A Cultural and Global Perspective of United States Health Care Economics
Section snippets
The Basic Aspects of Health Care Systems
Large social institutions, such as health care systems, are not created in a vacuum. Rather, they reflect the underlying values, tolerances, expectations, and cultures of the societies they serve. The impact of such factors should not be underestimated. Also, they evolve over time within the framework of historical changes, political realities, and the vagaries of collective national experience. A system that works for one country may be totally inappropriate for another. For example, much has
The Canadian Health Care System
Even with a shared democratic ancestry, political culture in Canada is decidedly different from the United States. Generally speaking, Canadians are more trusting of their government institutions. Canadians have shown a willingness to grant their government key powers to regulate and finance health care programs, a predisposition not seen in the United States. The distinction is well illustrated in their respective constitutions. The preamble of the United States Constitution presents the
Health Care in Germany
One of the significant features of German industrialization during the late 19th century was the strong involvement of the state whose importance is firmly anchored in German history. As a response to the growing unrest in the labor markets in the 1880s, the German Chancellor Otto von Bismarck created a spectrum of social insurance programs, and among these was a plan for universal health care. It was the first of its kind in the world, and it has proven to be remarkably resilient over time. It
Japan
The Japanese have always shown a remarkable ability to effectively blend what they regard as the better elements of Eastern and Western social systems. This is true with health care. The Japanese health care system was organized in 1922, when industries were required to form “insurance societies” to provide coverage for their employees. A separate national health insurance plan is available for persons not eligible for an employer-related group, and participation in some form of insurance
The United States Health Care System
As the examples previously described show, the health care systems of the industrialized world are, for the most part, characterized by strong involvement by the state in regulating costs by controlling the overall budget. The system in the United States is unique in that there is no annual national health care budget. The current system has evolved over time as expediency, feasibility, and practicality resolved the problems faced by hospitals, physicians, patients, and payers. Reflecting the
A General Overview of Markets
The basic function of a “market” is to allocate economic resources efficiently. Market systems do this much more capably than command systems. A market relies heavily on self-interest, and the great paradox of the market is that each individual's pursuit of his/her own interests collectively combines into an efficient economy. The core of the market system is the price system, which calculates what millions of individual goods and services are “worth.” Prices do this through the discipline of
The American Hospital System
At the beginning of the 20th century, a hospital was a charity providing a place for the poor to receive terminal care. The primitive state of medical care at the time, very poor hygienic conditions, and constant overcrowding plagued these facilities. Patients with financial resources were treated in a physician's office or in their own home, especially in their final days. As medical science developed, hospitals began to evolve, but, even in the 1920s, only about one half of patients were
Pharmaceuticals
In 2006, 15% of the health care budget was spent on drugs, a total of $280 billion. Spending for devices (hip joints, pacemakers, stents, and so on) added another $35 billion. Driven by higher demand and higher prices, spending for drugs doubled between 1995 and 2003, with an average increase of 7.4% per year, and has become the fastest growing component of health care costs. Between 1995 and 2003, the US population increased by 13%; the number of prescriptions written increased by 70%. There
Prescription Drug User Fee Act
In the late 1980s, the FDA was receiving severe criticism for long delays in the drug approval process for prescription drugs. There was a particular concern about AIDS drugs, and there was much clamor for reform. The agency responded that there simply was not enough money for all of the reviewers necessary to keep pace with the drug pipeline. In 1992, Congress passed the Prescription Drug User Fee Act (PDUFA), which allowed the drug manufacturers to sponsor FDA drug evaluations. (In 2002, the
Direct-to-Consumer Advertising
Direct-to-consumer (DTC) advertising of prescription drugs is legal in 2 countries: the United States and New Zealand. In all of Europe, Canada, Japan, and elsewhere, the practice is banned. The FDA regulates the content of all prescription drug advertising, including information directed to both consumers and medical professionals. They require that drug companies submit all final advertising material to the agency when they are first distributed to the public. The oversight function is given
Malpractice
Overall, the US tort system is essentially an unregulated tax to compensate the unfortunate. The overall total amount spent on negligence actions in 2002 was $233 billion or 2.23% of Gross Domestic Product (GDP). Over the last 50 years, tort costs have increased by more than a factor of 100 compared with a factor of 35 for GDP growth and a factor of 2 for population growth. In the lexicon of economics, as a method of compensating an injured party, the system is highly inefficient, returning
The Private Insurance Industry
In no other country does private health insurance play such an important role in financing the health care system. And, in the US, private health insurance did not come about by organized, systematic planning. The health insurance industry emerged from 2 great historical events, the great depression and World War II. In 1929, as a way of ensuring receipts, Baylor University Hospital entered into a contract with some 1,250 Dallas schoolteachers to provide up to 21 days of hospital treatment per
Medicare and Medicaid
After employment ended and a worker retired and for the poor, however, there was no prospect of health insurance, and, in the early 1960s, they constituted the largest segment of society without coverage. Every Democratic president since Franklin Roosevelt had sought a government-sponsored program to provide insurance coverage to these vulnerable groups. In 1965, with a rare majority in Congress and a supportive and politically experienced President Johnson, the Democrats enacted part of the
Physicians
The political deal struck with the American Medical Association at the inception of Medicare paid physicians based on their charges rather than on a fee schedule. The prevailing charge system at the time was the “usual, customary, and reasonable” system. A payment system based on the “usual, customary, and reasonable” methods was actually rare before the creation of Medicare, but it spread rapidly through the commercial insurance industry after 1965. For all practical purposes, the system paid
The Future of Health Care Reimbursement
The governments of Canada, Germany, Japan, and most other industrialized nations have far greater control over their national health care budget than the United States. Because of this, per capita expenditures are less than the United States, and in most cases overall survival is better, although generally only by a matter of months. Each nation's system is the result of the unique cultural and social forces within that country and is unsuitable for mere adoption by another. Indeed, all
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