The US Health Care System in the International Context

The US health care system has a mixed model of insurance coverage and of service delivery, with public and private sources of insurance and public and private health care providers. Unlike many countries in the Organization for Economic Cooperation and Development (OECD), the US does not have universal health care coverage.

While it lacks universal health insurance coverage, the United States spends far more on health care than any other nation. In 2017, total health spending per capita in the United States was $10,209, in comparison to $4,826 in Canada and $8,009 in Switzerland. When including social services and health care spending, the United States is much closer to the OECD average, highlighting the relative underpayment in the social services sector in the United States; 28.8 percent of US GDP is spent on social services and health care, compared to the OECD average of 21.4 percent of GDP (OECD, 2017). While the root cause of high health care spending is the subject of debate, it is clear that the United States is deriving less value for these expenditures than other OECD countries. Utilization of medical and hospital services is not the main driver of high health care spending, as patients in the United States do not use these services at a notably higher rate than patients in other nations. For example, Americans have an average of four physician visits annually compared to the OECD median of 6.5 visits (Squires, 2015). Lack of price control is likely a key driver of US spending compared to other nations (Anderson et al., 2003).

Sources of Coverage in the United States

The US health care insurance system is a patchwork of group health plans that are most often offered through employment arrangements, government-sponsored health insurance for defined populations, and non-group markets from which individuals to purchase coverage. In total, these insurance sources cover 91 percent of Americans, leaving more than 27 million individuals uninsured (OECD, 2017). Further, there is significant variability in benefits across insurance products, making it difficult for patients and providers to understand and obtain needed medical services, especially for behavioral health care. The largest sources of coverage are employer-sponsored health insurance (ESI), Medicare, and Medicaid.

Employer-Sponsored Health Insurance

In the United States, unlike many high-income countries, employment plays a major role in health care insurance coverage. More than 150 million Americans are covered by ESI, making it the largest source of coverage in the United States (Collins, Gunja, & Doty, 2017). This form of insurance was enabled by the Employee Retirement Income Security Act (ERISA) of 1974, which established minimum standards for retirement, health, and other welfare benefit plans. Employer-sponsored insurance receives preferred tax treatment, which encourages private businesses to provide it to employees. Employer and employee contributions for employer-sponsored insurance are excluded from income and payroll taxes, costing an estimated loss of approximately $250 billion in federal tax revenue annually (Congress of the United States Congressional Budget Office, 2013).

The cost of ESI has steadily grown faster than wages, concerning employers and employees alike. The growing ESI costs have led many employers to increase the amount employees must contribute for coverage through larger contributions to the premium and insurance plan designs that result in larger out-of-pocket costs and high deductibles for employees. For example, those enrolled in high-deductible plans must pay a substantial amount on their health care bills before insurance coverage is triggered. The share of people covered by ESI with deductibles of more than 5 percent of household income grew from 2 to 13 percent between 2003 and 2016 (Collins, Gunja, & and Doty, 2017). As a result, many individuals cannot afford to use their health insurance coverage – a phenomenon referred to as underinsurance – and forgo and delay necessary treatment.

It is also worth noting the variability in the regulation of ESI, depending on the size of the employer and the way the plan is administered. Some ESI plans are subject to state regulation and mandates, while others are subject to lesser federal oversight. This leads to significant variability in what ESI plans are required to cover.

Medicare

Medicare is a federal health insurance program for individuals aged sixty-five and older, as well as individuals under sixty-five with end-stage renal disease (ESRD), and with some disabilities. Medicare covers sixty million people. Traditional, or fee-for-service, Medicare is administered directly by the federal government and offers hospital insurance (Part A); physician services, outpatient services, and other medical services (Part B); and outpatient prescription drug coverage (Part D). Under Medicare Part C, also known as Medicare Advantage, private insurance companies administer the Medicare benefit through managed care programs. There are many notable gaps in Medicare, including long-term care, vision, hearing, and dental coverage, leading many beneficiaries to elect for supplemental insurance coverage (Cubanski et al., 2015).

Medicare is financed through federal taxes and beneficiary premium contributions. In 2016 Medicare accounted for 15 percent of total federal spending, and 20 percent of total public and private health spending in 2015 (US Centers for Medicare & Medicaid Services, 2018). Given the rising costs of health care and expected increases in enrollment due to the aging population, there is increasing concern about the future costs of Medicare.

Medicaid

Medicaid, which currently covers more than 67 million people, provides health insurance for people with low-income. Each state administers its own Medicaid program, which is jointly financed and overseen by the federal government. (US Centers for Medicare & Medicaid Services, 2018). To qualify for Medicaid, individuals must fall below income thresholds and meet categorical eligibility, such as being a child, a parent of an eligible child, or an aged adult. Although states must adhere to some federally mandated categories for eligibility, there is much discretion in designing Medicaid programs, leading to great variability in benefits from state to state.

The Affordable Care Act of 2010 (ACA) intended to expand Medicaid eligibility to all individuals under the age of 65 in households with income up to 138 percent of the federal poverty level. However, a 2012 Supreme Court ruling made the eligibility expansion optional for each state (Klees, Wolfe, & Curtis, 2017). As a result, many states chose not to expand their Medicaid programs. This has significantly hampered the ability of the ACA to reduce the uninsured and has resulted in even greater variability across state Medicaid programs.

Medicaid plays an especially important role in covering patients with serious mental illness. While only 14 percent of the adult population is covered by Medicaid, the program covers 21 percent of adults with diagnosed mental illness and 17 percent of adults with substance use disorders. In most states, individuals are automatically eligible for Medicaid if they qualify to receive Supplemental Security Income, the federal cash assistance program for the aged with low-income, blind, or disabled. Mental illness is a qualifying disability for program eligibility.

There are major differences between the states in Medicaid’s behavioral health coverage and funding for psychiatric and substance abuse services. This especially affects the provision of mental health services as many states do not adequately reimburse the cost of care provided by community mental health clinics or hospital providers. The variability is particularly stark in terms of substance use disorders, where many Medicaid programs do not cover medication-assisted treatment. Further, federal Medicaid funding is prohibited for “institutions for mental disease,” limiting access to residential and inpatient treatment settings (Social Security Act).