermined target. The possible scaling down of fee increases is supposed to create an incentive for a more judicious use of resources. Physicians enjoy nearly complete autonomy in treating patients (e.g., there is no mandatory second opinion for surgery) because policy makers believe there is no need for intrusive types of controls given that the hospital global budgets and physician expenditure targets tend to curb unnecessary services.

Many feel that it is inaccurate to characterize the Canadian system as “single – payer” because the provincial plans vary considerably. In spite of the differences it is fair to say that each provincial plan is a public – sector monopsony, serving as a single buyer of medical services within the province and holding down medical care prices below market rates. By U.S. standards, physicians’ incomes are on average low. In 1992 the average income of self employed physicians was $104,000 adjusted for purchasing power parity, about five times the average Canadian worker, but less than two thirds that of the typical U.S. physician.

The key element in the Canadian strategy to control overall spending is the regionalization of high – tech services. Government regulators make resource allocation decisions. This control extends to capital investment in hospitals, specialty mix of medical practitioners, location of recent medical graduates, and the diffusion of high tech diagnostic and surgical equipment. In 1997 Canada’s 53 MRIs meant one for every 572,000 citizens (contrast that figure to 2046 MRIs in the U.S., one for every 130,800 Americans). Access to open heart surgery and organ transplantation is also restricted.

That same year the 245 CT scanners in Canada meant one for every 123,500 citizens. The United States had 3667 CT scanners, one for every 73,000 Americans (Henderson 487).

Recent studies found Canadian deficits in several areas including angioplasty, cardiac catheterization and intensive care. Waiting lists for certain surgical and diagnostic procedures are common in Canada. Nationwide, the average wait for treatment is 13.3 weeks. The average waiting time in more than 80% of the procedures is one third longer than Canadian physicians consider clinically reasonable. If care required diagnostic imaging, waiting times are even longer. Canadians are sacrificing access to modern medical technology for first dollar coverage for primary care. Treatment delays are causing problems for certain vulnerable segments of the Canadian population, particularly the elderly who cannot get reasonable access to the medical care they demand, including hip replacement, cataract surgery and cardiovascular surgery.

Several lessons can be learned from the Canadian experience. When government provides a product “free” to consumers, inevitably demand escalates and spending increases. Products provided at zero price are treated as if they have zero resource cost. Resource allocation decisions become more inefficient over time and government is forced either to raise more revenue or curb services. A number of the provincial health plans are moving to reduce spending by dropping services from the approved list of the “medically necessary”. A second lesson from the Canadian experience is that everything has a cost. When care requires major diagnostic or surgical procedures, the “free” system must find some other mechanism to allocate scarce resources. The Canadian system delegates this authority to the government. Resource allocation is practiced, not through the price mechanism, but by setting limits on the investment in medical technology. Proponents will argue that using waiting lists as a rationing measure is reasonable and fair. Opponents find the lists unacceptable and an unwelcome encroachment on individual decision-making in the medical sector. Proponents of the single payer alternative must deal with the fact that Canadians face waiting lists for some medical services especially for high – tech specialty care. To avoid delays in treatment, many Canadians travel south to the United States for more advanced treatment.

Cost and delivery of Health care in Germany:

In the German health care system, each level of government has specific responsibilities. The central government passes legislation on policy and jurisdiction. State governments are responsible for hospital planning, managing state hospitals, and supervising the sickness funds and physician associations. Local governments manage local hospitals and public health programs. Decentralization is extensive. The sickness funds and physician associations have considerable administrative autonomy. Despite this autonomy, government intervention is extensive and has been increasing steadily. Expenditures of the sickness funds grew rapidly in the 1960’s and early 1970’s. As a result, the Cost Containment Act of 1977 introduced a fixed budget for payments by the sickness funds to the physician associations. In essence, this program is similar to prospective payment schemes developed in the United States. The Health Care Reform Act of 1989 introduced more major changes. These were directed at attempts to further reduce the growth of health expenditures through means familiar to those in the United States. The changes included greater cost sharing, a strategy increasingly favored in Germany’s many reform efforts. The act also attempted to control hospital costs through reductions in hospital capacity, hospitals inpatient admissions, and hospital expenditures on capital equipment (2).

As costs continued to rise for the sickness funds at a rate faster than the rise in incomes, the call for reform continued. In 1993 the Health Care Reform Act was passed which introduced supply- side competition. These reforms gave members the freedom to choose among a range of sickness funds whose revenues would be determined by the risks of their members. The reforms further changed the hospital payment system from a per diem payment to a DRG – styled prospective payment basis.

Germany’s success in controlling costs can be attributed to the institutional framework of the system itself. By linking medical expenditures to the income of sickness fund members, the success of the strategy depends upon the continued growth in wages and salaries and the success of the negotiations between the sickness funds and medical practitioners. The cost containment measures have resulted in a dramatic decrease in the relative salaries of primary care physicians, which have fallen from 5.1 times the average for wage and salary workers in 1975 to 2.7 times that average in 1990. By U.S. standards, physician’s salaries are relatively low. In 1993, the average German physician earned $75,700 with general practitioners receiving $64,300 on average and orthopedic surgeons receiving $107,600. More than 100,000 students attend one of the 29 medical schools run by the state. After completing the six-year curriculum, physicians must first practice in a hospital setting for five years before they are allowed to enter private ambulatory practice. Hospitals also have less high technology diagnostic, therapeutic, and surgical equipment than is available in the typical urban hospital in the United States. Germany has 22.6 percent fewer MRI units per million compared to the United States. The one area where Germany has more technology is CT scanners, where they have 17.1 per million population compared to 13.7 per million in the United States

The German system suffers from several problems that bring into question its ability to contain costs over the long term. Possibly the biggest problem with the system is its reliance on third party payment providing virtually no role for the cost – conscious consumer. Patients have no incentive to limit their demand and medical providers have no incentive to limit their supply. Nothing would lead competitive forces to reduce costs. The only competition is among medical practitioners to attract more patient volume. The ability of the system to control costs depends solely on the relative bargaining power between sickness funds and medical providers. Another problem with the system is its tendency to use resources inefficiently. Incentives promote the provision of invasive acute care procedures and discourage the provision of personal services. Based on the latest available OECD figures, Germans see their doctors more often, are provided more prescription drugs, have a higher hospital admission rate, and stay in the hospital longer than citizens of the major developed countries in the OECD. The average lengths of stay in the hospital are much longer in Germany than in the United States (12.0 days compared to 7.1 days). Significant excess capacity in the number of hospital beds relative to the population means 9.3 per 1000 population in Germany compared 3.7 per 1000 in the United States.

Cost and delivery of Health care in United states :

The United States has no single nationwide system of health insurance. Health insurance is purchased in the private marketplace or provided by the government to certain groups. Private health insurance can be purchased from various for – profit commercial insurance companies or from non – profit insurers. About 84% of the population is covered by either public (26%) or private (70%) health insurance. Approximately 61% of health insurance coverage is employment related, largely due to the cost savings associated with group plans that can be purchased through an employer (Santerre and Neun 46). Employers voluntarily sponsor the health insurance plans. Rather than purchasing an insurance policy from an external party (commercial insurance company) employer and employee premiums sometimes fund an internal health insurance plan. The fully self-insured firm assumes all the risk for its employees’ health care costs. A partially self insured firm limits the risk it assumes by purchasing “stop loss” insurance coverage, which protects it from incurring costs over a specified maximum amount. In either case, the firm usually contracts with a third party to administer the health insurance program.  

A conventional health insurance plan, which allows unrestricted choice of health care provider and reimburses on a fee for service basis, presently covers less than 30% of all employees. Even these plans provide some type of utilization management program (e.g. preadmission certification, concurrent review of length of stay, and mandatory second opinions for surgery). Traditional plans differ depending on the medical services that are covered and the co-payment and deductible amounts. Rather than enroll employees in a traditional insurance plan, most employers have turned to managed care health insurance plans. Managed care organizations are defined as “systems that integrate the financing and delivery of appropriate health care services to covered individuals by means of: arrangements with selected providers to furnish a comprehensive set of health care services to members; explicit criteria for the selection of health care providers; formal programs for on going quality assurance and utilization review; and significant financial incentives for members to use providers and procedures associated with the plan”

There are basically two types of MCOs: Health Maintenance Organizations (HMOs) and Preferred Provider Organizations (PPOs). About 70 percent of employees are currently enrolled in MCOs. HMO is a health care delivery system that combines the insurer and producer functions. HMOs are pre – paid and in return provide comprehensive services to enrollees. PPOs are a third party payer that offers financial incentives such as low out – of – pocket prices, to enrollees who acquire medical care from a preset list of physicians and hospitals. A PPO is also a prepaid type of MCO that combines the insurer and producer functions.

Unlike in Canada and Europe, where a single payer – system is the norm, the United States possess a multiplayer system in which a variety of third – party payers, including the federal and state governments and commercial health insurance companies are responsible for reimbursing health care providers.

Socioeconamic demographics Impatcs in health cae delivery:

Changes in population size, age, race and ethnicity affect the health-care resources needed, the cost of care provided, and even the conditions associated with each population group. Health-care organizations will have to adapt quickly to meet their patients’ changing needs—all while addressing health-reform requirements.

An Aging Population

In 1950, the population aged 65 and older represented 8.1 percent of the total U.S. population. That percentage is projected to reach 20.2 percent by 2050. This shift will place great demands on the nation’s health-care system. A report issued by the Institute of Medicine in 2008 found that the health-care workforce would be too small and ill equipped to meet the needs of the growing, aging population.

As each calendar year ushers in new health-care reform requirements, hospitals and health systems will need to form more partnerships with other providers and payers to create a complete continuum of patient care. Hospitals will need more specialists in the diseases and conditions of aging—including chronic disease and palliative and hospice care—and health-care professionals who can help patients address end-of-life care issues. And hospitals will have to tap into technology to enhance care coordination and proactively manage this aging cohort.

Cultural and Religious Differences

Cultural and religious diversity—well beyond communication barriers—is important as well. In some cultures, for example, a male physician won’t see female patients. Other cultures have complementary and alternative remedies that, when combined with traditional medicine, could have harmful consequences.

Health-care providers also need to keep patients’ religious beliefs and traditions in mind. Buddhists, for example, place an importance on mindful awareness and often seek non-pharmacological pain management options. During the month of Ramadan, Muslims do not eat or drink from dawn to sundown, and this fasting could present harm to a patient.

Health-care professionals must be cognizant of these differences within their patient community. They need to communicate clearly, in a respectful manner, if and when cultural and religious preferences may put the patient in harm’s way.

From patient age to religious preference, diversity isn’t going away. The once “one-size-fits-all” notion of health care has all but dissolved. Hospitals and other health-care organizations will have to continually assess and plan for their changing patient populations’ care needs.