Health Care Delivery in the United States

James R. Knickman Anthony R. Kovner Editors

Jonas & Kovner’s

11th Edition

Health Care Delivery in the United States James R. Knickman, PhD · Anthony R. Kovner, PhD Editors

Steven Jonas, MD, MPH, MS, FNYAS, Founding Editor

Knickm an


Jonas & Kovner’s 11th Edition

11th Edition

9 780826 125279

ISBN 978-0-8261-2527-9

11 W. 42nd Street New York, NY 10036-8002 www.springerpub.com

“Health care managers, practitioners, and students must both operate as effectively as they can within the daunting and con- tinually evolving system at hand and identify opportunities for reform advances… Health Care Delivery in the United States has been an indispensable companion to those preparing to manage this balance. The present edition demonstrates once again why this volume has come to be so prized. It takes the long view – charting recent developments in health policy, and putting them side-by-side with descriptions and analysis of existing programs in the United States and abroad.”

— Sherry Glied, PhD, Dean and Professor of Public Service, NYU Wagner, From the Foreword

T his fully updated and revised 11th edition of a highly esteemed survey and analysis of health care delivery in the United States keeps pace with the rapid changes that are reshaping our system. Fundamentally, this new edition presents the realities that impact our nation’s achievement of the so-called Triple Aim: better health and better care at

a lower cost. It addresses challenges and responses to the Affordable Care Act (ACA), the implementation of Obamacare, and many new models of care designed to replace outmoded systems. Leading scholars, practitioners, and educators within population health and medical care present the most up-to-date evidence-based information on health disparities, vulnerable populations, and immigrant health; nursing workforce challenges; new information technology; preventive medicine; emerging approaches to control health care costs; and much more.

Designed for graduate and advanced undergraduate students of health care management and administration and public health, the text addresses all of the complex core issues surrounding our health care system in a strikingly readable and accessible format. Contributors provide an in-depth and objective appraisal of why and how we organize health care the way we do, the enormous impact of health-related behaviors on the structure, function, and cost of the health care delivery system, and other emerging and recurrent issues in health policy, health care management, and public health. The 11th edition features the writings of such luminaries as Michael K. Gusmanno, Carolyn M. Clancy, Joanne Spetz, Nirav R. Shah, Michael S. Sparer, and Christy Harris Lemak, among others. Chapters include key words, learning objectives and competencies, discussion questions, case studies, and new charts and tables with concrete health care data. Included for instructors is an Instructor’s Manual, PowerPoint slides, Syllabus, Test Bank, Image Bank, Supplemental e-chapter on the ACA, and a transition guide bridging the 10th and 11th editions.

Key Features: • Integration of the ACA throughout the text, including

a supplementary e-chapter devoted to this major health care policy innovation

• The implementation of Obamacare • Combines acute and chronic care into organizations

of medical care • Nursing workforce challenges • Health disparities, vulnerable populations, and

immigrant health • Strategies to achieve the Triple Aim (better health and

better care at lower cost)

• New models of care including accountable care organizations (ACOs), patient homes, health exchanges, and integrated health systems

• Emerging societal efforts toward creating healthy environments and illness prevention

• Increasing incentives for efficiency and better quality of care

• Expanded discussion of information technology • A new 5-year trend forecast

Jonas & Kovner’s

H ealth Care Delivery in the U

nited States

Jonas & Kovner’s

Health Care Delivery in the United States

Brief Contents


Chapter 1 The Challenge of Health Care Delivery and Health Policy 3

Chapter 2 A Visual Overview of Health Care Delivery in the United States 13

Chapter 3 Government and Health Insurance: The Policy Process 29

Chapter 4 Comparative Health Systems 53


Chapter 5 Population Health 79

Chapter 6 Public Health: A Transformation for the 21st Century 99

Chapter 7 Health and Behavior 119

Chapter 8 Vulnerable Populations: A Tale of Two Nations 149


Chapter 9 Organization of Care 183

Chapter 10 The Health Workforce 213

Chapter 11 Health Care Financing 231

Chapter 12 Health Care Costs and Value 253

Chapter 13 High-Quality Health Care 273

Chapter 14 Managing and Governing Health Care Organizations 297

Chapter 15 Health Information Technology 311


Chapter 16 The Future of Health Care Delivery and Health Policy 333

Appendix Major Provisions of the Patient Protection and Affordable Care Act of 2010 343

Glossary 363

Index 379

James R. Knickman, PhD, is president and chief executive offi cer of the New York State Health Foundation (NYSHealth), a private foundation dedicated to improving the health of all New Yorkers, especially the most vulnerable. Under Dr. Knickman’s leadership, NYSHealth has invested more than $90 million since 2006 in initiatives to improve health care and the public health system in New York state. Central to the foundation’s mission is a commitment to sharing the results and lessons of its grantmaking; informing policy and practice through timely, credible analysis and commentary; and serving as a neutral convener of health care leaders and stakeholders throughout New York. Before joining NYSHealth, Dr. Knickman was vice president of research and evaluation, Robert Wood Johnson Foundation, and served on the faculty of New York University’s Robert F. Wagner Graduate School of Public Service. He serves on numerous boards, including the National Council on Aging and Philanthropy New York.

Anthony R. Kovner, PhD, is professor of management at New York University’s Robert F. Wagner Graduate School of Public Service. He has directed the executive MPA in manage- ment, the concentration for nurse leaders, the program in health policy and management, and the advanced management program for clinicians at NYU/Wagner. He was a senior program consultant to the Robert Wood Johnson Foundation’s rural hospital program and was senior health consultant to the United Autoworkers Union. He served as a manager for 12 years in all, in a large community health center, a nursing home, an academic faculty practice, and as CEO at a community hospital. Professor Kovner is the author or editor, with others, of 11 books, 48 peer-reviewed articles, and 33 published case studies. He was the fourth recipient, in 1999, of the Filerman Prize for Educational Leadership from the Association of University Programs in Health Administration.

Jonas & Kovner’s

Health Care Delivery in the United States 11th Edition

James R. Knickman, PhD

Anthony R. Kovner, PhD


Steven Jonas, MD, MPH, MS, FNYAS

Founding Editor

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ISBN: 978-0-8261-2527-9 e-book ISBN: 978-0-8261-2529-3

For Professors: Instructors’ Manual: ISBN 978-0-8261-7155-9 Transition Guide for the 11th Edition: ISBN 978-0-8261-2628-3 Test Bank: ISBN 978-0-8261-7159-7 PowerPoints: ISBN 978-0-8261-7157-3 Syllabus: ISBN 978-0-8261-7158-0 Please email [email protected] to request these fi les.

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Jonas and Kovner’s health care delivery in the United States / [edited by] James R. Knickman, Anthony R. Kovner.—11th edition. p. ; cm. Health care delivery in the United States Editors’ names reversed on the previous edition. Preceded by: Jonas & Kovner’s health care delivery in the United States. Includes bibliographical references and index. ISBN 978-0-8261-2527-9—ISBN 978-0-8261-2529-3 (e-book) I. Knickman, James, editor. II. Kovner, Anthony R., editor. III. Title: Health care delivery in the United States. [DNLM: 1. Delivery of Health Care—United States. 2. Health Policy—United States. 3. Health Services—United States. 4. Quality of Health Care—United States. W 84 AA1] RA395.A3 362.10973—dc23 2014045558

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FOREWORD Sherry Glied xiii






Context 3 Th e Importance of Good Health to American Life 4 Defi ning Characteristics of the U.S. Health System 5 Major Issues and Concerns 6 Key Stakeholders Infl uencing the Health System 8 Organization of Th is Book 11 Discussion Questions 12 Case Study 12 Bibliography 12


Th e U.S. Health Care System: A Period of Change 13 Th e Shared Responsibility for Health Care 14 Where the Money Comes From, and How It Is Used 16 A Comparative Perspective 16 Population Health: Beyond Health Care 17 Access to Care and Variation in Health Outcomes 19 Health and Behavior 20 Th e Health Care Workforce 21 Variations in Health Care Delivery 22 Health Care Quality 23 Health Care Cost and Value 24 Th e Future of Health Care Delivery 26 References 27


C o n t e n t svi


Context 29 Th e Government as Payer: Th e Health Insurance Safety Net 30 Government and Health Insurance: Th e Policy Process 41 Conclusion 49 Discussion Questions 49 Case Study 50 References 50

CHAPTER 4 COMPARATIVE HEALTH SYSTEMS 53 Michael K. Gusmano and Victor G. Rodwin

Overview 53 Health System Models 55 NHS and NHI Systems Compared With the United States 57 Th e Health Systems in England, Canada, France, and China 58 Lessons 70 Discussion Questions 71 Case Study 72 References 72



Context 79 Th e Population Health Model 80 Th e Medical Model 82 Comparing the Medical and Population Health Models 83 Th e Infl uence of Social Determinants on Health Behavior and Outcomes 85 Leading Determinants of Health: Weighting the Diff erent Domains 89 Health Policy and Returns on Investment 90 Conclusion 94 Discussion Questions 95 Case Study 96 References 97

CHAPTER 6 PUBLIC HEALTH: A TRANSFORMATION FOR THE 21ST CENTURY 99 Laura C. Leviton, Paul L. Kuehnert, and Kathryn E. Wehr

Who s in Charge of Public Health? 99 A Healthy Population Is in the Public Interest 102 Core Functions of Public Health 106 Governmental Authority and Services 108 Rethinking Public Health for the 21st Century 112 Discussion Questions 116 Case Study 117 References 117

C o n t e n t s vii

CHAPTER 7 HEALTH AND BEHAVIOR 119 Elaine F. Cassidy, Matthew D. Trujillo, and C. Tracy Orleans

Behavioral Risk Factors: Overview and National Goals 120 Changing Health Behavior: Closing the Gap Between Recommended and Actual Health Lifestyle Practices 126 Changing Provider Behavior: Closing the Gap Between Best Practice and Usual Care 137 Conclusion 142 Discussion Questions 143 Case Study 144 References 144

CHAPTER 8 VULNERABLE POPULATIONS: A TALE OF TWO NATIONS 149 Jacqueline Martinez Garcel, Elizabeth A. Ward, and Lourdes J. Rodríguez

Understanding Vulnerable Populations and Th eir Context 150 Th e Growing Number of Vulnerable Populations 153 Organization and Financing of Health Care and Other Services for Vulnerable Populations 158 Social Service Needs 162 Federal and State Financing of Care for Vulnerable Populations 164 Challenges for Service Delivery and Payment 165 Emerging and Tested Ideas for Better Health Delivery 167 Conclusion 174 Discussion Questions 175 Case Study 176 References 176


CHAPTER 9 ORGANIZATION OF CARE 183 Amy Yarbrough Landry and Cathleen O. Erwin

Description of the Current Care Delivery System 184 Th e Future of the Delivery System 202 Best Practices 207 Looking Forward 208 Discussion Questions 209 Case Study 209 References 210

CHAPTER 10 THE HEALTH WORKFORCE 213 Joanne Spetz and Susan A. Chapman

Who Is Part of the Health Workforce? 214 Traditional Approaches to Health Workforce Planning 215 Health Workforce Education 216 Critical Issues for the Health Workforce 218 Conclusion: Building the Future Health Care Workforce 224

C o n t e n t sviii

Discussion Questions 224 Case Study 225 References 225


General Overview of Health Care Financing 232 What the Money Buys and Where It Comes From 234 How Health Insurance Works 235 How Providers Are Paid for the Health Services Th ey Deliver 240 Specialized Payment Approaches Used by Payers 241 Issues Shaping the Future of Health Care Financing 244 Conclusion 249 Discussion Questions 250 Case Study 251 References 251

CHAPTER 12 HEALTH CARE COSTS AND VALUE 253 Thad Calabrese and Keith F. Safi an

Th e Issue of Health Care Spending Growth 254 Conclusion 269 Discussion Questions 269 Case Study 270 References 270

CHAPTER 13 HIGH-QUALITY HEALTH CARE 273 Carolyn M. Clancy and Irene Fraser

Defi ning Quality 274 How Are We Doing? 274 How Do We Improve Quality? 275 How Do We Incentivize Quality Care? 281 What Are Major Recent Developments Aff ecting Quality? 289 Core Competencies for Health Administrators 292 Conclusion 293 Discussion Questions 294 Case Study 294 References 295


Governing Boards and Owners 298 Management Work 301 Conclusion 308 Discussion Questions 308 Case Study 309 References 309

C o n t e n t s ix


HIT Defi ned 312 Th e Backing of Government 315 Transformative Powers of HIT 316 HIT at the VA 321 Th e New York Experience 322 Implementing HIT 323 Challenges and Shortcomings of HIT 324 Toward the Future 325 Discussion Questions 326 Case Study 327 References 327



Dynamics Infl uencing Change 334 Aspects of the Health System Th at Are Set to Change by 2020 335 Future Prospects for Diff erent Stakeholders in the Health Enterprise 339 Conclusion 341 Discussion Questions 341 Case Study 342 Bibliography 342

APPENDIX Major Provisions of the Patient Protection and Aff ordable Care Act of 2010 343




List of Tables and Figures

Chapter 2

Table 2.1 Th e diverse U.S. health care workforce. 22 Figure 2.1 Consumer perceptions of the U.S. health care system. 13 Figure 2.2 Th e role of government in health care. 14 Figure 2.3 Signifi cant health policy milestones, 1965–present. 15 Figure 2.4 Sources and uses of health care funding, 1970 and 2012. 17 Figure 2.5 Association between health care spending per capita and life expectancy. 18 Figure 2.6 Growth in obesity rates, 2000–2010. 18 Figure 2.7 Usual source of care by income level. 19 Figure 2.8 Adequate control of cholesterol by income level. 20 Figure 2.9 UWPHI county health rankings model of health improvement. 21 Figure 2.10 Th e Commonwealth Fund’s scorecard on local health system performance. 24 Figure 2.11 Th e factors that infl uence a patient’s choice of hospital. 25 Figure 2.12 Adjusted charges and discount prices for uncomplicated caesarean sections across

California hospitals, 2011. 26 Figure 2.13 Consumer perception of Aff ordable Care Act next steps. 27

Chapter 4

Table 4.1 Health system provision and fi nancing. 56 Table 4.2 Health care expenditure as a share of GDP: Selected countries, 2011. 66

Chapter 5

Figure 5.1 A guide to thinking about determinants of population health. 81 Figure 5.2 Association between health care spending per capita and life expectancy. 82 Figure 5.3 Gradients within gradients: Education is linked with health. 87 Figure 5.4 Health-related behaviors and education both aff ect health. 88 Figure 5.5 County health rankings model. 91

Chapter 6

Table 6.1 Ten great public health achievements: United States, 1900–1999. 103 Table 6.2 Diff erences between the roles of individual medical care and public health. 105 Figure 6.1 Th e public health system at the local level. 101 Figure 6.2 Th e circle of public health activities and 10 essential services. 106

Chapter 7

Table 7.1 Selected Healthy People 2020 objectives: Behavioral risk factors. 122 Table 7.2 Th e population-based intervention model. 133 Figure 7.1 Comprehensive approach to changing provider practice. 140

L i s t o f T a b l e s a n d F i g u r e sxii

Chapter 8

Figure 8.1 Projection of growth in chronic illness prevalence. 154

Chapter 9

Table 9.1 Registered hospitals in the United States by type and ownership status. 191 Table 9.2 Standards for patient-centered medical homes. 203 Figure 9.1 Domains in acute care. 187

Chapter 10

Table 10.1 Largest health care occupations in the United States. 215

Chapter 11

Table 11.1 National health expenditures (in $ billions), selected categories and years, 1970–2020. 234

Figure 11.1 U.S. national health expenditure as a share of GDP, 1970–2020. 234 Figure 11.2 Medicaid enrollments and expenditures for year 2010. 237

Chapter 12

Table 12.1 Average annual after-tax expenditures by consumer units/households, 2012. 256 Table 12.2 Health care spending as a percentage of GDP for OECD countries. 257 Figure 12.1 Annual change in health care spending and GDP, 1963–2012. 254

Chapter 13

Figure 13.1 Improving care through system redesign. 276 Figure 13.2 Number of state public-reporting mandates by provider category. 284



Th is, the 11th edition of Health Care Delivery in the United States, appears at an unprecedented moment in the evolution of the U.S. health care system. After decades of relentless increases in the number of uninsured residents, more Americans today hold health insurance coverage than at any time in the past. In the wake of the Aff ord- able Care Act coverage expansion, which began in January 2014, the share of the popu- lation uninsured has fallen to levels last seen more than 30 years ago. On the cost front, real per capita spending over the past 4 years has grown at the slowest rate on record. For the 8th year in a row, the Congressional Budget Offi ce has revised down- ward its projections of Medicare cost growth. Although the exceptional slowdown of overall health spending is largely due to the eff ects of the Great Recession, changes to payment policies and levels enacted in the health reform law may claim credit for some of the good Medicare news.

Th e new law, as well as changes in private insurer practices, also seems to have encouraged the proliferation of novel forms of health care delivery that seek to gen- erate the quality and cost benefi ts long associated with high-performing vertically integrated health care institutions. Some evidence suggests that these incentives have contributed to reductions in readmission rates and health care-acquired infections.

On the public health front, decades of educational eff orts, incentives, and inter- ventions, often based on academic evidence, have also led to signifi cant improve- ments. Teen and adult smoking rates are at all-time lows, and the teen birth rate has fallen almost continuously over the past 20 years. Th ese improvements are testimony to vibrant and creative eff orts in health fi nancing, delivery, and public health.

It is comforting and reassuring to imagine that the U.S. health system has settled into a more sustainable, equitable, and eff ective path. But that sanguine image belies both the condition of our health system and the history of health reform elsewhere. It is true that uninsurance rates have dropped dramatically in some states—but many others have rejected the coverage expansions. A concerted eff ort in the courts and in Congress seeks to roll back the gains that have already been made. Slower cost growth off ers the system some breathing room, but almost all analysts predict that the changes in payments and organizations will not be suffi cient to hold spending at supportable levels. Even under the most optimistic scenarios, as the baby boom generation ages, health care will consume a growing share of the gross domestic product and of the fed- eral budget. Health reform and insurer ingenuity have brought an abundance of new organizational forms, but the jury is out on whether these will actually improve quality and reduce costs. U.S. health outcomes, especially for the most vulnerable popula- tions, remain abysmally low in a comparative perspective, and the evidence suggests that inequality in health outcomes is growing.

Students of health care policy and delivery need to chart a middle course: nei- ther complacently optimistic about the promise of a new regime, nor overly discour- aged by the still-dismal U.S. context. Instead, as the experience of other countries suggests, we should recognize that health care system reform is a never-ending task. After all, Chancellor Otto von Bismarck initiated the German health insurance system in 1883—and Chancellor Angela Merkel completed the most recent German health insurance reform, building on Bismarck’s model, in 2011. Similarly, even though much

F o r e w o r dxiv

has changed, our health care system continues to resemble (quite closely) the system described in the fi rst edition of Health Care Delivery in the United States, published in 1977. No doubt a student of the future, scanning this 11th edition in 2050, will recog- nize many similarities to the health system he or she knows and will also see evidence of the decades of reform that will consume policymakers and delivery system manag- ers between now and then.

Health care managers, practitioners, and students must both operate as eff ectively as they can within the daunting and continually evolving system at hand and identify opportunities for reform advances. For nearly 40 years—27 of them at least in part under the stewardship of Tony Kovner—Health Care Delivery in the United States has been an indispensable companion to those preparing to manage this balance. Th e present edition demonstrates once again why this volume has come to be so prized. It takes the long view—charting recent developments in health policy and putting them side-by-side with descriptions and analysis of existing programs in the United States and abroad. Novelty gets its due, but so does context. Th e text recognizes that health is, after all, the ultimate object of health care delivery, and so provides a thorough assessment of population health. It explores the key elements of the health care deliv- ery system, from both the supply and the demand sides. In addition, it recognizes that the delivery system doesn’t stand alone and examines the structures and processes— technological, governmental, and organizational—that underpin the system.

Health Care Delivery in the United States profi ts from the editorship of two highly experienced observers of the health care system: James Knickman and Anthony Kovner. Jim, once a faculty member at Wagner, is now president and CEO of the New York State Health Foundation, which, under his stewardship, has been an impor- tant contributor to reform of the New York state health system. Tony is, to my delight, my colleague at the Wagner School. He has been a mentor and guide to generations of health care managers and policymakers, both at a distance, as contributor and editor to this text, and as a classroom teacher and adviser. He has transformed the lives of his students, and they, as leaders in health care institutions around the country, have transformed their institutions and the lives of their patients. Tony inculcates in his students—as he has in me—a conviction that policy and management can, should, and must be founded on the best possible evidence. Founding decisions on evidence is not just a mantra—it means asking the right questions, identifying the appropriate literature, and assessing the applicability and quality of this research. In this volume, Tony and Jim have put that system to work, and it is this foundation in rigorous evi- dence that allows the text to stand the test of time and to be responsive and useful in addressing current developments.

Sherry Glied, PhD Dean, New York University

Robert F. Wagner School of Public Service New York, New York



Th e editors would like to express deep appreciation to the team of people who made this book possible. First, we thank our 29 authors of the 16 chapters that comprise the book. Th ey are all noted experts in their fi elds, and we appreciate their willingness to translate their knowledge into chapters that introduce future leaders to the workings of the U.S. health system. Second, we wish to acknowledge the superb editorial role played by Sheri W. Sussman and the quality control of production under Joanne Jay’s direction at Springer Publishing Company. We appreciate Sheri’s insights about how to publish a textbook and have benefi ted from Joanne’s keeping the process moving in creating an eff ective and enjoyable learning experience for HCDUS readers. Christine Kovner frequently helped to strengthen the book, reading various chapters and off er- ing advice from her vantage as one of the leading nursing researchers in the country. At the New York State Health Foundation, Susan Illman, Emily Parker, and Amy Shefrin each provided valued assistance gathering current data to inform the book. Finally, we would like to acknowledge Steve Jonas, who originated this book 11 editions ago.


Organization of This Book

Th is is the 11th edition of Jonas and Kovner’s Health Care Delivery in the United States, which, although its title has evolved in the last 35 years, has stayed true to its original purpose: helping instructors and students better understand the complicated, expen- sive, and ever-changing U.S. health care delivery system and the public health system. It is a privilege to be able to work with instructors around the world to introduce the leaders of tomorrow to the health fi eld.

Our nation is embarked on an ambitious attempt to reshape how we go about taking care of the health concerns of our population. On the one hand, there is a new energy to develop initiatives that focus on keeping people healthy. On the other hand, there is a great deal of experimenting with the organization of the care system that addresses the needs of people who have medical problems associated with injuries and disease. Th e aim of this experimentation is to improve the quality of medical care and to bring costs in line with what Americans can aff ord and want to spend on the health sector.

Th is text is organized to address both the challenge of keeping people healthy (Part II) and the challenge of delivering good medical care that helps people recover from medical conditions that do occur (Part III). In addition, we have included a sec- tion that describes the current status of the U.S. health care system and explains the complicated public policy process that has so much infl uence on the way health care is delivered and fi nanced in this country (Part I). Th e text ends with a consideration of where the health system might be headed in the years to come (Part IV).

Each chapter starts with a list of key words that are central to the chapter’s focus, a list of the learning objectives addressed by the chapter, and an outline of what is to come. Each chapter ends with a list of discussion questions and a case study, encourag- ing the reader to apply the ideas of the chapter to real-life issues and challenges that face health care leaders focused on management issues and policy issues.

In addition to this text, an online Instructors’ Manual, which includes a variety of background materials that teachers will fi nd useful in guiding class discussion, is available. It also off ers additional resources and class projects that are useful to students and the learning process. In addition, PowerPoints, Syllabus, Test Bank, and Transition Guide are available to instructors via [email protected] .com

Students are encouraged to visit ushealthcaredelivery.com for additional materials including an updated supplementary chapter on the Patient Protection and Aff ordable Care Act.

We encourage instructors and students to communicate with us about this edi- tion, so that we may make the 12th edition even more useful to you. Please submit any comments or questions to us at [email protected] and [email protected] edu, and we will get back to you. As always, we appreciate your suggestions.

Anthony R. Kovner, PhD James R. Knickman, PhD



Thad Calabrese, PhD, is an assistant professor of public and nonprofi t fi nancial man- agement at New York University’s Robert F. Wagner Graduate School of Public Service. Dr. Calabrese is the coauthor of two textbooks on fi nancial management with applications to government and nonprofi t organizations, including health care organizations. Financial Management for Public, Health, and Not-for-Profi t Organizations (4th edition) was writ- ten with Steven Finkler, Robert Purtell, and Daniel L. Smith. Accounting Fundamentals for Health Care Management (2nd edition) was written with Steven Finkler and David Ward. Dr. Calabrese’s research applies the principles of corporate fi nance to organizations involved in the production or coproduction of public goods and services. He teaches courses on fi nancial management for health care organizations and also for nonprofi t organizations.

Elaine F. Cassidy, PhD, is a senior consultant in research and evaluation at consulting fi rm Equal Measure, where she manages projects related to health promotion, particularly among under-privileged populations. Before joining Equal Measure, Dr. Cassidy served as a program offi cer in research and evaluation at the Robert Wood Johnson Founda- tion, where she oversaw research and evaluation activities for the Vulnerable Populations portfolio. Her work and professional interests focus primarily on child and adolescent health and risk behavior, violence prevention, and school-based interventions, primar- ily for young people living in low-income, urban environments. She is a trained school psychologist and mental health clinician who has provided therapeutic care to children and families in school, outpatient, and acute partial hospitalization settings. She holds an MSEd in psychological services from the University of Pennsylvania and a PhD in school, community, and child-clinical psychology from the University of Pennsylvania.

Susan A. Chapman, PhD, RN, FAAN, is professor in the Department of Social and Behavioral Sciences, University of California, San Francisco School of Nursing, and fac- ulty at UCSF’s Center for Health Professions and the Institute for Health Policy Studies. She is codirector of the masters and doctoral programs in health policy at the School of Nursing. Her scholarly work focuses on health workforce research, health policy analysis, and program evaluation. Susan’s workforce research focuses on transforming models of primary care to address new and expanded roles for the health care workforce and the long-term care workforce. Susan received a BS from the University of Iowa, MS from Boston College, MPH from Boston University, and PhD in Health Services and Policy Analysis from UC Berkeley.

Carolyn M. Clancy, MD, is Interim Under Secretary for Health at the Department of Veterans Aff airs, having joined the VA in 2013 as Assistant Deputy Under Secretary for Health for Quality, Safety and Value. Prior to VA, she was director of the federal Agency for Healthcare Research and Quality (AHRQ) for ten years and also was director of AHRQ’s Center for Outcomes and Eff ectiveness Research. Dr. Clancy, a general internist and health services researcher, is a graduate of Boston College and the University of Massachusetts Medical School. Aft er her clinical training in internal medicine, she was a Henry J. Kaiser Family Foundation Fellow at the University of Pennsylvania. Dr. Clancy holds an aca- demic appointment at the George Washington University School of Medicine and serves as senior associate editor for the journal Health Services Research. She serves on multiple

C o n t r i b u t o r sxx

editorial boards, is a member of the Institute of Medicine, and was elected a master of the American College of Physicians in 2004. In 2009, she was awarded the William B. Graham Prize for Health Services Research. Dr. Clancy’s major research interests include improv- ing health care quality and patient safety and reducing disparities in care associated with race, ethnicity, gender, income, and education. As director of AHRQ, she launched the fi rst annual report to Congress on health care disparities and health care quality.

Catherine K. Dangremond, MPA, is currently an administrative fellow at the Yale New Haven Health System. Her professional interests lie at the intersection of health care deliv- ery and health policy, particularly the eff ects of this intersection on health system strategy and improvement in the delivery of health care and health outcomes. Ms. Dangremond holds an MPA from New York University’s Robert F. Wagner Graduate School of Public Service. She previously worked as a process improvement consultant and business devel- opment professional, focused in the health care provider and government sectors.

Cathleen O. Erwin, PhD, MBA, is an assistant professor of health services administra- tion in the Department of Political Science at Auburn University. Before her academic career, she worked for many years in administration, development, and communica- tions for nonprofi t organizations in the arts, health care, and higher education. Dr. Erwin received her doctoral degree in administration-health services from the University of Alabama at Birmingham. Her research primarily revolves around strategic management, organizational performance, and governance in health care organizations. Dr. Erwin’s teaching portfolio includes courses in health care delivery systems, health insurance and reimbursement, health care quality management, health information technology, and fundraising for nonprofi t organizations. She is a past president of the Alabama Health- care Executives Forum, the state chapter of the American College of Healthcare Execu- tives (ACHE), and is an appointed member of the board for the Health Care Management Division of the Academy of Management.

Irene Fraser, PhD, is a political scientist who has focused her work on Medicaid, private health insurance, and health care delivery. Since 1995, she has been at the Agency for Health- care Research and Quality, where she is director of the Center for Delivery, Organization, and Markets. Dr. Fraser spent 8 years at the American Hospital Association, as senior policy manager on indigent care, Medicaid, and health care reform, and director of Ambulatory Care. Before that, Dr. Fraser was associate professor of Political Science, director of the public policy program at Barat College, and adjunct faculty to the Institute for Health Law at Loyola School of Law. Dr. Fraser’s work has appeared in Health Aff airs, Inquiry, Health Care Financing Review, Medical Care Research and Review, Journal of Healthcare Manage- ment, Journal of Ambulatory Care Management, Health Services Research, and Journal of Health Politics, Policy and Law. She has a BA in political science and Spanish from Chatham College, and a PhD in political science from the University of Illinois.

Jacqueline Martinez Garcel, MPH, is vice president at the New York State Health Foundation (NYSHealth). Ms. Martinez Garcel serves as a key adviser to the president and CEO and has a central role in developing the foundation’s program areas, iden- tifying emerging opportunities and strategic niches, building partnerships with other foundations, and evaluating the performance of programs and grantees. Before joining

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NYSHealth, she served as the Executive Director for the Northern Manhattan Com- munity Voices Collaborative (Community Voices). Th e mission of Community Voices, funded by the W.K. Kellogg Foundation, is to improve access and quality of care for vulnerable populations. Ms. Martinez Garcel also worked with Dr. H. Jack Geiger at the City University of New York to complete an analysis of racial and ethnic disparities in diagnosis and treatment in the U.S. health care system. She has served as an NIH fellow for the Department of Public Health in the City of Merida in Yucatan, Mex- ico, and an adjunct professor of sociology at the Borough of Manhattan Community College. She is a board director for the Institute for Civic Leadership and for NAMI- New York City Metro. She holds a MPH from Columbia University and a BS from Cornell University.

Michael K. Gusmano, PhD, is a research scholar at Th e Hastings Center. Dr. Gusmano’s research interests include inequalities in health and theories of social jus- tice. He is one of the associate editors of Making Diffi cult Decisions with Patients and Families: A Singapore Casebook. His previous books include Health Care in World Cities (with Victor G. Rodwin and Daniel Weisz), Healthy Voices/Unhealthy Silence: Advocating for Poor People’s Health (with Colleen Grogan), and Growing Older in World Cities (coedited with Victor G. Rodwin). Dr. Gusmano holds a PhD in politi- cal science from the University of Maryland at College Park and an MPP from SUNY Albany. He was a Robert Wood Johnson Foundation scholar in health policy at Yale University and is a member of the editorial committee of Th e Hastings Center Report and the editorial boards of Health Economics, Policy and Law, and the Journal of Health Politics, Policy and Law.

Paul L. Kuehnert, DNP, RN, is the team director for the Bridging Health and Health Care Portfolio at the Robert Wood Johnson Foundation in Princeton, New Jersey. Imme- diately before coming to RWJ, Paul was the county health offi cer and executive director for health for Kane County, Illinois, a metro Chicago county of 515,000 people, for 5 years. In this role, Dr. Kuehnert provided executive leadership and oversight to four county departments: Health, Emergency Management, Community Reinvestment, and Animal Control. Before working in Kane County, Dr. Kuehnert served as deputy state health offi cer and deputy direc- tor of the state of Maine’s health department. Dr. Kuehnert is a pediatric nurse practitioner and holds a DNP in executive leadership as well as an MS in public health nursing from Uni- versity of Illinois at Chicago. He was named a Robert Wood Johnson Foundation executive nurse fellow in 2004.

Amy Yarbrough Landry, PhD, is an assistant professor in the Department of Health Services Administration at the University of Alabama at Birmingham. She teaches Introduction to Health Systems and Comparative Health Systems to masters and doc- toral students in her department. Dr. Landry’s research interests pertain to the strategic management of health care organizations in a variety of contexts, including acute care hospitals, long-term care organizations, Medicaid managed care organizations, and phy- sician organizations. Dr. Landry has also done research surrounding leadership in health care organizations. In particular, she is interested in executive selection, training, and development.

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Christy Harris Lemak, PhD, FACHE, is professor and chair of the Department of Health Services Administration at the University of Alabama at Birmingham. Dr. Lemak teaches and conducts scholarship in the areas of health care management and leadership, with an emphasis on how leadership and organizational factors lead to high performance in health care. Her research includes studies of a complex pay-for-performance incentive program for physicians, and relationships among organizational culture, management practice, and surgical outcomes in a multihospital surgical collaborative. Dr. Lemak has extensively studied how Medicaid policy demonstrations aff ect hospitals, health plans, and relationships among provider organizations. She is currently examining new ways of measuring hospital and health system performance. She holds a PhD in health services organization and policy from the University of Michigan, MHA and MBA degrees from the University of Missouri-Columbia, and a BS in health planning and administration from the University of Illinois.

Laura C. Leviton, PhD, is special advisor for evaluation at Robert Wood Johnson Foundation, Princeton, New Jersey. She has been with the foundation since 1999, over- seeing more than 100 national and local evaluations. She was formerly a professor at two schools of public health, where she collaborated on the fi rst randomized experiment on HIV prevention, and later on two large place-based randomized experiments on improving medical practices. She received the 1993 award from the American Psycho- logical Association for Distinguished Contributions to Psychology in the Public Inter- est. She has served on three Institute of Medicine committees and was appointed by the secretary of DHHS to CDC’s National Advisory Committee on HIV and STD Preven- tion. Dr. Leviton was president of the American Evaluation Association in 2000 and has coauthored two books: Foundations of Program Evaluation and Confronting Public Health Risks. She received her PhD in social psychology from the University of Kansas and postdoctoral training in research methodology and evaluation at Northwestern University.

C. Tracy Orleans, PhD, is the senior scientist for the Robert Wood Johnson Foundation and has led or coled the foundation’s public policy and health care system grant-making in the areas of health behavior change, tobacco control, chronic disease management and prevention, physical activity promotion, and childhood obesity prevention during the past 18 years. During the past 6 years, she has focused mainly on discovering, evaluating, and applying eff ective policy and environmental strategies for reversing the rise in child- hood obesity and reducing the disparities in its prevalence and health tolls. She is now working to develop metrics and research that will help to create a broad culture of health nationwide. Dr. Orleans has authored or coauthored more than 250 publications, served on numerous journal editorial boards, on national scientifi c panels and advisory groups (e.g., Institute of Medicine, U.S. Preventive Services Task Force, Community Preventive Services Task Force, National Commission on Prevention Priorities, National Collabora- tive on Childhood Obesity Research), and as the associate policy editor for the American Journal of Preventive Medicine. Dr. Orleans has received many awards for her national work in the fi elds of behavioral medicine, tobacco control, and childhood obesity preven- tion. Most recently, she was deeply honored, along with Drs. Jim Sallis and Mary Story, to receive the CDC’s Weight of the Nation Pioneering Innovation Award for Applied Obesity Research in 2012.

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Lourdes J. Rodríguez, DrPh, serves as program offi cer for the New York State Health Foundation (NYSHealth) in the prevention area, disseminating evidence-based pro- grams, supporting promising prevention strategies, and leveraging additional resources for New York state. Before her current position, Dr. Rodríguez served as associate director of community partnerships for healthy neighborhoods at City Harvest, overseeing com- munity engagement activities. From 2004 to 2012 she was on the faculty at the Columbia University Mailman School of Public Health. She coedited a book examining community mobilization for health and has authored numerous publications on violence prevention, mental health, and active living. Dr. Rodríguez received a BS in industrial biotechnology from the University of Puerto Rico, an MPH from the University of Connecticut, and a DrPH from Columbia University.

Victor G. Rodwin, PhD, MPH, professor of health policy and management at the Robert F. Wagner Graduate School of Public Service, NYU, conducts research and teaches courses on community health and medical care, comparative analysis of health care sys- tems, and health system performance and reform. He has lectured widely on these topics in universities around the world, most recently at Sun Yat Sen University in Gouangzhou, Fudan University in Shanghai, Renmin University in Beijing, London School of Econom- ics, London School of Hygiene and Tropical Medicine, and the Institut d’Etudes Poli- tiques in Paris. Professor Rodwin was awarded the Fulbright-Tocqueville Distinguished Chair during the spring semester of 2010 while he was based at the University of Paris– Orsay. In 2000, he was the recipient of a 3-year Robert Wood Johnson Foundation Health Policy Investigator Award on “Megacities and Health: New York, London, Paris, and Tokyo.” His research on this theme led to the establishment of the World Cities Project (WCP)—a collaborative venture between Wagner/NYU and the International Longevity Center USA, which focuses on aging, population health, and the health care systems in New York, London, Paris, Tokyo, and Hong Kong, and among neighborhoods within these world cities.

Pamela G. Russo, MD, MPH, is a senior program offi cer at Robert Wood Johnson Foundation (RWJF) in Princeton, New Jersey. She was recruited to RWJF to lead the Population Health: Science and Policy team in 2000. Before RWJF, she was an associate professor of medicine, director of the Clinical Outcomes Section, and program codirec- tor for the master’s program and fellowship in clinical epidemiology and health services research at the Cornell University Medical Center in New York City. Dr. Russo earned her BS from Harvard College, with a major in the history and philosophy of science; her MPH in epidemiology from the University of California, Berkeley, School of Public Health; and her MD from the University of California, San Francisco. She completed a residency in general internal medicine at the hospital of the University of Pennsylva- nia and a combined clinical epidemiology and rheumatology fellowship at Cornell and the Hospital of Special Surgery. Dr. Russo is a member of the IOM Population Health Roundtable.

Keith F. Safi an, MBA, FACHE, served as the president and CEO of Phelps Memo- rial Hospital Center from 1989 through 2014. His career started as an assistant direc- tor at Kings County Hospital in Brooklyn, then assistant, associate, and senior associate

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administrator at NYU Medical Center. He served as the administrator of St. John’s Epis- copal Hospital in the Rockaways for 4  years before joining Phelps. During Mr.  Safi an’s tenure, the hospital experienced extraordinary growth: from a $40 million operating bud- get to $245 million, from an 11% operating loss in 1988 to surpluses in 23 of the last 24 years, from 189 medical staff to 503, from 800 employees to more than 1,700, and from the 50th largest employer in Westchester to the 7th. He has received awards for his work in health care from the Dominican Sisters Family Health Service, the American College of Healthcare Executives, and the Hudson Valley Branch of the Arthritis Foundation. He is a fellow of the American College of Healthcare Executives. Mr. Safi an holds an MBA from the Wharton Graduate School of the University of Pennsylvania and undergraduate degrees in industrial engineering and electrical engineering from the University at Buff alo.

Nirav R. Shah, MD, MPH, is the chief operating offi cer for clinical operations for Kaiser Permanente’s Southern California region, a $20B health system with 14 hospitals and more than 3.7 million members. He is a graduate of Harvard College and Yale School of Medicine, was an RWJ Clinical Scholar at UCLA, and is board-certifi ed in Internal Medicine. Dr. Shah has been an attending physician at Bellevue Hospital in Manhattan, associate investigator at Geisinger Health in Pennsylvania, and a faculty member of NYU Medical Center in the section of value and comparative eff ectiveness. Most recently, he served as commissioner of the New York State Department of Health. Dr. Shah is an elected member of the Institute of Medicine of the National Academy of Sciences, and is a nationally recognized thought leader in patient safety and quality, health informa- tion technology, population health, and the strategies required to transition to lower-cost, patient-centered health care.

Michael S. Sparer, PhD, JD, is professor and chair in the Department of Health Policy and Management at the Mailman School of Public Health at Columbia University. Pro- fessor Sparer studies and writes about the politics of health care, with a particular empha- sis on the health insurance and health delivery systems for low-income populations and the ways in which intergovernmental relations infl uence policy. He is a two-time winner of the Mailman School’s Student Government Association Teacher of the Year award, as well as the recipient of a 2010 Columbia University Presidential Award for Outstanding Teaching. Professor Sparer spent 7 years as a litigator for the New York City Law Depart- ment, specializing in intergovernmental social welfare litigation. Aft er leaving the practice of law, he obtained a PhD in political science from Brandeis University. Sparer is a former editor of the Journal of Health Politics, Policy and Law and is the author of Medicaid and the Limits of State Health Reform, as well as numerous articles and book chapters.

Joanne Spetz, PhD, is a professor at the Institute for Health Policy Studies and in the Department of Family and Community Medicine and the School of Nursing at the Uni- versity of California, San Francisco. She is the associate director for research strategy at the UCSF Center for the Health Professions and the director of the UCSF Health Workforce Research Center. Her fi elds of specialty are labor economics, public fi nance, and econo- metrics. She has led research on the health care workforce, organization of the hospital industry, eff ects of health information technology, eff ects of medical marijuana policy on youth substance use, and quality of patient care. Dr. Spetz’s teaching is in the areas of quantitative research methods, health care fi nancial management, and health economics.

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Frank J. Thompson, PhD, is distinguished professor of public aff airs and administration at Rutgers-Newark and at the Rutgers Center for State Health Policy in New Brunswick, New Jersey. He has published extensively on issues of health policy and implementation, with particular attention to the eff ect of federalism. In 2008, Professor Th ompson received a Robert Wood Johnson Investigator Award to study the evolution of Medicaid policy during the Clinton, G.W. Bush, and Obama administrations. Th is research has led to several publications in scholarly journals and culminated in a book—Medicaid Politics: Federalism, Policy Durability, and Health Reform (2012). His book assesses the policy and political dynamics that fueled the dramatic expansion of Medicaid and established it as a key pillar of the Aff ordable Care Act. Professor Th ompson received his PhD in political science from the University of California, Berkeley. He is a fellow of the National Academy of Public Administration.

Matthew D. Trujillo, PhD, is a research associate in the Research, Evaluation, and Learning unit at the Robert Wood Johnson Foundation. Before coming to the founda- tion, Dr. Trujillo worked as an adjunct researcher at the RAND Corporation. He received his PhD in psychology and social policy from the Woodrow Wilson School of Public and International Aff airs at Princeton University. He specialized in prejudice and stereotyp- ing, and his research examines the relationship between racial and ethnic microaggres- sions, identity, and policy. Originally from Phoenix, Arizona, he received his bachelor’s degree in psychology from Arizona State University.

Elizabeth A. Ward is a program assistant at the New York State Health Foundation (NYSHealth). Ms. Ward supports grantmaking eff orts for projects under NYSHealth’s diabetes prevention and primary care priority areas. Before joining NYSHealth, she held a variety of positions in the public health and policy arena, including the consumer assistance program at the nonprofi t law fi rm Health Law Advocates and the health care advocacy organization Health Care for All, both located in her home town of Boston, Massachusetts. Ms. Ward also served as one of the inaugural volunteer members of the benefi ts and community outreach team for the Supplemental Nutrition Assistance Pro- gram (SNAP) at the Western MA Food Bank. Ms. Ward earned a BS public health, a BA in political science, and a certifi cate in public policy and administration from the Univer- sity of Massachusetts at Amherst.

Kathryn E. Wehr, MPH, program offi cer, joined the Robert Wood Johnson Founda- tion in 2010. Ms. Wehr focuses on discovering and investing in what works to promote and protect the nation’s health and to achieve the foundation’s vision where we, as a nation, strive together to build a culture of health enabling all in our diverse society to lead healthy lives, now and for generations to come. Previously, Ms. Wehr was a gradu- ate research assistant at the University of North Carolina–Chapel Hill Sheps Center for Health Services Research. She has also served as community projects coordinator for the Northeast Florida Healthy Start Coalition and as an AmeriCorps member of the North Florida Health Corps.

Share Jonas & Kovner’s Health Care Delivery in the

United States: 11th Edition

Health Policy I

This fi rst section of the book presents an overview of how the U.S. health system works and how public policy infl uences its operations. Th e section also provides basic sta- tistics outlining the dimensions of the health enterprise and sets the U.S. system in the con- text of the approaches to delivering health care in other countries. At times, it is easiest to understand one health system by comparing it to what happens in other parts of the world.

Chapter 1, authored by the book’s two editors, acts as an overall introduction to the material that will be covered in the other 15 chapters of the book. Th is chapter starts by reviewing why health is so important to people and how that importance is translated into characteristics of the health care sector. Th e authors also explain the societal dynamics that have shaped the current state of the health system and explore the roles of seven diff erent types of stakeholders in shaping the system.

Chapter 2 off ers a set of charts that provide a statistical overview of the U.S. health system. Th e charts are organized around the topics that will be covered in the book, with key data displayed in a way that introduces the reader to the scale and scope of the system.

In Chapter 3, political scientists Michael Sparer and Frank Th ompson address how the public policy process works at the federal government and state government levels. Th ey review how policy is made and the forces that shape public policy in the United States. Th e chapter focuses principally on the roles government plays in funding and providing health insurance coverage for parts of the population and why government does not cover the entire population, as happens in many other developed countries around the world. Th is chapter also reviews the recent major expansion of insurance coverage mandated by the Patient Protection and Aff ordable Care Act of 2010.

Finally, Chapter 4, coauthored by Michael Gusmano and Victor Rodwin, compares the structure and traditions of the health care system in the United States to the systems in other parts of the world. In addition to reviewing how key aspects of the organization of health care vary across countries, the chapter takes a close look at health care delivery in England, Canada, France, and China as good examples of the diversity of approaches to operating health systems.

1 The Challenge of Health Care Delivery and Health Policy

James R. Knickman and Anthony R. Kovner


LEARNING OBJECTIVES o Understand the importance of health and health care to American life o Understand some defi ning characteristics of U.S. health care delivery o Identify major issues and concerns o Identify key interest groups (stakeholders) o Understand the importance of engaging a new generation of health leaders

TOP ICAL OUTLINE o Why health is so important to Americans o Factors that shape the structure of the delivery system o Seven key challenges facing the health system o Stakeholders who shape and are affected by how the health system is

organized and how it functions o The organization of the book

access to health care behavioral health health care delivery interest groups (stakeholders) Patient Protection and Affordable

Care Act

payment systems population health public health value workforce

■ Context

Our goal in editing this book is to provide a vibrant introduction to the U.S. health care system in a way that helps new students understand the wonders of health care. Th e book lays out the complexities of organizing a large sector of our economy to keep Americans healthy and to help people get better when they become ill. In addition, the book provides a framework to help professors engage students, with room for each professor to bring his or her perspective to the materials covered.

To introduce students to the many parts of the health system in the United States, we have engaged some of the leading thinkers and “doers” in the health sector to explain the parts of the system in which they are expert. Each author brings a diff erent

P a r t I . H e a l t h P o l i c y4

perspective, and it is not our aim to present one voice on this topic. Rather, we have asked each author to lay out the facts about a given topic and to off er ideas about what he or she thinks must happen to improve a specifi c aspect of the health system.

In many ways, the text lays out a serious “to-do” list facing our health system and off ers individuals beginning a health-related career a guide to the types of challenges that could engage them. Th e authors explain how the health system works, what its challenges are, and how health professionals can contribute to the process of strengthening our sys- tem to make sure it works effi ciently and eff ectively at the task of keeping all of us healthy.

In this fi rst chapter, we explain the importance of the health system, provide an overview of how the system is organized, sketch out some of the challenges facing the overall system that are addressed in the book, and discuss the roles of fi ve types of key stakeholders involved in the health enterprise. We also provide the logic behind the topics the book addresses and explain the book’s organization.

■ The Importance of Good Health to American Life

Our nation is built on the idea that society should ensure an opportunity for “life, lib- erty, and the pursuit of happiness.” Th ese words, of course, are from the second sen- tence of our Declaration of Independence. Th e aspiration of ensuring “life” is the core goal of the health system. It is obvious that nothing is possible for an individual without life, and most of us would agree that health is among the core needs to live a vibrant, viable life. Good health is essential to participate in the political and social system, to work to support ourselves and our families, and to pursue happiness and a good life.

Our nation has invested a tremendous amount to learn how to keep people healthy and how to restore health when disease, injury, or illness occurs. In the 19th century, researchers and public health experts from the United States and other countries began to understand the role of germs in communicating disease and the importance of basic public health practices, such as ensuring clean water and safe sanitation to maintain health. In the 20th century, the science and art of medicine exploded, creat- ing amazing know-how to treat people who have diseases, injuries, and illnesses.

In response to the emerging know-how for delivering medical care, a large and complex health enterprise developed throughout the 20th century and continues to evolve. Th e pipeline of new ideas for better treating illnesses is quite full and prom- ises to lead to ever-expanding methods to restore health when Americans have life- threatening medical problems.

We use the word “enterprise” deliberately because the health system is a blend of an altruistic-oriented set of providers and activities mixed with a huge industry that accounts for a sizable portion of all economic activity in our society. Th e value we put on health has led us to devote just under 20% of our economic resources to medical care and health promotion. Fully 13% of all jobs in America are in the health sector. Each of us spends a sizable share of our income on the health care we need. We spend this money through taxes, which support a good share of the health enterprise, through foregone wages used by our employers to pay for health insurance, and by siz- able out-of-pocket health care expenses for which each of us is responsible.

Th us, the “pursuit of life,” listed as a core principle in the Declaration of Indepen- dence, not only has resulted in a set of social and political norms about the importance of good health to everyone in America but also has spurred a huge industry that aff ects

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and is aff ected by society’s economic activity and economic decisions. To understand the health system, we need to understand not only the art and practice of medicine and public health but also the economic, organizational, and management issues that must be addressed to keep the health system eff ective, effi cient, and aff ordable in our over- all economic life. How we go about organizing and managing the health system and changing it over time can hurt or help both our health status and our economic status.

■ Defining Characteristics of the U.S. Health System

It is ironic that most health professionals think of themselves as working within the “health system” when in truth one of the fi rst defi ning features of what we call a sys- tem is that health-related activities are not ordered or organized as a single enterprise. Rather, eff orts to improve health and health care involve many types of actors and organizations working independently and with little coordination to make contribu- tions to improving health status. In particular, our current approach to delivering medical care has evolved and keeps evolving in a haphazard way shaped more by eco- nomic incentives and opportunities than by a central or logical design.

In recent years, we also have begun to recognize the clear diff erence between “maintaining health” and “restoring health” to a person who has a medical problem. Th e medical care system clearly takes charge of restoring health when people are ill. Often the medical care system takes charge of caring for people even if restoring health is impossible; the goal may be to limit the spread of a medical problem, to alle- viate the symptoms of a medical problem, or to help a person cope with the pain and suff ering and loss of function when major medical problems emerge. Doctors, nurses, technicians of various types, hospitals, nursing homes, rehabilitation centers, pharma- ceutical companies, and medical device companies are among the actors who engage in eff orts to care for people when they have medical problems.

Th e goal of “maintaining health” also involves many actors and activities. To some extent, medical providers help with this huge task by providing screening and preven- tion services that can keep people from becoming ill and help to identify illnesses very early when they might be easier to treat. However, good health among a population also requires a vibrant public health system that works to help people avoid illness. Public health activities include preventing epidemics; making sure food, water, and sanitation are safe; monitoring environmental toxins; and developing community- based initiatives, public awareness initiatives, and education initiatives to help people eat healthy foods, exercise, and not engage in unhealthy behaviors such as smoking, drinking alcohol in excess, and using recreational drugs or abusing prescription drugs.

Increasingly, we also recognize that the health of populations is determined by social and economic factors. Adequate family incomes, high-quality educational opportunities, and being socially connected are all key factors that predict the health

Adequate family incomes, high-quality educational opportunities, and being socially connected are all key factors that predict the health of a given person.

P a r t I . H e a l t h P o l i c y6

of a given person. Social issues such as discrimination, abuse, and social respect all are important determinants of health. To ensure attention to these issues and others like them requires involvement from many sectors of our society as well as political leader- ship to guide collective action to ensure our society encourages pro-health norms and practices. Some people term this a “health in all” approach to social policy.

We have organized this book so that it addresses both types of health issue: the challenge of keeping the population healthy and the challenge of providing eff ective medical care when needed. Th ere are other key defi ning characteristics of the U.S. health care system that guide the organization of this book:

■ Th e importance of organizations in delivering care. Th ese include hospitals, nursing homes, community health centers, physician practices, and public health departments.

■ Th e role of professionals in running our system. Th ese include physicians, nurses, managers, policy advocates, researchers, technicians, and those directing technol- ogy and pharmaceutical businesses.

■ Th e emergence of new medical technology, electronic communications, and new pharmaceuticals. New techniques in imaging, electronic communications, pharmaceuticals, surgical procedures, DNA coding, and stem-cell technology are remarkable but often expensive ways of improving health care.

■ Tension between “the free market” and “governmental control.” Th is tension shapes America’s culture but is sharply present in the health care sector. Relative to citizens of other countries, Americans have more diversity of opinion about whether health care, or certain health care services, are “goods” or “rights.” How one feels about this issue often determines whether a person thinks the delivery of health care should be done by nonprofi t or for-profi t organizations and whether health care should be fi nanced by taxes or private payments.

■ A dysfunctional payment system. Th e current payment system creates poor incen- tives for providers to be effi cient, to be customer or patient friendly, or to focus on the delivery of high-value services. Also, the payment approach is not transparent for individuals who use health care. For example, patients frequently have no idea what a service costs until after it is delivered. Th is is rarely true for other goods and services in the U.S. economy.

Th ese defi ning characteristics make health care delivery a challenging part of U.S. politics and the economy. Addressing the challenges of delivering health care is worth the best eff ort and thinking of our readers, who are tomorrow’s health care leaders.

■ Major Issues and Concerns

Reliable studies have indicated that between 44,000 and 98,000 Americans die each year because of medical errors.

Addressing the challenges of delivering health care is worth the best effort and thinking of our readers, who are tomorrow’s health care leaders.

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Th ere are many ways in which our health system can be improved. Th e chapters that follow address a long list of specifi c concerns. Many of these issues fl ow, however, from seven overarching themes regarding challenges that each of us in the health sector can address:

■ Improving quality. Reliable studies have indicated that between 44,000 and 98,000 Americans die each year because of medical errors. Other well-regarded studies show that people with mental health or substance use problems, asthma, or diabetes receive care known to be eff ective only about half the time. In addition, the health system could do much more to improve the experience of patients receiving care. Th e system is not always “customer friendly” and has not adopted many prac- tices routinely used in other service sectors to improve the consumer experience. We have a good knowledge base about how to organize care so that high-quality services happen virtually all of the time. Th e challenge is spreading this knowledge into practice across the nation.

■ Improving access and coverage. Millions of Americans still lack insurance cover- age, and millions more have inadequate coverage for acute care. Th e new federal health reform, the Patient Protection and Aff ordable Care Act (ACA), has reduced the number of people who lack insurance coverage. But gaps in coverage persist. For example, undocumented immigrants lack coverage. Th e new federal health reform has not been fully implemented in many states because of political opposition to com- ponents of the new policy that are optional for states to adopt. Most Americans lack adequate coverage for chronic (rather than acute) care. Even when Americans have insurance coverage, access to health care is not always ensured. Many rural areas have shortages of doctors and other providers. Many doctors refuse to see patients with Medicaid coverage because of low payment rates.

■ Slowing the growth of health care expenditures. Health care expenditures are simply the price of services multiplied by the volume of services. Total expenditures are growing much more rapidly than the rest of the economy because both prices and volume of services have increased relentlessly over the past 50 years. To keep health care aff ordable for middle-class and low-income residents—as well as for taxpayers and employers—we need to devise ways to moderate the ever-increasing share of our nation’s economy devoted to the health sector. Th e challenge is to determine how to restructure delivery and payment so we can focus on high-value care as we get more effi cient.

■ Encouraging healthy behavior. Healthy behavior can help people avoid disease and injury or prevent disease or injury from getting worse. For millions of Americans, leading healthy lives is not of the highest priority. Changing health-related behav- ior is a diffi cult challenge, but we need to identify eff ective prevention programs and ways to make our social and built environments more encouraging of healthy choices.

■ Improving the public health system. Th e governmental public health infrastruc- ture maintains population health and regulates aspects of the health care delivery system. State and local health departments monitor the health of residents, pro- vide a wide range of preventive services, and regulate health care providers and businesses, such as restaurants, that aff ect population health. Th e eff ectiveness and funding of state, municipal, and county health departments vary widely.

P a r t I . H e a l t h P o l i c y8

■ Improving the coordination, transparency and accountability of medical care. Problems of quality, cost, and access are caused by fragmentation and lack of coordination at the community level. Th is fragmentation exists both within and between health care organizations. It is aff ected by a lack of integrated and elec- tronic record systems and by a  lack of cooperative relationships among diff erent types of providers who treat the same patient. For example, primary care physi- cians, hospitals, and specialty physicians often fail to work as teams or in coordi- nated ways. Consumers often are not given all of the information they deserve to make adequate medical choices. Providers often refuse to reveal the prices they will charge patients, second opinions are still not encouraged as frequently as they should be, and patients often do not get clear explanations of treatment options or the pros and cons of these options.

■ Addressing inequalities in access and outcomes. In the United States, medical care and its associated outcomes depend on one’s income level, race, and geo- graphical location. We are potentially headed toward a three-tier system of medi- cal care in which the way care is delivered to the poor, the middle class, and the wealthy varies markedly. Such a system might be acceptable if the care received by the poor and middle class were eff ective and adequate to provide the oppor- tunity for “life, liberty, and the pursuit of happiness.” However, most studies show that outcomes vary across the tiers in many ways. Other studies demonstrate that access and outcomes vary by race, even for Blacks, Latinos, and Whites who have the same incomes and education levels. Marked diff erences also exist in access, quality, and outcomes across diff erent regions of our country. Best practices do not spread easily or quickly. Addressing these inequalities is a major challenge facing the health sector.

■ Key Stakeholders Influencing the Health System

A complicated enterprise like the health system includes many types of stakeholders. A stakeholder group is a set of people who have a strong interest in how something in our society is done. In addition, stakeholders generally have some power in shaping what happens. Finally, diff erent stakeholders may have very diff erent goals and views about what should be done and how.

To understand the health system, one needs a good scorecard of the interests and roles of distinct stakeholder groups. Each contributor to this book gives attention to roles of stakeholders. Th e stakeholders that keep appearing as the story of the health system unfolds include fi ve key groups: (a) consumers, (b) providers and other profes- sionals engaged in the health system, (c) employers, (d) insurers, and (e) public policy makers.

A stakeholder group is a set of people who have a strong interest in how something in our society is done.

C h a p t e r 1 . T h e C h a l l e n g e o f H e a l t h C a r e D e l i v e r y a n d H e a l t h P o l i c y 9


Consumers (or patients) should be at the center of the health system. After all, it is their needs and wants that are the reason for this giant enterprise. In some ways, however, consumers sometimes seem like bystanders in health care decisions. Often, physicians and other providers assert that they know best and fail to have a patient co-manage a medical problem or be a full partner in selecting a choice of action. Or, perhaps worse, an insurer decides what is best or “allowed” given a specifi c health condition.

Consumers are also bystanders in issues about payments. Providers sometimes think that their “customer” is an insurance company because the insurer pays much of the bill. In addition, the same provider (unknown to many customers) may charge astonishingly diff erent prices to diff erent groups and individuals. Th e usual norm in our economy, unlike in health care, is that the person receiving goods or a service is the cus- tomer and the customer has a right to know what the charge will be before purchasing the good or service.

Even so, consumers are infl uential stakeholders in many ways. For example, when there is widespread dissatisfaction among consumers, change happens. Insurers changed the rules of early managed care payment systems in the 1990s due to con- sumer complaints. Similarly, a major federal program off ering a new form of cata- strophic insurance to elders was repealed after sharp dissatisfaction among seniors.

Most experts argue that consumers need to be at the center of health care choices. Additionally, individuals need to understand the crucial role their behavioral choices play in determining their health status. Choosing to eat healthy foods, stay physically active, drink alcohol moderately, and abstain from tobacco products are among the most important choices they make to protect their health.

What do consumers want as key stakeholders? Most importantly, consumers want good access to health care for themselves and their families. Polls indicate that indi- viduals value good-quality care and aff ordable care. Th ey would also like to be treated well by providers and have a good experience when they need care.


Many professionals work to advance medical knowledge, medical practice, and the business of health care. Th e vast majority of this workforce is motivated principally by the social goal of keeping people healthy. Medical providers, caregivers, pharmaceuti- cal and medical device companies, and researchers have created an impressive set of interventions that can help people who are sick.

In recent years, however, many members of the broad health workforce have faced great fi nancial pressure to prevent the costs of health care from increasing as quickly as in the past. Payment systems keep lowering the fees paid for goods and services, consumers and payers have been demanding better quality, better outcomes, more value, and better patient experiences. In addition, the organization of services has begun to evolve quickly.

Understanding the views and needs of the health workforce and the organizations dedicated to improving health is crucial to understanding how the system works and how to improve the system.

P a r t I . H e a l t h P o l i c y10

More and more physicians and other providers are working in large practices compared with the small ones that used to be the norm. Hospitals are merging with other types of medical providers, and the approach insurers use to pay for services is changing rapidly.

Understanding the views and needs of the health workforce and the organizations dedicated to improving health is crucial to understanding how the system works and how to improve the system. Th e following chapters suggest that providers and profes- sionals engaged in the health enterprise would value simpler rules that govern how care is provided and fair opportunities to earn incomes that refl ect their expertise and their large investments in training.


Employers are stakeholders because many fi rms off er employees private health insur- ance as a key element of their compensation package. In this sense, the cost of health insurance is a cost of doing business for employers and can greatly aff ect the profi tabil- ity of a business. For example, employee health care costs add approximately $1,500 to the cost of producing every automobile manufactured in the United States.

In their role as stakeholders, employers want to see a slowdown in their health care cost responsibility as compared with the last 50 years. In addition, employers want healthy employees who are productive and do not have to take time off from work due to illness. Th ese desires lead some employers to advocate for high-quality health care and for wellness and prevention programs that help employees stay healthy.


Insurance companies act as the intermediary among payers (often employers), provid- ers (who need a system for getting paid), and consumers (who need a system to deter- mine the kinds of health care covered by the employer’s insurance plan).

In some cases, insurers take some fi nancial risk: If the payments they make to providers exceed the premiums set for employers, the insurer loses money. Increas- ingly, however, the insurer leaves the employer to bear the risk and plays the role of a pure intermediary, setting rules to determine when a health service is eligible for reim- bursement and other rules to determine what payment is made. Of course, an insurer must negotiate these rules with employers and providers.

As stakeholders, insurers always face pressure. Employers, consumers, and pro- viders often have tense relationships with insurers, who in many ways play the role of referees in health care. Payers often feel that the costs of running the insurance process are too expensive.

New approaches to payment currently exist that could compete with traditional insurance companies. Some health systems are starting their own insurance compa- nies, and it is possible that capitated payment systems (payment of a premium for a person/family for the year regardless of use of covered benefi ts) could bypass traditional insurance systems and go directly from payers to providers. Insurers want to protect their role in the health sector. Th ey also seek to expand their role by off ering analytical services that can support higher-quality and more effi cient delivery approaches.

C h a p t e r 1 . T h e C h a l l e n g e o f H e a l t h C a r e D e l i v e r y a n d H e a l t h P o l i c y 11


Th e fi nal type of stakeholder we consider is policy makers; both appointed public offi - cials and elected politicians are included in this category. However, policy makers do not act as a single stakeholder group. Instead, various components of this group set agendas, which often confl ict with one another.

Elected offi cials diff er strikingly in their views about how the health system should work and about the role government should play in health care. At times, diff erences in views refl ect diff erent ideologies. Sometimes, however, diff erent views emerge about how best to manage the extensive responsibilities that have fallen to government over the past 80 years.

Consensus does exist on some policy issues, however, within this stakeholder group. Most elected offi cials and civil servants working on health issues would like to see slower infl ation rates in the health sector. In addition, there is consensus that the U.S. health system should use state-of-the-art medical care and prevention interven- tions. Finally, there is a common sense that quality and the patient experience should be important concerns of health providers.

■ Organization of This Book

Th e editors have enjoyed the privilege of working many years as part of numerous eff orts to improve health care in the United States. We remain optimistic that pragma- tism, fl exibility, consensus building, and attention to objective, high-quality evidence can bring about positive change. We remain stimulated by the challenges and pleased that we have worked hard at the local, state, and national levels to create and sustain a viable and eff ective health care system.

Certainly, we have observed that best practices are now being used to improve health care and health across a wide range of settings in the United States and world- wide. How do we speed up the process of getting more for the money we spend, and how do we engage every type of stakeholder to bring about more eff ective services by insisting on best practices in everything we do? Th is book gives the reader the motiva- tion and skills to get engaged.

Th e book is organized into four parts: Part I: Health Policy has chapters on the current state of health care delivery,

charts depicting key statistics, a discussion of the important role of policy, and a com- parative analysis of health care delivery in other countries.

Part II: Keeping Americans Healthy has four chapters on population health, public health, behavioral health, and the health of vulnerable populations.

Part III: Medical Care: Treating Americans’ Medical Problems has seven chapters discussing organization of care, workforce, fi nancing, cost and value, quality of care, health care management and governance, and information technology.

Part IV: Futures acts as a summary of key ideas addressed in the book, with a look to the future about how change in the health system might play out.

Th e future U.S. health care delivery system will see improvements if committed and informed Americans choose to enter the fi eld and engage eff ectively. Future lead- ers who are knowledgeable about the health sector and who know how to implement

P a r t I . H e a l t h P o l i c y12

eff ective change are needed. Th e system also needs to improve quality, get more value for cost, improve patient participation in self-care, and encourage provider transpar- ency and accountability.

■ Discussion Questions

1. What is the real and perceived performance of the U.S. health care system? How do views diff er among diff erent groups of patients, providers, payers, and politicians?

2. Why do we spend so much money on health care? 3. Why isn’t the population healthier? 4. How is the Aff ordable Care Act part of the problem or part of the solution to

improving health care delivery in the United States? 5. What are your priorities to improve the value of health care Americans get for the

money we spend? What is your rationale for these priorities?


You are an aide to the governor of State X. A billionaire has said he will give the

governor $3 billion if he comes up with a satisfactory plan to improve health and

medical care for the state. Assume the state currently spends $300 billion on health

care annually. The goal is ensuring quality of health care, improving the patient

experience, improving the overall health of the state’s population, and containing the

increase in health care costs. Develop the criteria for assessing the success of the

plan. Where will the major shifts in resources occur? Give a rationale for your recom-


As you consider the case study, you might address the following questions:

1. How might the billionaire evaluate whether the governor’s plan is satisfactory?

2. After the money is given to fund the plan, what must happen to improve health

care delivery performance substantially in State X?

■ Bibliography

Bradley, E. H., & Taylor, L. A. (2013). Th e American health care paradox: Why spending more is getting us less. New York, NY: Public Aff airs.

Christensen, C. M. (2009). Th e innovator’s prescription: A disruptive solution for health care. New York, NY: McGraw-Hill.

Gawande, A. (2009). Th e checklist manifesto: How to get things right. New York, NY: Picador.

Griffi th, J. R., & White, K. R. (2011). Reaching excellence in healthcare management. Chicago, IL: Health Administration Press.

Kenney, C. (2011). Transforming health care: Virginia Mason Medical Center’s pursuit of the perfect patient experience. New York, NY: CRC Press.

2 A Visual Overview of Health Care Delivery in the United States

Catherine K. Dangremond

■ The U.S. Health Care System: A Period of Change

Th e U.S. health care system is in a period of signifi cant and ongoing change. Many key provisions of the Aff ordable Care Act either have recently gone into eff ect or will be implemented in the near future. Health insurance exchanges began accepting applications in the fall of 2013. In 2014, provisions including prohibition of coverage denial based on preexisting conditions and elimination of annual coverage limits took eff ect. Yet even though more than eight million people applied for insurance coverage through the health care marketplace as of April 2014, and widespread support exists for certain consumer protections included in the Aff ordable Care Act, consumer perceptions of the U.S. health care system are mixed (Figure 2.1). Looking forward, varying degrees of optimism exist about the extent to which the Aff ordable Care Act will be able to bring about fundamental change in the aspects of the U.S. health care system that consumers currently dislike.

F I G U R E 2 . 1


— Cost of care and insurance coverage — Poor care coordination — Administrative hassles related to billing and insurance — Poor communication between patients and providers

Consumers Like Consumers Dislike — Consumer choice of plans and coverage — Access to latest medical technologies and pharmaceuticals — Perceived high-quality clinical care — Access to doctors and medical professionals

Source: Compiled from information obtained from Th e Morning Consult, Th e Commonwealth Fund, Health Aff airs.

Note: Th e visual overview should be utilized in conjunction with Chapter 1, where key words, learning objectives, and a topic outline have been provided.

P a r t I . H e a l t h P o l i c y14

■ The Shared Responsibility for Health Care

Th e development of health care policy and provision of health care services is a complex process, with responsibilities shared across all levels of government within the United States (Figure 2.2). Th e World Health Organization (1948) defi nes health as “a state of complete physical, mental, and social well-being and not merely the absence of disease or infi rmity.” Th is makes it quite clear that, within each level of government, the work of many agencies is required in pursuit of the health of the population. For example, within the federal government, responsibilities for health spread far beyond the Depart- ment of Health and Human Services (HHS) to agencies that include the Social Security Administration, the Department of Labor, the Department of Veterans Aff airs, and the Department of Agriculture, among others.

F I G U R E 2 . 2

Own and manage public hospitals

Operate public hospitals

Develop and enforce public health codes

Fund Medicaid programs

Administer Medicaid programs

Licensing of health care providers

Care provision including operation of facilities for the

mentally ill

Development of national health policies

Health insurance for the poor, disabled,

and elderly

Tax policies favorable to employer health


Care provision including veterans


Fund physician training





Source: U.S. Department of Health and Human Services.

C h a p t e r 2 . A V i s u a l O v e r v i e w o f H e a l t h C a r e D e l i v e r y i n t h e U n i t e d   S t a t e s 15

Th e current state of health care delivery in the United States has evolved over time and has been signifi cantly shaped by several key federal policy initiatives implemented since 1965 ( Figure 2.3). Th ese initiatives have focused on improving access to care, ensuring aff ordability of care, protecting patient confi dentiality, and controlling the growing cost of health care.

F I G U R E 2 . 3



Consolidated Omnibus Budget Reconciliation Act (COBRA) enables workers to continue insurance coverage for 18

months under former employer’s plan

Health Insurance Portability & Accountability Act (HIPAA) enacted

Medicare Program expanded to include prescription drug coverage

State Childrens Health Insurance Program (SCHIP) implemented to provide coverage for children in

families of modest means

Affordable Care Act passed

Creation of Medicare and Medicaid programs







Source: U.S. Department of Health and Human Services.

P a r t I . H e a l t h P o l i c y16

■ Where the Money Comes From, and How It Is Used

Although the rate of growth in health care spending has slowed somewhat in the past few years, such spending continues to account for more than 17% of the U.S. gross domestic product.

In 2012, total health care spending in the United States reached $2.8 trillion. Although the rate of growth in health care spending has slowed somewhat in the past few years, such spending continues to account for more than 17% of the U.S. gross domestic product (GDP), and preliminary data for 2014 indicate that spending may again be trending upward.

Th e sources of funding for U.S. health care expenditures have changed substan- tially over time. Most notably, since 1970, total out-of-pocket spending for health care has decreased from 33% to 12% of funds, while spending in public and private insur- ance programs (Medicare, Medicaid, and private health insurance) has increased from 38% to 68% of funds (Figure 2.4). In recent years, however, out-of-pocket costs have again started to trend upward as cost sharing in insurance plans has increased and consumer-directed health plans have become more common.

In contrast to changes in the sources of health care funding, the use of funds has remained relatively consistent since 1970. Although there has been some transfer away from expenditures on hospital care and growth in long-term and home care, there has not been a sizable shift in how health care spending is allocated in the United States (Figure 2.4).

■ A Comparative Perspective

In 2011, the per capita health care spending in the United States was approximately $8,500. Th is may not seem particularly troubling, until it is placed in the context of com- parison to Organisation for Economic Co-operation and Development (OECD) peers, among whom health care spending averaged approximately $3,300 per capita in 2011. In fact, no other country spent close to the same amount as the United States. Norway and Switzerland ranked a distant second in spending among OECD countries, at approxi- mately $5,600 per capita.

We often perceive that the United States has the best health care system in the world. If this were the case, we could conclude that there is no reason for concern about higher spending rates, assuming such spending results in optimal care and better outcomes. Unfortunately, evidence is not available to sustain this argument and, even as the United States leads the world in spending, it lags behind its peers in health outcomes. Since 1960, for example, Japan has seen an increase of more than 15 years in life expectancy. In com- parison, life expectancy in the United States has increased by only 9 years in the same period. In fact, in 1960 life expectancy in the U.S. was 1.5 years above the OECD average. Today, it is 1.5 years below the OECD average life expectancy of 80.1 years. As illustrated in Figure 2.5, the United States is an outlier in health care spending. Unfortunately, higher levels of spending are not necessarily associated with improved health outcomes.

C h a p t e r 2 . A V i s u a l O v e r v i e w o f H e a l t h C a r e D e l i v e r y i n t h e U n i t e d   S t a t e s 17

■ Population Health: Beyond Health Care

Health is about much more than health care—the services provided within the framework of health care institutions. A true assessment of health, an individual’s ability to live a long and healthy life, depends on many social and environmental factors beyond health care services, including education, income, racial or ethnic group, genetics, physical environment, and health-related behaviors.

Th e Population Health Model brings an integrative approach to identifying the infl uence of the many factors that play a role in the health of the population and to developing strategies for change. Th is approach takes a broad view, focusing not only on the need for improvement in health care delivery, but also on the many determi- nants of health. For example, the increase in obesity rates worldwide is a signifi cant population health concern (Figure 2.6). A population health approach considers not only medical care interventions to support better prevention and management of obe- sity by clinicians, but also examines other factors, including health-related behaviors such as diet and exercise and physical environment limitations that may prevent suf- fi cient exercise.

F I G U R E 2 . 4

Private Health Insurance



Out of Pocket



Doctors & Other Health Professionals

Drugs & Other Medical Devices Nursing Homes

& Caretakers



Where the Money Comes From


21% 10%

7% 33%


36% 26%

14% 8%


32% 27%

13% 13% 15%

33% 20%

15% 12%



Where the Money Goes

Source: Centers for Medicare and Medicaid Services National Health Expenditure data set.

P a r t I . H e a l t h P o l i c y18

F I G U R E 2 . 6







United Kingdom






2000 2010


Source: Organisation for Economic Co-operation and Development (OECD).

F I G U R E 2 . 5





65 0 1000 2000 3000 4000








( Y




5000 6000

R 2 = 0.51

7000 IND






















8000 9000


Source: Organisation for Economic Co-operation and Development (OECD). (2013). Health at a glance. OECD Indicators.

C h a p t e r 2 . A V i s u a l O v e r v i e w o f H e a l t h C a r e D e l i v e r y i n t h e U n i t e d   S t a t e s 19

■ Access to Care and Variation in Health Outcomes

In 2014, millions of previously uninsured Americans obtained health insurance cov- erage through the health insurance marketplaces established in accordance with the Aff ordable Care Act. However, millions of Americans remain uninsured. Economic barriers to care  are still present in the forms of uninsurance and underinsurance, whereby an individual may have insurance coverage but copayments and deductibles are unaff ordable, thus discouraging the patient from seeking necessary care. At lower income levels, individuals are less likely to have a usual source of care (Figure 2.7).

Wide variation in health status and outcomes exists within the United States by income level, by race and ethnicity, and by education level.

F I G U R E 2 . 7

$$$$ $$$$$ $$$$$$$$ $$$$$$$$$ $$$$$$$$$$





% O
















Source: U.S. Department of Health and Human Services Health Measures.

It is also important to recognize that many factors beyond health insurance coverage and income level aff ect access to care and, ultimately, health outcomes. Well-documented, signifi cant diff erences in health care utilization and outcomes exist among racial and ethnic groups. Although less well documented, it also has been observed that cultural and language barriers aff ect health care utilization, potentially for reasons that include the language barrier, diff ering views on illness and treatment, and distrust of Western medicine. In total, this range of economic and noneconomic barriers to health care access has a signifi cant eff ect on health outcomes. Wide varia- tion in health status and outcomes exists within the United States by income level, by race and ethnicity, and by education level. Figure 2.8 depicts just one example: Cholesterol levels are more poorly controlled at lower income levels.

P a r t I . H e a l t h P o l i c y20

■ Health and Behavior

F I G U R E 2 . 8

$$$$$ $$$$$$ $$$$$$$$$$$$




350%+% O














Source: U.S. Department of Health and Human Services Health Measures.

Behavioral risk factors, including tobacco use, alcohol abuse, unhealthy diets, and sedentary lifestyles, play a fundamental role in poor health.

Many factors combine in determining an individual’s health outcomes. Beyond medi- cal care, social and economic factors, and environmental factors, the University of Wisconsin Population Health Institute (UWPHI) Model of Health Improvement indi- cates that personal health behaviors account for approximately 30% of ultimate health outcomes (Figure 2.9). Behavioral risk factors, including tobacco use, alcohol abuse, unhealthy diets, and sedentary lifestyles, play a fundamental role in poor health. According to the U.S. Preventive Services Task Force, sedentary lifestyles and lack of exercise are associated with type 2 diabetes, stroke, hypertension, osteoarthritis, colon cancer, depression, and obesity. In 2013, the Centers for Disease Control and Prevention (CDC) reported that more than one third (35.7%) of Americans are obese, a signifi cant health risk factor highly associated with behavioral choices. Yet we must recognize that behavior is often diffi cult to change. Unhealthy behavioral choices may not have a visible health eff ect for many years. Many approaches to behavioral change exist, but a change in health behavior attitudes among Americans likely will require a continued, concerted eff ort using a combination of population-based interventions, individual behavioral change approaches, and greater involvement of health care pro- viders and organizations in healthy lifestyle interventions.

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F I G U R E 2 . 9





















Source: Adapted from UWPHI County Health Rankings Model.

■ The Health Care Workforce

More than 13% of the total U.S. workforce is employed in a health care–related job. From clinical roles, such as nurses, physical therapists, and doctors, to employees ful- fi lling administrative and support functions, such as environmental services, billing

P a r t I . H e a l t h P o l i c y22

and fi nance, and operations management, the health care workforce is both sizable and incredibly diverse. Also, health care workers are employed by many diff erent types of organizations, including hospitals, offi ces of health care practitioners, nursing homes, and home health agencies, among others (Table 2.1).

Th e U.S. Bureau of Labor Statistics estimates that the health care workforce could expand by more than 30%, adding an additional four million jobs, by 2020. However, sig- nifi cant challenges exist. Th e Aff ordable Care Act and health care reform eff orts empha- size increased focus on primary care and coordination of care. It is unclear whether there is an adequate supply of primary care physicians, particularly in certain geographic areas of the United States, to support an increased demand in primary care services. It is clear, however, that change must occur in how health care professionals are trained and incentivized. A move toward more coordinated models of care will undoubtedly require increased focus on communication skills and teamwork. To achieve success, payment and incentive models must move away from siloed, fee-for-service structures and toward payments focused on incentivizing coordination and health outcomes.

■ Variations in Health Care Delivery

It is easy to presume that the quality of health care services and the outcomes achieved should be similar regardless of whether you live in Los Angeles, Dallas, or Boston, and regardless of which hospital or doctor’s offi ce in your city you use for services. Research has shown, however, that this is not the case. Th e Dartmouth Atlas, among others, has shown that where you live, and at which facility you receive care, infl uence both access to care and the quality of care you receive. Tremendous variations exist among geo- graphic areas, among cities within the same state, and among health care facilities within the same city. Th e 2012 Commonwealth Fund’s Local Scorecard has also documented alarming variations including the following:


I n p a t i e n t C a r e A m b u l a t o r y C a r e L o n g - Te r m C a r e

Delivery Hospitals Doctors’ offi ces



Nursing homes

Home health care

Assisted living

Focus of Services

Acute care

Preventive care

Acute care

Chronic care

Chronic care


Registered nurses (38%)

Nursing aides (14%)

Technicians (13%)

Physicians and surgeons (7%)

Licensed practical

nurses (6%)

Health care services

managers (5%)

Therapists (5%)

Physicians (17%)

Other practitioners (12%)

Technicians (12%)

Registered nurses, nurse

practitioners (11%)

Medical assistants (11%)

Therapists (5%)

Health care services managers


Nursing and personal care

aides (60%)

Registered nurses (15%)

Licensed practical

nurses (11%)

Health care services

managers (3%)

Social workers (3%)

Therapists (2%)

Technicians (1%)

Source: Adapted from Th e Partnership for Quality Care.

C h a p t e r 2 . A V i s u a l O v e r v i e w o f H e a l t h C a r e D e l i v e r y i n t h e U n i t e d   S t a t e s 23

Th e rate of potentially preventable deaths before age 75 from health care amenable causes was more than three times as high in the geographic area with the worst (highest) rate than in the area with the best (lowest) rate (169.0 vs. 51.5 deaths per 100,000 population).

Th e incidence of unsafe medication prescribing among Medicare benefi ciaries was four times higher in Alexandria, Louisiana, than in the Bronx and White Plains, New York (44% vs. 11%, respectively).

Where you live, and at which facility you opt to receive care, infl uence both access to care and the quality of care you receive.

Figure 2.10 provides additional insight regarding some of the types and extent of variation documented by Th e Commonwealth Fund’s Local Scorecard. It is evident that signifi cant variation exists in access to care, delivery of care, and health outcomes. Th e challenge for policymakers and the U.S. health care delivery system is to identify strate- gies to close these gaps.

■ Health Care Quality

Th e U.S. health care system is known for being among the most advanced in the world in terms of scientifi c discovery, equipment, facilities, and training to address complex illness and injuries. However, landmark studies, such as the Institute of Medicine’s “To Err Is Human” (1999) and “Crossing the Quality Chasm” (2001), have brought to light the fact that even the most advanced equipment and techniques cannot overcome the system design and team coordination issues that often lead to poor-quality health care outcomes. Th e Institute of Medicine’s research indicates that at least 44,000 Ameri- cans die, and hundreds of thousands more are injured, in U.S. hospitals each year due to medical errors. Th ese errors cause unnecessary costs to the U.S. health care system of between $17 billion and $29  billion annually. Th e Institute developed a road map to achieve better quality, calling for focus on care that is safe, eff ective, patient centered, timely, effi cient, and equitable.

In the years since these studies, many tools, techniques, and measures have been implemented to evaluate and improve quality in the U.S. health care system. Payment systems have also begun to integrate quality measures. Each year since 2003, the Agency for Healthcare Research and Quality (AHRQ) has reported on progress toward improved health care quality and opportunities for ongoing improvement. Although annual improvements have been recognized, the reports also indicate that health care quality and access continue to be suboptimal. Eff orts also are underway to ensure that quality health care information is more readily accessible for patients as they make health care–related decisions. Th e HHS has developed mandatory quality reporting metrics, made publicly available through www.hospitalcompare.hhs.gov. Numerous other public and private sources have begun to provide ratings and infor- mation about patient experiences and outcomes. However, many factors other than quality data currently drive decisions when patients select health care providers (Figure 2.11).

P a r t I . H e a l t h P o l i c y24

■ Health Care Cost and Value

Just as patients often do not consider quality data in making choices about health care providers, costs typically are not part of the decision-making process. Th is happens for a number of reasons. For insured patients, focus may be on the required copay amount, as opposed to the total cost of care. In general, the health care system is not designed to allow patients to consider costs and value obtained, as they might when making other purchasing decisions. Yet patients who do attempt to obtain cost information often fi nd that accessing this information is nearly impossible. Costs for the same procedure may vary even within a particular hospital, depending on complexity level and peripheral

F I G U R E 2 . 1 0 T H E C O M M O N W E A LT H F U N D ’ S S C O R E C A R D O N L O C A L H E A LT H S Y S T E M

P E R F O R M A N C E .


Percent of adults with insurance


Number of potentially avoidable

hospitalizations per 100,000

Medicare beneficiaries


8,773 71


59% 26%












Number of deaths per 100,000 people

that could have been prevented by timely

access to care


Percent of older adults who

received timely preventive care


Source: Th e Commonwealth Fund.

C h a p t e r 2 . A V i s u a l O v e r v i e w o f H e a l t h C a r e D e l i v e r y i n t h e U n i t e d   S t a t e s 25

F I G U R E 2 . 1 1

$ $$+ –/


Patient Choice of Hospital








Source: Compiled from multiple articles regarding patient selection of hospitals, including Jung, Feldman, and Scanlon (2011).

services. Costs also diff er depending on a patient’s insurance carrier and the rates that have been negotiated by the insurer. Recent research has shown signifi cant varia- tion in cost for the same service between hospitals, even within the same geographic area (Figure 2.12). It is also clear that a signifi cant disconnect exists between the listed charge for each hospital and the discounted price. Yet, an important question remains unanswered: What is the value of the care received at this price?

Recent research has shown signifi cant variation in cost for the same service between hospitals, even within the same geographic area.

As health care expenditures have continued to grow—and today exceed 17% of the U.S. GDP—there has been increasing pressure for greater transparency regarding health care costs, with the presumption that greater transparency will foster greater

P a r t I . H e a l t h P o l i c y26

F I G U R E 2 . 1 2 A D J U S T E D C H A R G E S A N D D I S C O U N T P R I C E S F O R U N C O M P L I C AT E D

C A E S A R E A N S E C T I O N S A C R O S S C A L I F O R N I A H O S P I TA L S , 2 0 1 1 .


Discount price (Caesarean) Adjusted charge (Caesarean)


C h

a rg

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r P

ri c e

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. D o

ll a

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T h

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Source: Hsia, Yaa, & Weber (2014).

accountability. In support of this eff ort, beginning in 2013, the Center for Medicare and Medicaid Services (CMS) began to release certain Medicare provider charge data for public viewing. Although this may be a step toward transparency, given the com- plexity of the data and the design of health care charge systems, it remains to be seen whether this information will be helpful to patients in decision making or will have any infl uence on the decisions patients make.

■ The Future of Health Care Delivery

Forecasting the future involves both learning from the past and utilizing current evidence and circumstances to develop a reasonable view of what is likely to hap- pen going forward. Past trends and current evidence make it likely that quality and costs will become an even more central part of the health care delivery dialogue. If implementation of the Aff ordable Care Act continues to move forward as intended, the focus on coordinated care makes it likely that large health care organizations will become larger and capture a growing segment of the market. An increasing number of physicians are likely to become employed by these large organizations, as opposed to being in private practice.

Health care consumers, however, remain somewhat skeptical about the future of health care delivery. Recent polls have found that Americans remain divided on appro- priate next steps for the Aff ordable Care Act (Figure 2.13). What does seem likely is

C h a p t e r 2 . A V i s u a l O v e r v i e w o f H e a l t h C a r e D e l i v e r y i n t h e U n i t e d   S t a t e s 27

F I G U R E 2 . 1 3 C O N S U M E R P E R C E P T I O N O F A F F O R D A B L E C A R E A C T N E X T S T E P S .


Ja n

Fe b

M ar

A pr

M ay Ju n

Ju l

S ep

N ov


10 10 10 10 12 14 12 12 13

910 10 1011 11 11 11 18 16 15

43 39 39 39 39

3335 38 38 38 3837 37 37 37

40 40 4241

47 47 47 43



46 4950 50 50 5051 51 5152 52

53 5354

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Ja n

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EXPAND law or KEEP law as is REPEAL law and REPLACE with Republican alternative or REPEAL law and NOT REPLACE it Don’t know/Refused


O ct

D ec

What would you like to see Congress do when it comes to health care law?


Source: Th e Kaiser Family Foundation.

that patients will become more actively involved in their health care. As dissatisfaction with the current U.S. system and the cost of care continues to increase, and quality and cost data become more readily accessible, consumers will likely become more active participants in their health care. Th is alone could prove to be a step in the right direc- tion for the health of the U.S. population.

■ References

Hsia, R. Y., Yaa, A. A., & Weber, E. (2014). Analysis of variation in charges and prices paid for vaginal and caesarean section births: A cross-sectional study. BMJ Open, 4(1), e004017. doi:10.1136/bmjopen-2013-004017

Jung, K., Feldman, R., & Scanlon, D. (2011). Where would you go for your next hospital- ization? Journal of Health Economics, 30, 832–841.

World Health Organization. (1948). Preamble to the Constitution of the World Health Organization as adopted by the International Health Conference, New York, 19-22 June, 1946; signed on 22 July 1946 by the representatives of 61 States (Offi cial Records of the World Health Organization, no. 2, p. 100) and entered into force on 7 April 1948. Retrieved from http://www.who.int/about/defi nition/en/print.html

3 Government and Health Insurance: The Policy Process

Michael S. Sparer and Frank J. Thompson


LEARNING OBJECTIVES o Review the evolution of govern ment’s role in the U.S. health insurance system o Describe the roles of public and private stakeholders in the health policy process o Explore key issues on the government’s health policy agenda, including the enact-

ment and implementation of the Patient Protection and Affordable Care Act of 2010

TOPICAL OUTLINE o The government as payer: The health insurance safety net o Recent efforts to help the uninsured o The ACA and the uninsured o Key characteristics of the policy process o The dynamics of program expansion: Medicaid

Children’s Health Insurance Program (CHIP)

Medicaid Medicare

Patient Protection and Affordable Care Act (ACA) of 2010

policy process

■ Context

Government is deeply entrenched in every aspect of the U.S. health care system (see Chapter 2). Th e federal government provides tax incentives to encourage employers to off er health insurance to their employees; provides health insurance to the poor, the aged, and the disabled; operates health care facilities for veterans; and supports the training of doctors and other health professionals. State governments administer and help pay for Medicaid, license health care providers, regulate private health insurers, and operate facilities for the mentally ill and developmentally disabled. Local govern- ments own and operate public hospitals and public health clinics and develop and enforce public health codes.

With the enactment of the Patient Protection and Aff ordable Care Act of 2010 (ACA), government’s role has expanded dramatically, especially when it comes to insurance coverage. Th e law expands eligibility for public insurance, uses federal sub- sidies to make private coverage more aff ordable, imposes new rules on insurers and employers to make coverage more accessible, and adds an overarching requirement

P a r t I . H e a l t h P o l i c y 30

that nearly all Americans have some form of health insurance (or pay a penalty through the tax code). Most of these provisions took eff ect in 2014; in that initial year an addi- tional 5 million Americans enrolled in state Medicaid programs, nearly 8 million others received public subsidies for private coverage purchased through newly cre- ated insurance exchanges, and private insurers were no longer able to deny coverage based on preexisting health conditions, impose annual or lifetime limits on coverage, or spend excessive amounts on administration or profi t.

Th e goal of this chapter is to provide an overview of the health policy process by looking closely at government’s role in the health care system. We do so by focus- ing on government’s role in the health insurance arena and, in particular, on politics and policymaking in the Medicaid program, the nation’s public health insurance pro- gram for low-income populations. Why focus here instead of on government’s role as a regulator or as a provider of care? After all, there is no shortage of interesting and important topics in the health policy arena: As we write this chapter, the Centers for Disease Control and Prevention (CDC) is working to limit the Ebola epidemic, Congress is reviewing claims that the Veteran’s Administration has mismanaged its hospital system, the Food and Drug Administration (FDA) is deciding how to regulate e-cigarettes (if at all), and state insurance departments are implementing a host of new and complicated regulations on the private insurance industry.

Th e short answer is that we (or you) could pick any one of these policy arenas to focus on: Our goal is to provide you with tools for analyzing the policy process that are helpful whether the focus is Medicaid, the CDC, or the FDA. Th e longer answer is that government’s role in the nation’s health insurance system provides an important and interesting lens through which to consider the health policy process. In a nation that spends nearly 18% of its gross domestic product on health care, it is important to understand why government provides health insurance to many of those who are not covered by the employer-sponsored private health insurance system and also sub- sidizes (directly or indirectly) a growing portion of the cost of private coverage. Th e Medicaid policy process is especially intriguing and unexpected: When enacted in 1965, Medicaid was expected to be a small, welfare-based program for the poorest of the poor; over time, however, Medicaid has evolved into the nation’s largest health insurance program, with more than 65 million benefi ciaries (at a cost of well over $400 billion annually) and millions more likely to enroll in the next few years. How and why did that happen, and what does that evolution suggest about U.S. health policy?

■ The Government as Payer: The Health Insurance Safety Net

For much of U.S. history, the federal government and the states were minor players in the nation’s health and welfare systems. Th e social welfare system was shaped instead by the principles that governed the English poor law system. Social welfare programs

Government’s role in the nation’s health insurance system provides an important and interesting lens through which to consider the health policy process.

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were a local responsibility, and assistance was provided only to those who were outside the labor force through no fault of their own (the so-called deserving poor). National welfare programs were considered unwise and perhaps even unconstitutional. Th e main exception was the Civil War pension program, which provided federal funds to Union veterans, but even this initiative was administered and implemented at the local level.

Lacking federal or state leadership (and dollars), local governments tried to pro- vide a social and medical safety net. Th e most common approach was to establish almshouses (or shelters) for indigent aged and disabled people. A medical clinic often provided health care to almshouse residents. Th ese clinics eventually evolved into public hospitals, off ering services to the poor without charge. Generally speaking, however, the clinics (and hospitals) provided poor-quality care and were avoided by people who had any alternative. Similarly, the few private hospitals then in operation were charitable facilities that served only the poor and the disabled. Th ese hospitals, like their public counterparts, represented only a small and rather disreputable por- tion of the nation’s health care system.

Most 19th-century Americans received health care in their homes, often from family members who relied on traditional healing techniques. At the same time, an assortment of health care providers—physicians, midwives, medicine salesmen, herb- alists, homeopaths, and faith healers—off ered their services, as well. Generally speak- ing, these practitioners charged low fees, which families paid out-of-pocket, much as they would for other commodities.

As the 19th century drew to a close, two developments fundamentally changed the U.S. health care marketplace. First, allopathic physicians (MDs) won the battle for primacy among medical providers. Americans increasingly recognized that medi- cine was a science and believed that medical doctors were the most scientifi c prac- titioners, best able to deliver high-quality care. Th e status and prestige accorded to MD-physicians grew, whereas the role of alternative medicine providers declined.

Th e emergence of a physician-dominated health care system was accompanied by a second pivotal factor—the dramatic growth in the size and the status of the U.S. hospital industry. Indeed, the nation’s stock of hospitals grew from fewer than 200 in 1873 to 4,000 (with 35,500 beds) in 1900, to nearly 7,000 (with 922,000 beds) by 1930 (Annas, Law, Rosenblatt, & Wing, 1990).

Th is growth was prompted by several factors. Advances in medical technol- ogy (antiseptics, anesthesia, x-rays) encouraged wealthier people to use hospitals, eliminating much of hospitals’ prior social stigma. Th e number of nurses expanded dramatically, as nurses evolved from domestics to trained professionals, and hospital- based nurses worked hard to improve hospitals’ hygiene. Th e growing urbanization and industrialization of American life produced an increasingly rootless society, less able to rely on families to care for their sick at home. Finally, the medical education system began to require internships and residencies in hospitals as part of physician training, which put a cadre of trained doctors to work full time in these facilities.

By the mid-1920s, there was growing recognition that middle-income Americans needed help in fi nancing the rising costs of hospital care and increasingly high-tech medicine.

P a r t I . H e a l t h P o l i c y 32

As the hospital industry grew, so too did the costs of care. By the mid-1920s, there was growing recognition that middle-income Americans needed help in fi nancing the rising costs of hospital care and increasingly high-tech medicine. Th e onset of the Great Depression made the situation more problematic, as hospital occupancy rates plummeted and numerous facilities went bankrupt. In response to this crisis, the hos- pital industry created Blue Cross; for-profi t insurers soon followed Blue Cross into the health business and the nation’s private health insurance industry began to emerge.

Th e health insurance industry received a major boost from the federal govern- ment, fi rst during World War II, when federal policymakers excluded most employer- sponsored health insurance from wage and price controls, and then in the early 1950s when federal offi cials ruled that premiums paid by employers would not be considered income to the employee (a tax exclusion that now costs the federal government more than $250 billion a year). By the mid-1950s, employer-sponsored private insurance was on its way to becoming the vehicle through which most Americans could aff ord the rising cost of health care (see Chapter 11 for more on the early history of private health insurance).

At the same time, the demonstrable advances in medical technology after World War II engendered confi dence that the medical system would, in time, conquer nearly all forms of disease. Th is perception prompted the federal government (through the National Institutes of Health) to funnel billions of dollars to academic medical researchers. With federal dollars so readily available, medical schools soon empha- sized research, and medical students increasingly chose research careers. Around the same time, Congress enacted the Hill-Burton Program, which provided federal funds to stimulate hospital construction and modernization. Th e policy assumption was that all Americans should have access to the increasingly sophisticated medical care rendered in state-of-the-art hospital facilities.

Even with the growing employer-sponsored health insurance system, it was soon clear that large portions of the population would not easily have access to such cover- age or to the benefi ts of the new medical advances. Left out of these new systems were the retired elderly, the disabled, the unemployed, the self-employed, the part-time worker, and most of those who worked for small businesses.

To be sure, liberal politicians had argued for many years without success in favor of government-sponsored health insurance that would replace the employer-sponsored private system and would cover all Americans. President Harry Truman had posited that health insurance was part of the Fair Deal to which all Americans were entitled. However, neither Truman nor his liberal predecessors ever came close to overcoming the strong opposition to national health insurance from doctors, businessmen, and others, who viewed it as un-American and socialistic. Doctors feared a government program would lead to greater oversight, requirements to serve indigent patients, and reduced income potential.

By 1949, mainstream Democrats had abandoned their visions of universal insur- ance and proposed instead that the Social Security (retirement) system be expanded to provide hospital insurance for the aged, reasoning that the elderly were a sympathetic and deserving group and that hospital care was the most costly sector of the health care system.

Conservatives opposed the plan, arguing that it would give free coverage to many people who were neither poor nor particularly needy. Th ey argued instead that gov- ernment’s role is to provide a safety net to the deserving poor who are unable to access

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employer-sponsored coverage. Th e result was an amendment to the Social Security Act in 1950 that, for the fi rst time, provided federal funds to states willing to pay health care providers to care for welfare recipients. Interestingly, this “welfare medi- cine” approach passed with bipartisan support (Sparer, 1996). For liberals, this was an acceptable, albeit inadequate, fi rst step, but at least some poor people fi nally could obtain services. Conservatives went along because a medical safety net for the poor would undermine arguments for a more comprehensive health insurance program and because responsibility for the program was delegated to state offi cials.

In 1960, newly elected President John F. Kennedy revived the eff ort to enact hos- pital insurance for the aged. Congress responded by enacting the Kerr-Mills Program. Th is program distributed federal funds to states that were willing to pay health care providers to care for the indigent aged, expanding the welfare medicine model. Congress later opened the program to covering the indigent disabled. Th ese initiatives again defl ected support from the president’s broader social insurance proposal.

Th e political dynamic had evolved considerably by 1965. President Lyndon B. Johnson and the Democrats controlling Congress were enacting various laws designed to turn the United States into a “Great Society.” Th is seemed an opportune time to renew the eff ort to enact national health insurance. Even longtime opponents of health insurance expansions expected Congress to enact a plan far more comprehen- sive than Kerr-Mills. President Johnson followed the path set by Truman and Kennedy and again proposed hospital insurance for the aged. At the same time, various Repub- lican legislators, citing the nation’s oversupply of hospitals and desiring to return to a physician-centered delivery system, recommended that Congress enact physician insurance for the aged. Th e American Medical Association (AMA), hoping once again to scuttle the social insurance model, urged Congress simply to expand Kerr-Mills.

As Congress debated these various proposals, President Johnson (working behind the scenes) convinced Congressman Wilbur Mills, powerful chair of the House Ways and Means Committee and an aspiring Presidential candidate, to demand that his colleagues enact all three expansion initiatives (Blumenthal & Morone, 2009). Th e President’s proposal for hospital insurance for the aged became Medicare Part A; the Republican proposal for physician insurance for the aged became Medicare Part B. Th e AMA’s eff ort to expand Kerr-Mills became Medicaid. Th ese government pro- grams, for the fi rst time, became a true health insurance safety net for Americans without employer-sponsored coverage (Marmor, 2000).


Medicaid is not a single national program, but a collection of 50 state-administered programs, each providing health insurance to low-income state residents but with dif- fering eligibility rules, benefi ts, and payment schedules. Each state initiative is gov- erned by various federal guidelines, and the federal government contributes between 50% and 78% of its cost (the poorer the state, the larger the federal contribution). In 2012, the various Medicaid programs covered more than 60 million Americans at an annual cost of approximately $415 billion (Kaiser Commission on Medicaid and the Uninsured, 2014).

Given Medicaid’s decentralized structure, state offi cials have considerable discre- tion. One not-surprising result is that states such as New York have more generous eligibility criteria than do poorer states such as Alabama or Mississippi. Interestingly,

P a r t I . H e a l t h P o l i c y 34

however, stark contrasts exist even among the larger states. In fi scal year 2007, New York, for example, spent $8,450 per Medicaid enrollee, whereas California spent only $3,168 ( Kaiser Family Foundation, 2010).

During the late 1980s, Congress began imposing rules designed to dramatically increase state coverage. As a result of these mandates, the number of children on Medicaid nearly doubled between 1987 and 1995, and the total number of recipi- ents increased from roughly 26 million to nearly 40 million. Medicaid expansions had become the federal government’s main strategy for reducing the ranks of the uninsured.

Concomitantly, Medicaid’s annual price tag grew from $57.5 billion in 1988 to $157.3  billion in 1995. State offi cials blamed this increase on the federal mandates. Federal regulators disputed the claim and suggested that the states themselves were largely responsible for the increase, citing accounting techniques through which states shifted state-funded programs into their Medicaid budget so they could draw down additional federal dollars. Th is argument produced signifi cant intergovernmental ten- sion (Holahan & Liska, 1997).

During the early 1990s, President Bill Clinton, a former state governor and a critic of Medicaid mandates, stopped considering Medicaid the linchpin in eff orts to reduce the number of uninsured. Recognizing that many uninsured people are in families where the husband or wife works full or part time, he proposed instead to require that employers off er health insurance to their employees. Th e Clinton administration’s proposal for national health insurance failed, but the shift away from federal Medicaid mandates persisted (until the recent enactment of the ACA). Instead, federal offi cials became more lenient in approving state requests for waivers from federal Medicaid rules, giving states additional fl exibility and autonomy.

Two trends dominated Medicaid policy during most of the 1990s. First, states used their expanded discretion to encourage or require recipients to enroll in man- aged care delivery systems. Between 1987 and 1998, the percentage of enrollees in Medicaid managed care increased from less than 5% to more than 50%, from fewer than 1 million people to more than 20 million. Second, growth in the number of Med- icaid enrollees ended, and a slow decline began. Th e most convincing explanation for the decline was federal welfare reform, enacted in 1996. Before then, people receiving Aid to Families with Dependent Children (AFDC, often referred to as welfare) were automatically enrolled in Medicaid. Th ereafter, welfare recipients needed to apply separately for Medicaid, as did those no longer entitled to welfare but still eligible for Medicaid. Millions did not know they were Medicaid eligible, the states set steep administrative hurdles that deterred others from applying, and still others were dis- suaded by the stigma attached to receiving public assistance. For all of these reasons, between 1995 and 1997, the number of adult Medicaid recipients declined 5.5%, and the number of child recipients declined 1.4%.

During the late 1990s, state and federal offi cials undertook a major eff ort to increase Medicaid enrollment. One strategy was to simplify the eligibility process (shortened application forms, mail-in applications, and more eligibility-determination sites). A second strategy was to simplify eligibility rules (eliminating assets tests and ensur- ing 12 months of continuous eligibility). A third strategy was to expand outreach and education by increasing marketing activities and encouraging community-based insti- tutions to educate and enroll their constituents. Th ese eff orts succeeded. Beginning in mid-1998, Medicaid enrollment began to increase again, a trend that has continued.

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Th e growth in enrollment, along with higher costs for prescription drugs, services for people with disabilities, and long-term care, has led to escalating Medicaid costs, and for some years, states’ Medicaid expenditures have exceeded what they spend on education. At the same time, state tax revenues declined precipitously in the late 2000s. Th e ensuing budget crises prompted Medicaid cost-containment eff orts in every state. Th e most popular option was an eff ort to control the rising cost of phar- maceuticals, either through leveraged buying (purchasing pools) or limits on access (formularies). Other Medicaid cost-containment strategies have included freezing or cutting provider reimbursement, reducing benefi ts (such as dental and home care), cutting eligibility, increasing copays, and expanding disease management initiatives.

The story of Medicaid’s growth from a relatively small welfare medicine program to the nation’s largest insurance program (with more than 20% of the population enrolled) is a remarkable political story, and one that nicely illustrates several key characteristics of the U.S. health policy process.

More recently, the ACA contained a signifi cant expansion in Medicaid eligibility, initially requiring all states to expand coverage to 133% of the federal poverty level, though the Supreme Court subsequently converted that mandate into a state option (now in place in roughly half the states). Even with this judicial limit, the story of Med- icaid’s growth from a relatively small welfare medicine program to the nation’s largest insurance program (with more than 20% of the population enrolled) is a remarkable political story, and one that nicely illustrates several key characteristics of the U.S. health policy process. Later in this chapter we review more closely these key charac- teristics and the policy dynamics of the ongoing growth of the program. First, how- ever, we continue our overview of the nation’s health insurance system, starting with Medicare and then focusing on more recent initiatives designed to help the uninsured.


Like Medicaid, Medicare was enacted in 1965 to provide health insurance to segments of the population not generally covered by the mainstream employer-sponsored health insurance system. Also like Medicaid, Medicare has become a major part of the nation’s health care system, providing insurance coverage in 2013 to 43.5 million per- sons over the age of 65 and to just under 9 million of the young disabled population, at a total annual cost of over $583 billion (Th e Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, 2014).

In other respects, however, Medicare diff ers signifi cantly from its sister program. Medicare is a social insurance program, providing benefi ts to the aged and the dis- abled regardless of income, whereas Medicaid is a welfare initiative, off ering coverage only to those with limited income. Medicare is administered by federal offi cials and the private insurers they hire to perform particular tasks, whereas Medicaid is admin- istered by the states following federal guidance. Medicare is funded primarily by the federal government (plus benefi ciary copayments and deductibles), whereas Medicaid is funded by the federal government and the states without any benefi ciary contribu- tion. Medicare has a relatively limited benefi t package that excludes much preventive

P a r t I . H e a l t h P o l i c y 36

care, long-term care, and, until 2006, prescription drugs outside of the hospital and the oncologist’s offi ce, whereas Medicaid off ers a far more generous array of benefi ts.

For the fi rst 30 years of its existence, Medicare had two separate parts, each with diff erent funding sources and eligibility requirements. Medicare Part A covers inpa- tient hospital care. It is fi nanced primarily by a 2.9% payroll tax: 1.45% paid by the employer and 1.45% paid by the employee, though higher income benefi ciaries (post- ACA) pay a higher tax. All benefi ciaries automatically receive Part A coverage. Medi- care Part B, in contrast, is a voluntary program, providing coverage for outpatient care for benefi ciaries who choose to pay a $110 monthly premium (though here too individuals with annual income over $85,000 now pay a higher, income-based pre- mium). Some 95% of Medicare benefi ciaries choose to enroll in Part B. General federal revenues pay the balance of the Part B bill.

Before 1994, the revenue contributed to the Part A Trust Fund exceeded the program’s expenses, and the fund built up a signifi cant surplus. Beginning in 1994, expenses began to exceed revenue; the surplus was used to pay bills, and it began to shrink. Alarmed Medicare experts predicted that the surplus would be gone by the early 2000s, that the Trust Fund would be unable to pay its bills, and that Medicare would slide into bankruptcy. In response to this crisis, Congress in 1997 enacted a broad eff ort to reduce Medicare costs, mainly by cutting provider reimbursement.

Th e rapid shift in the economics of Medicare prompted an equally rapid change in its politics (Oberlander, 2003). No longer were politicians claiming that the program was about to go bankrupt. No longer was there talk of greedy providers overcharging and generating excess profi ts. No longer was there an intense eff ort to enroll benefi cia- ries in managed care. Th ere were instead three competing views about how to respond. One camp emphasized the need to undo some of the cuts in provider reimbursement, another focused on the importance of expanding the benefi ts package, and still another argued against new spending measures, whether on behalf of providers or benefi ciaries. Th is last group—the fi scal conservatives—proposed that any surplus remain in the Trust Fund to be used in years to come.

Faced with these options, Congress chose in 1999 to undo some of the cuts in provider reimbursement. Provider organizations argued that the prior cuts were unnecessarily endangering the fi nancial health of thousands of doctors and hospitals. Even supporters of the cuts conceded that the extent of the reductions was far greater than expected. As a result, Congress reduced the impact of the cuts by $16 billion over the next 5 years and $27 billion over the next 10 years. In 2000, Congress passed another giveback initiative, this time delivering to providers $35 billion over 5 years and $85 billion over 10 years.

Following the provider giveback legislation, newly elected President George W. Bush and Congress took up the issue of prescription drug coverage and enacted Medi- care Part  D. Under this legislation, benefi ciaries can receive outpatient drug cover- age through a managed care plan or, if they wish to stay in fee-for-service Medicare, through a private prescription drug plan. In most communities, seniors can choose among dozens of plans, some of which off er limited coverage for a small monthly premium, whereas others off er more generous benefi ts for a higher premium. Th e average monthly premium nationwide is $39, in exchange for which the benefi ciary has a $310 deductible, after which the plan pays 75% of drug costs up to $2,850 and 95% of the costs beyond $4,550 (the benefi ciary pays 100% of the costs between $2,850 and $4,550—the so-called “donut hole,” which is slowly being phased out as part of the 2010 health reform legislation).

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Th e Medicare drug legislation was extraordinarily controversial and partisan. President Bush and leading Republicans maintained that the legislation, expected to cost $410 billion over its fi rst 10 years, was the largest public insurance expansion since Medicare was fi rst enacted and that it would provide signifi cant coverage to millions of seniors. Leading Democrats, while supporting the goals of the legislation, complained that the initiative gives too little to needy seniors and too much to health maintenance organizations, big business, and the pharmaceutical industry.

Th e prescription drug plan was designed, in part, to encourage benefi ciaries to enroll in a managed care plan. Th e managed care program, called Part C and created as part of the 1997 Balanced Budget Act, had only limited success during the early 2000s, largely because of declining health plan interest. Back in 2004, for example, only 4.6 million benefi ciaries were enrolled in 145 plans (Kaiser Family Foundation, 2004). Health plans claimed the main barrier to their expanded participation was inadequate reimbursement. However, several studies suggested that Medicare was actually losing money on the managed care initiative because its capitation rates often were set high, based on the health care experience of the average client in a particular community, whereas the typical managed care enrollee was healthier and less costly than average (Kaiser Family Foundation, 2004).

In an eff ort to reverse the decline in health plan participation and to advance the goals of privatization and competition, the Bush administration proposed that the new drug benefi t be delivered exclusively by managed care plans. Although the legislation as enacted does not go so far, it did dramatically increase health plan capitation rates in an eff ort to encourage plans to get back in the game. Over the next decade, average monthly capitation rates increased dramatically. As a result, plans began aggressively marketing to benefi ciaries, and there now are 16 million Medicare Advantage enroll- ees (Kaiser Family Foundation, 2014).


During the early 2000s, the number of Americans without health insurance grew from roughly 40 million to approximately 46 million—more than 15% of the nation’s popu- lation. Millions more Americans were underinsured, with high out-of-pocket medical expenses and, often, considerable medical debt. Most of the uninsured (more than 80%) were in families with a full- or part-time worker, and most of these workers were self-employed or employed by small businesses. States with a strong unionized indus- trial and manufacturing base were likely to have fewer uninsured, whereas states with large numbers of immigrants and a service-based economy were likely to have more. In Iowa, Massachusetts, and Wisconsin, for example, less than 10% of the population was uninsured; whereas in California, Louisiana, and Texas, the percentage hovered between 20% and 25%.

Rather remarkably, the dramatic increase in the nation’s uninsured population began in the mid-1990s—an era of unprecedented economic growth, low unemploy- ment, and relatively small rises in health care costs; it then accelerated during the eco- nomic downturn of the early 2000s. Much of the increase in the uninsured population also occurred during a time when the Medicaid rolls were expanding dramatically. Th e best explanation for the rise in the number of uninsured was the decline in the number of Americans with employer-sponsored private health insurance. Between 1977 and

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2004, the percentage of Americans under age 65 with employer-sponsored coverage dropped from 66% to 61% (Clemens-Cope, Garrett, & Hoff man, 2006).

Th e decline in employer-sponsored coverage was due to several factors. Many employers have increased the share of the bill that the employee must pay, prompting some employees to abandon their coverage. Other employers eliminated coverage for spouses and children or phased out retiree health coverage. Still others hired more part-time workers and outside contractors, thereby avoiding the need to off er health insurance. At the same time, much of the recent job growth has been in the service and small business sectors of the economy. Th ese jobs are notoriously low paying and rarely provide health insurance.

In response to these trends and to media and political attention to the problems of the uninsured, state and federal offi cials tried during the early 1990s to enact new coverage programs (Brown & Sparer, 2001; Sparer, 2003). Th ese proposals generally sought to require employers to provide health insurance to their employees and to use public dollars as a safety net for those outside the labor market. Th e idea was to retain and reinvigorate the employer-sponsored health insurance system. By the mid-1990s, however, the various employer mandate proposals, including the plan proposed by President Clinton, had disappeared, defeated by vehement opposition from the busi- ness community. Business opponents argued that the mandate would be too costly and would force employers to eliminate jobs.

After the collapse of the employer mandate strategy, policymakers (especially at the state level) enacted a host of eff orts designed to make health insurance more avail- able and more aff ordable in the small group and individual insurance markets. Th ese reforms focused on three structural problems in the health care system:

■ Employers in the small business community often could not aff ord to provide health insurance to their employees. Th ese employers lacked the market clout to negotiate a good deal, particularly given the high administrative costs associated with insuring a small group.

■ People who are self-employed or employees of small businesses generally earned too little to purchase health insurance in the individual market.

■ People with a high risk of catastrophic medical costs were often excluded from the individual insurance market, regardless of their ability to pay.

Many of the state initiatives required insurers to guarantee coverage to segments of the small business community. Others encouraged small businesses to join state- run or state-administered purchasing alliances. Still others allowed insurers to sell no-frills insurance policies, presumably at a lower cost than the more comprehensive packages states often require. Taken together, however, the various state mandates had only a modest eff ect on the number of uninsured (Robert Wood Johnson Founda- tion, 2007), while generating signifi cant political controversy, especially from healthy younger workers who complain about paying higher rates to subsidize the older and the sicker and from insurance companies threatening to exit reform-minded states.

By the late 1990s, state and federal policymakers had shifted their focus away from the insurance reforms that had been disappointing up to that point, and toward programs that expanded health insurance for children. Several factors explained the trend. Children are considered a deserving group; there is bipartisan agreement that youngsters should not go without health care services because their parents cannot

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aff ord to pay; and children are a relatively low-cost population to insure. In 1993, for example, the average child on Medicaid cost just under $1,000, whereas the typical elderly recipient cost more than $9,200, and disabled recipients’ costs averaged just under $8,000.

Child health initiatives also are consistent with the political agendas of both Republicans and Democrats. Republicans, along with many moderate Democrats, support insurance expansions as a counterbalance to other social welfare cutbacks. For example, many families that move from welfare to work continue to need help in obtaining health insurance for their children. At the same time, liberal Democrats, still reeling from the defeat of national health insurance proposals, saw health insurance for children as an incremental step on the path to universal health coverage.

Given this bipartisan support, Congress enacted the State Children’s Health Insur- ance Program (SCHIP; later changed to CHIP in 2009). States can use CHIP funds to liberalize their Medicaid eligibility rules, to develop a separate state program, or to create a combination of the two. Th e main advantage to using CHIP funds to expand Medicaid is administrative simplicity for both the client and the state. Th is is especially so for families in which some children are eligible for Medicaid and others for CHIP. At the same time, there are several advantages to creating a separate state program:

■ Enrollment can be suspended when the dollars are spent, unlike with Medicaid, which is an entitlement program.

■ Th e state has more discretion when developing the benefi ts package. ■ Th e state can impose copayments and premiums, which generally are not allowed

under Medicaid. ■ Benefi ciaries and providers may be more likely to participate because the new pro-

gram lacks the stigma associated with Medicaid.

By all accounts, early eff orts to enroll children in SCHIP were disappointing. By the end of 1999, roughly 1.5 million youngsters were enrolled in the program, far fewer than predicted. Th e low enrollment was due to several factors. Large numbers of eligible families did not know they were eligible. Th e complicated application pro- cesses deterred others. Still others were dissuaded by the stigma often associated with government insurance programs. Th e premiums and other cost-sharing requirements clearly discouraged others. As a result, by the end of 2000, 38 states had not spent their full allotment of federal CHIP dollars. Funds not expended in these states were real- located to the dozen other participating states.

Beginning in early 2000, however, CHIP enrollment began to rise signifi cantly. By the end of the year, roughly 3.3 million children were enrolled—nearly double the number from the prior year—and by 2005, there were more than 4 million enrollees. Policymakers attribute the turnaround to improved outreach and education initiatives and to simplifi ed processes for eligibility and enrollment.

As program enrollment grew, bipartisan support began to fade. Th e politi- cal battling was particularly intense during the eff ort to reauthorize the program in 2007. Congressional Democrats proposed signifi cantly increased funding so as to expand enrollment even further. President Bush and many congressional Republi- cans opposed the expansion, arguing that expanding enrollment to more middle-class families would undermine the nation’s private insurance system, because employers would drop private coverage for children eligible for the expanded public program.

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Th e political battling continued during the last year of the Bush Administration; the president twice vetoed reauthorization legislation. When President Obama took offi ce in late January 2009, one of his fi rst priorities was to sign legislation reauthorizing and expanding the program. He did so on February 4, 2009. As a result, CHIP enrollment continues to increase.

Despite the growth in public insurance programs such as Medicaid and CHIP, the number of uninsured kept rising, leading to an ongoing debate over whether and how government should aid this population. Th is debate returned to the national agenda during the 2008 presidential campaign, as several Democratic candidates proposed federal legislation to dramatically reduce the number of uninsured, while their Repub- lican counterparts challenged such proposals as both unwise and counterproductive. After the election of Barack Obama and a strong Democratic majority in both the Senate and the House of Representatives, the nation engaged in a fi erce and partisan debate over the merits of health reform, a debate that culminated in the enactment of the ACA of 2010.


Early in his administration, President Obama decided to push hard for comprehensive health reform legislation. Th e goals were (a) to reduce dramatically the number of uninsured, (b) to pay for such coverage without adding to the nation’s budget defi cit, (c) to slow the rising cost of health care more generally, and (d) to encourage a more effi cient and higher-value health care delivery system. Th e president understood, how- ever, that the politics of health reform would be contentious and diffi cult. Health care is a $2.6 trillion industry, and interest groups (insurers, pharmaceutical companies, employers, hospitals, doctors) would vigorously resist proposals that threatened their share of these dollars.

In addition, reform opponents often characterize comprehensive health reform initiatives as “socialistic” and contrary to our political culture, arguing instead for more incremental reforms that focus on notions of personal responsibility rather than social solidarity or equity. Finally, America’s political institutions are designed to make it dif- fi cult to enact major new legislation, as the various checks and balances at the heart of the U.S. government provide numerous veto points for those opposed to reform.

In this context, President Obama needed to develop a strategy to overcome the interest group, ideological, and institutional obstacles to reform. By mid-2009, he had developed his strategy. First, he declared health reform to be his top domes- tic priority (doable during a recession only by declaring that fi xing the economy required fi xing the health care system). Second, he urged that health reform be enacted during the fi rst year of his term, recognizing that delay was the enemy of reform. Th ird, he delegated the task of developing a health reform plan to congres- sional leaders, eschewing the White House–centered approach that ran aground in the Clinton administration, hoping instead to persuade the leadership (especially the Democratic leadership) to be fully invested in the reform initiative. Finally, he encouraged administration offi cials to negotiate with key interest groups, emphasiz- ing the need to compromise and build incrementally off the current system.

After months of partisan politicking and various unexpected political hurdles (such as the election of Scott Brown to the seat of the recently deceased Ted Ken- nedy, which meant the Democrats no longer had a 60-vote, fi libuster-proof Senate

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majority), Congress enacted the Patient Protection and Aff ordable Care Act of 2010. Th e legislation is long and complex, and covers nearly every aspect of the nation’s health care system. At its core, however, is an ambitious eff ort to provide insurance coverage to more than 32 million of the currently uninsured. Th ere are fi ve key com- ponents to this eff ort:

■ Th e law mandates that nearly all Americans have some form of health insurance or pay a penalty through the tax code. Th is provision withstood judicial challenge and is now in eff ect.

■ Th e law requires state Medicaid programs to provide coverage to all persons (and their dependents) with incomes below 133% of the federal poverty level. Th is provi- sion did not survive judicial challenge and the Medicaid expansion is now an option, not a requirement. By mid-2014, 26 states (plus the District of Columbia) had imple- mented the expansion, resulting in more than fi ve million new Medicaid enrollees.

■ Each state is encouraged to create a so-called insurance exchange, a vehicle through which the uninsured and the small-business community could presumably purchase more aff ordable private coverage. Th e federal government would then provide sub- sidies to persons with incomes up to 400% of the federal poverty level to help them aff ord the more reasonably priced coverage. As of mid-2014, however, only 16 states (plus the District of Columbia) had cre- ated a state-based exchange; 27 states were relying completely on the newly created federal exchange (healthcare.gov), whereas the remaining seven states have exchanges that operate as state-federal partnerships. During the initial open enrollment period ( October 1, 2013 to March 31, 2014), approximately 7 million individuals obtained cov- erage via these exchanges, more than 80% of whom were receiving federal subsidies.

■ Th e law requires that employers with more than 50 full-time employees either provide coverage to their employees or pay a fi nancial penalty to the federal gov- ernment. However, the Obama administration has delayed implementation of this provision until 2015 (for fi rms with more than 100 employees) and until 2016 (for fi rms with 50–99 employees).

■ Private insurance companies are required to comply with a host of federal regu- lations that seek to eliminate the practice of discriminating against persons with preexisting conditions or who are otherwise likely to incur high medical costs.

■ Government and Health Insurance: The Policy Process

Th e portraits of Medicare, Medicaid, and the ACA suggest the importance of consid- ering the dynamics of policy processes in the United States more explicitly. We open by highlighting four important characteristics of these processes before turning to the case of Medicaid to illustrate how policy dynamics can stoke program growth.


Four observations loom large in considering the policy processes that shape health care programs in the United States. First, each health program or problem domain typically has a relatively distinct policy subsystem. Th ese policy subsystems consist of

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The fact that states have considerable discretion to shape Medicaid eligibility and services means that 50 policy subsystems at that governmental level help determine who gets what from the program.

actors from the public and private sectors who are routinely and “actively concerned about a policy problem or issue” and seek to shape what government does about it. Th ese actors include congressional committees, administrative agencies, interest groups, think tanks, specialized news media, and others (Jenkins-Smith & Sabatier, 1993, p. 17). Policy subsystems tend to be fl uid and permeable. For instance, a focus- ing event may occur (e.g., a proposal to restructure Medicare gains visibility), which leads segments of the public and new stakeholders to become active in the subsystem, at least for a while.

Each policy subsystem tends to be distinctive. Advocates for pediatricians and children are key players in the Medicaid policy subsystem but not in Medicare’s. So, too, Medicare has a policy subsystem more exclusively focused on decisions by the federal government, whereas states play a larger role in Medicaid. Th e fact that states have considerable discretion to shape Medicaid eligibility and services means that 50 policy subsystems at that governmental level help determine who gets what from the program. It means that the National Governors Association and other lobbies for state offi cials devote much greater attention to federal Medicaid policy than to Medicare.

Second, the fragmented nature of America’s governing institutions makes it diffi cult to translate majority preferences into major policy decisions in the health arena. Two fundamental features of the U.S. Constitution—the separation of powers and federalism—place formidable barriers in the path of those seeking to transform policy. A new law must not only win the approval of the two houses of Congress and the president, it at times must survive a court challenge. (Th e Supreme Court came within one vote of overturning the entire ACA.) Th e American electorate’s propensity to produce divided government, with diff erent parties controlling the three elected branches, heightens the transaction costs of getting legislation approved. Other fea- tures of the policy process also make it hard to translate simple majority preferences into law. By mandating that each state has two senators, the Constitution ensures that less populous states have outsized infl uence. Moreover, the growing use of the fi libuster in the Senate enables a minority of 41 to block legislation. When Congress passes a law that relies on the states to implement it, policymakers at that level of government may decline to participate (e.g., as in the ACA’s Medicaid expansion) or otherwise drag their feet.

Given this context, major policy breakthroughs in the expansion of health insur- ance have occurred during rare and fl eeting moments of one-party dominance. When Medicare and Medicaid won approval in 1965, Lyndon Johnson was president and Democrats held a 68 to 32 majority in the Senate as well as a 295 to 140 margin in the House. Similarly, the ACA was passed during a period in which the Democrats con- trolled the White House, had a 256 to 178 majority in the House of Representatives, and with the help of Independents, had the 60 votes in the Senate needed to surmount a Republican fi libuster.

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Although America’s balkanized institutions have often impeded movement toward universal health insurance, incremental policy changes expanding public cov- erage have frequently occurred. During the last half century, Congress has repeatedly approved amendments to Medicare and Medicaid. At times, federalism has also been catalytic (Brown & Sparer, 2003). When the federal government has failed to expand insurance coverage, several states have acted. Bottom-up policy diff usion has occa- sionally occurred as policymakers in the nation’s capital learn from state initiatives and refashion federal policy. Incremental or other changes in policy depend heavily on the presence of political brokers in Congress who can forge compromises among poli- cymakers and assemble the coalitions needed to legislate. To the degree that partisan polarization occurs and elected offi cials see compromise as a form of selling out one’s principles, the prospects for congressional gridlock increase appreciably.

Th ird, implementation is a critical part of the policy process, markedly aff ecting who gets what from federal health programs. Assessments of policy processes have often focused on the dance of legislation—how a bill becomes law. In fact, however, highly discretionary decisions made by administrative agents during the implementa- tion process also shape the outputs and outcomes of federal health programs. Th ese agents include top offi cials in federal and state bureaucracies, key private contractors, health care providers, and countless others. Th e importance of implementation partly refl ects the propensity of Congress to delegate ever more authority to the executive branch (e.g., Epstein & O’Halloran, 1999). Th e ACA serves as a case in point. By late 2013, the Obama administration had published more than 70 formal rules related to the ACA under the Administrative Procedure Act and issued scores of interpretive guidelines (Rosenbaum, 2013). Th ese actions did much to fi ll in the blanks left by the original law, such as whether the federal government or the states would defi ne the exact essential health benefi ts off ered on the insurance exchanges.

Myriad interest groups and other stakeholders employ various strategies to infl u- ence administrative decisions. At times implementation becomes a partisan battle- fi eld with heavy congressional involvement. In this vein, Republicans in Congress have repeatedly attempted to defund and otherwise obstruct the implementation of the ACA. Congress, for instance, turned down the Obama administration’s request to provide additional funds to help enroll people in the federal insurance exchanges. Sec- retary of Health and Human Services Kathleen Sebelius responded by seeking grants and contributions from the private sector to support the work of a nonprofi t organiza- tion called Enroll America. House Republicans denounced her initiative as illegal and called for an investigation. Th ey insisted that navigators working to expedite ACA enrollment take time out to fi le lengthy reports about their activities. Meanwhile, Republican policymakers in some states enacted certifi cation and training require- ments for navigators that hindered their deployment (Th ompson & Gusmano, 2014).

Fourth, the establishment of health programs reconfi gures policy subsystems and broader political factors in ways that aff ect program durability. Once enacted, pro- grams vary in the degree to which they become publicly popular and generate political

Although America’s balkanized institutions have often impeded movement toward universal health insurance, incremental policy changes expanding public coverage have frequently occurred.

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support from interest groups and other stakeholders (Patashnik & Zelizer, 2013). Dura- bility connotes a political strength that allows a health program to resist retrenchment, erosion, or termination. Construed broadly, the concept also characterizes the degree to which a program evinces accretion, growth, and enhanced eff ectiveness (i.e., pro- vides more high-quality services with improved health outcomes). After enactment, some health programs have eroded or died. In 1988, for instance, Congress passed the Medicare Catastrophic Coverage Act to provide prescription drugs to seniors. Th e law increased premiums on Medicare enrollees, especially those with higher incomes, to fund the initiative. Many Medicare enrollees objected to these premium hikes, and public support for the new law plummeted. A year later Congress voted to repeal it. In contrast, over time Medicare and Medicaid have generated supportive policy feedback that has helped these programs become major pillars of the American health insur- ance system. To illuminate expansionary policy processes, we shine the spotlight on Medicaid.


Medicaid has often been seen as a down-at-the-heels second cousin to Medicare, highly vulnerable to program erosion. In part this pessimism refl ected the fact that the program served welfare recipients—a stigmatized, politically weak clientele. It also emanated from the view that states, engaged in interstate economic competi- tion to attract business and keep the lid on taxes, would severely limit spending on a redistributive program like Medicaid. In fact, however, Medicaid expenditures and enrollees have grown by leaps and bounds over the decades. Although many reformers thought the program would fade away with the coming of national health insurance, it instead became a key component of the ACA. Th e surprising story of Medicaid’s rise can be traced through four historical periods, each of which highlights certain policy dynamics.

Welfare Medicine and the Incremental Politics of Long-Term Care (1965–1980)

Working with President Johnson, Representative Wilbur Mills (D-Arkansas) bro- kered an agreement leading to Medicaid’s birth in 1965. Concerned that states might drag their feet in expanding Medicaid coverage to the uninsured, the original legisla- tion required participating states to make a “satisfactory showing” in the “direction of broadening the scope of . . . care” and “liberalizing the eligibility requirements” by 1975 (Rose, 2013, p. 48). As Mills expected, most states did not rush to estab- lish generous Medicaid programs. What Mills failed to anticipate, however, was the degree to which a few states would move apace to extend Medicaid coverage to great segments of their populations (45% in the case of New York). Now concerned about potential runaway costs, Mills and other policymakers moved in 1967 to constrain the number of Medicaid enrollees by prohibiting states from creating income eligi- bility levels that exceeded 133% of the states’ AFDC levels. Hence, Medicaid more explicitly became “welfare medicine” serving the families of unemployed mothers on cash assistance. In 1972, Congress took another step to curb growth by repealing the provision that had required states to expand Medicaid services and eligibility (Rose, 2013, p. 63).

Soon, however, other policy dynamics fueled Medicaid’s expansion. From 1968 to 1972, federal and state Medicaid outlays nearly doubled (infl ation-adjusted dollars) as

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49 states gradually signed up for the program.1 But Medicaid growth persisted beyond this start-up period, with outlays increasing by nearly 60% in constant dollars from 1972 through 1980. Th is latter growth substantially refl ected an “unchecked” policy incrementalism that greatly enlarged Medicaid’s role in providing long-term institu- tional care for the elderly and people with disabilities (Smith & Moore, 2008, p. 134). Th is incrementalism featured members of Congress approving a series of amend- ments, largely in response to lobbying by state offi cials. Each amendment appeared to be minor and attracted little public attention; minimal consideration was given to its potential cost. But in the aggregate these measures planted the seeds for rapid Medicaid growth.

Th e original Medicaid statute required participating states to provide skilled nursing home care. Medicaid’s founders had envisioned that this care would have a substantial medical component and not extend to those who principally needed “custodial services” (such as the mentally ill and those with intellectual disabilities housed in state institutions). In 1967, however, Congress gave states the option to obtain Medicaid funds to serve people in intermediate care facilities (ICFs), which were more custodial than skilled nursing homes. Subsequent amendments in the early 1970s made ICFs serving the “mentally retarded” and psychiatric hospitals housing the mentally ill eligible for Medicaid payment. Policymakers in many states welcomed these measures as a source of fi scal relief. Whereas in the past states had to spend their own monies to assist people with disabilities, they could now obtain a hefty federal subsidy to do so.

The Triumph of Congressional Entrepreneurship (1981–1992)

Th is period highlights the role of the policy entrepreneur in defending and expand- ing Medicaid. Policy entrepreneurs can be “in or out of government, in elected or appointed positions, in interest groups or research organizations. But their defi ning characteristic, much as in the case of a business entrepreneur, is their willingness to invest their resources—time, energy, reputation, and sometimes money—in the hope of a future return” (Kingdon, 1984, p. 129). Few, if any, examples of policy entrepre- neurship by a member of Congress exceed that of Representative Henry Waxman (D-California) during this period.

Ronald Reagan’s arrival in the White House and the Republican takeover of the Senate in 1981 unleashed a concerted attempt to revamp and retrench Medicaid. Rea- gan’s successor, Republican George H.W. Bush, also sought to pare the program. When the dust settled, however, Waxman not only had fended off these retrenchment initia- tives; he had also laid the foundation for substantial Medicaid growth. Th roughout the period, Democrats enjoyed substantial majorities in the House of Representatives, with Waxman chairing a subcommittee overseeing Medicaid. In this position, he skill- fully exploited his role in the budgetary process to bolster the program. Space does not permit an exhaustive listing of the many Medicaid measures Waxman helped to engineer, but two examples capture the fl avor of his eff orts. In 1981, when the Rea- gan administration was laying siege to Medicaid, Waxman played a signifi cant role in establishing Medicaid’s Disproportionate Share Hospital (DSH) program (Smith

1 Data on Medicaid expenditure growth primarily come from the Offi ce of the Actuary, Department of Health and Human Services. Calculations are based on constant 2012 dollars. See www.cms/Research-Statistics-Data-and- Systems/StatisticsTrendsReports/NationalHealthExpendData/NationalHealthAccounts.html

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& Moore, 2008, pp. 168–169). Under the DSH program, states could direct monies to hospitals that served uncommonly high numbers of the uninsured and Medicaid enrollees. Soon, certain states rushed to obtain subsidies for these hospitals, and DSH program spending grew rapidly to account for over 11% of Medicaid outlays by 1992 (Gusmano & Th ompson, 2012, pp. 156, 161). So, too, Waxman worked with southern Democratic governors to expand eligibility for Medicaid. He secured passage of legis- lation that required all states to cover children younger than age 6 years and pregnant women with incomes up to 133% of poverty, and to phase in coverage for all poor children from 6 to 18 by 2002.

In part refl ecting Waxman’s policy entrepreneurship, federal and state Medicaid spending grew substantially between 1981 and 1992: by 16% during the fi rst term of the Reagan administration, by 27% in its second term, and by a whopping 66% under President George H.W. Bush (infl ation-adjusted dollars).

The Rise of Executive Federalism (1993–2008)

Congress continued to play an important role in shaping Medicaid during the Clinton and G. W. Bush administrations. For instance, passage of welfare reform legislation in 1996 and the Children’s Health Insurance Program in 1997 further transformed Medicaid into a program for working families rather than those on cash assistance. On balance, however, the surging importance of the executive branch in policy pro- cesses stands out as the dominant theme of this period. In essence, a pattern of execu- tive federalism emerged under which presidents and their appointees, in cooperation with key governors, facilitated a transformation in Medicaid without congressional approval (Gais & Fossett, 2005; Th ompson, 2012). Th e soaring use of program waivers abetted the rise of executive federalism.

Waivers are a congressional delegation of authority to the executive branch to per- mit states to deviate from the ordinary requirements of law. Medicaid waivers assume two basic guises: demonstrations (Section 1115 of the Social Security Act) and more targeted initiatives focused on long-term care (Section 1915c). Demonstration author- ity gives the federal executive broad discretion to experiment with alternative state approaches to Medicaid. In contrast, the 1915(c) waivers seek to rebalance Medicaid long-term care away from nursing homes and other large institutions toward home and community-based services (HCBS). Before 1993, concerns about the cost neutrality of waivers and other factors undercut federal willingness to approve them. Federal admin- istrators had, for instance, approved about 50 demonstration waivers since Medicaid’s inception and seldom renewed them. Th e Reagan and fi rst Bush administrations had been more willing to sign off on HCBS waivers, but states often found negotiations with the federal bureaucracy over waivers to be arduous and protracted. By 1992, HCBS spending still accounted for only 15% of Medicaid outlays for long-term care.

A pattern of executive federalism emerged under which presidents and their appointees, in cooperation with key governors, facilitated a transformation in Medicaid without congressional approval.

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Th e arrival of the Clinton administration uncorked an outpouring of Medicaid waivers. Clinton unilaterally initiated administrative measures that made it much eas- ier for states to obtain waivers, and the G. W. Bush administration followed suit. More than 40 states operated some facet of their program under a demonstration waiver by 2008 (Th ompson, 2012). Many of these waivers were comprehensive and transfor- mational. For instance, a bevy of states used them to move Medicaid enrollees into managed care while expanding coverage to new adult populations. Of particular note, negotiations between Massachusetts Governor Mitt Romney (R) over a Medicaid waiver yielded a plan for near-universal coverage in that state in 2006. Th e Massachu- setts model became the template for the ACA. HCBS waivers also proliferated, with about 280 in eff ect by the time the Obama administration took offi ce. Th anks largely to these waivers, HCBS grew to account for nearly 45% of all Medicaid spending on long-term care. Waivers were among the factors leading federal and state Medicaid outlays to more than double during this period (constant dollars).

Health Reform and Contentious Federalism (2009–2015)

Th e 2008 election gave Democrats control of the presidency and Congress, with sub- stantial majorities in both legislative bodies. As in 1965, this fl eeting period of party dominance ushered in a major policy breakthrough. Th us, the story of the policy pro- cess is largely about how Congress passed the ACA and why Medicaid became a key component of the law (primarily because it was cheaper than insuring the poor on the insurance exchanges). It is also a story about the courts. Of particular importance, a Supreme Court decision in 2012 eff ectively made state participation in the Medicaid expansion voluntary rather than required.

Important as Congress and the courts were in this period, themes of executive fed- eralism and unilateral presidential action also persisted. After the 2010 election, grid- lock rooted in a three-decade trend toward partisan polarization sidelined Congress from additional legislative action directed at Medicaid. Republicans, who regained con- trol of the House of Representatives, repeatedly attempted to repeal the ACA, derail its implementation, and eviscerate funding for Medicaid. Faced with deeply entrenched Republican hostility in Congress, the Obama administration relied on executive branch action to get the ACA off the ground. In the case of the Medicaid expansion, the White House needed to persuade Republican policymakers in the states to sign up for the expansion. Th is promised to be a formidable challenge. As 2013 dawned, Republicans controlled the governorship and both houses of the legislature in 24 states. In six of 13 states with divided governments, Republicans occupied the governor’s mansion.

Th e Obama administration pursued several strategies to defuse Republican oppo- sition in the states (Th ompson & Gusmano, 2014). As in the prior historical period, waivers loomed large. Th e ACA provided the executive branch with comprehensive waiver authority starting in 2017. In the meantime, the Obama administration used existing demonstration authority to serve its ends. In this regard, it bent over backward to accommodate states that wanted to enroll new Medicaid enrollees in the insur- ance exchanges or in other market-based arrangements. Th ese alternative approaches to a traditional Medicaid expansion appealed to Republican policymakers in several states. By July 2014, four Republican-controlled states and seven with divided partisan control had expanded Medicaid. In three of them (Arkansas, Iowa, and Michigan) market-oriented waivers facilitated their participation. Meanwhile, two other Repub- lican states, Indiana and Pennsylvania, indicated they would expand Medicaid if the Obama administration approved their market-fl avored waiver requests.

P a r t I . H e a l t h P o l i c y 48


Several factors have interacted over four historical periods to fuel supportive policy feedbacks leading to Medicaid’s growth (Th ompson, 2012). Th ese include Medicaid’s open-ended funding formula, which allows federal and state governments to leverage money from each other when they enlarge the program. Elected policymakers at the state and national levels can take political credit for expanding Medicaid while pay- ing only part of the tab. So too, state offi cials, especially governors, became increas- ingly aware of their stake in the program and, with occasional lapses by Republican governors, formed an intergovernmental lobby to support the program. In addition, a panoply of service providers and other advocates (such as hospitals, nursing homes, managed care organizations, and disability rights organizations) became increasingly dependent on Medicaid and defended the program. Movement over time toward a more positive social construction of Medicaid enrollees has also contributed.2 Medicaid’s image as “welfare medicine” has faded as a shrinking share of its nondisabled enrollees receives cash assistance. Instead, Medicaid has emerged as a program for working people and as a safety net for middle-class individuals who need long-term care for themselves or loved ones due to aging or disability. So too, skilled policy entrepre- neurship by Democrats in Congress, especially during the 1980s and in the politics triggering the ACA’s passage, fueled growth. Th e rise of waivers and executive federal- ism has also played a role. Th e increased willingness of the executive branch to grant these waivers has facilitated state eligibility expansions (most dramatically so-called Romneycare in Massachusetts) and kindled the growth of HCBS. In cooperation with key gubernatorial allies, presidents employ waivers to overcome barriers to adaptation and innovation rooted in the supermajority bias of American governance, especially under divided government and intense partisan polarization.

Th e policy processes that have fueled Medicaid are not, of course, immu- table. Changes in the political stream surrounding the program could precipitate retrenchment. Th is stream includes such factors as the “public mood . . . election results, partisan or ideological distributions in Congress and changes of adminis- tration” (Kingdon, 1984, p. 152). In this regard the growth of partisan polarization, especially the movement of the Republican party to the right, could vitiate Medicaid. It could stiff en the resistance of Republican policymakers in the states to the ACA’s Medicaid expansion. It could also manifest itself if subsequent national elections leave Republicans in control of the presidency and Congress. After taking control of the House of Representatives in 2011, Republicans for two consecutive years passed budget resolutions that would not only repeal the ACA but convert Medicaid to a capped block grant with massively reduced funding. Th e Romney–Ryan ticket ran on this anti-Medicaid platform in the 2012 presidential election. After the reelection of President Obama, Republicans in the House persisted in their eff orts to retrench Medicaid. In 2014, they approved a budget resolution that would convert Medicaid to a block grant and would slash spending on the program (along with CHIP) by 26% over 10 years. Whether a Republican-dominated government would retrench Medicaid—and the degree to which it would do so—remains an open question. However, the growing federal debt and the rise of partisan polarization heighten the risk of Medicaid falling.

2 Public opinion surveys reveal substantial support for Medicaid (e.g., Rose, 2013, pp. 19–20).

C h a p t e r 3 . G o v e r n m e n t a n d H e a l t h I n s u r a n c e : T h e P o l i c y P r o c e s s 49

■ Conclusion

Th e U.S. health system is in the midst of an extraordinary period of transition and transformation. Th e era of the solo physician is disappearing, replaced by larger and larger health systems. Th ere is increasing debate over the best scope of practice for diff erent groups of providers, as more and more nonphysicians (such as nurse prac- titioners and physician assistants) take on greater care responsibility. Th ere are new entrants into the health care marketplace, including some of the nation’s largest com- panies, such as Walmart, Apple, and Google. A major eff ort is underway to change the way we pay for health care services: Th e idea is to encourage value-based purchas- ing and pay for performance, rather than the traditional models that provide a preset fee for each service provided. An increased focus on care management especially tar- gets the high-cost medical patient. Meanwhile, nearly every Fortune 1000 company is implementing its own version of an employee wellness program. Tying together all of these changes is a growing use of health information technology in an eff ort to encour- age better communication between newly connected parts of the system.

All of these changes emerge from the ongoing eff ort to strike a balance among the quality of, access to, and cost of care. Th ose balancing strategies that are conducted within particular organizations are called management. Conversely, those external strategies implemented by government (through laws, regulations, overarching rules) are called policy.

Th is chapter has examined the ways that government sets policy in the health care arena. We began by reviewing government’s growing role as a payer for health care services, primarily as an insurer for many of those not covered by the private coverage system, but also as partial fi nancer (through the tax system) of the cost of private coverage itself. We then looked more closely at the policy process itself, emphasizing four key characteristics: (a) Each health program or problem domain typically has a relatively distinct policy sub- system; (b) the fragmented, supermajoritarian nature of America’s governing institu- tions profoundly aff ects policy processes in the health care arena; (c) implementation is a critical part of the policy process markedly aff ecting who gets what from federal health programs; and (d) the establishment of health programs reconfi gures policy subsystems and broader political factors in ways that aff ect program durability.

In the case of Medicaid policy, these four characteristics have combined to fuel extraordinary and unexpected program growth. In other issue areas, however, policy outcomes look quite diff erent. Given the extraordinary changes now underway in the nation’s health system, the task of the policy analyst and the policymaker could not be more important.

■ Discussion Questions

1. Should the government play a key role in aiding the uninsured, or should market forces reign supreme?

2. How should government fi nance its eff orts to aid the uninsured? 3. How much control should government have over the private health insurance

industry? 4. What is the right division of labor between the diff erent branches of government,

the private sector, and the individual consumer?

P a r t I . H e a l t h P o l i c y 50

■ References

Annas, G., Law, S., Rosenblatt, R., & Wing, K. (1990). American health law. Boston, MA: Little, Brown & Co.

Blumenthal, D., & Morone, J. (2009). Th e heart of power: Health and politics in the Oval Offi ce. Berkeley, CA: University of California Press.

Brown, L. D., & Sparer, M. S. (2001). Window shopping: State health reform politics in the 1990s. Health Aff airs, 20, 50–67.

Brown, L. D., & Sparer, M. S. (2003). Poor program’s progress: Th e unanticipated politics of Medicaid policy. Health Aff airs, 22, 31–44.

Clemens-Cope, L., Garrett, B., & Hoff man, C. (2006). Changes in employee health insur- ance coverage, 2001–2005. Washington, DC: Kaiser Commission on Medicaid and the Uninsured.

Epstein, D., & O’Halloran, S. (1999). Delegating powers: A transaction cost approach to policy making under separate powers. New York, NY: Cambridge University Press.

Gais, T., & Fossett, J. (2005). Federalism and the executive branch. In J. D. Aberbach & M. A. Peterson (Eds.), Th e executive branch (pp. 486–524). New York, NY: Oxford University Press.

Gusmano, M. K., & Th ompson, F. J. (2012). Safety-net hospitals at the crossroads: Whither Medicaid DSH? In M. A. Hall & S. Rosenbaum (Eds.), Th e health care safety net in a post reform world (pp. 153–182). New Brunswick, NJ: Rutgers University Press.

Holahan, J., & Liska, D. (1997). Th e slowdown in Medicaid growth: Will it continue? Health Aff airs, 16, 157–163.


You are a staffer for the federal secretary of Health and Human Services. The secretary

discusses with you the different ways that states have responded to the Medicaid

expansion in the Affordable Care Act: Roughly two dozen states have adopted the

expansion without much debate or negotiation; a few states, such as Arkansas, have

negotiated special terms for their expanded programs (and are using Medicaid funding

to buy private coverage for benefi ciaries); and still other states, such as Texas, have

simply refused to adopt the expansion. Your assignment is to prepare the secretary

for her upcoming visit to Texas (and her meetings with the governor, the Medicaid

director, and key interest group leaders) by writing a memorandum summarizing the

political and policy dynamics of the proposed Medicaid expansion in Texas. Be sure

your memo addresses questions such as the following:

1. Are the political reasons for not supporting Medicaid related to ideology about the

role of government in health care, or are they more about potential long-run costs

for the state budget?

2. How do the interests of hospitals, which would benefi t from the extra revenue if

Medicaid expands, affect the political and policy debates?

3. What is the role of public opinion in the choices being made by governors?

4. Will states feel differently about this issue over time and if the new insurance law

seems to become a permanent fi xture in public policy?

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Jenkins-Smith, H. C., & Sabatier, P. A. (1993). Th e study of public policy processes. In P.  A. Sabatier & H. C. Jenkins-Smith (Eds.), Policy change and learning. Boulder, CO: Westview Press.

Kaiser Commission on Medicaid and the Uninsured. (2014). Medicaid Moving Forward. Menlo Park, CA: Kaiser Commission on Medicaid and the Uninsured.

Kaiser Family Foundation. (2004). Medicare advantage fact sheet. Menlo Park, CA: Author.

Kaiser Family Foundation. (2010). Medicaid payments per enrollee, FY2007. Kaiser State Facts. Retrieved from http://www.statehealthfacts.org/comparemaptable. jsp?ind=183&cat=4

Kaiser Family Foundation. (2014). Medicare advantage. Menlo Park, CA: Author. Kingdon, J. W. (1984). Agendas, alternatives, and public policies. Boston, MA: Little,

Brown & Co. Marmor, T. (2000). Th e politics of Medicare (2nd ed.). New York, NY: Aldine de Gruyter. Oberlander, J. (2003). Th e political life of Medicare. Chicago, IL: University of Chicago

Press. Patashnik, E. M., & Zelizer, J. E. (2013). Th e struggle to remake politics: Liberal reform

and the limits of policy feedback in the contemporary American state. Perspectives on Politics, 11(4), 1071–1087.

Robert Wood Johnson Foundation. (2007). Th e state of the states. Princeton, NJ: Author. Retrieved from http://www.rwjf.org/fi les/publications/bther/Stateoft heStates2007. pdf

Rose, S. (2013). Financing Medicaid: Federalism and the growth of America’s health care safety net. Ann Arbor, MI: University of Michigan Press.

Rosenbaum, S. (2013, August 6). Federal policy implementation under the Aff ordable Care Act: Six issues whose fi nal resolution awaits, as implementation moves forward [Web log post]. Retrieved from http://healthreformgps.org/resources/federal- policy -implementation-under-the-aff ordable-care-act-six-issues-whose-fi nal-resolution -awaits-as-implementation-moves-forward/

Smith, D. G., & Moore, J. G. (2008). Medicaid politics and policy, 1965–2007. New Brunswick, NJ: Transaction Books.

Sparer, M. S. (1996). Medicaid and the limits of state health reform. Philadelphia, PA: Temple University Press.

Sparer, M. S. (2003). Leading the health policy orchestra: Th e need for an intergovern- mental partnership. Journal of Health Politics, Policy and Law, 28, 245–270.

Th e Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. (2014). 2014 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds.

Th ompson, F. J. (2012). Medicaid politics: Federalism, policy durability, and health reform. Washington, DC: Georgetown University Press.

Th ompson, F. J., & Gusmano, M. K. (2014). Th e administrative presidency and fractious federalism: Th e case of Obamacare. Publius, 44(3), 426–450.

Comparative Health Systems Michael K. Gusmano and Victor G. Rodwin


LEARNING OBJECTIVES o Understand the difference between NHI and NHS systems o Highlight key features and issues in the health systems of Britain, France, Canada,

and China o View the U.S. health system from an international perspective

TOPICAL OUTLINE o Looking abroad to promote self-examination at home o Health system models o NHS and NHI systems compared with the United States o The health systems in England, Canada, France, and China o Provider payment o Coordination of care o Workforce and information technology (IT) o Health system performance o Lessons

health system models health system performance national health insurance (NHI)

national health service (NHS) National Institute for Health and Care

Excellence (NICE)

■ Overview

Public opinion polls regularly fi nd that medical professionals and the public are dissatisfi ed with the system and believe major change is necessary.

Windows can sometimes be mirrors. A look at health systems abroad can enable us to develop a better understanding of our health system in the United States. An interna- tional perspective suggests that the United States has the most expensive health care


P a r t I . H e a l t h P o l i c y 54

system in the world, but unlike other wealthy countries, we fail to provide universal health insurance coverage and experience large inequities in access to primary and specialty care. Health care costs are often a source of fi nancial strain, even bankruptcy, for people with serious illness (Hacker, 2006), and Americans suff er from high rates of mortality that could have been avoided with timely and appropriate access to a range of eff ective health care services (Nolte & McKee, 2012). Th ere is also evidence that the U.S. health care system squanders resources and fails to address many of its population’s health care needs. Not surprisingly, public opinion polls regularly fi nd that medical professionals and the public are dissatisfi ed with the system and believe major change is necessary (Blendon, Benson, & Brulé, 2012).


International comparisons of health care system performance remind us that there are workable alternatives to our current system. Examining other systems provides “the gift of perspective” and helps us to understand our own system “by reference to what it is like or unlike” (Marmor et al., 2005). As Rudolf Klein (1997, p. 1270) explains:

Policy learning . . . is as much a process of self-examination—of refl ecting on the characteristics of one’s own country and health care system—as of looking at the experience of others . . . the experience of other countries is largely valuable insofar as it prompts a process of critical introspection by enlarging our sense of what is possible and adding to our repertoire of possible policy tools. For policy learning is not about the transfer of ideas or techniques . . . but about their adaptation to local circumstances. (emphasis in original)

Th is chapter attempts to provide a better understanding of the U.S. health care system by comparing it to health systems in wealthy countries, which share many characteristics in common, and by contrasting it to China, which is diff erent. Our focus on wealthy nations draws on the experience of those belonging to an organiza- tion based in Paris that studies economic trends and policies and collects health data from member nations—the Organisation for Economic Co-operation and Develop- ment (OECD). We pay special attention to England,1 which operates a national health service (NHS), and to Canada and France, which have national health insurance (NHI) systems. Our focus on China is an example of so-called BRIC nations (Brazil, Russia, India, and China) with large populations that have benefi ted from rapid economic growth over the past two decades and now are demanding access to state-of-the-art medical care.

Although England’s NHS is one of the most public systems in the world, it also allows opportunities for private hospitals, private practice, and private insurance for those who prefer such options. Canada is frequently compared with the United States because of its physical proximity and similar political culture; until the mid-1960s, Canada’s health care fi nancing and delivery systems were nearly identical to those in the United States (Marmor et al., 2005). France’s health system also shares many

1 We focus on England, the largest constituent country within the United Kingdom because there are important diff erences among the NHS in Scotland, Wales, and Northern Ireland.

C h a p t e r 4 . C o m p a r a t i v e H e a l t h S y s t e m s 55

features with the U.S. health system. Like the United States, France relies on a mul- tipayer system for fi nancing care and off ers a mix of public and private providers for delivering health care services. French citizens also enjoy freedom of choice among providers—to an even greater extent than Americans. Th e French experience (Rodwin & Contributors, 2006) suggests that it is possible to achieve universal coverage with- out adopting a single-payer NHI system, such as Canada’s, or an NHS, as in England. China off ers a more striking contrast to the United States. Despite its rapidly grow- ing economy, China’s national investments in public health and medical care are far smaller than those of OECD nations, and out-of-pocket payments represent roughly half of all health care expenditures. We conclude the chapter with some lessons of comparative experience for U.S. policymakers.

■ Health System Models

NHS systems, such as those in the United Kingdom, Sweden, Norway, Finland, Denmark, Portugal, Spain, Italy, and Greece, may be traced back to Lord Beveridge, who wrote the blueprint for the English NHS immediately after World War II. Although such systems are characterized by a dominant share of fi nancing derived from general revenue taxes, this does not preclude other forms of fi nancing. For example, the rela- tive size of private fi nancing and provision is much higher in Italy and Spain than in Sweden or Denmark. In England, 76% of NHS funding comes from general taxation, 18% from a payroll tax, and the remainder from private payments (Th omson, Osborn, Squires, & Reed, 2012, p. 33). Historically, NHI systems have had a more open-ended reimbursement system for health care providers, but this distinction is blurring as NHI systems are increasingly under pressure to operate within budget limits.

NHI systems may be traced back to Chancellor Otto von Bismarck, who established the fi rst NHI program for salaried industrial workers in Germany in 1883. With the exception of Canada, whose dominant share of fi nancing is from general tax revenues, these systems are characterized by payroll tax–based fi nancing. In addition to income taxes, about a quarter of Canada’s federal spending on health care comes from corpo- rations. Th e provinces also supplement income and corporate taxes with additional sources of funding, such as sales, tobacco, and alcohol taxes. As with NHS systems, NHI systems are characterized by signifi cant variation in their fi nancing and organizational arrangements. For example, the share of French health care expenditures fi nanced from general tax revenues has increased beyond 40% (Rodwin & Contributors, 2006).

Whether one’s image of a health system is private and market-based, as in the United States and Switzerland; public and government-managed, as in the United Kingdom and Scandinavian nations; or at some intermediary point along such a con- tinuum, as in France and Canada; it is possible to make some useful distinctions with respect to the public versus the private provision of health care and methods of fi nanc- ing of health services. Table 4.1 classifi es health systems along these dimensions.


Th e arrangements for providing health care in Table 4.1 distinguish whether health services are delivered by the public, private not-for-profi t, or private for-profi t sector. Within these categories, many distinctions may be added. For example, some publicly

P a r t I . H e a l t h P o l i c y 56

capitalized organizations (row A) are national (VHA), others are subnational (state mental hospitals), and many are local (municipal hospitals). Likewise, the not-for- profi t category may include a variety of quasi-public organizations, such as hospital trusts in Britain (row B). Th e for-profi t form of provision (row C), a distinctive sub- category in the United States, includes private for-profi t hospitals and managed care organizations (MCOs) that sell ownership shares to investors through stock markets. Indeed, the growth of large investor-owned MCOs distinguishes the United States from most other OECD nations.


Th e four methods of raising revenues to pay for health services correspond to columns A through D:

■ A: General revenue fi nancing through the fi scal tax system ■ B: Compulsory payroll tax fi nancing through the Social Security (payroll tax) system ■ C: Voluntary premiums assessed by private health insurance companies ■ D: Individual out-of-pocket payments

Th ere are, of course, other methods and sources of fi nancing, particularly for capi- tal expenditures, such as direct employer contributions and philanthropic funds. But these are no longer dominant sources of health care fi nancing.

Although all countries rely on these four sources of revenue to fi nance health care services, most developed countries have adopted one of two distinct models for fi nancing care. In NHS systems, the government uses its resources to operate most, if not all, of the delivery system. In NHI systems, revenue is most often raised through payroll taxes to fund a social insurance program that reimburses health care providers for services rather than paying for health care directly through the government’s budget.


P r o v i s i o n F i n a n c i n g

Government Social Security/NHI Private Insurance Out-of-Pocket


Government Owned 1 2 3 4


Private Nonprofi t/

Quasi-Government 5 6 7 8


Private For-Profi t 9 10 11 12


C h a p t e r 4 . C o m p a r a t i v e H e a l t h S y s t e m s 57

In contrast to England, Canada, and France, China and the United States rely, to varying degrees, on subnational and local governments to fi nance health care. In Canada, provinces and territories administer universal health insurance programs and the federal government provides block grants that account for approximately 20% of health care expenditures. To qualify for the federal funds, provincial and territorial health insurance systems must meet fi ve criteria specifi ed by the Canada Health Act of 1984. Th ey must be (a)  administered on a nonprofi t basis by a public authority; (b)  comprehensive in the sense that they must cover most health services provided by hospitals, medical practitioners, or dentists; (c) universal in that all legal Canadian residents are covered; (d) portable so that coverage for all residents in each province or territory is transferable to all other parts of Canada; and (e) accessible, although “reasonable access” is not defi ned in the law.

In 2009, China adopted a reform that seeks to provide health insurance for all of its population. Although China already provides some minimal health insurance to the majority of its population, coverage remains extremely limited and, as we noted earlier, more than half of all spending on health care still comes from out-of-pocket payments (Table 4.1, column D). In terms of public funding for health care, China relies—to an even greater extent than Canada—on subnational government revenues to fi nance the country’s three national health insurance funds.

Below the national government, China has provincial, regional, and local govern- ments. By the mid-1990s, these subnational government authorities fi nanced 80% to 90% of total government spending on social services, including health care (Hipgravel et al., 2012). Th e adoption of health reform has increased central government con- tributions to health care, but local government taxes and out-of-pocket payments from individual patients still represent the two largest sources of revenue. As of 2012, provincial and local government revenues fi nanced 78% of health care expenditures (Fabre, 2013). Th is approach has exacerbated the large economic disparities between the wealthier coastal provinces and the poorer rural provinces in western China. Th e national government has attempted to address the country’s rural–urban disparities, but with limited success (Jian, Chan, Reidpath, & Xu, 2010).

■ NHS and NHI Systems Compared With the United States

Table 4.1 enables one to highlight key features of NHS and NHI systems and to adopt an international perspective on the U.S. health care system. Th e most strik- ing diff erence between the United States and NHS or NHI systems is that the United States—even after passage of the Patient Protection and Aff ordable Care Act of 2010 (ACA)—includes large elements of fi nancing that are based on actuarial principles whereby private insurance premiums (column C) are set with respect to estimated risk. In contrast, in NHS and NHI systems, most health care fi nancing is based on ability to pay (columns A and B). Ability-to-pay criteria lead to wealthier, younger, and healthier individuals paying disproportionately to fi nance the care of poorer, older, and sicker individuals. Aside from this important distinction, a look at box 1 through box 12  suggests that most health care systems have elements of many boxes ranging from socialized medicine (box 1) to out-of-pocket payment for private practitioners and hospitals (box 12).

P a r t I . H e a l t h P o l i c y 58

Th e United States has neither an NHS nor an NHI system. Instead, the U.S. health care system relies on a patchwork of public and private insurance with large gaps in coverage (see Chapter 3). Its enormous pluralism exhibits components of its health system within each of the boxes in Table 4.1. It uses a social insurance system for older people and for those with permanent disabilities (Medicare: columns A and B); a social welfare system for some people with low incomes (Medicaid and CHIP, column B); and a subsidized employer-based private health insurance system for a large, but shrinking percentage of salaried employees in the private and public sectors (column C). Along with its public and private insurance programs, the United States has ele- ments of socialized medicine (publicly funded and provided programs in box 1), such as the military health care system, the Veterans Health Administration (VHA) system, and the Indian Health Service (IHS) for Native American and Alaskan Native people.

■ The Health Systems in England, Canada, France, and China

After World War II, governments have gradually extended their role in the fi nancing and provision of health services.

Beyond the diff erences we have noted between NHI and NHS systems, these systems have evolved in similar directions. After World War II, governments have gradually extended their role in the fi nancing and provision of health services. What was once largely the responsibility of the family, philanthropy, religious institutions, employers, and local governments has largely been taken over by national and subnational gov- ernments—a trend that has accompanied the rise of the welfare state (de Kervasdoué, Kimberly, & Rodwin, 1984). Th is evolution has aff ected all wealthy OECD nations and, increasingly, BRIC and less developed nations. Th e U.S. reliance on employer-based private health insurance—even after the implementation of the ACA—is an important contrast to NHI and NHS systems. Yet even in the United States recent decades have seen an expansion of public insurance and a decline in employer-based coverage.

Th e growth of government involvement in health systems has characterized OECD nations during the great boom years of health sector growth (1950s and 1960s), when governments encouraged hospital construction and modernization, workforce training, and biomedical research. It continued in the 1970s, when the goals of OECD countries shifted more in the direction of rationalization and cost containment (Rod- win, 1984). In the early 21st century, public and private health insurance has become the dominant source for funding health care, and public expenditure on health care services, along with education and Social Security, has become one of the largest cat- egories of social expenditure as a share of gross domestic product (GDP).

In contrast to these trends in OECD nations, by the end of the 1970s China moved from a health system dominated by public fi nancing to one that is now dominated by private, out-of-pocket payments. Between 1949 and the early 1980s, the Chinese health system was fi nanced largely by the central government and state-owned enter- prises ( Valentine, 2005). In 1978, Deng Xiaoping called for market reforms. Th e cen- tral government reduced its share of national health care spending from 32% to 15%

C h a p t e r 4 . C o m p a r a t i v e H e a l t h S y s t e m s 59

(Blumenthal & Hsiao, 2005). It slashed subsidies to public hospitals and introduced market mechanisms in health care, resulting in rapid growth of out-of-pocket pay- ments and income-based inequities.

By the late 1990s, Chinese offi cials increased investment in public health to address growing disparities between rural and urban areas. Eff orts to improve the public health and primary care systems accelerated after the outbreak of SARS in late 2002. By the end of 2003, more than 5,000 people were infected with SARS and 349 people died (Smith, 2006), thus exposing the weaknesses of the public health system. Since 2009, China has continued to expand the role of government through the cre- ation of new public insurance schemes and the adoption of new public health regula- tions (Wang, Gusmano, & Cao, 2011).

In addition to the growth of government’s role in health care, most OECD nations must confront common challenges and exhibit distinct approaches for many issues. We illustrate how this is so by comparing the health systems of England, Canada, France, and China with respect to (a) provider payment, (b) coordination of care, (c) workforce and IT, and most importantly, (d) health system performance.


All countries rely on multiple methods for paying physicians and hospitals. NHS sys- tems traditionally have relied more on salaried and capitation forms of payment for physicians and budgets for hospitals. In the English NHS, about two thirds of general practitioners (GPs) and dentists work as independent contractors reimbursed through a blended payment system, 75% from capitation payment and most of the rest (20%) from fee-for-service (FFS) payments based on performance. Since 2012, GPs have been placed in charge of clinical commissioning groups (CCGs), which control about 70% of the NHS budget. CCGs are responsible for purchasing hospital and specialty medical care services for their patients. Th e NHS fi rst introduced a prospective pay- ment system for reimbursing public and private hospitals in 2003 and, in April 2004, phased in a new national tariff system. Since 2012, the NHS has adopted a Payment by Results (PbR) system based on the average cost of providing the procedure or the treatment across the NHS as a whole.

Historically, Canadian primary care physicians have been paid on an FFS basis. Th e Ministries of Health for all provinces and territories are responsible for negotiat- ing an annual physician fee schedule based on a relative value scale (RVS) for each reimbursable procedure or code. Th e RVS may be based on a resource-based fee schedule (RBFS), which tries to capture the inputs required to provide the service, or on historical charges. Studies have found wide variation in fee schedules across Canada (Roth & Adams, 2009). In more recent years, some provinces have experimented with blended capitation schemes in family health networks, family health teams, and family health organizations. Blended capitation relies on age- and gender-adjusted payments, coupled with fi nancial incentives to follow “evidence-based” guidelines and FFS when physicians treat nonenrolled patients (HealthForceOntario, 2014).

In France, physicians in the ambulatory sector and in private hospitals are reim- bursed on the basis of a fee schedule negotiated among physician associations, NHI funds, and the government. Approximately 15% of all physicians (and 25% of those in private offi ce–based practice) selected the option to extra-bill beyond the negoti- ated fees that represent payment in full for all other physicians. Th ese fi gures vary by

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specialty, with the highest rates of extra-billing among specialists in comparison to GPs. Physicians who have opted to extra-bill may do so as long as their charges are set with “tact and measure,” a standard that has never been legally defi ned but which has been found, empirically, to represent a 50% to 100% increase to the negotiated fees. Physicians based in public hospitals are remunerated on a part-time or full-time salaried basis, and those in private for-profi t hospitals may bill the NHI based on the negotiated fees.

Before 1984, public hospitals in France were reimbursed on the basis of a ret- rospective, cost-based, per diem fee; after that, they were placed on global budgets that were later gradually adjusted for patient case mix in the 1990s. Private for-profi t hospitals used to be reimbursed on the basis of a negotiated per diem fee; in the 1990s the per diem payments were also gradually adjusted for their case mix. Th e basis for case-based adjustment in France is an adaptation of the U.S. Diagnosis Related Group (DRG) categories known in France as GHM (groupes homogènes de malades). Th e most recent modifi cation was introduced in 2004 (Schreyögg et al., 2006), when activity-based payment (ABP) was introduced to create a level playing fi eld for reim- bursement of acute-care services among public and private hospitals. As of 2012, the reimbursement system for public and private hospitals has been completely aligned based on the national ABP tariff s, which take into account each hospital’s historical costs. Th is has resulted in expected activity growth, which in turn, results in down- ward price adjustments because annual hospital costs are constrained by national and regional hospital expenditure targets (Or, 2010).

In China, the expansion of health insurance is changing the nature of provider pay- ment, but by the end of 2013 about half of physician payments to health care providers still came from FFS payments. Subnational governments in China regulate prices in an eff ort to make health care aff ordable and, during the past decade, provincial and local governments, with encouragement from the central government, have introduced such incentives as pay-for-performance based on treatment protocols to improve quality (Yip et al., 2010). Although the central government hopes that the expansion of health insurance will limit hospital reliance on kickback payments from medical device and pharmaceutical companies, such payments continue to be an important source of revenue for Chinese health care providers (Wang et al., 2011).

In comparison to England, Canada, France, and China, the United States pays signifi cantly higher prices for medical care. Although there is a vigorous debate about the factors that drive U.S. health care spending, consensus is emerging that price is the most important factor in explaining why the United States spends so much more than any other health care system in the world (Anderson, Frogner, Johns, & Reinhardt, 2006). Two of the distinguishing characteristics of the U.S. health care system are that the United States does not operate within a budget and does not negotiate prices with providers as aggressively as other countries.

Two of the distinguishing characteristics of the U.S. health care system are that the United States does not operate within a budget and does not negotiate prices with providers as aggressively as other countries.

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All countries suff er from problems of coordination among hospitals and community- based services. Th ey diff er, nonetheless, with regard to the size and nature of their delivery systems. France, for example, has more practicing doctors per 1,000 popu- lation (3.3) than the United Kingdom (2.8), the United States (2.5), Canada (2.4), or China (1.5) (OECD, 2013). France also has more hospital beds per 1,000 population (6.2) than the United States (3.1), the United Kingdom (3.0), Canada (2.8), or China (2.7) (OECD, 2013).

Since its creation in 1948, the NHS has been one of the largest public service orga- nizations in Europe. With more than one million employees, more than 2,500 hospi- tals, and a host of intermediary health care organizations, the NHS poses an awesome managerial challenge (Klein, 2013). Perhaps because Britain has fewer health care resources than most OECD nations, the British have been more aggressive in weed- ing out ineffi ciency than other, wealthier countries. Because the NHS faces the same demands as other systems to make technology available and to care for an increasingly aged population, British policymakers recognize they must pursue innovations that improve effi ciency. But numerous obstacles have arisen: opposition by professional bodies, diffi culties in fi ring and redeploying health care personnel, and not least, the tripartite structure of the NHS, which, since its inception, has created an institutional separation among hospitals, general practitioners, and community health programs. Th is separation is reinforced further by the fact that local authorities are responsible for a great deal of prevention and health promotion, as well as social care, making it diffi cult to integrate hospital and community-based care.

In Canada less separation exists between physicians and hospitals because spe- cialists are paid FFS and work both in community-based practice and hospitals. Hos- pitals are largely private nonprofi t institutions with their own governing boards, but they are almost entirely publicly fi nanced and subject to tight budget constraints. Most community-based physicians must refer their patients requiring diagnostic pro- cedures and testing, as well as more specialized care, to local hospitals, which can lead to extended waiting times for elective procedures and problems in ensuring optimal coordination between hospital specialists and community-based providers.

France also faces problems with the coordination of care between hospitals and community-based providers. Th ere is inadequate communication between full-time, salaried physicians in public hospitals and solo physicians working in private practice. Although GPs have informal referral networks to specialists and public hospitals, no formal institutional relationships exist to ensure continuity of medical care, disease prevention and health promotion services, posthospital follow-up care, or systematic linkages and referral patterns among primary-, secondary-, and tertiary-level ser- vices. Schoen et al. (2012) document that the French health care system is character- ized by poor hospital discharge planning and a lack of coordination among medical providers.

In China, before 1978 the health care delivery system in rural areas was organized by communes, which provided housing, education, and social services, as well as basic medical care. An important feature of the communes’ Cooperative Medical System was the staff of paraprofessionals known as “barefoot doctors”’ (Rosenthal & Greiner, 1982). Most of the barefoot doctors were young peasants who received a few months of training and off ered basic primary and preventive care, including health education.

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If the needs of patients were more complex, the barefoot doctors would refer them to physicians at the commune health centers or, if necessary, to the closest hospital. In urban areas, the health care delivery system relied heavily on so-called fi rst-level hospitals, community clinics with a modest inpatient capacity, to provide ambulatory care.

With the introduction of market mechanisms in the health sector after 1978, the government ended its barefoot doctor program in rural areas, leaving the population in rural China without adequate access to health care services. It also reduced its sub- sidies to state-owned fi rst-level hospitals; forced to become more self-reliant, these hospitals withdrew public health and primary health care services. Some fi rst-level hospitals went bankrupt, and those that survived turned to profi table medical services rather than emphasize primary care and prevention.


Primary care vs. specialty care balance. In most OECD health care systems, at least half of physicians are in primary care. Th e United States stands out, in contrast, because about 70% of physicians are specialists, and only about 30% are in primary care. Th e situation in China is far more dramatic. Only 57% of cities in China had a community-based primary care organization, and more than 40% of the population reports that it does not have convenient access to a primary care center (Wang et al., 2011). In addition, most general practitioners lack additional training after receiving their undergraduate medical education.

Primary care is important because systems with a higher concentration of primary care practitioners improve coordination and continuity of care. Access to an eff ective system of primary care appears to result in higher life expectancy projection at birth, lower infant mortality, lower mortality from all causes, lower disease-specifi c mortal- ity, and higher self-reported health status (Starfi eld, Shi, & Macinko, 2005).

Workforce shortages/surpluses. Concerns about the adequacy of primary care in the United States are reinforced by discussions about the adequacy of the health and social care workforce in the face of rapid population aging (Carrier, Yee, & Stark, 2011). Increases in Alzheimer’s disease and other forms of dementia in particular have raised concerns about the extent to which the health and long-term care systems will have a suffi cient number of physicians, nurses, and other medical professionals to address the needs of an aging society (Warshaw & Bragg, 2014).

Although a shortage of clinicians, particularly in primary care, is the major con- cern in the United States, France, and China, some countries in Europe, particularly England, now wonder whether they may have too many doctors and nurses. Before the global economic crisis began in 2008, many OECD countries adopted policies designed to increase their supply of medical professionals. After the economic slow- down, many countries expressed concern about an “oversupply” of some health care workers (Ono, Lafortune, & Schoenstein, 2013).

Starting in 2000, for example, the English National Health Service adopted a workforce redesign initiative to increase the number of doctors and nurses in the sys- tem, expand the roles of existing professionals, and redistribute responsibilities to rely more on teams of health care professionals. As a result, there is now concern that the country may have too many hospital specialists, but there are persistent concerns that it still does not have a large enough supply of well-trained social care workers,

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particularly for providing home care to older patients (Bohmer & Imison, 2013). Simi- larly, a recent assessment of health care needs in Ontario, Canada, concluded that there will be an aggregate surplus of GPs and specialists in 20 years, even though some specialties and areas may experience shortages (Singh et al., 2010).

Th e push for electronic medical records and other forms of health care IT. Th rough- out the world, policymakers are searching for ways to reduce health care spending while improving the quality of care. Th e use of electronic health records and other forms of health information technology (HIT) are often touted as solutions to these problems. Harvey Fineberg (2012), the president of the Institute of Medicine, argues that over the long term HIT will improve the quality and effi ciency of the health care system. Marmor and Oberlander (2012, p. 1217) dismiss the focus on HIT as a “fad” and suggest that the desire to fi nd a “big fi x” to the problems of cost and quality has led policy makers to embrace technical and managerial solutions, including the adoption of HIT, along with various forms of managed care, health planning, and payment reforms designed to align the incentives of providers and patients with public health goals.

Th is argument supports James Morone’s (1993) thesis that the United States tends to search for a “painless prescription” to the major challenges in health care. Indeed, comparative analysis suggests that such technical solutions to the problems of cost and quality as HIT have had little eff ect on cost or quality in health care and that the United States should focus on more important structural features of other health care systems, such as global budgets, fee schedules, systemwide payment rules, and con- centrated purchasing power.

Advocates of HIT argue that newer developments in the use of so-called big data are more likely to transform medical practice because of their capacity to link infor- mation among many institutions within a health care system. Th ey also argue that the United States has never adopted HIT on a widespread basis, so the failure of previous eff orts to improve quality or lower costs is not suffi cient evidence that HIT cannot contribute to these goals in the future.

It seems plausible to suggest that HIT may be a valuable tool for addressing costs and quality in health care, but its value surely depends on the policy context in which it is used. For England, Canada, and France, HIT may further enhance the effi ciency of resource allocation by providing administrators, providers, and patients with access to better information. In the United States, however, the eff ect of HIT within the context of a fragmented, open-ended fi nancing system may be far more limited. Viewed from this perspective, it is easier to understand the arguments of those who remain skepti- cal of HIT’s importance.


Policymakers and researchers often want to compare the performance of diff erent systems and identify lessons for health policy. Although these eff orts have generated important information, they have often succumbed to the temptation of devising a composite indicator to rank health care systems against one another (Oliver, 2012). Th is practice encourages lavish attention from the media on the search for the best health care system, the new holy grail of performance assessments. Unfortunately, such an approach lacks any eff ort to understand, assess, and compare health care systems in relation to the cultural context, values, and institutions within which performance indicators are embedded.

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Th e study of health system performance by the World Health Organization (WHO) is the most prominent example of the composite indicator approach to the comparative analysis of health systems (WHO, 2000). WHO ranked the health systems of 191 member states based on weighted measures of fi ve objectives: (a)  maximizing population health (as calculated by disability-adjusted life expectancy, or DALE); (b) reducing inequalities in population health; (c) maximizing health system respon- siveness; (d) reducing inequalities in responsiveness; and (e) fi nancing health care equitably.

Although controversial because of its many methodological fl aws and missing data, the WHO report generated tremendous discussion about health system per- formance and the criteria that should be used to assess it (Musgrove, 2003). Some of the controversy generated by the report can be attributed to complaints from coun- tries unhappy with their ranking, but prominent academics also criticized the study for relying on incomplete and inadequate data, as well as on questionable methods ( Williams, 2001).

WHO’s use of DALE as a measure of health status illustrates the problem of using population health status to assess the performance of health care systems. DALE includes causes of mortality that are amenable to health care as well as a host of social determinants of health. As a result, this measure is not “related directly to the health care system” (Nolte & McKee, 2003, p. 1129). Using DALE, life expectancy at birth and infant mortality are inadequate measures of health system performance because the role of health care in improving population health is small compared with interven- tions aimed at social and environmental determinants.

As Bradley and Taylor (2013) argue, one reason the United States performs so poorly on such indicators is because it has failed to invest suffi ciently in education, housing, employment, and other social programs that help to produce and sustain good health. Between those who emphasize the decisive eff ect of social determinants of health and those who focus on access to health care, there is a middle ground: atten- tion not only to the consequences of poor social conditions, but also to barriers in access to what we have called eff ective health care services.

Th ere is a vast literature that measures inequities in access to health care (see Chapter 2). Such studies rely either on comparisons of inputs (e.g., physicians, hospi- tal beds) or on administrative or self-reported survey data to measure service utiliza- tion. An alternative approach attempts to capture the consequences of poor access to disease prevention, primary care, and specialty services—in other words, mortality amenable to health care (amenable mortality). Of course, few causes of death are entirely amenable, or not amenable to health care, and as medical therapies improve even more deaths may be classifi ed as potentially avoidable. Nevertheless, based on an OECD study, this summary provides convincing evidence that the United States is not performing well in comparison to other wealthy nations (Gay, Paris, Devaux, & de Looper, 2011).

Crossnational analysis of trends in avoidable mortality indicate that avoidable deaths have declined much faster over the last three decades than other causes of mortality (Nolte & McKee, 2012). Th is result lends further credence to the validity of avoidable mortality as an indicator for the eff ectiveness of public health interven- tions and medical care. We have used this measure to compare the health systems in megacities located within four of the countries we highlight in this chapter: London, New York, Paris, and Shanghai (Gusmano, Weisz, & Rodwin, 2009).

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Th rough accountable care organizations (ACOs) in the United States (see Chapter 11) and various forms of disease management and integrated service delivery proposals in other countries, health care professionals are being encouraged to think about population, as well as individual, health. Th e eff ort to shift health systems in this direction is a positive development, but if we hope to understand the performance of health care systems and the relationship between health care inputs and health out- puts, it is important to select such indicators as amenable mortality, which are more closely related to the performance of these systems than are broad measures of health such as life expectancy and DALEs.

Th e extensive criticism of WHO’s eff ort to evaluate health system performance has not discouraged other groups from taking similar approaches. Th e Commonwealth Fund has a project designed to identify high-performing health systems within the United States and other wealthy nations. It also draws on more dependable data than WHO’s for its assessments, in part because its scope is more limited and focuses on nations for which population, health, and health system data are more readily available. For example, the Commonwealth Fund supplements many of the same data sources used by WHO with original surveys of patients and primary care providers fi elded by Harris Interactive.

Th e Commonwealth Fund (2014) uses these survey results, along with a host of other data sources, to compare U.S. national averages on health outcomes, quality, access, effi ciency, and equity to “benchmarks,” which represent the performance on these measures “achieved by top-performing groups” (Schoen, Davis, How, & Schoen- baum, 2006). In some cases, the “top-performing groups” are other countries. In other cases, they are regions, states, or health plans within the United States. Despite the more reliable empirical analysis and its contribution to stimulating attention to health care systems abroad, this study’s use of a single national scorecard to evaluate the per- formance of the U.S. health system shares many of the same problems highlighted by WHO’s eff ort to rank health systems on the basis of criteria about which policymakers rarely agree.

Access to services across income groups. An important dimension of health system performance is the extent to which a system provides access to health care services by income group. In contrast to the United States, countries with universal or near- universal coverage enjoy a relatively equitable distribution of primary care visits (Van Doorslaer, Masseria, & the OECD Health Equity Research Group Members, 2004). Lower-income residents of Australia, Canada, New Zealand, and the United King- dom, for example, are  less likely to report barriers to health care than people with below-median incomes in the United States (Blendon et al., 2002). Comparative stud- ies that examine hospitalizations for ambulatory care sensitive conditions (ACSC), a measure of access to timely and eff ective primary care, fi nd that rates are much lower in Canada, England, France, and Germany than in the United States and inequalities in rates of ACSC are smaller in these countries (Billings, Anderson, & Newman, 1996; Gusmano, Rodwin, & Weisz, 2014; Roos, Walld, Uhanova, & Bond, 2005).

A concern often voiced by conservative analysts in the United States is that so- called government-run health care systems, by which they mean both NHS and NHI systems, “ration” care (Goodman, Musgrave, & Herrick, 2004). Because such sys- tems operate within a budget, these analysts claim, they must limit access to spe- cialty and  surgical health care services in ways that are unacceptable. Th is claim is supported by studies that compare access to certain expensive health care services in England and the United States (Aaron, Schwartz, & Cox, 2005). Although there is

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evidence that some expensive technologies, including revascularization and kidney dialysis, are used less frequently in England than in the United States (Gusmano & Allin, 2011), this is not the case with respect to France or Germany. For example, after controlling for need, the use of revascularization (coronary artery bypass and angio- plasty) is comparable in France, Germany, and the United States (Gusmano et  al., 2014).

Even among countries that provide universal coverage there are diff erences in access to specialty services by socioeconomic status. Residents of higher-income neighborhoods in Winnipeg, Canada, a country that strives to eliminate fi nancial bar- riers to care, receive “substantially more” specialty and surgical care than lower-income residents of the city (Roos & Mustard, 1997). In France, Germany, and England, access to some specialty health care services is signifi cantly worse among residents of lower- income neighborhoods ( Gusmano, Weisz, & Rodwin, 2009). Inequalities in access to health care are even greater in BRIC countries and developing nations. Despite remarkable economic growth in recent decades, for example, there are fl agrant dis- parities in access to health care within China.

Cost. As was evident during the debates over the ACA, there is a widely shared belief among American policymakers that a national program providing for univer- sal entitlement to health care in the United States would result in runaway costs. In response to this presumption, nations that entitle all of their residents to a high level of medical care, while spending less on administration and on health care than the United States, are often held up as models. Th e Canadian health system is the most celebrated example. French NHI is another case in point. England’s NHS, although typically considered a “painful prescription” for the United States (Aaron, Schwartz, & Cox, 2005), nevertheless ensures fi rst- dollar coverage for basic health services to its entire population and, as we have seen, spends less than half as much on health care, as a percent of GDP, and approximately one half as much per capita as in the United States (Table 4.2). Huang (2011) expects that China’s total health care expenditures will increase rapidly over the coming decade, but its current spending, as a percent of GDP, is far below the OECD average.

Stories in the media often suggest that pressures from population aging will render existing welfare state commitments, including the Medicare and Medicaid programs in the United States, unsustainable. Despite these concerns, most studies


H e a l t h E x p e n d i t u r e a s a S h a r e o f G D P, 2 0 1 1

United States 17.7%

France 11.6%

Canada 11.2%

United Kingdom 9.4%

OECD Average 9.3%

China 5.2%

Source: Organization for Economic Co-operation and Development (2013).

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conclude there is no correlation between the percentage of the older population (65  years and over) and health  care expenditures as a percent of GDP. Th e United States, which spends more on health care than any country in the world, is among the OECD countries with the youngest age cohorts. In contrast, Britain, Italy, Sweden, Germany, and France, with older populations than the United States, spend a far lower percentage of GDP on health care. Even if one excludes the United States and examines only the European Union, there is no correlation between population aging and health care spending.

Crossnational analysis of health care expenditure data indicates that, after con- trolling for income, age has little eff ect on national health care expenditures. Prox- imity to death, not age, leads to an increase in health spending (Moon, 1996). An analysis of health spending on older people in Switzerland found that expenditures are concentrated in the last few months of life (Zweifel, Felder, & Meiers, 1999). Although the OECD projects that “age-related spending for the average country will rise by around 6 to 7 percentage points of GDP between 2000 and 2050,” they acknowledge that “part of this pressure is a result of cost pressures from advances in medical technologies, rather than ageing per se” ( Australian Department of the Treasury, 2007).

Price, volume, and technology diff usion are the most important factors that drive health care costs; as noted earlier, however, high U.S. prices explain why the U.S. health care system is so expensive relative to other nations (Anderson et al., 2006). Although Americans spend more than any other nation, health service use in the United States is actually below the median for the OECD on most measures. A study for the McKinsey Global Institute (Angrisano, Farrell, Kocher, Laboissiere, & Parker, 2007), based on four diseases, provides further support for the role of prices in driv- ing up U.S. health care costs. Th e study found that in 1990, Americans spent about 66% more per capita on health care than Germans but received 15% fewer real health care resources.

In addition to understanding the factors that drive health care spending, it is important to confront the question: How much spending on health care is too much? Most health economists argue that there is no right amount of money to spend on health care. Cutler (2007) argues that we should focus less on the level of health care expenditure and pay greater attention to whether the expenditures gen- erate more benefi ts than costs. However, eff orts to adopt explicit economic evalu- ation of health technology provoked controversy in the United States. Th e ACA forbids federal government agencies from using cost as a criterion for making cov- erage decisions. Among the countries compared in this chapter, France, Canada, and England, to varying degrees, all use economic evaluations of health technology to make coverage decisions. In France, economic evaluations of new drugs are rec- ommended but not required (Sorenson, 2009). In Canada, these eff orts are more decentralized than in England, and “only a handful” of technologies are subject to cost-eff ectiveness analysis (Menon & Stafi nski, 2009). In England, NICE focuses on new technologies only and is reputed to be the leading health technology assess- ment agency worldwide.

NICE, established in 1999 in response to growing concerns about variations in the use of new technology, is supposed to meet three primary objectives: (a) to reduce unwarranted variation in prescribing patterns across England and Wales, princi- pally through setting practice guidelines; (b) to encourage the diff usion and uptake

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of eff ective health technologies; and (c) to ensure value for money for NHS invest- ment by assessing the cost eff ectiveness of selected interventions. Record increases in NHS expenditures throughout the decade following 2000 were linked to meeting these objectives, particularly in terms of directing spending to facilitate widespread and uniform access to the most cost-eff ective treatments.

NICE prides itself on its transparency, methodological rigor, stakeholder inclu- siveness, consistency, independence from government, and timeliness, all of which appear necessary to secure the legitimacy and eff ectiveness of its recommendations. Since 2003, it has been mandatory for local NHS purchasers and providers to act on all positive recommendations on technology appraisals (i.e., recommendations that specifi c health care interventions be made available in the NHS) within 3 months of their publication.

NICE arrives at conclusions about whether interventions are therapeutically benefi cial and cost-eff ective compared with other relevant alternatives by review- ing a range of available evidence, assembled and synthesized by a publicly funded network of academic institutions. Th e role of social values in the appraisal process is increasingly apparent as NICE reviews complex cases, for instance, on whether select end-of-life cancer drugs be made available to NHS patients despite their off er- ing insuffi cient value for money with respect to conventionally accepted thresholds of cost-eff ectiveness.

Th ere is some evidence that widespread adoption of NICE recommendations for specifi c technologies, particularly cancer drugs and the use of varenicline for smoking cessation, has reduced geographic variations in access to the technologies (Chalkidou, 2009). Also, there is evidence that NICE guidance has increased costs to the NHS, which is not surprising because most cost-eff ective interventions are more expensive than the alternatives. Th is does not bode well for those in the United States who hope that economic evaluation of health technology will contain the growth of health care costs, particularly if assessment eff orts are disproportionately focused on new, expen- sive technologies. Chalkidou (2009) estimates that since its creation, NICE’s decisions have cost more than £1.5  billion a year. In this context, it should be noted that cost containment was never one of NICE’s explicit objectives.

Quality. Th e focus on quality is a relatively recent phenomenon. For many years, the primary concern of most policymakers, particularly in developed countries, was on overcoming fi nancial barriers to the health care system. In 2002, the OECD created the Health Care Quality Indicators (HCQI) project to develop and implement a set of international indicators. Th e project includes representatives from 23 of the 30 OECD nations, as well as a number of international partners, including the Commonwealth Fund, the Nordic Council of Ministers Quality Project, and the International Society for Quality in Health Care (ISQua). Th e project team identifi ed fi ve priority areas for monitoring quality: (a) cardiac care, (b) diabetes mellitus, (c) mental health, (d) patient safety, and (e) primary care and prevention/health promotion. Th e OECD secretariat asked participating countries to identify expert panelists to review potential indicators (Mattke, Epstein, & Leatherman, 2006). Th e panels were charged with reviewing exist- ing indicators rather than developing entirely new measures. Th ey used a consensus process and selected 86 indicators on the basis of relevance—including the extent to which the health system can infl uence the indicator—scientifi c soundness, and fea- sibility. Not surprisingly, the project has identifi ed signifi cant variation in quality as measured by these indicators (OECD, 2010).

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Some quality indicators, such as leaving a foreign body inside patients during sur- gery, follow directly from the literature on medical errors that can be infl uenced by a health system. Th e relationships between health system quality and other indicators, however, are controversial. For example, higher rates of 5-year survival among patients diagnosed with breast or cervical cancer may refl ect better access to high-quality cancer care. It is possible, however, that these outcomes may refl ect more aggressive eff orts to diagnose patients with cancer and have little to do with the quality of care patients receive. Beyond these conceptual issues, countries continue to struggle with a lack of relevant data for quality monitoring. Even in countries with relatively well-developed health data systems, it is often diffi cult to link data with unique patient identifi ers in ways that allow researchers and policymakers to understand quality of care across dif- ferent episodes of care and diff erent providers (OECD, 2010).

In 2010, the United Kingdom’s coalition government published a white paper entitled Equity and Excellence: Liberating the NHS, which called for the measure- ment of health outcomes based on a number of specifi c indicators. To achieve this goal, England has developed the NHS Outcomes Framework (Secretary of State for Health, 2014) with indicators that will be used to evaluate local health care arrange- ments across fi ve diff erent domains: (a)  preventing people from dying prematurely; (b) enhancing the quality of life for people with long-term conditions; (c) helping peo- ple to recover from episodes of ill health or after injury; (d) ensuring that people have a positive experience of care; and (e) treating and caring for people in a safe environ- ment and protecting them from avoidable harm.

In France the Haute Autorité de Santé (HAS), or National Authority for Health, was established in 2004 as an independent public organization to promote quality of health services through accreditation, certifi cation, and development of practice guidelines. Today, HAS leads the European Network for Patient Safety (EUNetPaS), which has developed a common agenda to promote patient safety. After a contami- nated blood scandal in the early 1990s, the French government established new insti- tutions to conduct disease surveillance and protect the population from unsafe foods, unsafe drugs, and unsafe blood. In addition, France’s Ministry of Health recently initi- ated a small number of aggressive safety campaigns with strong patient involvement, such as one supported by TV spots to improve the use of antibiotics in preventing the appearance of resistant bacteria. Based on a risk-scoring system for surgical wound infections, national prevalence rates of methicillin-resistant Staphylococcus aureus (MRSA) in France declined from 2001 (33%) to 2006 (27%). Th ese results are impres- sive in comparison with other European countries and the United States, where MRSA infections have increased (Degos & Rodwin, 2011).

In 1994, the Canadian government established the Canadian Institute for Health Information (CIHI) to improve its capacity to assess the health care system and to iden- tify standards for health system performance. CIHI maintains 27 databases and clinical

Even in countries with relatively well-developed health data systems, it is often diffi cult to link data with unique patient identifi ers in ways that allow researchers and policymakers to understand quality of care across different episodes of care and different providers.

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registries. Th e agency receives funding from the federal (80%) and provincial (20%) gov- ernments ( Marchildon, 2013). In 2004, the federal government adopted a 10-year plan to strengthen health care. Th e plan increased federal health transfers to the provinces by 6%, and the provinces were supposed to place greater emphasis on reducing wait times and improving quality (Allin, 2012). Some of these funds have been used to track and reduce wait times. Th e federal government has also encouraged the use of health technology assessment, clinical guidelines, and best practices to enhance patient safety. Critics argue that despite the increase in attention to quality in individual provinces, Canada lacks a “guiding framework that supports” quality improvement in primary care (Sibbald, McPherson, & Kothari, 2013, p. 2).

In China, the issue of quality is also central to recent policy debates, but their start- ing point is radically diff erent. When the Chinese government reduced its subsidies for health care in the late 1970s, health care organizations and providers often turned to pharmaceutical companies to make up for these lost revenues. Rather than focus on providing primary and preventive care, for example, many fi rst-level hospitals focused on selling drugs to patients (Wang et al., 2011). As a result, these institutions devel- oped a reputation for poor quality, and patients now crowd into larger hospitals and academic medical centers, creating overcrowding problems. Part of the motivation for expanding health insurance in China is to improve the quality of care across the entire health care system (Wang et al., 2011).

Criteria used to evaluate the performance of health care systems—such as access to, cost of, and quality of health care—are often called the “three-legged stool” of health policy. Until recently, however, quality did not receive a great deal of atten- tion. Since the 1970s, researchers, policymakers, and patients have been demanding better information about quality. In the late 1990s, the U.S. Institute of Medicine led the world in calling attention to the importance of this issue, based on a report that uncovered disturbing evidence of problems with safety and quality in the United States (IOM, 1999). In contrast, the SARS epidemic embarrassed the Chinese government and sparked eff orts to improve access to and the quality of care. Finding solutions to such problems has been a challenge because stakeholders cling to existing practices and technologies, data limitations make it diffi cult to measure the quality of care, and fundamental disagreements remain about the meaning of quality and how to measure value for money in health care.

■ Lessons

Based on the experience of NHI and NHS systems in the countries we have examined, we would highlight four lessons for policymakers in the United States:

■ Achieving the goal of universal health coverage requires legislation to make such coverage compulsory.

■ Financing broader insurance coverage in the United States—beyond Medicare and Medicaid—requires increasing government subsidies based on ability-to-pay criteria.

■ Health care systems with universal coverage rely increasingly on economic evalua- tion of health technology as a criterion for making coverage decisions.

■ Containing health care costs has not been achieved without greater reliance than in the United States on price regulation and systemwide budget targets.

C h a p t e r 4 . C o m p a r a t i v e H e a l t h S y s t e m s 71

Th e ACA represents the most signifi cant health care reforms since Medicare and Medicaid in 1965, because it is likely to increase signifi cantly the share of the popula- tion with health insurance coverage and redistribute the burden of health care fi nanc- ing from those who are wealthier, younger, and healthier toward those who are poorer, older, and sicker (see Chapter 3). We would argue that this legislation draws heavily on the fi rst two lessons of comparative experience (the mandate and the move toward ability-to-pay criteria for fi nancing health care), less so on the third (economic evalua- tion of health technology), and ignores the fourth (greater price regulation and budget targets). Th is will bring the United States closer to other wealthy nations in terms of population coverage. Yet the U.S. health care system continues to present some strik- ing contrasts to most other wealthy nations. It remains a patchwork system character- ized by a complex combination of institutions that include an enclave of socialized medicine such as the VHA, a social insurance program (Medicare), and social welfare programs (Medicaid and CHIP); tax-subsidized employer-based private insurance for about one half of the population; and heavy reliance on out-of-pocket payment for the population that remains uninsured, similar to the situation in China, India, and most developing nations.

Th e United States has the highest per capita expenditures; the highest salaries for physicians and other professionals making up the health care workforce; and the high- est aggregate prices for hospitals, physicians’ services, and pharmaceuticals. Despite our drive to innovate and invest in the latest medical technologies, access to high- technology services, as well as to basic primary care services, is highly inequitable compared with other OECD nations—but not with China, which faces not only the usual inequities among populations of diff erent income and educational levels, but also massive inequities among its urban and rural residents, and, within cities, among its registered and migrant populations.

Another way in which the U.S. health care system diff ers from that of wealthy OECD nations concerns the vast range of health insurance products we off er to our population, including the option (following the ACA) of not purchasing health insur- ance, albeit with a fi nancial penalty. Despite the emphasis on choice of insurer many people fi nd themselves confi ned to obtaining health care within restricted provider networks outside of which payment for services often becomes unaff ordable. Th ere is no parallel to this problem in wealthy OECD nations such as England, Canada, and France. In China, choice of too many insurance products is not the problem. Th e situ- ation there is far worse than in the United States because a large part of the urban migrant population is typically excluded from health insurance coverage. Th e prob- lem of internal migrants in China is substantial, but not surprising, for a system that spends only 3.2% of its GDP on health care and has only recently set itself the goal of providing universal coverage.

■ Discussion Questions

1. What are some reasons for studying health care systems abroad? 2. How do NHI and NHS systems compare with the health care system in the United

States? 3. How do most countries with similar levels of per capita income diff er from and

resemble the United States with respect to cost, quality, and access to health care?

P a r t I . H e a l t h P o l i c y 72

4. What can the United States learn from other OECD countries about how to extend health coverage while containing health care expenditures?

5. How can health system performance be measured? Compare the approaches adopted by WHO and the Commonwealth Fund.

6. How are the problems and opportunities diff erent for China than for the United States and other OECD countries?


You are an employee of a think tank in Washington, DC. The director has been asked

to testify before a congressional committee on the following question: In reforming the

ACA, what lessons should the United States learn from relevant experience abroad?

Your job is to write a memorandum that will help the director answer this question. In

writing this memo, you should address the following questions:

1. How can learning from abroad help policymakers engage in a process of self-

examination of health policy at home?

2. What is the difference between NHS and NHI systems?

3. What should members of Congress know about China’s problems and aspirations

in health policy?

4. What lessons from abroad would be most relevant in reforming the ACA?

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Keeping Americans Healthy II

An important theme of this book is that the U.S. health system must accom- plish two key tasks: It must keep people healthy from birth to death as much as is possible, and it must restore health when people are injured or become ill. Part II focuses on this fi rst challenge: promoting and maintaining good health among the entire population.

In Chapter 5, Pamela Russo introduces readers to the emerging fi eld of population health. It  is often said that this fi eld began with a simple question: Why are some people healthy and others are not? Th e chapter explains how health status is mostly determined by how we live our lives and by how the environment (both social and physical) in which we live supports the ability to lead healthy lives. Russo introduces the concept of the social determinants of health, explaining how income, education, housing, and a range of other such factors contribute to our well-being. Th e chapter also considers how public policy infl uences these social determinants of health.

Chapter 6 addresses how the governmental public health system contributes to the health of populations. Although the government plays a key role in fi nancing medical care in the United States, it also is engaged in a wide range of activities focused on preventing illness and promoting healthy living. State governments in particular have important responsibilities for ensuring public health, and in most states there also are public health departments within county or local governments. Laura Leviton, Paul Kuehnert, and Kathryn Wehr explain how public health departments promote health and describe how the public health fi eld is chang- ing, taking on a more active role in ensuring that our communities promote good health among their populations.

Individual choices we make every day have a lot to do with whether or not we maintain our health. Decisions about what and how much we eat, how much we exercise and stay active, how safely we drive, and whether we drink too much alcohol or inappropriately use drugs all shape our health status. Chapter 7, authored by Elaine Cassidy, Matthew Tru- jillo, and C. Tracy Orleans, explains the range of behavioral choices that aff ect health and reviews how medical providers, other health professionals, and public initiatives can help people change unhealthy behaviors. Th e chapter makes clear that the social conditions we face (the focus of Chapters 5 and 6) and the individual choices we make both determine our health status. Also, these two sets of factors interact in that social conditions often aff ect our behavioral choices.

Chapter 8 focuses on the important issue of addressing the health challenges facing the most vulnerable Americans. Th is group includes low-income people, who often do not live in places that make it easy to live healthy lifestyles or to have good access to social and health services. What we term the vulnerable population also includes immigrants and people with signifi cant chronic illnesses. Jacqueline Martinez Garcel, Elizabeth Ward, and

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y78

Lourdes Rodriguez review emerging ideas for improving how our health system serves the most vulnerable in our society.

Th ree of the authors in this section are on the senior staff of the Robert Wood Johnson Foundation, the nation’s largest foundation focused on the health of Americans. Th e Foundation has recently refocused its funding and operational priori- ties to emphasize initiatives that will improve population health across our country. Th e Foundation’s website (www.rwjf.org) is a good source of current information and ideas on this important topic.

LEARNING OBJECTIVES o Understand the differences between the medical and population health models

of producing health, including the difference between the concepts of health and health care

o Explain how the two models lead to different strategies for interventions to prevent disease and improve health

o Learn about the differential importance of various health determinants o Review the evidence regarding social and physical environmental infl uences on

behavior and on health outcomes o Review the variation in health and life expectancy between counties and between

countries o Describe innovative synergistic approaches that integrate the clinical and popula-

tion models

TOPICAL OUTLINE o The population health model o The medical model o Comparing the medical and population health models o The infl uence of social determinants on health behavior and outcomes o Leading determinants of health: weighting the different domains o Health policy and returns on investment

5 Population Health Pamela G. Russo

KEY WORDS determinants of health gradient integrative models medical model

population health model population medicine reverse causality

■ Context

Th e majority of this book concerns what happens within the walls of health care institutions—hospitals, clinics, physician offi ces, and long-term care facilities. Th e focus in those chapters is on how health care is delivered, fi nanced, managed, and measured for quality and eff ect, and how access to appropriate and safe diagnostic

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y80

and treatment modalities varies across populations. In several chapters, disparities in health care and outcomes are shown to exist among insured, underinsured, and uninsured groups, among diff erent races and ethnic groups, between rural and urban populations, among immigrant groups, and even between men and women.

However, having access to high-quality medical care is not the only factor that leads to disparities in health between diff erent groups, nor are health care and medical services even the most important factors that determine the overall health of a popu- lation. Th is chapter documents the profound infl uences on health that occur outside of the health care system, where the vast majority of people—or patients—spend the overwhelming majority of the time.

Whether people live long and healthy lives is largely determined by powerful social factors such as education, income, racial or ethnic group, and the quality of environ- ments where they live, learn, work, and play. In fact, the eff ects of the systematic diff er- ences in health care are far smaller than the eff ects of the nonrandom diff erences in other determinants of health on a population’s overall health outcomes. Th ese infl uences that are outside the health care system greatly infl uence which groups of people are more likely to become ill in the fi rst place, to be injured, or to die early. Th ese infl uences also help determine people’s health care outcomes once they become sick, injured, or disabled.

■ The Population Health Model

Th e population health model seeks to explain and intervene in the causes of the sys- tematic diff erences in health between diff erent groups (Kindig & Stoddart, 2003). To do so, it analyzes the patterns or distribution of health between diff erent groups of people in order to identify and understand the factors leading to poorer outcomes. Th ese fac- tors are often described as “upstream” causes, in the sense that they infl uence health through a series of pathways that may not be immediately visible (see also Chapter 7).

In addition, population health employs an integrative model, meaning that diff erent factors are highly likely to intersect and combine to produce good or poor health and should be assessed in tandem. Population health scientists use the term “determinants of health” rather than factor or cause, and they use the term “the multiple determinants of health” to describe the determinants that arise from fi ve important domains:

■ Th e social and economic environment—factors such as income, education, employ- ment, social support, and culture (often referred to as the social determinants of health, or SDOH)

■ Th e physical environment, including urban design, housing, availability of healthy foods, air and water safety, exposure to environmental toxins

■ Genetics (and, more recently, epigenetics—the study of gene–environment interactions) ■ Medical care, including prevention, treatment, and disease management ■ Health-related behaviors, such as smoking, exercise, and diet, which in turn are

shaped by all of the preceding determinants

Health is therefore conceptualized as the result of exposure to diff erent patterns of these multiple determinants. Although the determinant categories are listed inde- pendently, they have substantial and complex interactions over the life course of an individual or group.

C h a p t e r 5 . P o p u l a t i o n H e a l t h 81

Some health care outcomes can, in turn, aff ect the determinants; that is, they can have a “reverse causality” eff ect on determinants. For example, whereas social deter- minants such as income have an eff ect on outcomes, the outcome of being unhealthy also can have a negative eff ect on income (Kindig & Chin, 2009).

The population health model is that of a web of causation, in which multiple different infl uences interact to produce good or poor health.

F I G U R E 5 . 1 A G U I D E T O T H I N K I N G A B O U T D E T E R M I N A N T S O F P O P U L AT I O N H E A LT H .








Innate Individual Traits: Age, sex, race, and biological

factors –––

The biology of disease

Living and working conditions may include: • Psychosocial factors • Employment status and occupational factors • Socioeconomic status (income, education, occupation) • The natural and built environments • Public health services • Health care services

Individual Behavior

Social, Family, and Community Networks

Living and Working Conditions

Broad social, economic, cultural, health, and environmental conditions and policies at the global, national, state, and local levels


Source: Institute of Medicine (2003, p. 52). Reproduced with permission from National Academies Press, Copyright 2002, National Academy of Sciences.

Th e population health model is that of a web of causation, in which multiple dif- ferent infl uences interact to produce good or poor health (see Figure 5.1). Over the past 40 years, a signifi cant body of knowledge has developed that demonstrates the profound eff ects of multiple determinants from diff erent domains, as well as the inter- actions among them, their eff ects at diff erent stages in the life course from gestation to old age, and their cumulative eff ects.

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y82

■ The Medical Model

In contrast to the population health model, the medical model hones in on individuals, focusing on the factors that are most immediately linked to the pathophysiology under- lying a person’s disease. It is a reductionist model in the sense that it searches for the mechanisms at the cellular level that explain how specifi c factors produce illness or act as markers of incipient disease. In turn, the therapeutic goal is to fi nd the “silver bullet” that will stop or reverse those mechanisms and thus cure the current medical problem.

Th e medical model frames risk factors as working through disease-specifi c path- ways, and typically analyzes risk factors as if they were independent in statistical modeling. Th e medical model does consider how diff erent biological systems within the individual interact—for example, the endocrine system and the cardiovascular system—but the lens remains focused on the body.

Health care is generally reactive, meaning that it responds to abnormality, disease, or injury, and as a result has been characterized as a “sickness care system” (Evans, Barer, & Marmor, 1994). Health care has traditionally been delivered (and reimbursed) in acute episodes, although the rise of chronic illnesses that require continued care management has led to a more long-term perspective. Historically, the health care system has placed less value on and provided less reimbursement for eff orts to promote health or to prevent illness and injury. Although health care has achieved great strides in diagnosing, treating, and in some cases curing illness and injury, and although new knowledge and technol- ogy are constantly increasing the capacity to preserve life, relieve suff ering, and maintain or restore function, the inexorable increases in U.S. health care spending clearly are not improving Americans’ chances for living long and healthy lives, as shown in Figure 5.2.

F I G U R E 5 . 2





65 0 1000 2000 3000 4000








( Y




5000 6000

R 2 = 0.51

7000 IND






















8000 9000


Source: Organisation for Economic Co-operation and Development (OECD). (2013). Health at a glance. OECD Indicators.

C h a p t e r 5 . P o p u l a t i o n H e a l t h 83

Th e United States is the outlier point on the far right—the highest health care spending—yet Americans’ probability of survival to age 80 is lower than that of other developed countries. Th is marked discrepancy between the highest spending on health care and poorer survival rates is referred to as “the U.S. health disadvantage.” Th e diff erences between the medical and population health models can help explain the reasons for the disparity between the United States and other developed countries, as well as the severe disparities within the United States among diff erent populations.

■ Comparing the Medical and Population Health Models

Consider two examples, obesity and tobacco use, that illustrate the diff erent explana- tory and intervention approaches of the medical model versus the population health model. In the medical model, when an obese adolescent visits a health care provider, the provider will likely take a family history and a diet and physical activity history. Th ese may be followed by laboratory tests to rule out hormonal or other physiological causes for obesity and to check for diabetes and other consequences of extreme over- weight. Interventions are likely to include referrals to nutritionists and recommenda- tions for decreasing calories and increasing physical activity, with regular monitoring. In very serious cases (morbid obesity) or with failure to achieve weight loss through these means, the patient may be referred for bariatric surgery.

The medical model does not ask why an epidemic of obesity has occurred over the past 20 years.

Th e medical model does not ask why an epidemic of obesity has occurred over the past 20 years, or investigate why there are higher rates of obesity in low-income and minority populations, or grapple with the circumstances that make it diffi cult for many patients to comply with medical recommendations for eating less and exercising more.

In contrast, the population health model has identifi ed a wide variety of causes that have worked synergistically—an unintended conspiracy of causes over time—to produce the epidemic and the diff ering patterns of obesity observed among popula- tion groups. Th ese causes could include the following:

■ Higher density in low-income neighborhoods of fast-food restaurants, which off er high-calorie, high-fat, low-nutrient, supersized meals at very low prices

■ Th e presence of vending machines, which sell high-calorie soft drinks as a source of needed revenue, in schools

■ Subsidized school lunches with high caloric and fat content—a result of agricultural policies

■ Th e decrease in physical education classes and near-elimination of recess periods, due to shrinking school budgets and a narrow focus on meeting academic test score requirements

■ Fewer children and adults walking or bicycling to school or other destinations, due in part to the lack of sidewalks, safe pedestrian crossings, and bicycle lanes

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y84

■ Few places to play or walk in urban, low-income neighborhoods, due to unsafe play- grounds, crime, and violence

■ A lack of grocery stores with healthy food options such as fresh fruit and vegetables in many neighborhoods, due to the higher cost and lower profi t margins of these foods

Th ese determinants are all in the social and physical environmental domains, and they strongly limit people’s behavioral choices. It is extremely diffi cult to achieve lasting lifestyle behavioral changes in people who do have the economic resources to join gyms, have child care while they exercise, and aff ord healthier food choices. It is almost impossible to achieve such changes among people for whom healthy choices are out of their fi nancial reach.

In a population health framework, the relevant interventions could include zoning law changes; menu labeling; working with fast-food industries to provide healthier, but low-cost menu options; educational policies that encourage healthy food choices and increased physical activity in schools and after school; and so on. Such interventions are not traditionally considered part of the health arena by adherents of the medical model. Making the healthy choice the easier choice is not always suffi cient; programs to change behavior boost the chances that people will make those healthy choices their default choices. Such programs might include workplace or community programs to encourage physical activity in the form of walking, bicycling, or other exercise, or cooking classes using nutritious, aff ordable, noncalorie-dense foods.

Tobacco use off ers a second example. In the medical model, the focus is on indi- vidual patients who smoke or chew tobacco. Th e solution is framed in individual terms and is geared toward behavioral change through cessation counseling and nicotine replacement options. Success requires having access to providers who support and encourage cessation (see Chapter 7).

In the population health model, the understanding of the problem includes the infl uences of tobacco production, advertising, distribution, and patterns of use in diff erent groups, and the interventions include smoke-free laws, tobacco taxes, and regulation of advertising and marketing. Without doubt, these populationwide policy changes have changed U.S. social norms regarding the acceptability of tobacco use and prompted a dramatic decrease in the rate of smoking.

As with programs to increase physical activity and healthy eating, policy changes to reduce smoking are usually coupled with increases in access to cessation programs at the community level, such as free quitlines and free nicotine patches, which assist smokers to quit. Th e population health model also enables targeting policies toward groups with the highest rates of tobacco use, and it responds to tobacco industry actions to redirect their advertising from the more affl uent smokers who are able to access cessation programs to new, more susceptible markets, including youth, minori- ties, and people in developing countries (Kreuter & Lezin, 2001).

Making the healthy choice the easier choice is not always suffi cient; programs to change behavior boost the chances that people will make those healthy choices their default choices.

C h a p t e r 5 . P o p u l a t i o n H e a l t h 85

■ The Influence of Social Determinants on Health Behavior and Outcomes

Th e medical model is well accepted and respected by health care providers, labora- tory researchers, clinical researchers, and health services researchers. Many people tend to regard medical knowledge as based on the so-called hard sciences, and thus as having greater likelihood of refl ecting the “true” nature of human pathophysiol- ogy. Th e population health model, conversely, requires multiple disciplines to col- laborate and integrate diff erent social science concepts, methods, and data sources with those of the biological sciences. Although few people may doubt that poverty and lack of education are associated with worse health—as the Australian-born population health researcher John Lynch says, population health is the “science of the bleedin’ obvious”—they are not aware of the magnitude of the scientifi c basis underlying these eff ects, the gradients in eff ect, the importance of the interactions, and the biological pathways. Th ey are even less aware of the most eff ective public health interventions.

Th ose who follow the medical model are often surprised that the social science disciplines are just as rigorous as the biological sciences—if not more so—in their analysis of data, their reliance on large longitudinal data sets collected under strict criteria, and their coupling of these with work in tightly controlled experimental set- tings. In fact, signifi cant progress has been made in defi ning the pathways between the social determinants and health—in other words, how these factors “get under the skin”—using a wide variety of research methods, including animal research, neuroim- aging, experimental psychology studies, and a variety of stress-related physiological phenomena involving the cardiovascular, endocrine, neural, and other systems, as well as epigenetics. For a recent, comprehensive review of the research on the interaction between social determinants and human biology, see Adler and Stewart (2010).

Initially, work on health determinants was based on epidemiological fi ndings link- ing morbidity and mortality to socioeconomic status, defi ned by education, income, or occupational status or grade. One of the earliest studies to demonstrate the impor- tance of such factors was Michael Marmot’s Whitehall study, a longitudinal study con- ducted over two decades with results reported throughout the 1970s and 1980s (Evans et al., 1994). Th e British data were especially enlightening because they included a measure of social class, based on occupation, not available in U.S.-based data.

Th e Whitehall study collected extensive information on more than 10,000 British civil servants, from the lowest rung of the income and rank hierarchy to the highest. Marmot found that the likelihood of death was about three and a half times higher for those in the lowest status rank (clerical and manual workers) than for those in the high- est administrative jobs. Mortality rates increased steadily with every reduction in rank.

Such a steady increase is known as a “gradient” in the population health model and a “dose-response eff ect” in the medical model, where it is taken as evidence of a robust relationship between causal factor and outcome. None of the workers in this population were actually poor, and none had high exposure to work-related toxins or other risks in the physical environment. All had access to the British National Health System. Th e gradient in heart disease mortality continued to be present after adjust- ing the data for diff erent rates of smoking, high blood pressure, and high cholesterol. In other words, after controlling for the traditional medical model risk factors, the

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y86

3:1 diff erence in death rate by social class could not be explained away. Marmot and others went on to investigate the role of stress associated with occupational rank.

Over the past 20 years, studies on the stress response have rigorously demon- strated its eff ects on multiple bodily systems in addition to the endocrine system, including the immunological, neural, and cardiovascular systems. Th ese eff ects have been shown in both laboratory and community situations. A wide variety of stressful stimuli have been studied, including social subordination, lack of job control, discrimi- nation, social isolation, economic insecurity, job loss, bankruptcy, and other situations that provoke anxiety. Th e proposed pathway is that such situations result in greater stress, which leads to biological dysregulation, adverse physiological responses, and a common pathway of pathology, including the onset and progression of diseases.

Scientists increasingly recognize that the mechanisms by which social determi- nants act depend on the context in which people encounter stressful events. One area of research focuses on “neighborhood eff ects,” which include the interaction of social and physical environmental determinants; for example, the negative interaction between the physical environment (poor housing, areas of crime and violence, lack of stores with healthy foods, and so on) and social determinants related to poverty.

Recent U.S. data on the links between social factors and health and the wide varia- tions in health among groups come from two reports from the Robert Wood Johnson Foundation Commission to Build a Healthier America (2009), a national, independent, nonpartisan group of leaders who investigated how factors outside the health care system shape and aff ect opportunities to live healthy lives. Th e Commission’s team of researchers compared average life expectancy by county and found signifi cant varia- tions. For example, the average life expectancy in Bennett County, South Dakota, is 66.6  years, compared with 81.3 years in nearby Sioux County, Iowa—a diff erence of almost 15 years. Th e challenge is to understand and address the underlying factors that explain this marked diff erence in mortality rates.

Two of the most predictive factors of life expectancy are income and degree of education. Examination of the relationship between measures of education and income on U.S. life expectancy showed that:

■ College graduates can expect to live at least 5 years longer than those who did not complete high school.

■ Upper middle-income Americans can expect to live more than 6 years longer than poor Americans, signifi cant for national life expectancy because 25% of adults nationwide live in poor or near-poor households. (In 2015, the federal poverty level [FPL] was $20,090 for a family of three.)

■ Middle-income Americans can expect to live shorter lives than those with higher incomes, whether or not they have health insurance.

Th e Commission also examined the relationships between health status, educa- tional attainment, and racial or ethnic group. Th e measure of health status was a self- reported assessment of one’s own health as excellent, very good, good, fair, or poor. Self-reported health status corresponds closely with assessments made by health pro- fessionals. Indeed, among adults studied by the Commission’s research team, those who reported being in less than very good health had rates of diabetes and cardiovas- cular disease more than fi ve times as high as the rates for adults who reported being in very good or excellent health. Highlights of the Commission’s results include:

C h a p t e r 5 . P o p u l a t i o n H e a l t h 87

■ Overall, 45% of adults ages 25 to 74 reported being in less than very good health, with rates varying among states from 35% to 53%.

■ Adults with less than high school degrees were more than two to three times as likely to be in less than very good health than college graduates. Th ere was also a clear gradient in health by educational level.

■ Health status varied across racial or ethnic groups; non-Hispanic Whites were more likely to be in very good or excellent health than were other groups nationally and in almost every state. In some states, non-Hispanic Black and Hispanic adults were more than twice as likely as White adults to be in less than very good health.

■ Analyzing both social factors simultaneously, non-Hispanic Whites had better health status than adults in any other racial or ethnic group at every level of educa- tion. Th e gradient in health by educational level within each racial or ethnic group is shown in Figure 5.3.

Educational attainment may infl uence healthy choices and better health via multi- ple pathways. For example, people with more schooling may have a better understand- ing of the importance of healthy behavior, or higher educational attainment may lead to higher-paying jobs with greater economic security, healthier working conditions, better benefi ts, and increased ability to purchase more nutritious foods and live in a

F I G U R E 5 . 3 G R A D I E N T S W I T H I N G R A D I E N T S .














60.9 57.5










U.S. Overall

National Benchmark



Black, Non-Hispanic

Hispanic Asian American Indian or Alaska Native

Less than high-school graduate High-school graduate

Some college College graduate

P e rc

e n

t o

f A

d u

lt s A

g e s 2

5 – 7 4 Y

e a rs

, in

L e s s T

h a n

V e ry

G o

o d

H e a lt


Other White, Non-Hispanic


Source: Robert Wood Johnson Foundation Commission to Build a Healthier America (2009). Available at www.commissiononhealth.org.

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y88

safe neighborhood with good schools and recreational facilities. Figure 5.4 demon- strates that behavior and education both aff ect health: At every level of educational attainment, adults who smoke and do not participate in leisure-time exercise are less likely to be in very good health than adults who do not smoke and do get exercise.

Similar to educational attainment, racial discrimination can aff ect health via mul- tiple pathways. A substantial base of evidence exists regarding the eff ect of diff erent policies on both discrimination and health. A variety of policies have combined to maintain or worsen Black–White segregation by neighborhood, despite the civil rights legislation of the 1960s. Segregation determines access to educational and employ- ment opportunities and increases the likelihood of unsafe housing, few places to play or exercise, food “ deserts” with no access to fresh healthy foods, and exposure to vio- lence. Th ere is strong evidence that elimination of residential segregation would com- pletely eliminate Black–White diff erences in income, education, and unemployment, in turn reducing racial disparities in health (Williams & Collins, 2001). Exposure to discrimination in and of itself provokes a physiological stress response in the lab, and chronic discrimination results in toxic chronic stress.

As noted earlier, the population health model calls for integration of the multiple determinants of health, with consideration of both negative and positive interactions among diff erent factors. Th e relationships between socioeconomic status and health are complicated, but the most persistent disparities in health between groups clearly involve the intersection of multiple types of social disadvantages (Adler & Stewart, 2010).

F I G U R E 5 . 4









Less Than High-School


High-School Graduate

Adults without healthy behaviors Adults with healthy behaviors

P e rc

e n

t o

f A

d u

lt s A

g e s 2

5 – 7 4 Y

e a rs

, in

L e s s T

h a n

V e ry

G o

o d

H e a lt


Some College College Graduate


U.S. Overall

National Benchmark





Source: Robert Wood Johnson Foundation Commission to Build a Healthier America (2009). Available at www.commissiononhealth.org.

C h a p t e r 5 . P o p u l a t i o n H e a l t h 89

Th e fi ve diff erent domains or categories of health determinants, described earlier in this chapter, do not make equal contributions to the health outcomes of popula- tions. Th is is not “new news.” In the 1970s, Th omas McKeown (1976) concluded that improved health and longevity in England over the previous 200 years resulted from changes in food supplies, sanitary conditions, and smaller family sizes, rather than medical interventions. In the United States, John Bunker and colleagues (1995) esti- mated that during the 20th century, medical care explained only 5 of the 30-years of increase in life expectancy, and between 1950 and 1990, when many new therapies were developed for infectious diseases and heart disease, medical care accounted for only 3 of the 7 years of life expectancy increase.

Medical care also can be responsible for increasing mortality rates. A 2000 Insti- tute of Medicine (IOM) report publicized the startling fi nding that medical errors accounted for approximately 2% to 4% of U.S. deaths annually (Kohn, Corrigan, & Donaldson, 2000), which would make medical error the fi fth leading cause of death (Bleich, 2005).

Th ere was a period of time in the 1990s during which medical scientists expected that genetics could explain much of the variation in health between groups and indi- viduals; however, experience to date has not borne out this belief. Current estimates suggest that, although many diseases have genetic contributors, only about 2% of U.S. deaths can be explained by genetic factors alone. On a population level, multiple stud- ies of immigrants show that the patterns of disease and death change from those of the original country to those of the new country over a fairly short time period—again suggesting that genetics plays a relatively minor role in preventable deaths (Evans et al., 1994).

Health behavior (smoking, physical activity, substance abuse, sexual activity, diet, and so on) is considered a major determinant of health in both the medical and population health models. Analysis of data from 22 European countries showed that variations in health disparities could be attributed to variations in smoking, alcohol consumption, and access to care, but that the patterns of determinants of inequality were diff erent for men and women, by country, and by which outcome was measured (Mackenbach et al., 2008).

Th e best weighting scheme to determine the combined eff ects of determinants from diff erent domains depends on the health outcome of interest. Some outcomes will be more dependent on certain determinants than on others. Researchers have therefore estimated the relative contributions of the multiple determinants of health through what are called summary measures of mortality and morbidity; that is, mea- sures that summarize the length and quality of life. Signifi cant progress has been made in accumulating the empirical data that can yield the best approximations of the rela- tive weights of each domain on summary health outcomes.

■ Leading Determinants of Health: Weighting the Different Domains

During the 20th century, medical care explained only 5 of the 30-years’ increase in life expectancy.

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y90

McGinnis and Foege (1993) reviewed the relevant literature from 1977 to 1993 to analyze the leading causes of U.S. deaths. Th ey concluded that approximately half of all deaths in 1990 were due to key nonmedical care factors, led by tobacco use and followed by diet and physical activity. Th ey estimated that about 40% of deaths were caused by behavioral factors, 30% by genetics, 15% by social determinants, 10% by medical care, and 5% by physical environmental exposures. Ten years later, an IOM (2003) analysis revised the 1990 estimate of 50% of all deaths upward to 70% of all deaths being due to key nonmedical care factors. Th e CDC updated the McGinnis and Foege analysis and concluded that smoking remained the leading cause of preventable deaths, followed by poor diet and lack of physical activity (Mokdad, Marks, Stroup, & Gerberding, 2004).

Th e America’s Health Rankings report ranks states in order of overall health status and uses an expert panel to assign weights and attribute causes to four categories of deter- minants: (a) behavior at 36% percent, (b) community environment at 25%, (c) public and health policies at 18%, and (d) clinical care at 21% (United Health Foundation, 2007). Since 2010, there also has been an annual national County Health Rankings report. Th is report ranks the overall health of every county within each of the 50 states and reports the contribution of the multiple determinants of health on each county’s overall health using a population health framework. Health outcomes are viewed as the result of a combined set of factors, and these factors are also aff ected by conditions, policies, and programs in their communities. Th e report is based on a model that compares overall rankings on health outcomes with rankings on diff erent health factors (Figure 5.5).

Th e County Health Rankings report estimates the infl uence on health and lon- gevity of (a) health behaviors at 30%, (b) clinical care at 20%, (c) social and economic factors at 40%, and (d) physical environmental factors at 10%. Th ese rankings dem- onstrate the dramatic amount of variation between one county and another in health outcomes and in health determinants. Th is variation is even greater than the variation in health care expenditures and health care outcomes that has been demonstrated over many years by health service researchers. For example, the premature death rate in the least healthy counties was two and one half times greater than in the healthiest counties.

Th e bottom-line message of the County Health Rankings project is that some places are healthy and others are not, so where people live matters to their health. Th e population health framework enables communities to see which factors are contribut- ing the most to their poor or good health outcomes, and thus choose to act to improve the factors aff ecting health, vitality, and productivity of all community residents.

■ Health Policy and Returns on Investment

In a logical world, the more that is known about the causes of a problem, the more resources would be allocated toward reducing the most important of those causes. In the United  States, two thirds of what we spend on health care is attributable to diseases that are preventable. Yet we invest less than 5% of our more than $2 tril- lion annual health spending on eff orts to prevent illness, whereas 95% goes to direct medical care. Th e population health model shows that only perhaps 10% to 15% of preventable mortality could be avoided by increasing the availability or quality of medical care.

C h a p t e r 5 . P o p u l a t i o n H e a l t h 91

F I G U R E 5 . 5
























Source: University of Wisconsin Population Health Institute (2010). See also http://www.countyhealthrank- ings.org.

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y92

Th e population health model suggests that investments and policy decisions in areas that are not traditionally considered the province of health care are more likely to have a signifi cant eff ect on improving a population’s health than will increased spend- ing on medical services. An excellent review of the challenges and eff ect on health of policies in the areas of education, income transfer, civil rights, macroeconomics and employment, welfare, housing, and neighborhoods is provided in a recent compre- hensive text (Schoeni, House, Kaplan, & Pollack, 2008).

Unfortunately, researchers are only beginning to be able to provide the evi- dence to guide policymakers regarding the comparative eff ectiveness and costs of specifi c investment choices across the fi ve categories of health determinants. Th is lack of cross- sectoral economic evidence stems from complicated issues of interac- tions among determinants, the latency over time of their eff ects, and the absence of robust longitudinal data sets.

Nevertheless, this evidence base is growing rapidly, as shown by research such as that which estimates that correcting disparities in education-associated mortality rates would have averted eight times more deaths than improvements attributable to medical advances between 1996 and 2002 (Woolf, Johnson, Phillips, & Philipsen, 2007). Another example comes from a study by the Urban Institute, which calculated the return on investment for prevention and concluded that an investment of $10 per person per year in proven community-based programs to increase physical activity, improve nutrition, and prevent smoking and other tobacco use could save the coun- try more than $16 billion annually within 5 years. Th is is a return of $5.60 for every $1[invested] (Trust for America’s Health, 2008).

In 2009, the Commission to Build a Healthier America delivered a series of evi- dence-based recommendations to improve health, including the following:

■ Provide high-quality early developmental services and support for all children ■ Fund and design the Special Supplemental Nutrition Program for Women, Infants,

and Children (WIC) and the Supplemental Nutrition Assistance Program (SNAP, also known as food stamps) programs to meet the need of hungry families for nutri- tious food

■ Eliminate so-called food deserts through public-private partnerships ■ Require healthy foods and physical activity in all schools (K–12) ■ Ensure that decision makers in all sectors have the evidence they need to build

health into public and private policies and practices

Th e last strategy underscores the need to consider the health eff ects of policies, programs, and projects in sectors that are not traditionally thought of as aff ecting health. Th is can be achieved through the use of health impact assessments (HIAs) (www.healthimpactproject.org), which have a long history of use in the same countries

The population health model suggests that investments and policy decisions in areas that are not traditionally considered the province of health care are more likely to have a signifi cant effect on improving a population’s health than will increased spending on medical services.

C h a p t e r 5 . P o p u l a t i o n H e a l t h 93

that have led the way in developing and acting upon the population health model. HIAs have been used in a wide variety of decisions regarding transportation, housing, zoning, and other aspects of the built environment, and more recently have been used to address social policies related to education, labor, criminal justice, segregation, and other areas. HIAs are one of the tools that can be used to bring a health lens to policy, program, and project decisions made in nonhealth sectors, a practice known as health in all policies (HIAP).

Th e recommendations for improving health that come from a population health model are very diff erent from the technological breakthroughs and “silver bullets” hoped for in the medical model. With their broad reach across an entire population or community and their focus on the fundamental causes of illness, population health interventions have the potential to create much greater improvements in the health of Americans than further spending increases for medical services. Th e challenge is to fi nd ways to fi nance population health interventions. Over the past 5 years, a num- ber of innovative methods have been implemented to direct funding to community prevention addressing social, physical, and economic environments. One model is a wellness trust: a fund set aside specifi cally to support populationwide interventions or policies. Funds for a wellness trust can come from a number of sources, such as a tax on insurers or hospitals, as was done in Massachusetts in 2013. Another innova- tion is a variation on social impact bonds as health impact bonds. Capital is raised from private investors to implement community or state prevention interventions, and the resulting health care cost savings are returned to the investors as break-even or profi t. Th ere are a number of health impact bonds in progress, including commu- nity prevention to reduce the incidence and severity of asthma in Fresno, California; improving birth outcomes through the Nurse-Family Partnership in South Carolina; and reducing recidivism among juveniles in the justice system in New York City.

Another funding mechanism receiving wide attention is community benefi ts from nonprofi t hospitals. Since the 1950s, to keep their tax exempt status nonprofi t hospi- tals have owed certain duties to the community. In large part these duties included providing charity care to the medically indigent, but federal regulations were fairly vague. In 2002, the Congressional Budget Offi ce estimated that the tax savings to nonprofi t hospitals were approximately $12 billion, and this brought community ben- efi t under scrutiny. With passage of the Patient Protection and Aff ordable Care Act (ACA), amendments were made to the Internal Revenue Service code that increased the transparency of hospital reporting, required hospitals to perform a community health needs assessment every 3 years with collaboration from public health experts and the community, and obliged hospitals to conduct community health improve- ment activities. Th e last can include community health improvement investments in research, training, and education; certain community- building activities that can be shown to improve health; and community-based health services that are furnished outside of the hospital and are not billable by the hospital. Th ese changes have stimu- lated increased collaboration by many hospitals with public health and community partners, although the degree to which hospitals are committing funds varies widely. A variety of models are being promoted that show the potential for community benefi t to have an eff ect on population-wide health improvement.

Other innovations include the concept of a health dividend, which refers to the opportunity cost of waste in health care spending, estimated at $750 billion per year. If this waste could be eliminated and the funding recaptured, the money could be

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y94

used on population health–enhancing improvements in education, job training, or improvement to the built environment.

Other potential population health fi nancing innovations result from the imple- mentation of the ACA. Th e most signifi cant was the Prevention and Public Health Fund, which is intended to provide stable and increased activities in community health. Th e fund was designed to build from $500 million in fi scal year 2010 to $2 billion per year by fi scal year 2015. As a result, a number of positive programs to improve population health using place-based strategies have occurred, such as Community Transformation Grants. However, the fund also has been used to fi ll gaps in the implementation of health care changes under the ACA, and has been a continual target of those opposed to the health reform act.

Other opportunities have resulted from the ACA, including accountable care organizations (ACOs) and Medicaid waivers and innovation grants. ACOs are essen- tially a network of providers and hospitals that share responsibility for the health care of a set of patients. ACOs provide savings incentives by off ering bonuses when provid- ers keep costs down and meet specifi c quality benchmarks, focusing on prevention and carefully managing patients with chronic diseases. In other words, providers get paid more for keeping their patients healthy and out of the hospital. To do this requires providers and hospitals to work in the community beyond the walls of their institu- tions to ensure better care coordination—and better social and physical conditions for promoting health. Th e Texas Medicaid waiver was constructed such that 5% of the billions of dollars in the waiver was earmarked to support public health interventions that would prevent illness or injury and thus save Medicaid money. Th ese innova- tions, like the ones mentioned previously, must be monitored for their ability to lead to population health improvement interventions and results in order to document their potential as sustainable sources of funding for population health improvement.

■ Conclusion

Th e population health model has been accepted and used as a basis for health policy decisions in Europe, Canada, Australia, and New Zealand for nearly 20 years, and the World Health Organization Commission on Social Determinants made recommenda- tions for implementation in 2008.

Th e United States is fi nally catching up. Recognition of the importance and value of population health science in the United States is demonstrated by numerous types of evidence:

■ Th e very large bibliography of relevant peer-reviewed articles appearing in top U.S. medical and health care journals, as well as books in multiple disciplines

■ National Institutes of Health and CDC funding of multidisciplinary population health research and intervention programs

■ Numerous IOM review committees and reports on the multiple determinants of health

■ Th e IOM roundtable on population health improvement ■ Interdisciplinary population health centers and training programs at premier

universities across the country

C h a p t e r 5 . P o p u l a t i o n H e a l t h 95

■ Th e MacArthur Research Network on Socioeconomic Status and Health, a research working group funded by the MacArthur Foundation, which operated from 1998 to 2010

■ National commissions on population health and prevention, including the Robert Wood Johnson Foundation’s two reports from the Commission to Build a Healthier America

■ Th e annual national County Health Rankings report based on a multiple determi- nants of health framework

Th e population health model is increasingly accepted as a framework for under- standing the multiple determinants of health, with an emphasis on prevention and a strong basis in scientifi c evidence. However, the same term—“population health”— entered the clinical lexicon in 2007 as part of the Institute for Healthcare Improve- ment’s (IHI) Triple Aim initiative. Th is initiative’s three-part goal is (a) to improve the health of the population, (b) to enhance the experience and outcomes of the patient, and (c) to reduce per capita cost of care for the benefi t of communities. Th e Triple Aim initiative’s use of the phrase “population health” has led to some confusion in termi- nology. Noting this confusion, the IHI stated in 2014 that “population health” refers to the broader determinants of health, whereas the Triple Aim refers to “population medicine” as the management of a discrete population in a health care system, health plan, or accountable care organization to improve outcomes.

Th ere is also a great potential for population health strategies to aid medical care providers in improving the outcomes for their patients. As noted earlier in this chapter, population health is not only about primary prevention; the social, behav- ioral, and environmental determinants of health also strongly aff ect patients’ ability and likelihood to carry out medical care providers’ recommendations about chang- ing lifestyle behaviors to reduce potential complications, or to prevent social cri- ses (such as losing a job or becoming homeless) that in turn trigger serious health crises.

As envisaged in the 2003 IOM report on the future of the public’s health, col- laboration among those using the medical, governmental public health, and popu- lation health models would provide a more coherent national approach to health improvement. Such an approach would include a common, integrated set of metrics for determinants and outcomes, would provide sustainable realigned funding, and would result in more strategic and synergistic planning for the actions best suited for improving the conditions needed for all Americans to have the opportunity to lead healthy lives.

■ Discussion Questions

1. Th e general public equates the word “health” with “health care.” Polls asking people about their health typically result in responses about their health care experiences. How do you defi ne health? How would you assess a population’s health if you could ask the people in that population only one question on a survey?

2. Why do some people refer to the health care system as “the sickness care system”? Do you agree or disagree with this term?

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y96

3. Cross-sectional research shows that, on average, people with disabilities second- ary to illness or injury have lower socioeconomic status than people without dis- abilities. How could longitudinal research help to explain whether this is because people of lower socioeconomic status are at higher risk of developing disabilities, or because disability leads to loss of income and thus lower socioeconomic status? In a population health model, how might lower socioeconomic status increase the risk of disability secondary to illness or injury?

4. Th e Commission to Build a Healthier America found that non-Hispanic Whites were more likely to be in very good or excellent health than were other groups nationally and in almost every state. In addition, non-Hispanic Whites had better health status than adults in any other racial or ethnic group at every level of edu- cation, but all groups showed a gradient in health by educational level. What are some of the determinants that are likely contributing to this disparity in health between non-Hispanic Whites and other groups after controlling for diff erent edu- cational levels?

5. It is possible that a community’s County Health Rankings would suggest that the biggest driver of poor health in that community is unemployment. How would you present the case to your nonprofi t hospital board that the biggest commu- nity benefi t contribution the hospital could make would be to join and support an initiative to increase job openings in the community, rather than holding health fairs or off ering educational lecture series?


Recent data show that Americans consume, on average, more than three times the

recommended level of sodium per day in their food and beverages. High salt intake

contributes to high blood pressure and its complications—stroke, heart attack,

congestive heart failure, and kidney failure. In fact, thousands of lives could be saved if

sodium consumption were lowered in people with high blood pressure. Write a memo

for the U.S. Secretary of Health and Human Services about what might be done to

address concerns about the effect of high sodium intake on health. In preparing your

memo, consider the following questions:

1. How might we address this problem in the patient population using the medical

model that a health care provider might use versus a population health model that

a public health offi cial might use?

2. How far can and should governments go in attempting to create a more healthful

environment? Intrinsic to many population health policies is the specter of the

so-called nanny state. In this case, is it necessary for everyone to be exposed to

lower sodium in their bread, in other common foods, and in restaurants, so as to

protect people who have salt-sensitive illnesses?

3. Should manufacturers bear the costs of manufacturing different versions of foods

in order to protect the public’s health? Should they be required to manufacture

healthier foods even if customers prefer the less-healthy versions? Or should they

be liable if they don’t manufacture healthier foods?

C h a p t e r 5 . P o p u l a t i o n H e a l t h 97

■ References

Adler, N. E., & Stewart, J. (Eds.). (2010). Th e biology of disadvantage: Socioeconomic status and health. Annals of the New York Academy of Sciences (Vol. 1186). San Francisco, CA: MacArthur Network for Socioeconomic Health.

Bleich, S. (2005, July). Medical errors: Five years aft er the IOM report. Issue Brief (Th e Commonwealth Fund), 830, 1–15.

Bunker, J. P., Frazier, H. S., & Mosteller, F. (1995). Th e role of medical care in determining health: Creating an inventory of benefi ts. In B. C. Amick III, S. Levine, A. R.  Tarlov, & D. C. Walsh (Eds.), Society and health (pp. 304–341). New York, NY: Oxford University Press.

Evans, R. G., Barer, M. L., & Marmor, T. R. (Eds.). (1994). Why are some people healthy and others not? Th e determinants of health of populations. New York, NY: Walter de Gruyter, Inc.

Institute of Medicine. (2003). Th e future of the public’s health in the 21st century. Washington, DC: National Academies Press.

Institute of Medicine. (2013). Shorter lives, poorer health. Washington, DC: National Academies Press.

Kindig, D., & Chin, S. (2009, June 18). Achieving “a culture of health”: What would it mean for costs and our health status?” Innovation, health, and equity: Taking a systems approach to health and economic vitality. Presentation sponsored by Altarum Institute, Ann Arbor, MI.

Kindig, D., & Stoddart, G. (2003). What is population health? American Journal of Public Health, 93, 380–383.

Kohn, L. T., Corrigan, J. M., & Donaldson, M. S. (Eds.). (2000). To err is human: Building a safer health system. Washington, DC: National Academies Press.

Kreuter, M., & Lezin, N. (2001). Improving everyone’s quality of life: A primer on popula- tion health. Seattle, WA: Group Health Community Foundatio n.

Mackenbach, J. P., Stirbu, I., Roskam, A. R., Schaap, M. M., Menvielle, G., Leinsalu, M., & Kunst, A. E. (2008). Socioeconomic inequalities in health in 22 European coun- tries [Special article]. New England Journal of Medicine, 358, 2468–2481. doi:10.1056/ NEJMsa0707519

McGinnis, J. M., & Foege, W. H. (1993). Actual causes of death in the United States. Journal of the American Medical Association, 270, 2207–2212.

McKeown, T. (1976). Th e role of medicine: Dream, mirage, or nemesis? London: Nuffi eld Provincial Hospitals Trust.

Mokdad, A. H., Marks, J. S., Stroup, D. F., & Gerberding, J. L. (2004). Actual causes of death in the United States, 2000. Journal of the American Medical Association, 291, 1238–1245. (Correction published 2005, Journal of the American Medical Association, 293, pp. 293–294.)

Robert Wood Johnson Foundation Commission to Build a Healthier America. (2009). Beyond health care: New directions to a healthier America. Princeton, NJ: Robert Wood Johnson Foundation.

Robert Wood Johnson Foundation to Build a Healthier America. (2014). Time to act: Investing in the health of our children and communities. Princeton, NJ: Robert Wood Johnson Foundation.

Schoeni, R. F., House, J. S., Kaplan, G. A., & Pollack, H. (Eds.). (2008). Making Americans healthier: Social and economic policy as health policy. New York, NY: Russell Sage Foundation.

Trust for America’s Health. (2008). Prevention for a healthier America: Investments in disease prevention yield signifi cant savings, stronger communities. Washington, DC: Trust for America’s Health. Retrieved from http://healthyamericans.org/reports/prevention08/

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y98

United Health Foundation. (2007). America’s Health Rankings: A call to action for people and their communities. Minnetonka, MN: United Health Foundation.

University of Wisconsin Population Health Institute. (2010). County Health Rankings model. Madison, WI: University of Wisconsin Population Health Institute.

Williams, D., & Collins, C. (2001). Racial residential segregation: A fundamental cause of racial disparities in health. Public Health Reports, 116, 404–416.

Woolf, S. H., Johnson, R. E., Phillips, R. L., & Philipsen, M. (2007). Giving everyone the health of the educated: An examination of whether social change would save more lives than medical advances. American Journal of Public Health, 97, 679–683.

6 Public Health: A Transformation for the 21st Century

Laura C. Leviton, Paul L. Kuehnert, and Kathryn E. Wehr


LEARNING OBJECTIVES o Contrast defi ning characteristics of prevention-oriented public health and

treatment-oriented health care o Describe state, federal, and local authority for public health law, regulation, and

services o Identify how challenges and opportunities are transforming public health

TOPICAL OUTLINE o Who’s in charge of public health? o A healthy population is in the public’s interest o Core functions of public health o Governmental authority and services o A transformation of public health

Association of State and Territorial Health Offi cers (ASTHO)

core functions (assessment, assurance, policy development)

disease prevention (primary, secondary, tertiary)

essential services health impact assessments health promotion

National Association of County and City Health Offi cials (NACCHO)

nongovernmental organizations population health Public Health Accreditation Board

(PHAB) World Health Organization (WHO)

defi nition of health

■ Who’s in Charge of Public Health?

Th is chapter introduces the policies, programs, and practices that constitute public health in the United States. Public health is “what society does collectively to assure the condi- tions for people to be healthy” (Institute of Medicine [IOM], 2002). It is the science, prac- tice, and art of protecting and improving the health of populations. Historically, public health emphasized regulating and improving community sanitation and monitoring envi- ronmental hazards. Over time it greatly expanded its role in documenting and control- ling communicable diseases and encouraging healthful behavior. In the late 20th century,

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y100

many local health departments were the provider of last resort for indigent health care, a situation that is changing with passage of the Patient Protection and Aff ordable Care Act (ACA) in 2010. As the ACA reorganizes activity and channels resources to preven- tion, public health champions are working far beyond the health sector to advocate for a broader set of policies and systems changes to improve and protect health.

We fi rst describe the goals and characteristics of public health that diff erentiate it from medical care treatment, and we outline the core functions of public health. We then describe the complex network of laws, regulations, authorities, and services involved. State, federal, tribal, and local government agencies, often called the infra- structure, have legal authority for the core functions. But champions of public health span many public, private, and nonprofi t organizations. In the concluding section, we describe forces at work to transform public health in the 21st century.


Public health activities aff ect the lives of Americans profoundly, but more often than not these activities are invisible. A thought experiment shows how this works. Imagine waking up and going through your morning routine. You slept 8 hours for a change, because health experts claim that lack of sleep causes stress and other health problems. You wander into the bathroom and brush your teeth—teeth that are still in your mouth and pain-free thanks to regular brushing and fl ossing, adequate nutrition, the fl uoride in your local water supply, and routine dental visits. You rinse your mouth with water that is safe to drink. Before it ever reached your faucet, it was checked for sickness- causing bacteria, heavy metals such as lead (which causes lower intelligence in chil- dren), and chemicals such as polychlorinated biphenyls (which cause cancer). When you fl ushed the toilet, the waste did not get into the water supply where it could kill you.

You get your children ready for school; so far, they have all survived, never hav- ing had measles, diphtheria, polio, or other diseases that killed and maimed so many children in bygone days. Th e kids’ breakfast includes cereal and pure pasteurized milk. You looked at the nutritional label on their cereal and saw that the ingredients included whole grains and not too much sugar. You open the newspaper to see that a new infl uenza strain is spreading, and the authorities have renewed their advisory for hand-washing and travel precautions.

Your sister calls to announce she is going to have a baby! She is not aware that the toast she is eating is fortifi ed with folic acid, the B vitamin that prevents birth defects. Th e couple can have a baby in part because young people in their town had access to comprehensive sex education and family planning—they never had gonorrhea or chlamydia, which can cause infertility.

Th e two of you also discuss your father. He’s over 70 and not in the best health, so he needs to get his fl u and pneumonia shots right away! Th e last time he had fl u, it turned into pneumonia; he went to the hospital and could have died. Both of you are worried about him, because he is overweight, still smokes, and never exercises.

Public health activities affect the lives of Americans profoundly, but more often than not these activities are invisible.

C h a p t e r 6 . P u b l i c H e a l t h : A T r a n s f o r m a t i o n f o r t h e 2 1 s t C e n t u r y 101

Is a heart attack, diabetes, or stroke in his future? Th e odds are not in Dad’s favor. Quit-smoking programs are available in the community without charge, so you agree that Dad’s doctor should try suggesting them again. Too bad there are no sidewalks in Dad’s neighborhood; he loves to walk, but there is too much traffi c. Does the senior center have an exercise program that might appeal to him?

You buckle the kids into their safety belts. When you get to your job, you see signs that read: “607 days without an accident at this worksite” and “proud to be tobacco free since 2008.”


Th e responsibility for the public’s health and the infrastructure to make it work are divided among many agencies across all levels of government, and many nongovern- mental organizations, professional associations, and businesses (see Figure 6.1). In

F I G U R E 6 . 1











Elected Officials



Mental Health

Home Health

Community Centers

Nursing Homes

Nonprofit Orgs.

Neighborhood Orgs.

Drug Treatment

Law Enforcement

Tribal Health

Faith Instit.


Public Health Agency

Civic Groups





Community Health




Elected Officials



Mental Health

Home Health

Community Centers

Nursing Homes

Nonprofit Orgs.

Neighborhood Orgs.

Drug Treatment

Law Enforcement

Tribal Health

Faith Institution


Public Health Agency

Civic Groups

Source: Redrawn from the Centers for Disease Control and Prevention, 2013, Th e Public Health System and the 10 Essential Public Health Services http://www.cdc.gov/nphpsp/essentialservices.html

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y102

our thought experiment, for example, municipal authorities handle waste water, but the federal government regulates chemicals in the water supply. Th e federal govern- ment recommends physical activity for older adults, but senior centers, YMCA, pri- vate gyms, and city departments of transportation, parks and recreation, and public safety all make it possible to be physically active. Th e federal government requires seat belts and air bags in cars, but state laws mandate seat belt use and the penalties for violation, and local police generally enforce the laws.

At least four factors account for the complexity and diff use responsibility for public health in the United States. Th e fi rst factor is that our government is not cen- tralized; states have authority for public health except where specifi ed by federal and tribal law. How much authority the states in turn share with local government varies a great deal and rests with diverse agencies, boards of health, and municipal and tribal codes (Hodge, 2012; IOM, 2011).

Second is the distinctive American tendency, fi rst recognized by Alexis de Toc- queville in the 1830s, to design laws, policies, and organizations that are problem specifi c, rather than general. For example, individual diseases receive special legal recognition, and new federal programs, policies, and categorical funding streams are created to deal with them. Diverse federal departments (see Chapter 2) deal with such health problems as assuring pure food and drugs (Food and Drug Administration [FDA] and U.S. Depart- ment of Agriculture [USDA]), monitoring and controlling infectious diseases (Centers for Disease Control and Prevention [CDC]), providing guidance to prevent chronic diseases (CDC, National Institutes of Health [NIH]), improving traffi c safety (U.S. Department of Transportation, National Highway Traffi c Safety Administration [NHTSA]), maternal and child health (Centers for Medicare & Medicaid Services [CMS], Health Resources and Services Administration [HRSA]), and ensuring a healthy place to work (Occupa- tional Safety and Health Administration [OSHA], Mine Safety and Health Administra- tion [MSHA], National Institute for Occupational Safety and Health [NIOSH]).

A third distinctively American approach is the heavy reliance on nongovernmen- tal organizations to achieve public health goals. Yet these organizations also tend to be issue specifi c: national organizations and their local affi liates such as the American Red Cross, American Heart Association, the Planned Parenthood Federation of America, United Way Worldwide, the Y, various environmental organizations, and many community-based organizations specifi c to a city neighborhood. With shrinking governments, these organizations take on additional importance.

Th e fourth cause of diff used responsibility lies in the broad defi nition of health goals and ongoing debates over what should be done to achieve them. Th e World Health Organization (WHO) asserts that health is more than the absence of disease, but rather “a state of complete mental, physical, and social well-being” (Green & Kreuter, 1999). Well-being is achieved, for example, when children perform well in school and do not fear neighborhood violence, when physical and mental function- ing is maintained well into old age, and when people have a better quality of life. But where, then, do we draw the line between health goals and other societal goals? Should we draw such a line? Who has responsibility, and for which goals?

■ A Healthy Population Is in the Public Interest

Two key assumptions distinguish public health from the health care delivery systems discussed elsewhere in this text: (a) A healthy population is in the public interest, and

C h a p t e r 6 . P u b l i c H e a l t h : A T r a n s f o r m a t i o n f o r t h e 2 1 s t C e n t u r y 103

(b) working at a societal or community level (outside of what a clinician can do in a medical care setting) we can improve an entire population’s health.


Th e goal of public health is to improve the health status of entire populations, not just individuals. It is concerned with the incidence, prevalence, and distribution of health problems (see Chapter 5). In using these indicators, public health aims to identify health problems and improve them through action at a community or collective level. Th is aim is well justifi ed by past successes. Between 1900 and 2000, average life expec- tancy increased from 47.3 to 76.8 years (CDC, 2011). Medical care treatment did not accomplish this change. Rather, society made pervasive improvements in 10 public health arenas (see Table 6.1). In the present day, health is still most strongly deter- mined by behavioral, community, environmental, and societal forces, not by medical care (see Chapters 5 and 7).


Since ancient times, people have taken collective action to protect themselves from plague and environmental disaster. In the 19th century, public health was justifi ed on utilitarian grounds: the greatest good for the greatest number. Healthy people are a more productive workforce and better able to defend the nation. Th e utilitarian argu- ment is still compelling: For example, a high childhood obesity rate impairs America’s economic competitiveness and the combat readiness of youth (IOM, 2012). However, public health today is also justifi ed as a human right and is seen as a means to achieve social justice by addressing social and economic disparities in health (Beauchamp & Steinbock, 1999).

Not everyone agrees with this rationale. Conservatives often reject social justice as a reason for collective action. In truth, most public health services serve both utilitar- ian and social justice aims. For example, many publicly funded prevention eff orts are targeted to poor children, but these eff orts also help produce a healthier workforce.


■ Vaccination

■ Motor-vehicle safety

■ Safer workplaces

■ Control of infectious diseases

■ Decline in deaths from coronary heart disease and stroke

■ Safer and healthier foods

■ Healthier mothers and babies

■ Family planning

■ Fluoridation of drinking water

■ Recognition of tobacco use as a health hazard

Note: Based on the eff ect on death, illness and disability in the United States and not ranked by order of importance. Source: U.S. Centers for Disease Control and Prevention (1999). Ten great public health achievements— United States, 1900 to 1999. Retrieved April 6, 2014 from http://www.cdc.gov/mmwr/preview/mmwrhtml /00056796.htm

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y104

Also, libertarians believe public health limits individual liberty (Leviton, Needleman, & Shapiro, 1997). Indeed, public health policy and practice usually balance individual freedoms and collective benefi ts. For example, health departments have police pow- ers to control infectious disease as a “clear and present danger,” but they need to do so without appearing to abuse this power. Finally, some Americans may question whether government should be involved in public health: Can’t private or nonprofi t organiza- tions play the role that government plays now? In fact, private and nonprofi t organiza- tions do play important roles, but without government there is no way to address what economists term “market failures” of health care. For example, private physicians lack the health department’s legal authority to monitor, track, intervene, and disrupt the spread of sexually transmitted diseases, food-borne disease outbreaks, rat infestations, lead poisoning among children, and other many other problems.


Public health works on prevention at a collective level through health promotion, changes in policy or law, and consensus of professional societies about prevention eff orts. Health promotion addresses behavior and lifestyle: “the combination of edu- cational and environmental supports for actions and conditions of living conducive to health” (Green & Kreuter, 1999; see Chapter 7). Health promotion often works through businesses, schools, recreational facilities and community associations, as well as in the health care setting.

Th e U.S. Preventive Services Task Force (2010) uses three long-accepted catego- ries to describe the full array of potential preventive interventions:

■ Primary prevention: helping people avoid the onset of a health condition, including injuries

■ Secondary prevention: identifying and treating people who have risk factors or preclinical disease

■ Tertiary prevention: treating people with an established disease, in order to restore their highest functioning, minimize negative eff ects, and prevent complications

Th ese categories, especially tertiary prevention, obviously spill over into the medical treatment of individuals; at a systems level, however, they are public health issues. Providers need guidance and support to carry them out. In Table 6.2 we can see the diff erences between individual and collective prevention for heart disease and stroke. Notice that successful prevention for an individual (in this case, a person who might have a heart attack or stroke) depends on the widespread availability of prevention services at a population level. To understand more about how medical care and pub- lic health can support each other, especially since the passage of the ACA, see the Surgeon General’s National Prevention Strategy (www.surgeongeneral.gov/initiatives/ prevention/strategy/).

Disease prevention and health promotion are rarely completely effective, because there are no “magic bullets” that can prevent 100% of people from becoming sick.

C h a p t e r 6 . P u b l i c H e a l t h : A T r a n s f o r m a t i o n f o r t h e 2 1 s t C e n t u r y 105

An important eff ort of the U.S. Department of Health and Human Services (DHHS, 2013), Healthy People 2020, provides a comprehensive review of priority health risks, eff ective strategies, and public health focus areas for the nation, each with many specifi c objectives. Th ese areas are updated every 10 years. Progress in meeting the Healthy People objectives has been very uneven, because many of the objectives are quite ambitious ( Sondik, Huang, Klein, & Satcher, 2010). Disease prevention and health promotion are rarely completely eff ective, because there are no “magic bul- lets” that can prevent 100% of people from becoming sick. For example, prevention has greatly reduced the rate of heart attacks, but some heart attacks still occur. Youth smoking has declined, but some youth still take up smoking in spite of all eff orts to discourage them. People die in car crashes in spite of lower fatalities and many safety improvements.

Universal prevention means that everyone receives an intervention equally, whereas targeted prevention involves identifying and serving people at higher risk. When they are possible, universal approaches are often more eff ective in improving the health of populations. Th e case of traffi c safety illustrates these approaches. People who drive while intoxicated are clearly at high risk of injury to themselves and others, and target- ing drunk drivers improves road safety for everyone. However, universal protections, such as seat belts, air bags, and safer vehicles, contribute much more to reducing traf- fi c fatalities and injuries because they help everyone, even those who never encounter a drunk driver (National Highway Traffi c Safety Administration, 2014).

Targeted prevention is an important focus for public health when the risk is preva- lent and when there are eff ective means to identify and treat it. For example, a national campaign in the 1970s led to improved identifi cation and treatment of people with


I n d i v i d u a l M e d i c a l C a r e P u b l i c H e a l t h



Encourages patients to maintain

healthy weight, be physically active,

and not smoke

Works to establish bike and walking paths

and to eliminate transfats from foods, offers

smoking quitlines, advocates for smoke-free

public spaces and higher cigarette taxes,

provides prevention guidelines to medical

care providers



Encourages regular checkups for

detecting and treating high blood

pressure, elevated cholesterol, and

other risk factors

Mounts public service campaigns about the

importance of controlling blood pressure

and “knowing your number” for cholesterol,

provides guidelines to medical care

providers on diagnosis of blood pressure and




Treats heart attack to save the heart

muscle, treats stroke to minimize

nervous system damage, treats

atherosclerosis, restores function and

prevents recurrence through cardiac

rehabilitation and medication

Provides guidelines on treatment to

medical care providers, creates widespread

awareness of the symptoms of heart attack

and stroke and the need to seek help quickly

to save the heart muscle, teaches CPR,

locates automated external defi brillators in

public places and worksites, establishes

effective emergency systems, sponsors

patient support groups

P a r t I I . K e e p i n g A m e r i c a n s H e a l t h y106

high blood pressure. Th is, in turn, greatly reduced premature death and disability from cardiovascular disease (CDC, 2011). However, an initial goal was to make sure that providers screened all their patients for high blood pressure, a universal strategy with a population focus. Combining universal and targeted strategies can have a cumula- tive benefi t, and a balance of targeted and universal approaches is important to avoid stigma or victim-blaming of people at risk.

■ Core Functions of Public Health


Public health serves three core functions—assessment, policy development, and assurance—as seen in Figure 6.2, to solve health problems at a population level (IOM, 2002). Assessment of public health problems involves understanding their prevalence, severity, and causes, using various well-tested statistical tools. Although private and nonprofi t organizations often do such assessments, public health agencies have the

F I G U R E 6 . 2 T H E C I R C L E O F P U B L I C H E A LT H A C T I V I T I E S A N D 1 0 E S S E N T I A L S E R V I C E S .

Monitor Health

Diagnose & Investigate

Inform, Educate, Empower


Mobilize Community

Partnerships Develop Policies

The 10 Essential Public Health Services describe the public health activities that all communities should undertake and serve as the framework for the National Public Health Performance Standards (NPHPS) instruments. Public health systems should:


Monitor health status to identify and solve community health problems.












Diagnose and investigate health problems and health hazards in the community.

Inform, educate, and empower people about health issues. Mobilize community partnerships and action to identify and solve health problems.

Develop policies and plans that support individual and community health efforts.

Enforce laws and regulations that protect health and ensure safety. Link people to needed personal health services and ensure the provision of health care when otherwise unavailable.

8 Ensure competent public and personal health care workforce.

9 Evaluate effectiveness, accessibility, and quality of personal and population-based health services. Research for new insights and innovative solutions to health problems.

Enforce Laws

Link to/ Provide


Ensure Competent Workforce














S ys

te m M

anagem en



Source: Redrawn from the Centers for Disease Control and Prevention, 2013, Th e Public Health System and the 10 Essential Public Health Services http://www.cdc.gov/nphpsp/essentialservices.html

C h a p t e r 6 . P u b l i c H e a l t h : A T r a n s f o r m a t i o n f o r t h e 2 1 s t C e n t u r y 107

primary responsibility for surveillance of population health status, monitoring of dis- ease trends, and analysis of the causes of those trends and points for intervention. Th e assessment function is undergoing dramatic transformations, both in terms of resources and technology, as seen in the fi nal section.

Th e second core function, policy development, is to create and advocate for solu- tions to achieve public health goals. Formal policy development includes devising laws and regulations to protect the public, as in the case of environmental protec- tion; funding and reimbursement for specifi c services such as child immunizations; and setting guidelines or standards for services or practices, such as laboratory test- ing for infectious diseases. However, policy development can also involve voluntary changes and agreements in communities, business, health care, or nonprofi t organi- zations—for example, locating a supermarket in an underserved area so that people have access to fresh fruits and vegetables.

Th e third core function, assurance, involves enforcement of policy, as with inspec- tion of restaurant sanitation or nursing home safety; monitoring legal compliance, as with smoke-free indoor air laws; ensuring proper implementation of necessary ser- vices such as supervision of home visits to new mothers in disadvantaged communi- ties; and adequate crisis response, as when public health plays a role in coping with natural disasters.

In order to fulfi ll all three core functions, public health departments are highly dependent on other organizations and individuals. For assessment, public health relies on medical care providers, fi rst responders, and others to provide the necessary data on births, deaths, reportable diseases, and environmental hazards. For policy develop- ment it relies on advocates, policymakers, and community collaborators who share a common interest in public health goals. For assurance it relies on complementary health care services and voluntary compliance with standards and regulations. Public health agencies do not have the legal authority, fi nancial capability, or personnel to address all health problems by themselves. Th ey need to collaborate with other orga- nizations that have the power, infl uence, and resources to achieve better public health outcomes—for example, in promoting worker safety, ensuring safe food, or building bicycle- and pedestrian-friendly streets for physical activity.


Th e following example, concerning the birth defect spina bifi da, illustrates the cycli- cal problem-solving approach used in public health (see Figure 6.2 and www.cdc.gov/ ncbddd/spinabifi da/data.html). Diff erent types of assessment, policy development, and assurance issues emerge during this cycle.

1. Monitor the problem: Spina bifi da is a neural tube defect that develops in the fi rst 3 to 4 weeks of pregnancy, when the neural tube that will form the spine does not close properly. In its most severe form, spina bifi da leads to leg paralysis, bowel and bladder control problems, and, without treatment, mental retardation. Spina bifi da aff ects 3.05 out of every 10,000 live births (assessment).

2. Diagnose and investigate: Th e CDC projects that 50% to 70% of spina bifi da cases can be prevented if women take enough folic acid (a B vitamin) before and during pregnancy. Folic acid is most eff ective in promoting healthy neural tube

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development when taken before pregnancy and during the critical fi rst weeks. For this reason, the CDC recommends that, even before they become pregnant, women take a multivitamin with 400 mg of folic acid every day and eat foods rich in folic acid (Centers for Disease Control and Prevention, 2010). (policy development).

3. Develop policies: Unfortunately, women may not know they are pregnant until the defect has developed, as roughly half of all pregnancies are unplanned. Also, foods that naturally contain folic acid may not be readily available to the poor or to individuals eating certain diets (assessment). One alternative is to fortify common foods with folic acid (policy development).

4. Enforce laws and regulations: Since 1998, the government has required that enriched cereal, pasta, fl our, and bread products include folic acid (assurance, policy development).

5. Evaluate eff ectiveness: Since the fortifi cation requirement began, the rate of spina bifi da in the United States has declined by 31% (assurance, assessment).

6. Diagnose and investigate: Many scientists believe that we could prevent more cases of spina bifi da if new regulations increased the amount of folic acid in grain products (policy development, assessment).

■ Governmental Authority and Services


State Law

Th e 10th Amendment to the U.S. Constitution gives states the primary responsibil- ity for public health. (In contrast, the Constitution recognizes tribes as sovereign nations for decision making and designates federal responsibility for their health [Hodge, 2012]). Th e 50 states vary greatly on how they defi ne and delegate public health authority and responsibility. States enacted public health statutes over time to respond to specifi c diseases or health threats.

Th ese laws are fragmented and badly out of date, so public health law is emerging as a powerful force to improve eff ectiveness (IOM, 2011). For example, some state laws have separate sections for specifi c communicable diseases, instead of standard approaches to address infectious disease in general. Th is fragmentation leaves them with no standards for addressing new infectious diseases, advances in public health practice, and constitutional law. State laws require updating to permit new multi- sectoral health promotion eff orts—for example, collaborations among public health, transportation, and parks and recreation to encourage more physical activity. State laws may also neglect important safeguards for privacy, due process, and protection from discrimination. Th e Model State Public Health Act takes a systematic approach to establishing authority, implementing public health responsibilities, and modern- izing public health core functions. However, as of 2011 the Model Act did not have much uptake (IOM, 2011).

Although the Model Act addresses inconsistencies within a state, other improve- ments are needed for problems that cross state lines. Chief among these are problems arising from human-made and naturally occurring events such as the anthrax attacks in the fall of 2001, hurricanes Katrina and Rita in 2005, the 2009 H1N1 infl uenza pan- demic, and Superstorm Sandy in 2012. Th ese events have underscored the need for

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legal reforms to enhance public health emergency preparedness by addressing a variety of issues including: (a) declaring public health emergencies separate from other types of disasters; (b) expediting public health powers, such as those needed to collect health data, screen, vaccinate or treat exposed people or seize property to abate hazards, iso- late or quarantine residents; (c)  recruiting and deploying trained health professional volunteers; and (d) providing liability protections to health professionals and entities, among others (Hodge, 2012). Since 2002, 26 states and the District of Columbia have amended their statutes to incorporate the term “public health emergencies” or similar terms (Network for Public Health Law, 2011).

State Health Departments

A state’s chief health offi cial directs the department of public health and may report directly to the governor or to an offi cer in the governor’s cabinet. Th e state health department’s position in the chain of command and the governor’s priorities aff ect the authority and power of its director. Medicaid and public assistance programs, being among the costliest state programs, tend to garner most of a governor’s atten- tion. At times, this can aff ect the quality of public health services. Th e website of the Association of State and Territorial Health Offi cers (ASTHO, www.astho.org) pro- vides a wealth of detail on the characteristics and fi nancing of state health depart- ments. Twenty-seven state health departments are free standing as separate agencies, whereas 23 states combine public health into umbrella agencies with related programs, such as Medicaid, human services and welfare, mental health and substance abuse, or environmental management. Th e ways various health-related functions and pro- grams are organized aff ect how well public health activities can be coordinated. For example, environmental protection is often located outside the health department, in which case conservation, wilderness preservation, or litigation around toxic spills may head that other agency’s agenda. Th is situation often leaves less opportunity for eff ec- tive interaction with the health department, even though the health department must monitor potential health consequences of environmental exposures.


Federal–State Relations

Although the states have constitutional authority to implement public health, a wide variety of federal programs and laws aff ect their work. Federal law relating to pub- lic health preempts state laws, just as state law preempts local laws. (However, tribal governments are sovereign nations, so tribal law supersedes other laws, if they are in place.) Preemption aff ects public health, because the federal government can require “fl oor preemptions”—minimum protections below which states cannot go. For exam- ple, the Clean Water Act requires a minimum standard for water in all states, although states are allowed to have more stringent standards. But “ceiling preemption” can pose an obstacle to prevention when states and localities are more aggressive than the fed- eral government. For example, the tobacco industry challenged state and local regula- tion of tobacco in the courts, and more recently, Mississippi passed a law to preempt local eff orts to limit the size of sugar-sweetened beverages.

Th e federal agencies working in public health are described in Chapter 2. States must constantly interact with these federal agencies. For example, the DHHS supports

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state health departments with block grants for maternal and child health and preven- tive services; it also supports state agencies for child welfare services, substance abuse treatment and prevention, and mental health. Th e DHHS also funds the states to train the public health workforce. Th e CDC provides grants and cooperative agreements to states, cities, and community-based organizations for HIV prevention, chronic disease control, and from 2010 to 2013, for improving state and local infrastructure (see the following). Th e USDA provides health departments with direct support for food assistance and nutrition education. Th e Environmental Protection Agency (EPA) provides direct resources to the states for environmental management. Most of these funding streams are categorical—that is, the funding is intended for specifi c categories of people or special purposes. Congress authorizes categorical funding to address a specifi c health problem, such as preventing AIDS or addressing bioterrorism. How- ever, categorical funding limits states’ fl exibility to deliver a range of relevant services with available resources.

Delegation of State Authority to Local Health Departments

States vary in terms of the authority they give to local governments and local public health departments. As of 2011, 14 states had centralized public health departments, meaning that employees of the state lead the local health units, and the state retains authority over many decisions relating to the budget, public health orders, and the selection of local health offi cials. Health departments were decentralized in 27 states: Local governments make many decisions and staff the local health units. Four states shared authority, decision making, and employment with local governments. Th e remaining fi ve states were mixed, meaning that some features were centralized, whereas others were shared or decentralized.

Th e National Association of County and City Health Offi cials (NACCHO) web- site (www.naccho.org) off ers further detail on the wide variety of organizational arrangements, responsibilities, fi nancing, staffi ng, and authority of local health departments. One reason for this variety is simply historical. Th e fi rst public health agencies were formed in the early 1800s and were primarily city based. Later in the 19th century, state health agencies began to form. Th roughout the 20th century, county health departments developed. One can see the eff ects by comparing older states with states that were admitted to the union more recently: Massachusetts has 329 local boards of health, whereas Oregon has 34 county health departments. State and local health departments are exploring ways to share services, functions, and staff across jurisdictional boundaries. From “handshake agreements” to more formal memoranda of understanding to consolidations and mergers, these sharing arrangements often seek to balance eff ectiveness and effi ciency concerns (Libbey & Miayhara, 2011).

Local, state, tribal, and federal agencies all have strengths and resources for public health. States and localities usually better understand local problems and how local conditions aff ect services. Meanwhile, the federal government has greater resources and scientifi c expertise for tackling large and complex health threats. Th e CDC, for example, leads the investigation of serious disease outbreaks, such as H1N1, and makes recommendations for both clinical and community prevention. Th e federal govern- ment also steps in when health threats cross state borders or when states cannot com- ply with federal regulations, off ering technical assistance and fi nancial support.

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State Responsibilities

Th ese generally include disease and injury prevention, sanitation, controlling water and air pollution, vaccination, isolation and quarantine, inspection of commercial and residential premises, food and drinking water standards, extermination of vermin, fl uoridation of municipal water supplies, and licensure of physicians and other health care professionals. However, the specifi c activities and services provided vary widely across states and localities. For example, state and local health departments work to prevent chronic disease but focus to varying degrees on education, social marketing, or policy and environmental changes (see Chapter 7).

Ten Essential Services

In the face of this variation, most public health professionals agree that all health departments should provide the 10 essential services listed in Figure 6.2. Most local health departments are challenged to provide these services on their own, given their serious resource and staffi ng limitations. Most departments are small and rural: 61% serve fewer than 50,000 people and usually have 15 or fewer full-time staff . Staff skills in many health departments are weak, and higher education is not doing enough to provide the appropriate training. Many experienced professionals are on the verge of retirement, and replacements are in short supply given the low salaries and rural location of many local health departments. Many health departments are thinking creatively about how to meet these challenges, the topic of the fi nal section.

Public Health Emergencies

Since the 2001 anthrax attacks, public health agencies have faced the added respon- sibility of protecting the public against bioterrorism threats and other communica- ble disease emergencies. Experts agree that we can soon expect another severe fl u epidemic, perhaps as serious as the 1918 pandemic that killed an estimated 675,000 Americans. Diseases spread much more quickly than they did in the past because of international travel, urban overcrowding and poverty, climate change, and overuse of antibiotics, which produce multiple drug resistant infections (such as the so-called superbug multidrug-resistant Staphylococcus aureus [MRSA]). Interventions include global surveillance networks, stockpiles of vaccines, and better communications to deal with outbreaks. Although preparedness is much better now than in 2001, a 2013 study found that two thirds of the states had inadequate policies and capabilities to protect against threats from communicable diseases (Trust for America’s Health, 2013b).

New Training, Competencies, and Accreditation

As of 2011, public health agencies have national voluntary performance standards, with review by an external accrediting body, the Public Health Accreditation Board (PHAB). Th ese standards are a means, not an end, to improve the quality of public health services, including their eff ectiveness and effi ciency. Th ey establish accountability for providing good services, strengthen the credibility of public health agencies, and help to iden- tify areas for improvement (Centers for Disease Control and Prevention, 2004). At the end of 2013, more than 170 state, local, and tribal health departments serving 60% of the U.S. population were accredited or in the accreditation process. Th e PHAB website

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gives updates on progress and details of the accreditation standards (www.phaboard. org). PHAB also developed a consensus set of core competencies for public health prac- tice at the entry, supervisory, and executive levels (being revised in 2014). Movement to upgrade the competence of individual public health workers is seen in new management academies, continuing education, and certifi cate programs (IOM, 2009).

■ Rethinking Public Health for the 21st Century

Champions of the public’s health now have a major opportunity to rethink the infrastructure by working in new ways, communicating more effectively with the public, advocating for a wider variety of policies that affect health, and engaging new partners that are vital to achieving public health goals.

Government agencies are important, but they are only part of the public health story, and government is shrinking in the early 21st century. Champions of the public’s health now have a major opportunity to rethink the infrastructure by working in new ways, commu- nicating more eff ectively with the public, advocating for a wider variety of policies that aff ect health, and engaging new partners that are vital to achieving public health goals.


Shrinking Government

According to ASTHO and NACCHO, state and local health departments were hard hit by the recession of 2008 to 2010, with job losses totaling about 20% of the total pub- lic health workforce. During the recession nearly every health department reported making cuts to programs and services. Th ese staffi ng and program cuts have contin- ued into the recovery period. How can health departments serve their constituents with high quality and meet new national performance standards? National develop- ments and creative partnerships at the state and local level off er part of the answer.

Federal Action Transforms Prevention

Th e ACA authorized $15 billion over 10 years for a Prevention and Public Health Fund, and recent stimulus funding, the American Recovery and Reinvestment Act of 2009, provided $650 million. Th ese resources go to state and local governments but also to nongovernmental organizations and community coalitions. Many of the com- munity eff orts aim to change policies and environments to prevent chronic disease and promote physical activity, nutrition, and tobacco control (see Chapter 7). However, it has been challenging for the existing systems to absorb these funds quickly and to implement activities at scale (Trust for America’s Health, 2013a). Also, the Prevention and Public Health Fund depends on appropriations from Congress; it faced the 2013 federal budget sequester as well as ongoing reductions to pay for other ACA activities such as enrollment in health insurance exchanges. Th e American Public Health Asso- ciation (APHA) website (www.apha.org) gives updates on the fund.

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Government at all levels aims to encourage more coordinated action across orga- nizations. Th e ACA and executive orders mandate better planning and coordination of prevention. For example, the White House ordered coordination of childhood obe- sity prevention eff orts across the USDA, CDC, NIH, and Department of Education (IOM, 2012). At the state and local levels, there is a growing realization that public health must rely on the range of partners with power and resources to bring about needed changes.

A New Role for the Health Care Sector

For more than 40 years, many local health departments have provided direct health care to the poor, leaving fewer resources to improve the health of populations. Th e ACA will free up these resources by insuring poor individuals, who may choose pro- viders other than the health department. Some health departments are exploring ways to divest their primary care services while still fulfi lling their duties to ensure health care in their jurisdictions, especially for vulnerable populations (Kuehnert & McConnaughay, 2012). Where they continue to provide health care services, health departments are identifying ways to collect third-party reimbursements— collections they have not had to do or been able to do historically. Th e ACA also alleviates pres- sure on health departments by giving incentives for providers to work in underserved areas and by reimbursing private plans for essential prevention services, such as vac- cinations and screening, if the plans meet federal standards.

New Resources for Assessment

Nonprofi t hospitals can satisfy their community benefi t obligations under the ACA with community health assessments once every 3 years. Th ese assessments aim to engage multisectoral community stakeholders to identify priority needs (www.cdc .gov/policy/chna/). Also, PHAB accreditation sets health department standards for more consistent, high-quality assessment. New data sources, including electronic health records, shared and linked databases, and techniques such as geographic information systems (GIS), allow rapid response to potential public health emergen- cies. Equally important, however, they help policymakers and community stakehold- ers to understand health diff erently, including opportunities to promote health and reduce health disparities. For example, GIS make it possible to design communities proactively to prevent obesity (IOM, 2012) or to reduce triggers for asthma (http:// propellerhealth.com).

Public Health Institutes

Th e growing number of these institutes is a very positive development for public health. Th e National Network of Public Health Institutes website (www.nnphi.org) provides details on the 25 institutes, 11 institutes under development, and 7 affi liate organizations. As nongovernmental organizations, these institutes can accept private funds, leverage funding from multiple sources, and serve as fi scal intermediaries for health departments to speed the delivery of services and processes, such as hiring staff and buying supplies or equipment. Institute staff can advocate vigorously for public health programs and funding, whereas government employees have restrictions. Institutes can off er a cred- ible, neutral, third-party voice on issues and can convene all interested parties to address a broad health problem and implement a multisector strategy. In general, health depart- ments support these institutes and recognize their value and complementary roles.

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Putting the Public Back in Public Health

The public—and policymakers—react to specifi c problems and crises. They do not see the disease cases, injuries, disabilities, and deaths that have been prevented.

Th e champions of the public’s health need to build a constituency that understands its value, in order to create coalitions, gain allies to solve public health problems, and advocate eff ectively. Th e general public does not understand what public health is, often supposing it refers solely to programs for the poor. Th e public—and policymakers— react to specifi c problems and crises. Th ey do not see the disease cases, injuries, disabil- ities, and deaths that have been prevented. And they do not understand why problems are not solved quickly when an eroded infrastructure hinders crisis response—such as when the 2001 anthrax episode overwhelmed many public health laboratories or after Hurricane Katrina, when even such a basic function as handling the dead broke down. In reality, public health is invisible because it is generally so eff ective. With this in mind, how can public health develop an eff ective public constituency?

Building and Maintaining Trust

Public health practitioners sometimes can be seen as authoritarian or paternalistic, especially when they stress science and technology (“this is good for you because sci- ence says so”) while ignoring collaboration, democratic processes, and individuals’ preferences. Th is tendency weakens their connections to grassroots groups and local leadership and limits input from (and active listening to) their constituents. Th e last years of the 20th century heightened public awareness of the need for a new form of leadership in public health—one that engages people on their own terms in order to engender trust and cooperation. For example, the EPA learned to work with commu- nities aff ected by toxic contaminants. In its early days, however, the agency did not lis- ten to the public about their concerns, did not provide the information they needed, or gave them incomprehensible techno-babble that enraged community leaders ( Leviton et al., 1997). Th e old bureaucratic ways of doing business were simply not eff ective when people had legitimate concerns.

Th e most diffi cult lesson for public health came from the Tuskegee syphilis exper- iment (Jones, 1993). In 1932, 600 poor African American men in Macon County, Alabama, unknowingly became syphilis research subjects when the Public Health Service and the Tuskegee Institute began a study of the natural course of syphilis and off ered the men “free medical care.” Of 600 subjects, 339 had syphilis but were left untreated for up to 40 years, even though a penicillin cure became available in 1947. As many as 100 of the men died of syphilis and many more suff ered long-term dis- abilities before a public outcry and a federal advisory panel’s recommendations halted the study in 1972. Along with the Nuremberg Code on medical experiments, this epi- sode led Congress to require new protections for human research subjects. In 1997, President Bill Clinton off ered an offi cial public apology to the Tuskegee study’s eight survivors and participants’ families. However, public health—and the health care system more generally—never fully regained African Americans’ trust.

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More Effective Voices

ASTHO, NACCHO, and APHA off er important communication tools to increase eff ectiveness in advocating for policies and resources at state and local levels. Public health also has advocates such as Trust for America’s Health (www.healthyamericans. org), an especially vigorous and articulate champion. Th e Trust draws attention to specifi c health problems—what Americans generally respond to—tying these issues to the need for better public health infrastructure and investment. Th e Trust has also been able to bring together diverse stakeholders interested in similar kinds of health protections to amplify the collective message about these issues. County Health Rank- ings and Roadmaps (www.countyhealthrankings.org) rank the health and well-being of counties within each state. Th ese rankings provide an important new way to convey a snapshot of health, attract the interest of policymakers and the public, and stimulate community discussions and collaborations to improve health.

Advocacy in public health generally has a twofold purpose: It aims to strengthen public health resources and reorganization, but also to make changes that health departments cannot make on their own. For example, advocacy led to increased taxes on cigarettes and smoke-free indoor air laws; now advocacy is generating new state and local policies to increase the school physical education requirement, bring recess back into the school day, and require healthier off erings in school cafeterias (IOM, 2012).

Public health advocacy deals with a wider range of topics today than ever before. Because health is rooted in a wide variety of social and economic conditions, the fi eld has started using an approach called “health in all policies” (HIAP). In this approach, health advocates engage policymakers across various sectors to make sure that deci- sions will promote, or at least not adversely aff ect, health. Th e state of California, for example, has established a Health in All Policies Task Force (sgc.ca.gov/hiap/) to help the state’s Strategic Growth Council achieve its goals, including “improving air and water quality, protecting natural resources and agricultural lands, increasing the availability of aff ordable housing, improving infrastructure systems, promoting pub- lic health, planning sustainable communities, and meeting the state’s climate change goals”—all tied to the health of the state’s residents.

Health impact assessments (HIAs) help policymakers and community stakehold- ers to identify the health eff ects of decisions about nonhealth issues, such as economic development or transportation plans. Th e HIA is a structured process to gather, ana- lyze, and present scientifi c data, health expertise, and public input to a public policy body so that policy choices can be made that will protect or promote health. HIAs have been used eff ectively around the world and have become more widespread in the United States over the past 5 years with the development of the Health Impact Project (www.healthimpactproject.org/hia/process).


Th roughout this chapter, we have attempted to show the many ways in which a wide variety of organizations take on the public health role when they focus on populations. Th is approach means that other interests can be aligned with the public health mission. For example, walkable communities can appeal to real estate developers, city planners, public health practitioners, and advocates. Across the nation, public health profes- sionals are now working with city planners, police departments, real estate developers,

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and others to reframe suburban sprawl as an issue that has consequences for people’s health. Similarly, employers and public health advocates alike see advantages to having workplace health promotion and disease prevention programs, practices, and policies such as smoke-free campuses.

Local, tribal, and state public health departments and nongovernmental organi- zations have always connected to grassroots leadership and other public services in order to solve collective problems. However, their leadership abilities for cross-sector collaboration are now being cultivated as never before, in what has become known as the collaborative leadership approach or collective impact. Collaborative leadership means understanding where public health shares common goals with other interest groups and building coalitions based on those common interests. In the same way, public health organizations are now participating more eff ectively in emergency pre- paredness and in health reform, because they can show where the public health inter- est is aligned with national defense and preparation for natural disasters, on one hand, and health care quality and cost containment, on the other. Th rough coalition building at all levels, public health can leave the sidelines, convene multiple stakeholders, and develop a common vision and shared, measurable goals. Sometimes it must lead, and sometimes it must follow, but most often, we will fi nd public health walking hand-in- hand with its many partners and building on the assets of the communities it serves.

■ Discussion Questions

1. What examples of public health and prevention can you identify in your daily life? How do you believe they have aff ected your health?

2. Pick two examples from your answer to question 1, from either your own life or the text, and then go to the Internet and fi nd out which federal laws and agencies, state laws and agencies, local health departments, nonprofi t organizations, or city and county government units aff ect this aspect of your health. Th e more complete your answer, the better your answer is!

3. What is the diff erence between individual- and population-based prevention eff orts? For population-based prevention, what is the diff erence between universal and targeted strategies?

4. What does a population focus require, in terms of planning, consensus building, and resources for implementation (a) in the case of safety belts and (b) in the case of heart attack prevention?

5. Why can’t public health do more to achieve its goals? Name some of the political, legal, logistic, and resource challenges.

6. What should be left to the public sector to do in order to achieve public health goals? Where could other health care delivery systems do more to help? Why?

7. Give some examples of the constituencies that public health will have to reach in order to implement its goals (a) in the case of chronic disease prevention and (b) in the case of HIV/AIDS.

8. How would you personally balance individual liberty, the common good, and social justice in public health? What would have to change to achieve this balance? Give specifi c examples in the area of public health that you are best acquainted with.

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■ References

Beauchamp, D. E., & Steinbock, B. (1999). New ethics for the public’s health. New York, NY: Oxford University Press.

Centers for Disease Control and Prevention. (2011). Ten great public health achieve- ments—United States, 2001–2010. Morbidity and Mortality Weekly Report, 60(19), 619–623. Retrieved from http://www.cdc.gov/mmwr/preview/mmwrhtml/ mm6019a5.htm

Centers for Disease Control and Prevention. (2013). Th e Public Health System and the 10 Essential Public Health Services. Retrieved from http://www.cdc.gov/nphpsp/essen- tialservices.html

Green, L. W., & Kreuter, M. (1999). Health promotion planning: An educational and eco- logical approach. New York, NY: McGraw-Hill.

Hodge, J. (2012). Th e evolution of law in biopreparedness. Biosecurity and Bioterrorism, 10(1), 38–48. doi:10.1089/bsp.2011.0094

Institute of Medicine. (2002). Th e future of the public’s health in the 21st century. Wash- ington, DC: National Academies Press.

Institute of Medicine. (2009). HHS in the 21st century. Washington, DC: National Acad- emies Press.

Institute of Medicine. (2011). For the public’s health: Revitalizing law and policy to meet new challenges. Washington, DC: National Academies Press.

Institute of Medicine. (2012). Accelerating progress in obesity prevention: Solving the weight of the nation. Washington, DC: National Academies Press.


You are an analyst for a federal agency. Congress has ordered your agency to come

up with policy options to fi nd a cure for birth defects. You recognize that (a) birth

defects have many causes, (b) some can be treated, (c) some can also be prevented,

but (d) not all of them can be “cured.” You analyze this issue using the core functions

of public health and the problem-solving process outlined in “Core Functions of Public


Based on the information about spina bifi da in that section, you decide it

should be the focus for policymaking on birth defects. You decide to propose four

options to Congress: (a) more research on treatment of spina bifi da, (b) more health

education for women about folic acid, (c) more promotion of birth control to reduce

the proportion of unplanned pregnancies in the country, and (d) new regulations to

increase the amount of folic acid in grain products. You may also see other options,

so be sure to discuss them.

In your proposal, take the following questions into account:

1. For each option, what would you need to know to determine effectiveness?


2. What are the tradeoffs in each course of action?

3. Who would support this option, who would be opposed, and does it matter?

4. Is there a single best option? Why or why not?

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Jones, J. H. (1993). Bad blood: Th e Tuskegee syphilis experiment (New and expanded edition). New York, NY: Free Press.

Kuehnert, P. L., & McConnaughay, K. S. (2012). Tough choices in tough times: Enhanc- ing public health value in an era of declining resources. Journal of Public Health Management and Practice, 18(2), 115–125.

Leviton, L. C., Needleman, C. E., & Shapiro, M. (1997). Confronting public health risks: A decision maker’s guide. Th ousand Oaks, CA: Sage.

Libbey, P., & Miyahara, B. (2011). Cross-jurisdictional relationships in local public health: Preliminary summary of an environmental scan. Princeton, NJ: Robert Wood Johnson Foundation. Retrieved from http://www.rwjf.org/content/dam/web-assets/2011/01 /cross-jurisdictional-relationships-in-local-public-health

National Highway Traffi c Safety Administration. (2014). Traffi c safety facts: 2012 data. Washington, DC: U.S. Department of Transportation. Retrieved from http://www- nrd.nhtsa.dot.gov/Pubs/811892.pdf

Network for Public Health Law. (2011, August 1). Th e model state emergency health powers act: Summary matrix. Retrieved from https://www.networkforphl.org/_ asset/80p3y7/Western-Region---MSEHPA-States-Table-8-10-12.pdf

Sondik, E. J., Huang, D. T., Klein, R. J., & Satcher, D. (2010). Progress toward meeting the Healthy People 2010 goals and objectives. Annual Review of Public Health, 31, 271–281.

Trust for America’s Health and the New York Academy of Medicine. (2013a). A compen- dium of proven community based prevention programs. New York, NY: New York Academy of Medicine. Retrieved from http://www.tfah.org/report/110/

Trust for America’s Health. (2013b). Outbreaks: Protecting Americans from infectious disease. Retrieved from http://www.tfah.org/reports/outbreaks2013

U.S. Department of Health and Human Services (DHHS). (2013). Healthy people 2020. Washington, DC: U.S. Government Printing Offi ce. Retrieved from http://www. healthypeople.gov/2020/default.aspx

U.S. Preventive Services Task Force. (2010). Recommendations. Washington, DC: DHHS. Retrieved from http://www.uspreventiveservicestaskforce.org/Page/Name/recom- mendations

7 Health and Behavior Elaine F. Cassidy, Matthew D. Trujillo, and C. Tracy Orleans


LEARNING OBJECTIVES o Learn about the contributions of personal health practices (e.g., tobacco use, risky

drinking, physical activity, diet, obesity) to individual and population health status o Understand how strategies for changing individual and population health behavior

have evolved, and identify the targets and characteristics of effective interventions o Learn about the social, policy, and environmental determinants of healthy and

unhealthy behaviors and the disparities and inequities in exposure to them o Understand models and prospects for addressing behavioral risk factors through

national health care quality improvement efforts and health reform o Describe provider-oriented interventions for changing individual and population

health behavior and their infl uence in achieving national health care quality objectives

TOPICAL OUTLINE o Behavioral risk factors: overview and national goals o Changing health behavior: closing the gap between recommended and actual

health lifestyle practices o Changing provider behavior: closing the gap between best practice and usual


behavioral risk factors chronic care model clinical practice guidelines community prevention guidelines health disparities patient self-management prevention

quality improvement social ecological models social learning theory social marketing social media stages of change

Health care professionals, who live in a world in which often heroic eff orts are needed to save lives, can easily believe that medical care is the most important instrument for maintaining and ensuring health. Th is chapter explains, however, that behavioral choices—and the social, environmental and policy factors that infl uence them—are key determinants of Americans’ health and well-being.

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To some extent, the task of helping people adopt healthy lifestyles falls into multiple realms, including behavioral psychology, public health, and even social marketing. How- ever, current models for shaping healthy lifestyles include major roles for medical pro- viders and the health care systems in which they practice. Th erefore, clinicians, health care payers, managers of provider organizations, and health care policymakers need to understand and address the powerful behavioral determinants of health and illness.

Th is chapter begins with a brief overview of the major behavioral risk factors that contribute to the growing burden of preventable chronic disease in the United States—tobacco use, alcohol abuse, and sedentary lifestyle and unhealthy diet, includ- ing the joint eff ects sedentary lifestyle and unhealthy diet have on adult and childhood obesity and overweight. Th ere is now voluminous and incontrovertible evidence for the roles these behaviors and risk factors play in shaping public health.

Th e chapter then describes the progress that has been made over the past four decades to help adults modify these risk factors by intervening both at the individual level—with behavioral and clinical treatments that can be delivered in health care set- tings—and at the broader population level—with public health environmental and policy changes and social marketing and media strategies that can prompt and sup- port the development and maintenance of healthy behavior. Th eoretical advances (e.g., social learning theory and stage-based and social ecological models) have led to a clear understanding of the need for broad-spectrum, multilevel ecological approaches, and new science-based clinical and community practice guidelines have been developed to guide them.

Multifaceted eff orts have been successful in encouraging clinicians to use proven health behavior change protocols in their interactions with patients. Many parallels can be drawn between what we have learned about ways to promote health through indi- vidual behavior change and what we have learned about strategies to improve health care quality through provider behavior change. Health reform legislation at the local, state, and national levels increasingly recognizes that the signifi cant progress in both areas holds unprecedented potential for breakthrough improvements in national health status and health care quality.

■ Behavioral Risk Factors: Overview and National Goals

Acute and infectious diseases are no longer the major causes of death, disease, and disability in the United States. Today, chronic diseases—coronary heart disease, can- cer, and asthma—are the nation’s leading causes of illness and death (Murphy, Xu, & Kochanek, 2013). Given the continued aging of the population, both the prevalence and the costs of chronic illness care will continue to rise. Yet, much of the growing burden of chronic disease is preventable.

More than two decades ago, McGinnis and Foege (1993) estimated that 50% of the mortality from the 10 leading causes of death could be attributed to personal behavior. A more recent analysis by Danaei and colleagues (2009) reinforced this estimate, fi nd- ing that tobacco use, alcohol abuse, sedentary lifestyle, unhealthy diet, and overweight and obesity together accounted for more than 1 million of the 2.5 million deaths in 2005. Moreover, research fi ndings over the past two decades have established that modifying these behavioral risk factors leads to improved health and quality of life and to reduced health care costs and burden (Orleans, Ulmer, & Gruman, 2004).

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Almost 90% of Americans have reported they have at least one of these risk factors, and 52% have reported having two or more, with the highest prevalence of individual and multiple behavioral risks occurring in low-income and racial and ethnic minority groups (Coups, Gaba, & Orleans, 2004). Given these statistics, it is not surprising that many of the leading health indicators tracked by Healthy People 2020—which updates the nation’s primary objectives for promoting longer, healthier lives and eliminating health disparities—relate to healthy lifestyles. Although recent analyses suggest that our nation had an uneven record in achieving Healthy People 2010 targets in previ- ous years (see Chapter 6), more well-rounded improvements across multiple health indicators are needed in order to advance quality of life and signifi cantly reduce health disparities (Koh, 2010). Selected indicators for tobacco use, alcohol abuse, physical activity, diet, and obesity are shown in Table 7.1.

Th e past decade of social science, behavior change, and population health research also has clarifi ed that there are profound sociodemographic inequities in access to community-level and health care supports for healthy behavior and health behavior change (Adler, Bachrach, Daley, & Frisco, 2013). Th ese inequities are powerful driv- ers of health disparities and threats to the health of the nation. In fact, the Robert Wood Johnson Foundation’s Commission for a Healthier America convened in 2013 to emphasize that the nation’s health depends fundamentally on ensuring equita- ble access to the supports and resources needed for making healthy choices in the environments where people live, learn, work, and play.

All Americans do not have the same opportunities to be healthy and to make healthy choices. Sometimes barriers to health and to healthier decisions are too high for individuals to overcome, even with great motivation (Robert Wood Johnson Foundation Commission to Build a Healthier America, 2013).


Tobacco use causes more preventable deaths and diseases than any other behav- ioral risk factor, including 443,000 premature deaths from several forms of cancer, heart, and lung disease (Centers for Disease Control and Prevention [CDC], 2013b). It accounts for annual health care costs of $96 billion, in addition to an estimated $97  billion in lost productivity costs.

Smoking remains the single most important modifi able cause of poor pregnancy outcomes, accounting for 20% of low birth weight deliveries, 8% of preterm births, and 5% of perinatal deaths. For infants and young children, parental smoking is linked to sudden infant death syndrome (SIDS), respiratory illnesses, middle ear infections, and decreased lung function, with annual direct medical costs estimated at $4.6 billion. Quitting, even after 50 years of smoking, can produce signifi cant improvements in health and less use of health care services.

Although the adult smoking prevalence rate decreased to 19% in 2011, smok- ing prevalence among adults remains well above the Healthy People 2020 target of 12% (Ward, Barnes, Freeman, & Schiller, 2012). Nearly one in fi ve adults still smokes, with the highest rates (29%) among members of low-income populations. And even though rates of smoking during pregnancy also have dropped in the past decade, 10% of women reported in 2007 that they smoked during pregnancy.

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Each day, more than 3,000 children and teens become new smokers, and 30% of those young people will become addicted to tobacco. Some 18% of high school stu- dents smoke cigarettes and more than 8 million Americans, mostly adolescent and young adult males, report using smokeless tobacco, which is linked to oral cancer, gum disease, and tooth loss (American Cancer Society, 2012; CDC, 2013d). Furthermore,


B a s e l i n e a ( % ) 2 0 2 0 G o a l s ( % )

Tobacco Use

Cigarette smoking ■ Adults (18 years and older) ■ Adolescents (grades 9 through 12)

Exposure to secondhand smoke

■ Children (6 years and younger)







Alcohol Misuse/Risky Drinking

Proportion of adults who exceed guidelines

for low-risk drinking

Binge drinking

Adults (18 years and older)

Adolescents (12 to 17 years)

Deaths from alcohol-related auto crashes

72 (women);

74 (men)








Physical Activity

Regular moderate physical activity ■ Adults (18 years and older)b

■ Adolescents (grades 9 through 12)c

Vigorous physical activity

(at least 3 days per week for 20 minutes) ■ Adults (18 years and older) ■ Adolescents (grades 9 through 12)









Diet and Overweight (Older Than Age 2)

■ Proportion of people eating at least two servings of

fruit daily ■ Proportion of people eating at least three servings

of vegetables (at least one of which is dark green or

orange) daily ■ Proportion of people eating at least six servings of

grain products (at least three being whole grains) daily

Overweight and obesity ■ Obesity among adults (aged 20 years and older) ■ Overweight and obesity among children and

adolescents (aged 6 to 19)











aBaseline data extracted from sources between 1988 and 1999. bAt least 30 minutes per day. cAt least 30 minutes 5 or more days per week. Source: U.S. Department of Health and Human Services. (2011). Healthy People 2020: Understanding and improving health. Washington, DC: Author.

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public health and tobacco control experts are concerned that the availability and marketing of electronic cigarettes (e-cigarettes) may reverse recent declines in youth tobacco use initiation and tobacco addiction by reglamorizing smoking and igniting lifelong nicotine addiction (Richtel, 2013). In addition, the most recent survey data from 2009 and 2010 suggest that 42% of children ages 3 to 11 and 28% of adult non- smokers were exposed to secondhand smoke. Socioeconomics may play an impor- tant role in infl uencing smoking behaviors and exposure to tobacco-control policies. A study by Giovino and colleagues (2009) revealed that increasing median household income was associated with decreasing prevalence of smoking, higher cessation rates among smokers, higher state cigarette excise tax rates, and stronger legal protections from tobacco smoke pollution.


Th e millions of Americans who abuse or misuse alcohol include those who are alcohol dependent as well as those who engage in drinking behavior that is risky (e.g., because they drive after drinking alcohol) or harmful (e.g., because they suff er the eff ects of episodic binge drinking). About 5% of the U.S. adult population meets the criteria for alcoholism or alcohol dependence, and another 20% engages in harmful or risky drinking, defi ned as drinking more than one drink per day or seven drinks per week for women, more than two drinks per day or 14 drinks per week for men, periodic binge drinking (fi ve or more drinks on a single occasion for men; four or more for women), drinking and driving, or drinking during pregnancy.

Th e 2013 Monitoring the Future Survey indicates that 22% of high school seniors reported that they engaged in binge drinking in the 2 weeks before the survey (John- ston, O’Malley, Bachman, & Schulenberg, 2013b). Alcohol misuse is most common in young adults, particularly among White and Native American men. And exces- sive alcohol use among U.S. college students remains a problem with college students, compared with their noncollege peers, reporting more instances of heavy drinking and being drunk (Johnston, O’Malley, Bachman, & Schulenberg, 2013a). It should be noted, however, that low and moderate levels of alcohol use in adults (below those defi ned as risky) have been linked to modest health benefi ts, such as lowered risk for heart disease.

Alcohol misuse accounts for approximately 80,000 deaths and more than 2  million years of potential life lost a year (CDC, 2012). Th e estimated cost of excessive alco- hol use was recently estimated at $223  billion ( Bouchery, Harwood, Sacks, Simon, & Brewer, 2011). Of this $223 billion, $170 billion was attributed to binge drink- ing, $25  billion to underage drinking, and $5  billion to drinking during pregnancy (National Institute on Alcohol Abuse and Alcoholism [NIAAA], 2001).

Factors associated with alcohol access, such as alcohol retail density and alcohol-related advertising, can vary by certain neighborhood sociodemographic characteristics. For instance, compared with individuals living in high-income, high-education, mostly White neighborhoods, those living in low-income, low- education, predominantly minority neighborhoods have relatively higher densities of alcohol retail outlets available to them (Berke et al., 2010). Disparities also exist in completion rates for alcohol treatment, with people from minority backgrounds having signifi cantly lower completion rates than their White counterparts (Saloner & Le Cook, 2013).

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Th e health benefi ts of treating alcohol dependence are well established, and the U.S. Preventive Services Task Force (USPSTF) found that brief behavior change inter- ventions to modify risky drinking levels and practices produced positive health out- comes detectable 4 or more years later.


Th e health risks associated with physical inactivity and sedentary lifestyle are numerous. Th ey include heart disease, type 2 diabetes, stroke, hypertension, osteoarthritis, colon cancer, depression, and obesity (USPSTF, 2003a). Engagement in physical activity helps to maintain healthy bones, muscles, joints, and weight, and it is also associated with positive psychological benefi ts. Physical activity has been shown to reduce feelings of anxiety and depression and promote feelings of well-being.

In 2011, 48% of adults engaged in at least 75 minutes per week of moderate-to- vigorous aerobic exercise, a proportion that meets Healthy People 2020 guidelines for recommended physical activity among adults. In comparison, national guidelines rec- ommend at least 60 minutes of moderate-to-vigorous physical activity every day for children and teens, but the majority of young people do not meet this goal (Troiano et al., 2008). Sedentary behavior also has risen for U.S. youth, with the amount of time young people spend in sedentary behaviors, including all forms of screen time, increas- ing dramatically in recent years (Rideout, Foehr, & Roberts, 2010). Sedentary behaviors are independently linked to a higher risk for obesity, diabetes, and other chronic health problems among adults, even those who are physically active and consume healthy diets (Hamilton, Hamilton, & Zedric, 2007).

Th e adults, youth, and families most at risk for inactivity include those with lower income and education levels, those living below the poverty line in all racial and ethnic groups, members of several racial/ethnic minority groups (e.g., African Americans, Hispanics), and those with disabilities. Sallis and colleagues (2011) found neighbor- hood-level income disparities for numerous variables aff ecting everyday physical activity. For instance, residents of high-income neighborhoods reported more favor- able pedestrian and building facilities, safety from traffi c, safety from crime, and access to recreation facilities than residents of low-income areas. Furthermore, growing evi- dence now shows that within the United States, African American and Latino youth and youth living in lower-income communities do not have as many built and social environmental supports for physical activity as White children or those living in mid- dle- and higher-income communities (Taylor & Lou, 2012).

Although the societal costs of physical inactivity are diffi cult to quantify, the CDC has estimated that nearly $95 billion (adjusted to 2009 dollars) would be saved if all inactive American adults were to become active (CDC, 2013c). In addition to providing objec- tives for physical activity behaviors, Healthy People 2020 includes objectives for policies that facilitate physical activity, particularly for children. Th ese policy objectives focus on policies that promote physical activity in childcare settings as well as during recess and physical education classes in schools.


In 2005, unhealthy diet was responsible for just under 350,000 deaths in the United States. Over 40% of these deaths were attributed to either low intake of fruits or veg- etables or high consumption of transfatty acids (Danaei et al., 2009). Poor diet and

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nutrition also has contributed to a surge in overweight and obesity that has reached epidemic proportions over the last 20 years, particularly within low-income and minority populations.

Four of the 10 leading causes of death—coronary heart disease, some cancers, stroke, and type 2 diabetes—are associated with an unhealthy diet. Th e relationships between dietary patterns and health outcomes have been examined in a wide range of observational studies and randomized trials with patients at risk for diet-related chronic diseases. Th e majority of studies suggest that people consuming diets that are low in fat, saturated fat, transfatty acids, and cholesterol and high in fruits, vegetables, and whole grain products containing fi ber have lower rates of morbidity and mortality from coronary artery disease and several forms of cancer (USPSTF, 2003b). Moreover, dietary change has been found to reduce risks for many chronic diseases, as well as for overweight and obesity.

Four of the 10 leading causes of death—coronary heart disease, some cancers, stroke, and type 2 diabetes—are associated with unhealthy diet.

For decades, low-income communities of color have suffered as grocery stores and fresh, affordable food disappeared from their neighborhoods. … Without access to healthy foods, a nutritious diet and good health are out of reach (Treuhaft & Karpyn, 2010).

Th e 2010 Dietary Guidelines for Americans recommend that Americans reduce their caloric intake from solid fats and added sugars and increase the amount of fruits, vegetables, and whole grains in their diets. Again, as Table 7.1 shows, gaps exist between the recommended guidelines and actual diets of American children and adults. Numerous studies have documented wide racial, ethnic, and socioeconomic disparities in access to healthy food outlets, particularly chain supermarkets (Powell, Han, & Chaloupka, 2010), and that access to healthy food is associated with lower risks of obesity and diet-related chronic diseases. In 2010, PolicyLink and the Food Trust published “Th e Grocery Gap: Who Has Access to Healthy Food and Why It Matters,” a comprehensive review of two decades of food access research. Th is review found over- whelming evidence that access to healthy food was particularly limited for low-income communities, communities of color, and rural communities.


As poor dietary habits and physical inactivity have become endemic, national obesity rates have soared. Nearly 70% of all American adults are overweight or obese—up from 12% just one decade ago. Th is trend is alarming, given the strong links between obesity and many chronic diseases. Total expenditures related to overweight- and obe- sity-related problems were estimated at nearly $110 billion, infl ated to 2009 dollars (Finkelstein, Fiebelkorn, & Wang, 2003)—a number that will continue to increase until we have eff ective interventions to teach and reinforce healthy behavior. Even modest

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weight loss (e.g., 5% to 10% of body weight) over a period of 12 to 24 months can reduce these risks and prevent the onset of diabetes among adults with impaired glu- cose tolerance.

More alarming is the prevalence of overweight and obesity among children and adolescents (ages 6 to 19), which has increased signifi cantly over the past three decades. Like adults, overweight youth are at risk for coronary heart disease, hypertension, cer- tain cancers, and even type 2 diabetes early in life. Th e highest and fastest-rising rates of childhood obesity are seen among children and adolescents of African American or Latino descent and children (particularly girls) from low-income backgrounds— making eff orts to reach these groups a public health priority (White House Task Force on Childhood Obesity, 2010).

Reducing obesity among adults and children and adolescents represent leading health indicators for Healthy People 2020, which set the target rates of adult and child and adolescent obesity at 31% and 15%, respectively. In 2012, the IOM released the report Accelerating Progress in Obesity Prevention: Solving the Weight of the Nation, which identifi ed fi ve critical environments in which reform was urgently needed to prevent obesity: (a) environments for physical activity, (b) food and beverage envi- ronments, (c) message environments, (d) health care and work environments, and (e) school environments. In a 2013 follow-up report, Creating Equal Opportunities for a Healthy Weight, the IOM focused on the research, policies and actions most needed to ensure greater equity in opportunities to achieve a healthy weight and address the pervasive disparities in obesity prevalence and health and economic tolls in the United States.

■ Changing Health Behavior: Closing the Gap Between Recommended and Actual Health Lifestyle Practices

In 1982, the IOM published Health and Behavior, one of the fi rst scientifi c documents to establish convincingly the links between behavioral risk factors and disease and to identify the basic biopsychosocial mechanisms underlying them. Th e IOM recom- mended intensifi ed social and behavioral science research to develop interventions that could help people change their unhealthy behavior and improve their health pros- pects. Th is section presents a broad overview of the ensuing research—research that has attempted to close the gap between what we know and what we do when it comes to adopting and fostering healthy lifestyles.


Early behavior change eff orts in the 1970s and 1980s relied primarily on public edu- cation campaigns and individually oriented health education interventions. Th ey were guided by the health belief model and similar theories (the theory of reasoned action, the theory of planned behavior), which emphasized the cognitive and motiva- tional infl uences on health behavior change and recommended raising awareness of the harms of unhealthy behavior versus the benefi ts of behavior change as a primary intervention. Th ese cognitive/decisional theories were based on an underlying prem- ise that people’s intentions and motivations to engage in behavior strongly predict

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their actually doing so (i.e., “if you tell them, they will change”). Because raising health risk awareness and motivation was a primary goal, the doctor–patient relationship was seen as a unique and powerful context for eff ective health education.

Both population-level and individual clinical health education eff orts based on these theories achieved initial success. For instance, tens of thousands of smokers quit in response to the publication of the fi rst U.S. Surgeon General’s Report on Smoking and Health in 1964 and the multiple public education campaigns that followed.

By 2000, hundreds of studies had confi rmed that even brief physician advice could be a powerful catalyst for health behavior change—boosting the number of patients who quit smoking for at least 24 hours or who made some changes in their diet and activity levels. But a growing body of research found these successes to be modest— the interventions were important and perhaps necessary for changing people’s health knowledge, attitudes, and beliefs, as well as broader social norms, but not suffi cient to produce lasting behavior change. Cumulative fi ndings made it clear that people needed not only motivation but also new skills and supports to succeed in changing deeply ingrained health habits.

Th ese fi ndings spurred the development and testing of expanded multicompo- nent, cognitive behavioral treatments designed not only to (a) raise perceptions of susceptibility to poor health outcomes and benefi ts of behavior change, but also to (b) teach the skills required to replace ingrained unhealthy habits with healthy alterna- tives and to (c) help people make changes in their natural (home, work, social) envi- ronments to assist them in successfully establishing and maintaining new behaviors. Social learning theory, which emphasized interactions between internal and external environmental infl uences on behavior, provided the primary theoretical basis for this evolution, and it remains the dominant model for eff ective cognitive behavioral health behavior change interventions.

Lifestyle change interventions derived from social learning theory combined edu- cation and skills development. Th ey included techniques such as modeling and behav- ioral practice to help people learn not just why, but how, to change unhealthy habits. For instance, they taught eff ective self-management and behavior change skills, such as goal-setting, self-monitoring, and stress management skills for people who had relied on smoking, eating, or drinking as coping tactics. Th ey taught skills for reen- gineering the person’s immediate environments, replacing environmental cues and supports for unhealthy behavior with new cues and supports for healthy ones (e.g., removing ashtrays, replacing unhealthy high-calorie foods with healthy alternatives, fi nding exercise buddies, and avoiding high-risk events, such as offi ce parties at which risky drinking was expected).

Th e “nudge” principles of modern behavioral economics that, for instance, are used to advocate for replacing soda with water and French fries with apple slices in fast food children’s meals have their roots in these approaches. Another principle was that problem-solving should start with helping people set realistic, personal behav- ior change goals and go on to address the unique barriers and relapse temptations they face. Finally, new social learning theory treatments taught patients to take a long- range perspective, viewing repeated attempts over time as part of a cumulative learn- ing process rather than as signs of failure.

Eff ective multicomponent treatments were initially delivered and tested in multi- session, face-to-face group or individual clinic-based programs, typically off ered in clinical or medical settings and usually led by highly trained (e.g., MD, PhD)

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professionals. Results were extremely encouraging, with substantial behavior change— for example, smoking quit rates as high as 40%—maintained 6 to 12 months posttreat- ment. However, participants were typically self-referred or recruited based on high readiness or motivation for change, and thus represented a small fraction of those who could benefi t.

Th e next push was to distill core elements of this treatment approach into lower- cost formats with much wider reach. Th ese formats included paraprofessional-led worksite clinics, self-help manuals and programs, and brief primary care counsel- ing. Absolute treatment eff ects were smaller—for example, 20% long-term smoking quit rates—but potential population eff ects were much greater. Only 5% to 10% of smokers might ever attend intensive clinics, whereas 70% of U.S. smokers might receive brief, eff ective tobacco interventions during visits with their primary care physicians, introducing a context that could double the nation’s annual quit rate. Access to telephone quitlines providing free or no-cost counseling and medication proved equally eff ective and had the benefi t of better reaching smokers in sociode- mographic populations with limited access to high-quality health care (Schlam & Baker, 2013).

Development of the stages-of-change model in the mid-1980s accelerated the shift from individual to population intervention models and has had a profound, lasting eff ect on the design and delivery of health behavior change programs. Studying how people went about changing on their own, Prochaska and DiClemente (1983) discov- ered that health behavior change was a multistage process:

■ Precontemplation: no plans to change behavior; behavior is not seen as a problem ■ Contemplation: serious plans to change behavior within the next 6 months, weighing

the pros and cons, and building supports and confi dence ■ Preparation: plans to change are imminent; small initial steps are taken ■ Action: active attempts are made to quit smoking, drink less, become more active, or

change to a healthier diet and to sustain changes for up to 6 months ■ Maintenance: change is sustained beyond 6 months ■ Relapse: the individual returns to any earlier stage and begins to recycle through the

earlier stages

Based on these fi ndings, diff erent skills, knowledge and types of treatment were recommended to help people in each stage; motivational and educational interven- tions were helpful to people in the precontemplation and contemplation stages, and active cognitive-behavioral interventions were needed for those in the preparation, action, and maintenance stages. Many population surveys found that, at any given time, the vast majority of people (80%) are in the precontemplation and contemplation stages, which helped to explain why so few enrolled in weight loss or quit-smoking clinics, even when these were free and accessible.

Th e stages-of-change model has been successfully applied to numerous behav- ioral health risks and has helped people with multiple risk factors make progress in changing several at the same time. One of the greatest eff ects of this model was to propel a dramatic shift away from one-size-fi ts-all approaches to individualized, stage- tailored strategies that could be applied eff ectively to entire populations—in commu- nities, worksites, and health care settings—assisting people at all stages of change, not just the motivated volunteers in action stages, but also those needing motivation

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and support to reach action stages. Th e model stimulated the development and wider use of eff ective motivational interventions for clinical settings, especially motivational interviewing, which seeks to help people strengthen their determination to change behavior (Emmons & Rollnick, 2001).

Originating as they did in the study of successful self-change, stages-of-change models fueled a burgeoning movement toward low-cost self-help tools and treatment formats. Some tools capitalized on computer-based and interactive communication technologies to design and deliver print and web-based materials, interactive video, and telephone interventions geared to the individual’s stage of change. Th ese treat- ments also addressed many other variables important for tailoring treatment meth- ods and improving treatment outcomes—for example, degree of nicotine addiction, unique behavior change assets, barriers, and cultural norms.

A fi nal force in the evolution from individual to population-based approaches was the emergence of social marketing strategies, which apply the concepts and tools of suc- cessful commercial marketing to the challenge of health behavior change. Basic mar- keting principles and methods—including market analysis, audience segmentation, and a new focus on consumer wants and needs—catalyzed the development of cultur- ally appropriate communication and intervention strategies for reaching underserved, high-risk, low-income, and racial/ethnic minority populations for whom the preva- lence of behavioral health risks is often highest and access to health-promoting envi- ronments and resources is often lowest. For instance, one model program employed social marketing strategies to tailor a no-cost smoking cessation intervention to the needs of African American smokers, using messages on Black-format radio stations to promote culturally tailored quitline counseling and materials. Results included a higher quitline call rate and a higher quit rate among African Americans receiving the tailored intervention versus a generic one.

Social marketing strategies apply the concepts and tools of successful commercial marketing to the challenge of health behavior change.

More recent eff orts focus on creating and harnessing the power of social network support for health behavior change (Christakis & Fowler, 2008). Th rough the Inter- net, individuals can share and receive health information through open forums, such as those provided through Facebook or Twitter. Th ey can upload health-related apps or access online communities intentionally designed to promote good health. Th ese social media tools have made health interventions more accessible than ever before by delivering strategic, eff ective, user-friendly messages directly to target audiences, even right into people’s hands via their hand-held mobile devices.

Still, more research is needed to assess the eff ect of social media on health behavior. Th e practice of using social media tools to promote health has become so widespread in the past decade that the CDC now off ers communication guidelines and a social media toolkit for creating social messages in health communications and activities (CDC, 2013a). Furthermore, in 2013, the National Library of Medicine, a division of the Department of Health and Human Services (DHHS), announced its plan to install software that will mine Facebook and Twitter to assess how Tweets and Facebook posts can be used as change agents for health behaviors.

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Th e progress in health behavior change research and treatment set the stage for the development of brief, individually oriented, primary care health interventions that could be widely off ered to all members of a practice, health plan, or patient population.

Th ese eff orts were based on a strong rationale for primary care interventions to address behavioral health risks. Patient surveys have repeatedly found that patients expect and value advice from their providers about diet, exercise, and substance use and are motivated to act on this advice. Most primary care providers describe health behavior change advice and counseling as an essential part of their role and responsi- bilities.

Th e unique extended relationship that is the hallmark of primary care provides multiple opportunities over time to address healthy behavior in a “string of pearls” approach, capitalizing both on teachable moments—for example, introducing physical activity or diet counseling when test results show elevated cholesterol levels—and on a therapeutic alliance that often extends beyond the patient to include key family mem- bers. Moreover, evidence suggests that the health benefi ts and cost-eff ectiveness of evidence-based preventive health behavior change interventions rival and frequently surpass those of remedial disease treatments (Maciosek et al., 2006).

In the minimal contact primary care counseling interventions that were distilled from the successful multicomponent models, the physician was seen as the initial catalyst for change, providing brief motivational advice, social support, and follow- up, with referral to other staff members or community resources for more intensive assistance. Stage-based and social marketing approaches held the potential to reach and assist entire populations of patients, including those not yet motivated for change and those in underserved and high-risk groups. As social media introduced innovative options to promote health information, computer-based, patient-tailored, and popu- lation-targeted interventions provided new ways to reduce provider burden. In fact, in 2013, the Community Preventive Services Task Force added mobile phone–based quit smoking counseling to its roster of recommended tobacco control interventions.

Progress in developing eff ective minimal-contact, primary care interventions occurred fi rst in the area of smoking cessation, culminating in the development of an evidence-based, practice-friendly intervention model now known as the 5A’s: ask, advise, agree, assist, arrange follow-up. Th e 5A’s model was found to be eff ective when used by a variety of health care providers (physicians, nurses, dentists, dental hygien- ists), with as few as 2 to 3 minutes of in-offi ce provider time.

Th e model starts with asking about tobacco use, leading to clear and personal advice to quit for smokers (or congratulations for quitters), and the off er of help. Th e agree step starts with assessing patient readiness to quit and goes on to establish a goal and quitting plan. For those not ready to quit, assistance includes a recommended motivational intervention; for those who are ready to quit, assistance combines brief face-to-face or telephone-based behavior-change counseling with FDA-approved pharmacotherapy, such as nicotine gum, patch, nasal spray or inhaler; bupropion hydrochloride (Zyban); varenicline (Chantix); or some combination of these, unless medically contraindicated (e.g., in pregnancy).

Behavioral counseling was eff ective when provided through multiple formats— self-help materials and face-to-face or telephone counseling—and there is a clear dose-response relationship between the amount of counseling and quit rates. Eff ective

C h a p t e r 7 . H e a l t h a n d B e h a v i o r 131

follow-up arrangements include planned visits, calls, or contacts to reinforce progress, adjust the quitting plan to better meet individual needs, or refer for more intensive help. One-year quit rates for patients receiving these interventions are typically two to three times higher than the 5% to 7% quit rates among people who try quitting on their own. In fact, the CDC and Prevention and Partnership for Prevention found the 5 A’s intervention to be one of the most eff ective and cost-eff ective of all evidence-based clinical preventive services (Maciosek et al., 2006).

Th e 5A’s model has been formally adopted by the USPSTF as a unifying conceptual framework or guideline applicable to addressing all behavioral health risks, including risky drinking, physical activity, diet, and obesity. In most cases, the USPSTF found that counseling interventions could produce clinically meaningful, populationwide health improvements that were sustained for at least 6 to 12 months. Although there are many common elements, the specifi c intervention components and intensity of recommended strategies vary from behavior to behavior, as does their eff ectiveness with unselected versus high-risk patients. Primary care providers may intervene more forcefully with healthy patients when they are known to be at high risk for a particular chronic disease, and patients at high risk may feel more vulnerable and motivated to act on the advice and assistance they receive.

Th e fi rst step is always to assess, not only the relevant behavior (using a stan- dard health-risk appraisal or brief screening that can easily be administered in a busy practice setting), but also the individual factors that are helpful in tailoring the inter- vention, such as medical and physiologic factors, motives, barriers, patient’s stage of change, social support, and cultural values. Based on this information, and with refer- ence to the patient’s immediate health concerns and symptoms, the clinician provides brief, personalized advice, expressing confi dence in the patient’s ability to change and soliciting the patient’s thoughts about the recommended changes.

Th e next critical step is to negotiate and agree on a collaboratively defi ned behav- ior-change goal and treatment plan, which commonly includes practical problem- solving to assist the patient in addressing personal change barriers, building social support, developing a more supportive immediate social and physical environment, and securing adjunctive behavior change resources and pharmacologic aids, such as nicotine replacement. Adjunctive resources can include evidence-based face-to-face, telephone, or mobile phone counseling; targeted or generic self-help materials; and interactive Internet-based tools that are tailored to a patient’s gender, age, racial/eth- nic or cultural group, health status or condition, stage of change, and other relevant variables. Th ese resources can be used before, during, and after the offi ce visit.

Th e fi nal step is to arrange follow-up support and assistance, including referral to more intensive or customized help, or to online tools and supports to help the patient maintain behavior change maintenance.

Th ese new guidelines provided unprecedented scientifi c support for the USPSTF assertion that “the most eff ective interventions available to clinicians for reducing the incidence and severity of the leading causes of disease and disability in the United States are those that address patients’ personal health practices” (1996, p. iv).

However, several important limitations and gaps remain. Th e greatest limitation is the lack of long-term maintenance after successful behavior change for 12 months or longer. Th is is not surprising, given that patients return to the environments that shaped and supported their unhealthy lifestyles and choices. Higher maintenance rates are achieved in clinic-based programs that off ered extended booster or maintenance

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sessions, providing ongoing social support and behavior change assistance, or in those that helped patients to create an enduring “therapeutic microenvironment” to shield them from unhealthy infl uences—for example, implementing an in-home smoking ban, arranging for the delivery of recommended diet foods, or arranging ongoing behavior change buddies.

Researchers and policymakers agree that current research and evidence gaps are the result of too few studies that have developed and tested primary care interventions for children, adolescents, and underserved populations.


Th e shift to population-based models of health promotion and disease prevention was prompted by several factors:

■ Th e success of eff ective, brief, and intensive interventions based on social learning theory, which gave greater prominence to environmental factors in behavior

■ Th e emergence of new stage-based and social marketing models for population- wide interventions

■ Th e disappointing reach and long-term eff ectiveness of even the most successful cognitive-behavioral treatments

Th e lackluster performance of individual treatment approaches was especially apparent when contrasted with new evidence from public health research showing far-reaching and lasting health eff ects from environmental and policy changes that eliminated the need for individual decision making. A prime example is the develop- ment of safer roads and more crashworthy automobiles, combined with shifts in laws and norms regarding seatbelt use and drinking and driving, which collectively pro- duced a dramatic decline in auto-related deaths and injuries.

With the stage well set, the fi nal push for a change in approach came in the 1990s with the development of social ecological models of health behavior. Th ese models integrate behavioral science with clinical and public health approaches. Th ey rede- fi ned what the targets of successful health interventions need to be—not just indi- viduals but also the powerful social contexts in which they live and work. And they emphasized that a person’s health behavior is aff ected by multiple levels of infl uence: interpersonal factors (e.g., physiologic factors, knowledge, skill, motivation), social factors (e.g., social–cultural norms, supports, and networks), organizational and com- munity factors, broader environmental infl uences, and public policies.

Proponents of the ecological model recommend multilevel strategies that address all these levels of infl uence (IOM, 2000, 2012, 2013; Koh, 2010). Specifi cally, they pro- pose that educational and clinical interventions to improve the motivation, skills, and supports for individual behavior change (e.g., for permanently quitting smoking or risky drinking, or for adopting and maintaining healthier activity and eating patterns) would be more successful when policies and infl uences in the wider environment prompt and reinforce healthy behavior through, for example, clean indoor air laws and access to safe and attractive places to walk or bike and obtain healthy, aff ordable foods.

A strong, early proponent of the ecological approach to prevention, McKinlay (1995) proposed a template for more eff ective population health promotion strat- egies that linked individual-level, clinical health behavior change strategies with

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broader, population-level health promotion eff orts, including upstream policy and environmental interventions. Th e model McKinlay proposed (see Table 7.2) rec- ommended interventions across a broad spectrum of factors, linking downstream individual clinical approaches with midstream interventions aimed at health plans, schools, worksites, and communities with upstream macro-level public policy and environmental interventions strong enough to subvert or redirect countervailing societal, economic, and industry forces. In essence, McKinlay was one of the fi rst to argue that success in achieving lasting populationwide health behavior change required a “full court press.”

In its landmark review of the past three decades of progress in population health promotion, the IOM’s (2000) report, Promoting Health: Intervention Strategies from Social and Behavioral Research, recommended individual-level interventions aimed at those who possess a behavioral risk factor or suff er from risk-related disease. For these groups, the emphasis is on changing rather than preventing risky behavior. Popula- tion-level interventions that target defi ned populations in order to change and/or pre- vent behavioral risk factors may involve mediation through important organizational channels or natural environments. State and national public policy/environmental


D o w n s t r e a m I n t e r v e n t i o n s

M i d s t r e a m I n t e r v e n t i o n s

U p s t r e a m I n t e r v e n t i o n s

Individual-level interventions

aimed at those who possess a

behavioral risk factor or suffer

from risk-related disease.

Emphasis is on changing rather

than preventing risky behavior.

Population-level interventions

that target defi ned populations

in order to change and/or

prevent behavioral risk factors.

May involve mediation through

important organizational

channels or natural


State and national public policy/

environmental interventions that

aim to strengthen social norms

and supports for healthy behavior

and redirect unhealthy behavior.

■ Group and individual


■ Worksite and community-

based health promotion/

disease prevention programs

■ National public education/

media campaigns

■ Patient health education/cog-

nitive behavioral interventions

■ Health plan–based primary-

care screening/intervention

■ Economic incentives (e.g.,

excise taxes on tobacco

products, reimbursement for

effective primary care, diets,

and extensive counseling)

■ Self-help programs and

tailored communications

■ School-based youth

prevention activities

■ Policies reducing access to

unhealthy products (e.g.,

pricing, access, labeling)

■ Pharmacologic treatments ■ Community-based

interventions focused on

defi ned at-risk populations

■ Policies reducing the

advertising and promotion

of unhealthy products and


Source: From McKinlay, J. B. (1995). Th e new public health approach to improving physical activity and autonomy in older populations. In E. Heikkinen, J. Kuusinen, & I. Ruoppila (Eds.), Preparation for aging (pp. 87–102). New York, NY:  Plenum.

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interventions aim to strengthen social norms and supports for healthy behavior and redirect unhealthy behavior.

(I)t is unreasonable to expect that people will change their behavior easily when so many forces in the social, cultural, and physical environment conspire against such change (Institute of Medicine, 2000).

Th e IOM used McKinlay’s broad-spectrum, multilevel model for describing the balance needed between the dominant clinical and individually oriented approaches to disease prevention, on the one hand, and the population-level approaches address- ing the generic social and behavioral factors linked to disease, injury, and disability, on the other. Observing that many forces in the social, cultural and physical environment often constitute enormous barriers to health behavior change (IOM, 2000, p. 2), the authors recommended population-based health promotion eff orts that:

■ Use multiple approaches (e.g., education, social support, laws, incentives, behavior change programs) and address multiple levels of infl uence simultaneously (i.e., indi- viduals, families, communities, nations)

■ Take account of the special needs of target groups (e.g., based on age, gender, race, ethnicity and social class)

■ Apply a long view of health outcomes, because changes often take many years to become established

■ Involve a variety of sectors in society that have not traditionally been associated with health promotion eff orts, including law, business, education, social services, and the media


Th e last three decades of progress in national tobacco control, hailed by some as one of the greatest public health successes of the second half of the 20th century, is the example most often used to illustrate the power and promise of ecological approaches for health intervention.

Although major disparities in tobacco use and its addiction remain, regressive tobacco tax and price increases have proved especially eff ective in certain high-risk and underserved populations—including adolescents, pregnant women, and low-income smokers. State telephone quitlines (1-800-QUIT-NOW) off ering cost-free counseling and medication have greatly expanded the reach of evidence-based individual cessa- tion treatments to traditionally underserved low-income and minority populations.

Refl ecting the growth in research evaluating the population eff ects of midstream and upstream interventions for tobacco control, the CDC’s Task Force for Com- munity Preventive Services was launched in 1996 to conduct systematic reviews of community-based and policy interventions to change health behavior, similar to the reviews conducted by the USPSTF of downstream clinical preventive interventions. Based on its review of evidence for 14 diff erent tobacco control interventions, the CDC makes these recommendations:

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■ Smoking bans and restrictions to reduce exposure to environmental tobacco smoke ■ Tax and price increases and mass media campaigns to reduce the number of youth

who start smoking and to promote cessation ■ Telephone quitline and mobile phone-based support, as well as a number of health

care system interventions, also to increase cessation

Similar ecological models have been described and proposed for each of the other major behavioral risk factors discussed in this chapter—risky drinking, physical inactivity, dietary behavior change, and obesity. Th ese are summarized on the CDC’s Community Preventive Services Task Force Community Guide website (CDC, 2013b) and in the Task Force’s 2013 Th ird Annual Report to Congress, presenting more than 200 evidence-based recommendations for promoting better health among community members.


A great sense of urgency surrounds the need to identify evidence-based full-court press strategies that can halt the nation’s current obesity epidemic, especially among children (IOM, 2010, 2012; White House Task Force, 2010). Th e dramatic rise in the prevalence of overweight and obesity among youth and adults over the past several decades is primarily due to environmental and economic changes aff ecting behavior on both sides of the energy balance equation; that is, the amount of energy (calories) used versus the amount consumed.

Th e cumulative eff ects of technology—such as automobile-dependent transporta- tion and more sedentary jobs—along with changes in lifestyles in typical suburban environments, which limit the places to which adults and children can walk, have reduced the amount of physical activity in everyday life.

At the same time, increased access to low-cost, sugar-laden, and high-fat foods and beverages, increased exposure to marketing for these unhealthy products, larger portion sizes, increased restaurant use, an exodus of grocery stores and other sources of fresh fruits and vegetables from cities to suburbs, and the rising cost of fresh pro- duce relative to soda and snack foods have all played a critical role in promoting exces- sive caloric intake, especially in low-income and racial/ethnic minority populations. Pervasive racial/ethnic disparities in access to safe places to walk, bike, and play have sparked several studies of socioeconomic diff erences in access to community sports areas, parks, swimming pools, beaches, and bike paths.

Rapid progress is being made to understand the environmental and policy factors that aff ect physical activity and identify promising multilevel, broad-spectrum inter- ventions to address the nation’s obesity epidemic. Th e CDC’s Community Preventive Services Task Force reviewed research on interventions and found evidence for rec- ommendations spanning the full McKinlay model. Th ese include the following:

■ Downstream health behavior change programs that increase social supports for physical activity and exercise (e.g., health care provider reminder systems plus pro- vider education)

■ Midstream requirements for school physical education classes that increase the time students spend in moderate or vigorous physical activity and “point of deci- sion” prompts on elevators and escalators that encourage people to use nearby stairs

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■ Upstream eff orts to create, or increase, access to safe, attractive, and convenient places for physical activity, along with informational outreach to change knowledge and attitudes about the benefi ts of and opportunities for physical activity

Recommendations from the CDC’s Community Guide to Increasing Physical Activity address transportation and land-use policies, ranging from zoning guide- lines to improved federal, state, and community projects for walking and bicycling (2013e). Together, these guidelines have provided a strong, science-based blueprint for multisector eff orts by professionals in public health, urban planning, transpor- tation, parks and recreation, architecture, landscape design, public safety, and the mass media to close the gaps between recommended and actual physical activity levels for U.S. children and adults.

Some upstream eff orts come in the form of federal payments that can help commu- nities create or improve access to healthy options. Th e Patient Protection and Aff ord- able Care Act (ACA), passed in 2010, provides states and communities with a new stream of funds to promote healthy living by creating and improving multiple factors— such as housing, education, child care, and food outlets—in ways that address health disparities, improve access to behavioral health services, and reduce and control behav- ioral risk factors.

Other federal and state health-related policy changes have been infl uential in reducing childhood obesity, particularly among children from low-income families who participate in the Special Supplemental Nutrition Program for Women, Infants, and Children (better known as WIC). A 2008 overhaul of the WIC food package changed the mix of foods covered by the program, making more fruits and vegetables, skim and low-fat milk, and whole grain breads and cereals available to participants. Grocery stores and schools serving WIC children changed their inventories to meet the new standards, which benefi tted not only WIC families but also entire communi- ties. In 2013, evidence pointed to declining obesity rates among children from low- income communities in 18 states and one U.S. territory (CDC, 2013c).

Among U.S. cities, Philadelphia set itself apart by reporting a signifi cant decrease in obesity between 2006 and 2010, particularly among schoolchildren in grades K through 12 and adolescents of color. Th ese decreases emerged after the city instituted a decade-long, multipronged eff ort to combat obesity and infl uence health behavior. Over those 10 years, Philadelphia implemented the following:

■ Nutrition education to public school students whose families are eligible for the federal Supplemental Nutrition Assistance Program

■ Financial incentives to attract grocers to open stores in underserved areas ■ A school district–wide wellness policy ■ Improved nutritional off erings in schools, which included the removal of deep-fried

foods, sodas, and sugar-sweetened beverages ■ Required calorie postings at chain restaurants

With respect to high-risk populations and environments, systematic surveillance can increasingly monitor the prevalence of behavioral risk factors and related health- promoting programs, resources, and policies. Such surveillance systems, which already exist for tobacco control and are rapidly developing for physical activity, establish a national baseline that makes it possible to assess the eff ects of specifi c interventions

C h a p t e r 7 . H e a l t h a n d B e h a v i o r 137

and to evaluate important local, state, and national intervention eff orts (Sallis et al., 2011). Although some events and political changes may create opportunities for rapid change, as did the Tobacco Master Settlement Agreement, a long-term view is essen- tial. Most successful health promotion and social change eff orts have required decades of hard work.

As we learned from the success of tobacco control, highly credible scientifi c evi- dence can persuade policymakers and withstand the attacks of those whose interests are threatened. Collaboration among public health researchers, advocates, commu- nicators, strategists, and health care providers is needed to ensure that high-quality evidence reaches policy decision-makers at the right times.

Th e diffi culty of implementing eff ective broad-spectrum approaches should not be underestimated. Powerful political opponents benefi t from the sale, promotion, and marketing of unhealthy products. Other barriers include industry lobbying, chronically limited public support for healthy public policies, and inadequate funding for and enforcement of eff ective policies and programs. Creating a favorable political climate requires advocacy in order to instigate broad public pressure and support for change, clear and well-communicated evidence of public demand and support for change, and evidence of the benefi cial health and economic eff ects of proposed programs and policies.

■ Changing Provider Behavior: Closing the Gap Between Best Practice and Usual Care

One of the most basic measures of national health care quality is the extent to which patients receive recommended, evidence-based care. Evidence-based guidelines exist for prevention-oriented primary care interventions related to behavioral risks, and putting these guidelines into practice has become an important objective for national health care quality improvement eff orts.

More than a decade ago, the IOM’s (2001) transformative report, Crossing the Quality Chasm, set forth a bold national agenda for improving health care quality across the full spectrum of care, from prevention to acute and chronic illness and palliative care, including health behavior change. A follow-up IOM report (2003) selected health behavior change interventions for tobacco and obesity as two of the top 20  priorities for national action.

Th ese reports and the reviews and recommendations issued over the past decade by the USPSTF and CDC’s Community Preventive Services Task Force have had a sig- nifi cant infl uence on the prevention and public health provisions of the ACA, enacted in 2010. Th ey helped researchers, health professionals, and policymakers understand the need for a multisystemic approach for obesity prevention—one that involved a range of recommendations to build sustainably healthy communities that off er oppor- tunities for everyone to make healthy, productive choices. Th is strategy was outlined in the IOM’s 2012 report, Accelerating Progress in Obesity Prevention: Solving the Weight of the Nation, which emphasized the need for targeted health interventions to reduce the inequitable distribution of health promotion and health care resources and risk factors that contribute to health disparities among members of low-income, low-resource communities.

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Despite strong evidence for behavioral prevention in primary care, signifi cant gaps persist between recommended and actual care. A landmark study of the qual- ity of outpatient health care found that U.S. adults, on average, receive about half the services recommended for people with their specifi c health problems and even less— only 18%—of the recommended lifestyle screening and counseling services ( McGlynn et al., 2003). It is safe to say that most patients who could benefi t from health behav- ior change counseling—particularly those from lower-income and economically dis- advantaged racial/ethnic populations, communities, and neighborhoods—are not receiving it. In most studies, patients receive only the fi rst two of the 5A’s—assessment and advice.

■ Tobacco use: According to national data in 2010, 68% and 19% of visits to offi ce- based ambulatory care settings involved tobacco use screening and tobacco cessa- tion counseling, respectively (DHHS, 2011). Th ese percentages, though higher than those in the baseline year of 2007, are below the Healthy People 2020 target.

■ Alcohol use: A 2005 study found that less than one third of individuals who saw a general medical provider were screened for alcohol or drug use (D’Amico, Paddock, Burnam, & Kung, 2005). Th e probability of problem drinkers in the study’s sample being screened for alcohol use was less than 50%.

■ Physical inactivity and unhealthy diet: National surveys indicate that in 2010 9% of physician visits by children and adults included counseling about exercise (DHHS, 2011). Among patients diagnosed with diabetes, cardiovascular disease, or hyperlipidemia, the percentage of their physician visits that included counseling or education related to exercise was 12%. Survey data also found that in 2010, 14% of physician visits by children and adults included counseling about nutrition or diet. Th is percentage increases to 19% for patients diagnosed with diabetes, cardiovascu- lar disease, or hyperlipidemia.

■ Obesity: In 2008, just under half of primary care physicians regularly assessed body mass index for their child, adolescent, and adult patients (DHHS, 2011). Similarly, more recent surveys of family practitioners ( Sesselberg, Klein, O’Connor, & John- son, 2010) and pediatricians (Klein et al., 2010) found that only about half of these primary care providers (45% and 52%, respectively) routinely assess BMI in chil- dren over age 2. Among adult patients diagnosed with obesity, the percentage of physician visits that include counseling or education regarding weight reduction, physical activity, or nutrition was 28% (DHHS, 2011).

Systematic evidence reviews beginning in the 1990s have found that most edu- cational approaches, including traditional continuing medical education (CME), had

The Institute of Medicine’s 2012 Report Accelerating Progress in Obesity Prevention presents an ambitious vision of “a society of healthy children, healthy families, and healthy communities in which all people realize their full potential” made possible through “large- scale transformative changes focused on multi-level environmental and policy changes” (p. 19).

C h a p t e r 7 . H e a l t h a n d B e h a v i o r 139

limited eff ect. More interactive and skills-based educational eff orts that used prin- ciples of adult learning and social-learning theory (including modeling by respected peer “opinion leaders”) were somewhat more eff ective. Multicomponent interventions that addressed the multiple intrapersonal and environmental barriers to provider adherence, especially system barriers, were most eff ective.

Th e limited success of “if you tell them, they will change” provider education strategies drew critical attention to the many system-level barriers to adherence to evidence-based guidelines and recommendations, including the pressure of time (in the face of more urgent medical issues), inadequate offi ce supports, a lack of provider and patient resources, and missing fi nancial incentives.

Follow-up studies confi rmed that clinician training was most eff ective when com- bined with eff orts to create offi ce supports to prompt, facilitate, and reward the deliv- ery of preventive interventions, especially behavioral counseling, and that the most successful interventions were not one-size-fi ts-all, but tailored to the unique circum- stances present in any particular offi ce practice.


Collectively, these fi ndings led to a shift in understanding what the targets of interven- tions to change provider health care practices needed to be. Crabtree and colleagues (1998) introduced a practice ecology model emphasizing the need to address not just the behavior of individual providers, but also the powerful eff ects of the health care systems and environments in which providers practice.

Th ey and other proponents of a broader view of health care improvement empha- sized the need for broad-spectrum strategies addressing multiple levels of infl uence: downstream intrapersonal/individual provider-level factors; midstream interpersonal/ practice team, offi ce microsystems and health plan infl uences; and upstream macro- level health care systems and policies (Goodwin et al., 2001) (See Figure 7.1).

Responding to the same evidence, the IOM’s (2001) Crossing the Quality Chasm report recommended a fundamental reengineering of the nation’s health care sys- tem—moving from a system designed primarily to support and pay for the delivery of reactive acute and remedial illness care to one that would support and pay for the pro- active, preventive, and behavioral care needed to prevent and manage chronic disease.

It has been said that “an ounce of prevention takes a ton of offi ce system change.” Until recently, we lacked a coherent model for what this “ton of change” involved. Filling this void, Wagner, Austin, and Von Korff (1996) reviewed the research on eff ec- tive chronic illness care and prevention and devised a model for the multiple interlock- ing systems supports required for eff ective planned, proactive chronic illness care—the chronic care model.

Th is model applies equally to the prevention and to the treatment of chronic dis- ease, both of which require helping patients to change the behavioral risk factors that cause or complicate their illnesses. Th e chronic care model helped to pave the way for the concept of the “medical home” as a means for reorganizing primary care practices to improve health outcomes and reduce health care costs and disparities.

Th e six key elements of the chronic care model can be implemented at the level of the offi ce practice or larger health care delivery system. Each element includes interventions that are planned rather than reactive, patient-centered and informed

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by individually relevant patient data, proactive, involving scheduled outreach and fol- low-up, and population-based—that is, focused on an entire panel of patients with a specifi c behavioral risk factor, disease, or condition and not just on individuals who seek care. Both prevention and treatment of chronic conditions require regular (non- symptom-driven) screening and counseling for health behavior change, involve ongo- ing planned care with proactive follow-up, depend on active patient involvement in decision making and adherence, and require links to supportive community resources and services.

As an example, the chronic care model proved a helpful heuristic for describ- ing an organization-wide initiative at Group Health Cooperative of Puget Sound that integrates screening and treatment for tobacco use with routine primary care. Th is successful plan applied all six model elements as follows:

■ Health care organization: Health plan leaders made reducing tobacco use their top prevention priority, provided fi nancial and other incentives to providers (including hiring dedicated clinic counselors), and eliminated patient copayments for counsel- ing.

■ Clinical information systems were used to create a registry of the tobacco users enrolled in the health plan, track their use of treatment resources and programs, and generate proactive telephone quitline calls for patients and feedback reports for providers.

F I G U R E 7 . 1 C O M P R E H E N S I V E A P P R O A C H T O C H A N G I N G P R O V I D E R P R A C T I C E .


Managed care regulatory standards, performance

measurement/accreditation (e.g., NCQA/HEDIS)

Office-level reminder systems, detailing

local opinion leaders

Individual provider-level: CME strategies

Health plan level: organizational

mandates/incentives, clinical information systems, technical

assistance, CQI

National/state/local performance mandates,

reimbursement and pay for performance



C h a p t e r 7 . H e a l t h a n d B e h a v i o r 141

■ Decision support tools included extensive provider training, ongoing consultation, automated patient assessment and guideline algorithms, and reminder tools.

■ Practice redesign and self-management support included self-help materials and a telephone quitline to deliver counseling and pharmacotherapy without burdening the provider.

■ Community resources and policies included referral to community and worksite quit-smoking clinics and related healthy lifestyle change programs, focused on stress management, exercise, and weight loss, as well as support for worksite smok- ing cessation. Th eir eff orts also involved campaigns and smoking restrictions and expanded state funding for tobacco prevention and control programs.

Th e chronic care model has provided a unifying approach to health care quality improvement that cuts across diff erent types of health behavior and chronic conditions with the promise of a more effi cient, sustainable, and cost-eff ective approach to health care quality improvement. Th is is especially the case given the development of several successful continuous quality improvement (CQI) techniques for putting chronic care model–based system changes into place. Promising midstream CQI techniques have been used to design and test offi ce system changes to fi nd ways to eliminate barriers and strengthen the supports for recommended care, often through a series of “rapid cycle” (plan-do-study-act) improvement eff orts.

Successful preventive CQI interventions have been delivered through learning col- laboratives involving multiple health care teams from diff erent organizations that meet and work over a 12- to 18-month period with faculty experts in CQI techniques and in the type of care targeted for improvement (e.g., tobacco dependence, obesity, diabe- tes management). Individual practice-level, chronic care model–based improvements involve planning, implementing, evaluating, and refi ning changes in individual prac- tices. Th ese eff orts have substantially increased the proportion of patients—including the most disadvantaged patients—who receive evidence-based preventive care and for whom individual behavior change plans were developed and implemented.

Eff ective individual practice consultation models for CQI with a focus on multiple risk behavior change were pioneered in the STEP-UP (Study To Enhance Prevention by Understanding Practice) trial conducted by Goodwin and colleagues (2001). Th is randomized, controlled trial tested a brief practice-tailored approach to improving preventive service delivery, emphasizing improving rates of health habit counseling and the usage of eff ective community-based programs and supports for health behav- ior change.

Intervention practices received a one-day practice assessment, an initial practice- wide consultation, and several brief follow-up visits to assess and address practice- specifi c barriers. All interventions were delivered by a specially trained nurse facilitator who helped practices to identify promising changes and presented a menu of tools for implementing them (e.g., reminder systems, fl ow sheets, patient education materials, clinical information systems), including a practice improvement manual. Th is brief CQI intervention resulted in signifi cant improvements at 6 and 12 months, which were main- tained at a 24-month follow-up.

Improvements in behavioral counseling services were especially dramatic. Th e investigators attributed these lasting results to the maintenance of the practice and system changes that were made—changes that may have been easier to institutionalize because they were tailored to the unique characteristics of each practice.

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Th e success of the STEP-UP trial and similar chronic care model–based primary care practice redesign approaches inspired the Robert Wood Johnson Foundation’s Prescription for Health national program. Th is program funded 27 studies in primary care practice–based research networks to discover and test innovative ways of deliver- ing 5A’s interventions for two or more health behaviors: tobacco use, sedentary life- style, unhealthy diet, and/or risky drinking.

Projects in round 1 of the program demonstrated that practices could identify at-risk patients and motivate them to make changes. Round 2 projects built linkages between clinical practices and community resources to reduce provider burden and help patients sustain behavior changes. Each project required policy and environmen- tal changes in the practice (e.g., reminder systems, patient registries, performance incentives) to facilitate delivery of evidence-based counseling and related treatments and to facilitate use of needed follow-up support from community resources, such as telephone quitlines. Results showed that primary care providers were able to deliver eff ective health behavior change interventions when working in supportive health care systems and practices.

In the long run, just as upstream macro-level societal and policy change is needed to sustain individual behavior change, upstream macro-level health system and policy change is needed to improve care in offi ce practices and health plans. Such changes include quality performance measurement and public reporting; “pay-for- performance” initiatives that reward providers based on the quality of care they off er; and improved information technology to drive and support care improvement.

Some research has found that providers were more likely to off er health behavior change counseling when a portion of their capitation payment depended on their doing so. Providers in physician organizations were found to be more likely to off er proven health promotion services if their performance measures were publicly reported or they received public recognition or economic benefi t, and they had greater clinical information technology capacity (McMenamin et al., 2004).

■ Conclusion

Changing health-related behavior represents a prime target for improving national health and health care. Never have we known more about the importance of address- ing the lifestyle factors that pose the most serious threats to Americans’ health, pro- duce the greatest demands on our health system, and contribute most to health care costs. Th e growing burden of chronic disease, a national epidemic of obesity, and esca- lating health care costs—at a time when health care spending already is growing faster than the U.S. gross domestic product—makes establishing a stronger preventive ori- entation in the nation’s health care and public health systems an urgent priority.

Just as upstream macro-level societal and policy change is needed to sustain individual behavior change, upstream macro-level health system and policy change are needed to support and improve care in offi ce practices and health plans.

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Never have we known as much about how to motivate, support, and assist indi- viduals to make lasting lifestyle changes or how to support and assist health care professionals to deliver evidence-based preventive care aimed at behavior change. Th e tremendous parallel gains made in what we have learned about how to achieve eff ective health promotion for individuals and health care quality improvement for providers have created unprecedented potential.

In the ninth edition of this book, published in 2008, we concluded that the stage was set for breakthrough improvements in national health status and health care qual- ity. We recognized, however, that realizing this potential depended on leadership and political will to translate the evidence for health behavior change and health care sys- tem change into practice and policy. Recent interest has developed among leaders in health care and public health research, advocacy, practice, and policy to collabo- rate more eff ectively in order to assist those in practice and policy to make evidence- informed decisions. Th ese collaborations could signifi cantly help our nation move even closer to maximizing its potential in health and health care quality.

Th e landmark ACA represents one promising strategy that places prevention at the heart of the eff orts needed to improve the nation’s health and health care. Its prevention- oriented provisions include (a) full Medicaid and Medicare coverage for all preventive health services recommended by the U.S. Preventive Services Task Force, including those focused on health behavior change; (b) funding for community-based prevention grants to implement programs and policy; (c) environmental changes to improve nutrition, increase physical activity, reduce tobacco use and substance abuse and to reduce health risk disparities; (d) funding for childhood obesity community demonstration projects; and (e) the establishment of a National Prevention, Health Promotion, and Public Health Council to set and track goals and objectives for improving health through federally sup- ported prevention, health promotion, and public health programs.

Th e law also requires funding for the continuation and greater coordination of the U.S. Preventive Services Task Force and CDC’s Community Preventive Services Task Force. Combined, these eff orts hold unprecedented potential to capitalize and build on the strong evidence for health-related behavior change created over the past three decades.

■ Discussion Questions

1. Briefl y describe the eff ects of personal health behavior (e.g., tobacco use, risky drinking, diet, and physical activity) on individual and population health status and health care costs in the United States.

2. How have health behavior change programs and interventions evolved over the past 40 years?

3. In order to achieve eff ective behavioral interventions, most physicians use clinical practice guidelines that are based on the 5 A’s model. Briefl y describe this model, using tobacco cessation counseling as an example.

4. Describe the parallel shifts that have taken place during the past 30 years in under- standing what the essential targets must be for successful interventions (a) to increase patients’ adherence to recommended prevention-oriented health behav- ior and (b) to increase providers’ use of recommended clinical preventive behavior change interventions.

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5. With reference to McKinlay’s population-based intervention model, outline possible coordinated downstream, midstream, and upstream strategies that can be used to achieve one of the following: (a) curb binge drinking on a college campus, (b)  increase smoking cessation, especially among pregnant smokers enrolled in a Medicaid managed care plan, or (c) increase physical activity and healthy eating among middle school students in an urban center. Be sure to mention the diff er- ent sectors that would need to be involved (e.g., public health, law enforcement, local business, school offi cials, policymakers, community planning, transportation, health plan leaders/providers, and so on).


You have just been hired as the director of strategic planning for a health plan that

insures 30% of the residents in a metropolitan area of 500,000. Most of those insured

by this health plan are employed by large companies in the metropolitan area, and

these companies pay for their employees’ health insurance. The health plan leaders

and the employers both recognize that their business model depends on their success

in addressing behavioral risk factors that play a critical role in the prevention and

management of chronic diseases, the containment of health care costs, and the

enhancement of employee productivity.

In your new role, you are asked to create a comprehensive plan for addressing

these behavioral risk factors—by improving both the clinical care provided and the

plan’s community-based efforts. Specifi cally, you want to develop strategies to reduce

the levels of tobacco use, unhealthy diet, and physical inactivity. In constructing your

plan, consider the following questions:

1. What mix of interventions would you need to consider that might change enrollee

behavior, provider behavior, and community policies and environments and

maximize the cost-effectiveness of this plan?

2. What is the evidence that these interventions would work?

3. What would be the implementation challenges of the plan?

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LEARNING OBJECTIVES o Understand the predisposing and enabling factors that put individuals in vulner-

able contexts o Explain how the U.S. health care system provides and pays for services to vulner-

able populations o Identify challenges and opportunities to reduce health care costs and improve

health outcomes of vulnerable populations

TOPICAL OUTLINE o Understanding vulnerable populations and their context o Organization of health care and other services for vulnerable populations o Challenges and recommendations for service delivery and payment o Opportunities in the ACA to meet health care needs of vulnerable populations o Limitations in ACA provisions

8 Vulnerable Populations: A Tale of Two Nations Jacqueline Martinez Garcel, Elizabeth A. Ward, and

Lourdes J. Rodríguez

KEY WORDS behavioral health services cash (monetary) assistance

programs disproportionate share hospitals dual eligible Medicaid Medicare

Patient Protection and Affordable Care Act (ACA)

poverty and health predisposing and enabling factors safety-net provider social services supportive housing programs

Th roughout the 20th century, the United States—one of the wealthiest nations in the world—made several strides toward ensuring that all Americans had access to health care. Th e advent of employer-based health insurance, passage of Medicare and Medic- aid in the 1960s, the establishment of community health centers in the 1970s, and the creation of the Children’s Health Insurance Program in the 1990s all worked together to connect medically and socioeconomically disadvantaged populations to the U.S. health care system. Th e passage of the landmark Patient Protection and Aff ordable Care Act (ACA) in the 21st century was yet another major victory in narrowing the gap between those who have access to health care services and those who have been historically marginalized from them.

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All of these eff orts have opened the door to health services for millions of Ameri- cans who had traditionally been left out—the poor, uninsured, and those without a medical provider. Most of the gains have been made because of the expansion of health insurance. However, progress thus far has barely scratched the surface of a mounting problem—the health and well-being of vulnerable populations in the United States. Positive changes have been slow to come and have not kept up with the growing number of people who fall into the category of vulnerable populations. Th ere remain millions of Americans who have not benefi ted from these improvements. Moreover, the solutions developed to address the needs of vulnerable populations have been fragmented and categorical, adding to the already heavy burden of those at highest risk for falling through the cracks.

Developing solutions that will contain health care expenditures and meet the needs of vulnerable populations is one of the leading challenges facing policymakers in the United States.

Th e solutions are also faced with growing price tags. Th e accelerated spending associated with many of the federal and state programs and policies that were put in place to protect and serve vulnerable populations puts these programs at heightened risk of major funding cuts. Developing solutions that will contain health care expen- ditures and meet the needs of vulnerable populations is one of the leading challenges facing policymakers in the United States. Th ere is a growing awareness that 80% of health care dollars are spent on 20% of the population—of which vulnerable popula- tions make up a large percentage. Th e United States cannot aff ord to overlook the needs of vulnerable populations.

Th is chapter examines the issues aff ecting vulnerable populations. In the fi rst sec- tion, we defi ne and provide an overview of the diverse segments of the population that fall under the category of vulnerable groups. As part of this section, we off er a framework for understanding the factors that enable vulnerability and the domains that aff ect the well-being of this population. In subsequent sections, we explore the organization and fi nancing of health care for vulnerable populations, examine its limi- tations, and explore recommendations. In the fi nal section, we discuss opportunities to address the needs of vulnerable populations aff orded by the ACA.

■ Understanding Vulnerable Populations and Their Context


Whether one lives in a thriving metropolis, a gated suburban community, or a small town in rural America, the presence and realities of vulnerable populations are ines- capable. Th e lives of people in these populations are interwoven into our communi- ties and neighborhoods; their faces greet us at the intersections of our daily routines. Th ey are the single mother of three living next door who just lost her job and who cares for her elderly dad; the young man diagnosed with HIV who sleeps in a make- shift bed at the steps of the local church; the neighbor’s daughter who dropped out

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of high school and has been abusing drugs to self-medicate her untreated bipolar depression; the coworker who has been increasingly withdrawn and depressed after he was diagnosed with diabetes and heart disease; the elderly couple who are home- bound and isolated as a result of decreased mobility.

Th e term “vulnerable populations” is an umbrella term for all of the individu- als who, due to a wide variety of factors, are at a greater risk for poor health status and health care access. Vulnerable groups are categorized by disease status (such as chronic conditions, mental illness, HIV-positive status), demographics (such as socio- economic status [SES], educational attainment, housing situation, racial/ethnic back- ground, immigration or refugee status), age group (such as children or the elderly), or the ability to access health services (e.g., the uninsured, those who live in a remote rural area, those who lack a regular source of care; Aday, 2001). Regardless of which category or categories a vulnerable individual falls into, the common thread across all groups can be found in the defi nition of the word “vulnerable.” Derived from the Latin verb vulnerare, which means “to wound,” to be vulnerable means “to be easily hurt or harmed physically, mentally, or emotionally” or “to be open to attack, harm, or damage.”

Our humanity, and the range of life experiences we face, puts us all at risk of being vulnerable at diff erent points in our lives. Vulnerability may lead to poor health status and health care access. Th ere are, however, individual and community factors that mediate this risk. For instance, negative or stressful events, such as sudden or chronic illness, unemployment, temporary homelessness, or divorce, may hurt some people more than others. Th e eff ect of a stressful life event on a person who lives in a poor neighborhood with limited access to resources is much more adverse than on a person who lives in a wealthy neighborhood with access to a variety of options to ameliorate the problem ( Hobfoll, 2001).

Th e intersection of social factors—including where we live, income status, edu- cation level, job security, and the strength of social networks—and health problems ultimately predisposes some and not others to fall into the category of “vulnerable populations.”


Th e common traits and experiences of vulnerable populations provide a compre- hensive framework for understanding the underlying determinants and enablers of vulnerability. Models that have emerged within the last decade have begun to rec- ognize the real-life convergence of individual, social, community, and access-to-care risks that lead to vulnerability (Shi & Stevens, 2010). In these models, individual risk factors, such as demographics (age, gender, race/ethnicity, SES), health status, health insurance, and individual belief systems associated with health behaviors, are stud- ied in light of the larger context of a person’s life. Environmental (or ecological) risk

The intersection of social factors and health problems ultimately predisposes some and not others to fall into the category of “vulnerable populations.”

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factors include the geographical location (rural versus urban), socioeconomic status of an entire community (neighborhood income level and unemployment rates), resource inequalities, and the social capital (or social cohesion) of the neighborhood.

Vulnerability to poor health, as posited by this model, is determined by a conver- gence of predisposing, enabling, and need characteristics at the individual and ecolog- ical levels. For example, a man who has hypertension (health need factor), is African American (predisposing factor), and is uninsured (enabling factor) would be consid- ered more vulnerable than an individual who has hypertension alone. In this model, health needs directly imply vulnerability, predisposing factors indicate the propensity for vulnerability, and enabling factors refl ect the resources available to overcome the consequences of vulnerability (Shi & Stevens, 2010).

In this chapter, we frame health needs using the defi nition of health developed by the World Health Organization (WHO). WHO defi nes health as a “state of complete physical, mental, and social well-being” (WHO, 1948). Th is defi nition may be under- stood as follows:

■ Physical health needs are characterized according to the physiological and physi- cal status of the body. Problems aff ecting physical health include specifi c acute or chronic diseases (such as HIV/AIDS, diabetes, asthma) or disabilities.

■ Mental (or psychological) health needs are characterized by emotional and behav- ioral health—in essence, by an individual’s state of mind. Problems aff ecting mental health include specifi c mental illnesses, chronic dependence on drugs or alcohol, or a susceptibility to suicidal thoughts.

■ Social health needs extend beyond the individual and include both the quantity and quality of social contacts with other people. Individuals who have been marginalized or ostracized from their communities (such as homeless individuals, immigrants or refugees, the formerly incarcerated, people living in an abusive home) would be characterized as having social health needs (Aday, 2001).

Poor health along one dimension, for instance physical, is very likely to converge with poor health along others, such as the individual’s psychological or social needs. In the earlier example, the African American male who has hypertension and is unin- sured would be more susceptible to depression because of the compounding stresses.

Th e concept of social capital is integral to understanding the enabling factors that can lead to vulnerability. Social capital is measured by the quantity and quality of interpersonal ties among people and groups sharing a community (be it defi ned geo- graphically or by a common characteristic). Family structure, friendship ties, religious organizations, and neighborhood connections provide social capital to members in the form of social support and associated feelings of belonging, psychological well- being, and self-esteem (Aday, 2001). Social support is critical for mitigating or mini- mizing the eff ect of negative life events on health.

A strong social support system is key to making a signifi cant difference in the likelihood of starting—and sticking with—lifestyle changes.

Building on the example of the uninsured, an African American male who has hypertension and begins to suff er from depression: If he is also socially isolated, with

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little or no social network in his community, it is unlikely that he will succeed in long- term eff orts to improve his health, such as establishing healthier eating habits or adher- ing to a strict medication regimen. A strong social support system is key to making a signifi cant diff erence in the likelihood of starting—and sticking with—lifestyle changes.

Th e framework described previously is used throughout this chapter to illustrate best practices; later in the chapter are recommendations for programs and policies that can improve the health outcomes of this population. Before we describe the net- work of existing services and programs—and their fi nancing mechanisms—that care for the needs of vulnerable populations, we focus in the next section on why the num- ber of vulnerable groups is increasing in the United States. Th is increase is one of the critical reasons why health care leaders and policymakers must fi nd more eff ective and effi cient ways to address the needs of vulnerable populations than are available in our current systems of care.

■ The Growing Number of Vulnerable Populations

Th ree leading and concurrent factors have contributed to the growing number of vul- nerable populations:

■ Th e rise in prevalence of chronic conditions, such as diabetes and cardiovascular disease

■ Shifting demographics of the overall U.S. population, especially the growing income inequality between rich and poor and the graying of the baby boomer generation

■ A shrinking and strained sector of supportive services in low-income communities

All three of these factors have aff ected the American landscape and created fertile ground for the rising number of people and communities who are now considered vul- nerable.


Chronic illnesses, such as heart disease, diabetes, cancer, respiratory diseases, and arthritis, are ongoing medical conditions that can be treated but not cured. Th ese con- ditions require constant management, and they signifi cantly alter the daily life of those who suff er from them. In the United States, the rise in chronic conditions has been unprecedented, and these conditions have exacted an enormous human and fi nancial toll. Unhealthy lifestyle behaviors, such as tobacco use, lack of regular physical activ- ity, and consumption of diets rich in saturated fats, sugars, and salt, have greatly con- tributed to the increase in chronic conditions in the United States. Studies have also shown that people who live in  areas of more socioeconomic disadvantage are more likely to take part in these risky health behaviors (Diez-Roux, 2003; Do, 2009; Lang et al., 2009).

Th e 2010 wave of the National Health Interview Survey estimated that 24.8% of U.S. adults had one chronic condition. Th e prevalence of multiple chronic con- ditions—comorbidity of any combination of the previously mentioned conditions— makes it even harder to coordinate eff orts and address the problems at hand. More than 20% of adults had two or three chronic conditions (Ward & Schiller, 2010). Th ese

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estimates look worse for specifi c segments of the population, especially racial and eth- nic minorities and the poor. If these trends continue unchanged, we can expect the number of adults with at least one chronic disease to reach more than 171 million by 2030 (Figure 8.1; Wu & Green, 2000). Not only is the toll on life high—with 7 out of 10 deaths each year attributed to chronic conditions—but so is the toll on the health care system, because people with chronic conditions account for more than 80% of hospital admissions (Partnership for Solutions, 2004).

Although some individuals with chronic conditions live full and productive lives, for many, one or more of these conditions can be disabling, thereby reducing the qual- ity of life and leading to isolation and depression.


Growing Income Inequalities

In 2014, the United States marked the 50th anniversary of President Lyndon B.  Johnson’s War on Poverty. As a nation, however, the United States has fallen short of the commitment made in 1964 that American citizens would have a fair opportunity to pursue a productive future, earn a decent living wage, and live in a safe community with access to good schools. In 2012, more than 46 million Americans—approximately 15% of the population—were living at or below the federal poverty threshold ($23,492 for a family of four; U.S. Bureau of Labor Statistics, 2012). More than one third of the poor—6.6% of the overall U.S. population—live in deep poverty, earning less than $6,000 a year.

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Poverty has persistently aff ected certain segments of the population more than others. Children under the age of 18 are more likely to live in poverty. In 2012, nearly 22% of children—one out of every fi ve—were living in poverty. Certain racial and eth- nic groups are more likely to be poor than others. Poverty rates for Blacks (27%) and Latinos (25%), as well as their children (38% and 33%, respectively), are signifi cantly higher than for White Americans (10%) and their children (20%). To put this in per- spective, one out of every three Black children and one out of every four Latino chil- dren lives in poverty. Single-parent families are also more likely to live in poverty. Th irty-one percent of female-headed households, for instance, live in poverty, com- pared with 6% of married couple households. People with disabilities (28%) are more than twice as likely to live in poverty as their counterparts without a disability (12%).

Th roughout U.S. history, poverty has been concentrated in cities and in rural com- munities; there has been a steady increase, however, in the number of people living in poverty in suburban neighborhoods. In 2008, the number of suburban poor exceeded the urban poor in central cities by 1.5 million. Although the rates of poverty con- tinue to be higher in urban areas than in suburbs (18% versus 9.5%), poverty rates are increasing at a faster pace in suburban areas (Allard & Roth, 2010).

Income—or lack thereof—is one of the key enablers of vulnerability. People with fi nancial resources not only have the ability to obtain access to the highest-quality health services, they also have access to other material goods that benefi t health and greater opportunities to build the social capital that can serve as a buff er for adverse life events. Income also has a more substantive and complex eff ect on health when it is considered in the context of a neighborhood. Concentrated wealth has a larger eff ect on the environment (neighborhood) that shapes a person’s position along the socioeconomic gradient, which includes an individual’s education level and employ- ment opportunities. In the United States, where you live determines the quality of the education system your children have access to, because the local tax base determines funding for public schools. In communities with concentrated poverty, students have lower average test scores, fewer qualifi ed teachers, fewer interactions with colleges and potential employers, higher levels of teen pregnancy, and higher high school drop- out rates than public schools in neighborhoods with more resources (Willms, 1999).

Th us far, we have explored the eff ect of absolute income and SES status on health and the role of SES as an enabling factor of vulnerability. However, distribution of income is also an important factor in determining the health of a population. Income inequalities are on the rise in the United States; in fact, in 2012 the gap between the richest 1% and the remaining 99% was the largest it has been since the 1920s. Accord- ing to recent analysis, the 400 richest people in the United States have more combined wealth than the bottom 150  million put together. Th e relationship between income inequality and health has broader implications in determining health outcomes beyond personal income. Concentrated wealth leads to concentrated poverty, which in turn leads to poor neighborhoods and communities.

People living in neighborhoods with many resources are more likely to engage in healthy behaviors, whether these behaviors are due to the wider availability of primary care services, stores offering healthy food, or environments for safe physical activities.

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Myriad studies have shown the correlation between disadvantaged communities and poor health outcomes (Diez-Roux, 2003; Do, 2009; Lang et al., 2009). Th e widen- ing gap between rich and poor leads to a greater separation between the institutions, organizations, and services that promote and protect health. People living in neigh- borhoods with many resources are more likely to engage in healthy behaviors, whether these behaviors are due to the wider availability of primary care services, stores off er- ing healthy food, or environments for safe physical activities. An entire population is at greater risk of poor health outcomes when they are persistently exposed to poverty, have limited access to high-quality health organizations, and have major stressors impeding their daily life activities.

The Graying of America

On January 1, 2011, the fi rst baby boomers turned 65 years old. Over the next 5 years, 8,000 people will turn 65 each day. Th e population aged 65 and over increased from 35 million in 2000 to 41 million in 2011 (an 18% increase). As of 2013, people over 65 represented 13% of the U.S. population, about 1 in every 8 Americans. In 2030, when the entire baby boom generation will have turned 65, seniors will make up one fourth of the population. Th e segment of the population 85 years and older is projected to increase from 5 million in 2011 to 9 million in 2030 (Knickman & Snell, 2002).

Baby boomers will live longer than previous generations because of improvements in health care, technology, and lifestyles. Th e elderly of 2030 will also be better edu- cated than the current elderly population, with rates of college graduation two times higher and high school dropout rates one third less than the current elderly generation (Knickman & Snell, 2002). Th is is good news for the future health of baby boomers because there is a strong association between education and disability. College gradu- ates have a disability rate about half that of high school dropouts (Knickman & Snell, 2002). However, with the aging of America and longer average life spans, the rates of chronic conditions associated with an older population will also grow.

According to the Centers for Disease Control and Prevention (CDC), the average American over the age of 65 has multiple chronic conditions, such as hypertension (72%), arthritis (51%), heart disease (31%), cancer (24%), and diabetes (20%). In 2010, about 13.6 million persons aged 65 or older were discharged from short-stay hospitals. Th eir rate of discharge is three times the comparable rate for persons of all ages. Th e average length of stay in a hospital is longer for older people. Th e average length of stay for persons aged 65 to 74 was 5.4 days; for those aged 75 to 84 it was 5.7 days; and for those aged 85 and over it was 5.6 days. Th e comparable rate for persons of all ages was 4.8 days.

Health expenditures are a greater fi nancial burden for older people. In 2011, older consumers averaged out-of-pocket health care expenditures of $4,769, an increase of 46% since 2000. In contrast, the total population spent considerably less, averaging $3,313 in out-of-pocket costs. Older Americans spent 12.2% of their total expendi- tures on health, almost twice the proportion spent by all consumers (6.7%). Health costs incurred on average by older consumers in 2011 consisted of $3,076 (64%) for insurance, $786 (16%) for medical services, $714 (15%) for drugs, and $193 (4.0%) for medical supplies. Considering that the median income of older persons in 2011 was $27,707 for men and $15,362 for women, these health care costs put the elderly at greater risk of fi nancial hardship. Th eir age (a predisposing factor of vulnerabil- ity), coupled with the risk of fi nancial hardship (an enabling factor) and the increased

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possibility of chronic conditions (another enabling factor), places older Americans— especially those living in impoverished neighborhoods—at highest risk of vulnerability.


Between December 2007 and June 2009, the United States experienced an economic recession that was one of the longest and, by most measures, the worst since the Great Depression (Grusky, Western, & Wimer, 2011). Th is so-called Great Recession began with the bursting of an $8 trillion housing bubble, which was then followed by mas- sive job loss. Between 2008 and 2009, the U.S. labor market lost 8.4 million jobs, or 6.1% of all payroll employment. According to the U.S. Bureau of Labor Statistics, in the months after the recession, the unemployment rate peaked at 10% (in October 2009)— the largest loss of employment in any recession since the Great Depression. To make matters worse, the recovery period after the recession has been sluggish. In October 2010, 16 months after the offi cial end of the recession, the economy still had 5.4% fewer jobs than it did before the recession started. Th is recession has also seen historic num- bers of home foreclosures. Between 2006 and 2009, the number of home foreclosure fi lings increased from approximately 1.2 million annually to almost 4 million, and have been disproportionately concentrated in Black and Hispanic neighborhoods.

Th e prolonged economic recession and historically slow recovery have been tak- ing a toll on the average American family. Job loss is a signifi cant source of stress and has been shown to be associated with poor health outcomes, such as increased risk of heart attack, stroke, and psychiatric problems including depression and anxiety. When you combine the rates of unemployment with the unprecedented number of foreclosures, there is no mystery as to why there has been such strain on social and supportive services. Not only are these services serving the millions of Americans who lived in poverty before the economic downturn, they are also serving families who are seeking this type of help for the fi rst time in their lives.

Th e Brookings Institute reported that 76 metro areas across the United States saw Supplemental Nutrition Assistance Program (SNAP) receipt increase 66%—adding 7.5 million people—between July 2007 and July 2010. In the suburbs, SNAP receipts have increased at an even faster pace: 73% (Garr, 2011). Th ough not as dramatic, other programs, such as Temporary Assistance for Needy Families (TANF), Medicaid, Supplemental Security Income (SSI), and supportive housing programs, have experi- enced similar trends in the past 5 years. Th e agencies that administer these programs are working at full capacity. Th e problem is not just that the demand for services has grown but that the programs—as well as the agencies that help people connect to them—are experiencing detrimental cuts.

Th e economic downturn has produced signifi cant gaps between revenues and expenditures in state and local budgets. Th e decline in revenue and increased demand for state services has resulted in states facing total budget gaps of nearly $300 billion over the 2009 to 2012 period. All levels of government have had to implement a mix of discretionary cuts across the social service sector; in many states these cuts have happened at the same time that governments have cut taxes. In the Brookings Institute study, the researchers looked at three large states and the eff ect on social services in suburban neighborhoods. Nearly half of the nonprofi ts surveyed reported a loss in revenue source, and one third of the nonprofi ts that connect people to social service programs had been forced to lay off staff members because of the cuts (Garr, 2011).

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Th e very same agencies that help to alleviate the economic and social eff ects on families and communities are being stretched to the limit while experiencing cuts to their own budgets. Even more concerning are the growing threats to cut the fi nan- cial aid provided by programs such as SNAP. In 2014, SNAP benefi ts will average less than $1.40 per person per meal (Dean, Rosenbaum, & Foley, 2013). Th ese cuts aff ect some of the most vulnerable populations that participate in SNAP—including 22 million children (10 million of whom live in “deep poverty,” with family incomes below 50% of the poverty line) and 9 million people who are elderly or have a serious disability.

■ Organization and Financing of Health Care and Other Services for Vulnerable Populations

We have defi ned vulnerable populations and described the pathways through which predisposing and enabling factors lead to vulnerability. We have also described three main reasons why the number of vulnerable groups is projected to grow. In this sec- tion, we provide an inventory of the existing resources and strategies set in place to care for the vulnerable. First, we off er a brief description of institutions and structures within the health care system that deliver services for vulnerable populations. Th en, we describe fi nancing mechanisms at the federal, state, and private levels that sup- port health care and social services for vulnerable groups. More thorough and general treatments (not specifi c to vulnerable populations) of some of the topics presented here are off ered in other chapters of this book.


Public hospitals are core providers of services to America’s sickest, poorest, and most vulnerable populations. Th e mission of a public hospital within the safety-net system is, quite simply, to be the guarantor of health for the public (Gourevitch, Malaspina, Weitzman, & Goldfrank, 2008). Public hospitals focus on providing care to the most vulnerable groups within a community, including the uninsured, the underinsured, the homeless, the disabled, documented and undocumented immigrants, high-risk mothers and infants, and those with limited profi ciency in speaking and reading English. Public hospitals also provide services to the incarcerated, respond to disas- ters within communities, provide trauma care, and administer behavioral health and substance abuse treatment when necessary (Gourevitch et al., 2008). In 2004 alone, public hospitals averaged 405,000 ambulatory visits and 18,000 hospital admissions per site (Gourevitch et al., 2008).

Most patients who receive health care services from public hospitals are low- income and uninsured; they also suff er disproportionately from preventable chronic health conditions. Many of these patients visit the emergency departments (EDs) of public hospitals to receive primary care because they lack a primary care provider. Patients who use the ED for most of their health care, regardless of urgency, are referred to as high utilizers (see Case Study 2).

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Federally Qualifi ed Health Centers (FQHCs) are systems of safety-net providers that serve predominantly vulnerable groups living in underserved communities. Th ese centers are overseen by the Health Resources and Services Administration (HRSA) of the U.S. Department of Health and Human Services (DHHS).

Th e FQHC program allocates special Medicare and Medicaid cost-based reim- bursement payments to health centers for legislatively specifi ed services. To qualify as an FQHC, a safety-net provider must meet the following criteria:

■ Provide services in communities identifi ed as “predominantly medically under- served areas” or provide services to a target population documented to be under- served

■ Off er the required primary and preventive health services, meet specifi c staffi ng requirements, and off er a sliding-fee payment scale for services rendered

■ Participate in an ongoing quality assurance program ■ Have a governing board of directors that includes representatives from the popula-

tions served

FQHCs include these facilities:

■ Community Health Centers (CHCs) ■ Migrant Health Centers (MHCs) ■ Health Care for the Homeless Centers (HCHs) ■ Public Housing Primary Care Centers (PHPCCs)

Community Health Centers (CHCs)

Riding on the successful passage of the 1964 Civil Rights Act and President Johnson’s War on Poverty eff orts, Tufts University physicians H. Jack Geiger and Count Gib- son submitted proposals to the federal Offi ce of Economic Opportunity (OEO) for funding to establish what they called “neighborhood health centers” in inner-city, underserved areas across the United States (Hawkins & Groves, 2011). Th e Economic Opportunity Act of 1964 provided federal funds for two such centers; both were built in Boston, Massachusetts, in 1965 (National Center for Farmworker Health, n.d.). Building on a community-based health care model already thriving in South Africa, these two CHCs off ered comprehensive primary health care that focused on out- reach, disease prevention, social support services, and patient education activities, including nutritional education and counseling and sanitation education. Dr. Geiger and Dr. Gibson believed that treating patients with dignity and respect, regardless of age, race, health status, or income level, and engaging them in their own health and health care, were of critical importance and promoted these beliefs as central tenets of CHC care (Adashi, Geiger, & Fine, 2010). As of 2010, there were more than 8,000 designated CHCs throughout the United States, serving as the medical home to more than 20 million Americans—about 5% of the current population (Adashi et al., 2010).

Migrant Health Centers (MHCs)

MHCs serve the migrant and seasonal farm workers who come to the United States each year to harvest, plant, and tend to agricultural crops. Patients pay for care on a

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sliding scale (an average visit costs $30). Currently there are 156 MHCs that operate within the CHC system in the United States. In 2011, the federal government spent $166 million to help pay for the care of close to 1 million migrant and seasonal farm- workers (Galewitz, 2012).

Health Care for the Homeless Centers (HCHs)

Although eligible for federally funded health care, approximately 70% of homeless health center patients lack health insurance and face signifi cant barriers to care elsewhere in their communities (National Health Care for the Homeless Council ([NHCHC], 2008). Th e Health Care for the Homeless program was initially authorized under the Stewart B.  McKinney Homeless Assistance Act of 1987. HCHs provide comprehensive medical services to the homeless, including pediatric and adult primary care, screening, health education, referrals for specialty medical care, transportation services, social service outreach, and both long- and short-term rehabilitative care. By statute, the HCH pro- gram receives 8.7% of the total health center appropriations for all FQHCs.

Public Housing Primary Care Centers (PHPCCs)

PHPCCs are health centers that provide comprehensive medical care and social sup- port services to individuals who live in public and assisted housing. Currently there are 63 PHPCCs in 25 states and Puerto Rico, and these centers provided services to nearly 171,731 public and assisted housing residents in 2012 (National Center for Health in Public Housing, 2012).


Rural Health Clinics (RHCs) were created as a result of the Rural Health Clinic Services Act of 1977. Th is federal legislation provided reimbursement not just for services pro- vided by full-time doctors but also for preventive and primary care services done by health professionals called mid-level providers (MLPs) such as nurse practitioners (NPs) and physician assistants (PAs) at clinics in underserved rural areas across the United States. Th is legislation was established both to alleviate the burden on the limited num- ber of full-time doctors and specialists and to cut down on emergency care spending (DHHS Offi ce of Rural Health Policy, 2006).

Rural health networks (RHNs)—also known as rural health alliances, coopera- tives, or affi liations—are systems of care in rural areas that include at least one rural hospital and two other separate community health organizations, such as a nursing home or a public health unit. Th ese networks operate by pooling resources in ways such as developing continuing education programs, investing money in electronic medical record systems for easier care coordination between providers, and support- ing advocacy activities within the communities served by the RHN (DHHS Offi ce of Rural Health Policy, 2006). Th ese networks were created out of necessity to foster collaboration and discourage reduction in services due to unwarranted competition ( Moscovice, Gregg, & Lewerenz, 2003).


Because of the history of oppression and enduring health inequities since Europe- ans fi rst landed in the Americas more than 500 years ago, Native Americans are

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considered a special group under the umbrella term “vulnerable populations.” Th e relationship between the U.S. federal government and North American native peo- ples (that is, Indian tribes) began in 1787 and has evolved ever since with various laws, treaties, and executive orders to protect their status (DHHS Indian Health Services, 2014).

Th e IHS has an annual budget of about $4 billion (Devi, 2011) and is the pri- mary federal health care provider for approximately 1.9 million American Indians and Alaska Natives who belong to the more than 566 federally recognized tribes in 35 states (DHHS Indian Health Services, 2014). Th rough a network of 45 hospitals and more than 293 clinics, IHS programs provide Native Americans with preventive, pri- mary, dental, and emergency medical care; mental health and substance abuse preven- tion and treatment; nutrition education; access to referrals and resources; and social service support, including (but not limited to) assistance in applying for federally des- ignated public housing for Native Americans and other need-based benefi t programs such as SNAP, WIC, and TANF.


In 1963, Congress passed the Mental Retardation Facilities and Community Health Centers Construction Act, which provided federal funding for the development and implementation of community-based mental health centers (CMHCs). With the excep- tion of the most severely mentally ill, most previously institutionalized patients were released into their communities and encouraged to seek care at these new CMHCs and other, similar facilities (Unite for Sight, n.d.).

Unfortunately, CMHCs are underfunded and understaff ed; as a result, many people living with mental illness or chemical dependence are not receiving the proper com- prehensive care they need. Many ultimately end up homeless or in prison. According to the Journal of Community Mental Health, the combination of deinstitutionalization and inadequate and underfunded community care has led to “transinstitutionaliza- tion,” a phenomenon in which prisons, instead of psychiatric or detoxifi cation facili- ties, become the main providers of highly structured, controlled living environments for the severely mentally ill and chemically dependent (Prins, 2011).

Not only are mentally ill individuals more likely to be incarcerated or homeless, they also contribute signifi cantly to the cost of ED care in hospitals across the country. By one federal estimate, spending by general hospitals to care for these patients will nearly double in one year: from $20.3 billion in 2013 to $38.5 billion in 2014 (Creswell, 2013).


Legislation to address the AIDS epidemic was fi rst enacted in 1990 as the Ryan White Comprehensive AIDS Resources Emergency (CARE) Act. Since then, the legislation has been amended and reauthorized four times to accommodate new and emerging medical and social needs; it is now called the Ryan White HIV/AIDS Program (Henry J. Kaiser Family Foundation, 2013a). HRSA estimates that more than 500,000 indi- viduals receive at least one medical, health, or related support service through a Ryan White program each year (Henry J. Kaiser Family Foundation, 2013a). Th e multiple

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parts of the Ryan White Program all emphasize risk reduction and prevention through interventions at both individual and community levels. For those aff ected, intensive case management in a community-based health care setting is critical to a long life (Aday, 2001).

Despite the delayed response to the HIV/AIDS epidemic in the United States, the wraparound services provided through the Ryan White Program serve as a model for responding to health needs with a whole person approach. No other vulnerable popu- lation has been able to advocate as eff ectively for that level of support.

■ Social Service Needs

Spanish philosopher José Ortega y Gasset posited, “Yo soy yo y mi circunstancia, y si no la salvo a ella no me salvo yo” (Ortega y Gasset, 1914), which loosely translates as “I am myself and my circumstance; if I do not help it, I cannot help myself.” In that same spirit, social needs are the circunstancia that enables the events that lead peo- ple with predisposing characteristics to become vulnerable. Toward the end of the 19th century and sporadically throughout the 20th century, the United States made attempts to advance social change. Examples include President Franklin D. Roos- evelt’s New Deal in response to the Great Depression; the previously mentioned War on Poverty waged by President Johnson; and President John F. Kennedy’s work in support of progressive taxation, aff ordable housing, and extension of social welfare. Th e existing safety-net of social services is an amalgam of programs that, though not completely infallible, provides some support for vulnerable populations, potentially making the diff erence between maintaining good health outcomes and succumbing to illness.

In the next section, we highlight three types of social service programs: (a) food assistance, (b) monetary assistance, and (c) housing assistance.


All food assistance programs listed in this section are administered and funded through the U.S. Department of Agriculture (USDA) Food and Nutrition Service Agency.

Supplemental Nutrition Assistance Program (SNAP)

Th e fi rst food assistance program was implemented in May 1939 but was shut down in 1943 because “unmarketable food surpluses and widespread unemployment no longer existed” (USDA Food and Nutrition Service, n.d.). It wasn’t until President Kennedy came along 18 years later that a second food assistance program was implemented. Kennedy’s program eliminated the concept of diff erent stamps for diff erent foods and encouraged benefi ciaries to use their stamps to buy healthy food (USDA Food and Nutrition Service, n.d.). In September 2007, the Food Stamp Program was renamed SNAP (Supplemental Nutrition Assistance Program) to decrease the stigma associ- ated with the term “food stamps” and to encourage those who need benefi ts to apply for them. As of October 2013, more than 47 million individuals were receiving SNAP benefi ts (Center on Budget and Policy Priorities, 2014).

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Women, Infants, and Children (WIC)

Th e Special Supplemental Nutrition Program for Women, Infants, and Children was authorized by the Child Nutrition Act of 1966 and offi cially launched in 1974. WIC state agencies receive federal funding to pay for WIC foods, nutrition-related services, and administrative costs (Association of State & Territorial Health Offi cials, 2010). Pregnant, breastfeeding, or postpartum women, as well as infants and children up to age 5, are eligible for benefi ts if (a) they meet a predetermined income standard; (b) they already receive SNAP, Medicaid, or TANF benefi ts; or (c) they have documen- tation from a medical professional explaining that the mother, her children, or both are at nutritional risk (Kent, 2006). In 2013, WIC had close to 8.7 million participants. Th e program costs an average of $43.45 per month per participant (USDA Food and Nutrition Service, n.d.).

Other Federal and Private Food Programs

Th e USDA Food and Nutrition Service administers 11 additional supplemental nutrition programs, ranging from reduced-price or free lunch programs for elemen- tary school children (Th e National School Lunch Program [NSLP]) to emergency food assistance programs that organize and fund food banks, pantries, and soup kitchens to distribute food items to low-income people (USDA Food and Nutrition Service, n.d.).

Th e rise in food insecurity since the 1980s has not kept up with federal food pro- gram availability. Th us, a network of private food assistance programs has emerged to try to fi ll the gap between need and federal support. Th is private food assistance net- work relies on food donations, at-cost bulk purchasing, and food rescue of perishable, nonperishable, and prepared foods (Daponte & Bade, 2006).


Support for vulnerable individuals and families in the form of monetary assistance is aimed at off ering both short-term and long-term fi nancial relief to meet basic needs. Several federal agencies administer monetary assistance.

Temporary Assistance for Needy Families (TANF)

Temporary Assistance for Needy Families (TANF) is a monthly cash assistance pro- gram for low-income families with children established under the Personal Responsi- bility and Work Opportunity Reconciliation Act of 1996 as a replacement to the Aid to Families with Dependent Children (AFDC) program. TANF is overseen by the Offi ce of Family Assistance (part of the DHHS Administration for Children & Families), but control over implementation is given to states (Purtell, Gershoff , & Aber, 2012).

Supplemental Security Income (SSI)

President Richard M. Nixon passed the federal Social Security Amendments of 1972 in an eff ort to centralize the administration of Social Security and reduce inequalities among the state-run adult assistance programs already in existence. Today, the federal SSI program administers cash assistance each month to eligible individuals aged 65 and older, the blind, and mentally or physically disabled children and adults. A preset federal benefi t rate determines benefi t levels (U.S. Social Security Administration, n.d.).

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Unemployment Insurance (UI)

Unemployment insurance (UI) is available to people who have lost their jobs through no fault of their own but as a result of circumstances such as employer cutbacks. Fed- eral funds are distributed through the U.S. Department of Labor to each state; states then administer their UI programs according to state-determined criteria.


Th e fi rst major investment in housing assistance in the United States took place in 1932, when—in the midst of widespread unemployment and homelessness resulting from the Great Depression—Congress passed the Emergency Relief and Construc- tion Act (U.S. Department of Housing and Urban Development, n.d.). Th is act created the Reconstruction Finance Corporation (RFC), an agency whose responsibility was to make loans to private corporations that were providing housing for low-income families. From 1932 to 1956, four housing acts were enacted; these continued through the 1960s and into the 1970s. Funding included federal investments in new housing construction, the preservation of existing housing resources, and the development of safer, better public housing communities.

Th e McKinney-Vento Homeless Assistance Act of 1987 established the Sup- portive Housing Program (SHP) especially for the homeless. Th e 2009 American Recovery and Reinvestment Act (ARRA) included new housing programs, most notably the Homelessness Prevention and Rapid Re-Housing Program (HPRP). Th is program allocated $1.9  billion in funding to homelessness housing. Funds allocated for HPRP helped with short-term or medium-term rental assistance and housing relocation and stabilization services, including such activities as mediation, credit counseling, security or utility deposits, utility payments, moving cost assistance, and case management.

Th is section has not presented an exhaustive list of federal and private social ser- vices available for vulnerable populations. For example, in terms of housing, there are services that off er long-term care for elderly and disabled people, such as nursing homes, and supportive at-home services that allow for aging in place, such as home health aides.

Th e next section off ers a more detailed picture of the payment system that covers the health care of vulnerable populations.

■ Federal and State Financing of Care for Vulnerable Populations

Th ere are three main payers for health care for the vulnerable: (a) the federal govern- ment, (b) the states, and (c) private sources, including employers, insurers, and phil- anthropic organizations.

At the federal level, the primary health care payment programs are Medicare, Medicaid, and the Children’s Health Insurance Plan (CHIP). Th ese programs are man- aged by the Centers for Medicare & Medicaid Services (CMS); however, each state has the power to administer its Medicaid program. Medicaid-eligible individuals typically include low-income individuals and families who fall below a certain federal poverty level (FPL) threshold and those receiving SSI.

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According to Congressional Budget Offi ce estimates, in 2012 Medicaid provided health coverage for 32 million children, 19 million adults, 6 million seniors, and 11 million persons with disabilities (totaling 68 million low-income Americans) over the course of the year at a cost of $415 billion (Henry J. Kaiser Family Foundation, 2013b).

Individuals eligible for Medicare include the elderly (ages 65 and older), some people under 65 with qualifying disabilities, and people with kidney failure requir- ing dialysis. Th e most recent estimate of Medicare expenses in 2009 reported a yearly program cost of $471 billion, with benefi ciaries exceeding 49 million people in 2012 (Center on Budget and Policy Priorities, 2013).

Dual eligibles are individuals who qualify for both Medicare and Medicaid and are among the sickest and poorest in the United States. Although they represent a relatively small percentage of the overall Medicare and Medicaid populations, dual eligibles account for $300 billion (approximately 33%) of annual spending between the two programs ( Fontenot & Stubblefi eld, 2011). Th is population is three times more likely than the Medicare-only population to be disabled and has much higher rates of chronic conditions such as diabetes, pulmonary disease, stroke, mental disorders, and Alzheimer’s disease (Fontenot & Stubblefi eld, 2011). Disproportionate levels of fund- ing for state Medicaid programs means the resources available for dual eligibles vary from state to state.

Th ere is a segment of the vulnerable population that neither qualifi es for subsi- dized care nor receives care through an employer or other private funder. To off set the burden of off ering care for the uninsured, federal law off ers a modifi ed payment strategy called the Medicaid and Medicare Disproportionate Share Hospital (DSH) program. DSH payments are available to qualifying hospitals that have a high number of Medicaid and Medicare patients and uninsured individuals (Mitchell, 2013).

■ Challenges for Service Delivery and Payment

Th e systems of care and fi nancing mechanisms currently available in the United States, well intentioned as they are, fall short of their goal of taking care of vulnerable pop- ulations. At best, the programs and services are disjointed and, at worst, they off er temporary solutions that deal with isolated problems, and for very targeted popula- tions. For instance, a person’s drug or alcohol dependency may preclude him or her from eligibility for supportive housing. Yet, stable housing has been linked to recov- ery from addictions. Th e common response by policymakers—and common practice by researchers—is to focus on distinct populations when examining and addressing the needs of vulnerable populations. Disparate and disjointed programs are created to address the needs of children, the elderly, the physically disabled, the chronically ill, the mentally ill, substance abusers, persons with HIV/AIDS, the homeless, residents of rural areas, immigrants, individuals with limited or no English profi ciency—the list goes on and on. Yet, the distinctions among many of these vulnerable groups are thin and artifi cial. Many of these groups share common traits and experience a convergence of multiple vulnerable characteristics. Th ese subpopulations are more likely to live in poor communities, less likely to have access to high-quality health and education, and less likely to have the fi nancial resources to secure adequate, stable, aff ordable housing.

Th e programs and services available are not very cost-eff ective; this puts them at the mercy of critics who would prefer less government involvement in the care of

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vulnerable individuals and their families. Th e current market-driven health care deliv- ery and payment system is one that gives providers fi nancial incentives for the volume, not the quality, of services delivered. Some areas for improvement related to delivery and payment are discussed later. In this section, we point out how (and where) the cur- rent ways in which care is delivered and payment is structured fall short of their goal to take care of the vulnerable while containing cost. Second, we highlight emerging service delivery models and innovative payment strategies created to reach the Triple Aim—better care for individuals, better health for populations, and lower cost—as it pertains to vulnerable populations.


Health care initiatives to reduce the barriers created by vulnerability rarely recognize the common overlap of risk factors, and few studies have examined the combined infl uences of multiple risks on obtaining needed health care services (Shi & Stevens, 2005). Th e main issues that emerge in a review of delivery systems created to care for vulnerable populations include (a) fragmented and siloed structures and (b) a focus on health and psychological needs that does not always recognize the link between social needs and health.

Fragmentation refers to care that is delivered by diff erent providers who are not co-located or within proximity of each other. Where fragmentation exists, patients must make and manage multiple appointments that may require, for example, more days off from work to attend appointments. Silo structures refer to care off ered by mul- tiple providers who do not consult with each other. An endocrinologist, for instance, may be unaware of the medications prescribed by a psychiatrist treating a patient’s depression—which may have weight gain as a side eff ect, thus disrupting the patient’s diabetes management.

Although there has been budding awareness of the importance of meeting social and other nonclinical needs in relationship to health, the U.S. delivery system has not made the necessary transformation to make this possible. For example, food insecurity would make it hard for a person managing cardiovascular disease to eat more fruits and vegetables, because that person may depend on a local emergency food provider that is unequipped to receive and distribute produce.


A major weakness of our current payment system is that it encourages a volume- driven health care system rather than a value-driven system. Under fee-for-service (FFS), providers (such as hospitals, physicians, and health centers) gain increased

Health care initiatives to reduce the barriers created by vulnerability rarely recognize the common overlap of risk factors, and few studies have examined the combined infl uences of multiple risks on obtaining needed health care services.

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revenue and profi t by delivering more services to people. Th is payment model becomes an enormous barrier to delivering eff ective and effi cient care to vulnerable populations. Providers have little or no incentive to spend the necessary time with an individual who has complex medical, behavioral, and social needs in order to deter- mine a course of action that will address the underlying complexities of the patient’s life. Providers are more likely to address the present health crisis aff ecting the indi- vidual—usually by delivering more diagnostic tests, prescribing more medication, or making more referrals to costly specialists. FFS payment systems also reinforce fragmentation of care by paying multiple providers for multiple services or tests for the same patient, regardless of whether the care is coordinated or duplicative.

Behavioral and social services operate in an entirely diff erent realm than medi- cal care; such a vast, complex web of disconnected services is available for vulnerable populations that the time and eff ort required to coordinate and manage transitions across necessary services are beyond any reimbursement rate set by public or pri- vate payer. Instead, there is a perverse payment system that rewards the provider for delivering more health care services, rather than addressing (by connecting patients to critical services) the pressing social and behavioral problems that negatively aff ect the patient’s health outcomes.


Only a small fraction of health care spending is devoted to the promotion of healthier behavior, despite the fact that preventable chronic diseases are linked to smoking, obesity, lack of exercise, and drug and alcohol use (DeVol et al., 2007). Th ere are very few incentives in the health care system to promote prevention and early interven- tion, especially in the case of chronic diseases. Only a small percentage of health care spending is devoted to promoting healthier behavior, despite the fact that preventable chronic diseases are linked to lifestyle behaviors, such as smoking, exercise, and drug and alcohol use, and to social determinants of health (McGinnis, Russo, & Knickman, 2002).

■ Emerging and Tested Ideas for Better Health Delivery

Health care leaders and policymakers are grappling with how to improve our health delivery systems. In this section, we highlight emerging service delivery models cre- ated to improve health outcomes for vulnerable groups while containing the cost of care. Defi nitions and descriptions of these budding models are explained, along with case studies that have implemented these models.


Growing evidence shows that three distinct delivery strategies—care coordination, patient engagement and team-based care, and integration of care—help to meet the needs of vulnerable populations. We describe these strategies and discuss the mean- ingful use of data to drive them.

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Care Coordination

Creating successful integrated delivery systems for vulnerable populations requires several factors: (a) an emphasis on primary care; (b) coordination of all care, includ- ing behavioral, social, and public health services; and (c) accountability for population health outcomes (Witgert & Hess, 2012). Th e Agency for Health Care Research and Quality (AHRQ) defi nes care coordination as:

…[T]he deliberate organization of patient care activities between two or more participants (including the patient) involved in a patient’s care to facilitate the appropriate delivery of health care services. Organizing care involves the marshal- ing of personnel and other resources needed to carry out all required patient care activities, and is often managed by the exchange of information among participants responsible for diff erent aspects of care. (AHRQ, 2014)

According to a 2011 report published by the American Hospital Association, prom- ising practices that will improve care coordination include (among other practices) conducting periodic home visits, facilitating and encouraging data sharing through the use of integrated health information systems (i.e., electronic medical records [EMRs]), providing non–health care services such as transportation to appointments, employing and incorporating specially trained teams of providers that are aware of each patient’s cultural and language backgrounds and can administer guidance and advice as they see fi t ( Fontenot & Stubblefi eld, 2011).

Patient Engagement and Team-Based Care

Patient engagement is generally defi ned as the process of involving individuals in their health care, disease management, or preventive behaviors. Providers can—and do— play an important role in the health outcomes of their patients; however, after a patient has left the doctor’s offi ce, the patient’s health is largely in his or her own hands. Low income, lack of education, language barriers, and not having a regular source of care are some of the many risk factors that may create signifi cant barriers to accessing nec- essary health care services (Shi & Stevens, 2005). Patients are expected to follow rec- ommended care management plans, communicate regularly with their providers, and make positive lifestyle changes; however, patients—especially those within vulnerable populations—lack the energy, money, knowledge, and skills needed to navigate suc- cessfully their often complex health conditions, regardless of whether they are sick or well (Center for Advancing Health, 2010).

Patient engagement works best when it involves a team that not only pos- sesses clinical expertise, but also considers patients’ socioeconomic needs (such as the importance to clinical outcomes of stable housing) and provides coordination (e.g., across multiple providers or between community-based organizations and the health system). Th e ideal care team includes not only physicians and nurses direct- ing decisions related to medical care, but also psychiatrists, psychologists, or other licensed clinical social workers who support behavioral and mental health, as well as social workers who can provide counseling and access to social services via refer- rals (Manahan, 2011; Volkmann & Castanares, 2011). More and more, such mul- tidisciplinary teams include outreach specialists and community health workers, especially when addressing the needs of vulnerable populations (Martinez Garcel, 2012; Volkmann  & Castanares, 2011). A 2014 report on Bronx Lebanon Hospital’s

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Case Study 1. Patient Engagement: Bronx-Lebanon Hospital Department of Family

Medicine’s Patient-Centered Medical Home

Th e South Bronx is home to a vibrant community, albeit poor, young, and with high rates of every illness now reaching epidemic proportions in the United States: diabetes, asthma, HIV, drug use, and obesity, to name a few. It is also the home of the Bronx-Lebanon Hospital Department of Family Medicine’s Patient- Centered Medical Home.

Th e hospital’s chair of family medicine, Dr. Douglas Reich, was grappling with the department’s goal of improving health outcomes for the patients with

utilization of community health workers (CHWs) showed that CHWs help to reduce the number of ED visits and hospitalizations, thus reducing health care costs and contributing to the management of chronic disease (Findley, Matos, Hicks, Chang, & Reich, 2014). Case Study 1 expands on the Bronx-Lebanon Hospital example ( Findley et al., 2014).

CHWs play a critical role in patient engagement. Th ey can explain reasons for their actions in layman’s terms and provide a support system that allows patients to feel they have the power to navigate the system and take control of their condition. When care coordination includes the support of individuals such as CHWs, patients have the help they need to think through how to integrate self-management of their chronic conditions into their existing life circumstances and—in the best of cases—are directed to the auxiliary services they need to get a handle on their nonmedical prob- lems, stabilize their routines, and have better health outcomes.

Bringing It All Together: An Integrated System

Populations that are vulnerable due to low income or poor health stand to benefi t from the integration of care. Integrated health care delivery systems provide or arrange a coordinated continuum of health care services to a defi ned population, and these delivery systems hold themselves accountable for the outcomes and health status of their patients (Witgert & Hess, 2012). By ensuring appropriate care, avoiding dupli- cation of services, and reducing fragmentation within a preventive framework, inte- grated delivery systems seek to promote health care equality while controlling costs.

Use of Data in Improving Care

EHRs (also called electronic health records) and advances in information technol- ogy (including geographic information systems) have created new opportunities to improve the eff ectiveness and effi ciency of care—particularly for vulnerable popula- tions. Such technological advances have facilitated the use of large data sets to inform health care delivery and also to conduct comprehensive cost and utilization analysis by population type, geography, and more.

One of the most compelling examples of data-reliant integrated care is the work of New Jersey’s Camden Coalition of Healthcare Providers (CCHP), which utilizes the Camden Health Information Exchange (HIE) to track, monitor, and target services for the highest-cost patients across health systems in Camden. Case Study 2 expands on the example of the Camden Coalition.

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the most complex life contexts. Beyond completing the very important clinical tasks of diagnosis and treatment, Reich’s clinicians lacked the time and the skills to conduct meaningful discussions that would help to provide a better context for patients’ care: What were the barriers to following a treatment regimen? What was getting in the way of managing illness? Was there room for prevention? An even greater challenge was reaching the hundreds of people who were in need of health care but going without.

In 2007, the Community Health Worker (CHW) program was established. CHWs, supervised directly by the department chair, received extensive training to fulfi ll their role as care managers. Integration into the care team was achieved by creating opportunities for shared learning and cross-education about team roles, for CHWs and clinical members alike, through continuing education, rounds, staff meetings, and so on.

Achieving CHW program sustainability required additional infrastructure, and protocol changes were necessary, the following among them:

■ Recognition of CHW team contributions, including assessments and feedback within the department and hospital administration

■ Shared group visits with a CHW and a physician ■ Elaboration of the care management process ■ Focus of work on interactions with patients

Th e patients assigned to CHWs demonstrated improvements in medica- tion compliance, increased self-management of chronic conditions, and showing up for follow-up primary care appointments. In several cases, there has been a reduction of ED use and inpatient hospitalization. Th e CHW program at Bronx- Lebanon Hospital Department of Family Medicine has yielded important les- sons for other patient-centered medical homes interested in expanding their care teams to enhance patient engagement.

Case Study 2. Integrated Care: Camden Coalition of Healthcare Providers

Founded in 1828, Camden, New Jersey, was once the center of a thriving manu- facturing industry. As with many other U.S. cities, deindustrialization led to high poverty rates that, coupled with political corruption and consistently high rates of violent crime, earned the city the dubious title of poorest city in the country. In addition to high unemployment rates, Camden is home to many Medicaid and Medicare benefi ciaries and to others who are uninsured.

Dr. Jeff rey Brenner, a family physician operating a solo practice in Camden, recognized patterns of overspending that did not result in better health out- comes for Camden residents. In 2002, he and a small group of other primary care providers began meeting over breakfast once a month to discuss the issues they faced in their practices. It quickly became evident that all of the provid- ers experienced many of the same barriers. In 2003, Dr. Brenner and colleagues

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On March 23, 2010, President Obama signed the ACA into law and altered the land- scape of U.S. health care policy. Although much of the law’s emphasis has been on the historic expansion of insurance coverage to millions of uninsured people, the ACA also provided major investments to expand federally qualifi ed health centers and initi- ated eff orts to change how health care is delivered and paid for in the United States. Many of these changes will have a direct eff ect on vulnerable populations. Th e next section briefl y describes several key provisions of the ACA that aim to improve access and quality of care for vulnerable populations.

founded the Camden Coalition of Healthcare Providers and set out to convince local stakeholders that an integrated health delivery model, in which patient data were shared and care coordinated, would result in better care for Camden resi- dents (Gawande, 2011).

Th e coalition showed how vulnerable populations, in absence of a well- integrated and supportive health care system, have higher numbers of ED visits, suff er from more chronic disease, have access to fewer preventive services, and seek more reactive care than their peers living less chaotic lives. Th e analysis looked at 480,000 records for 98,000 patients by pooling data from the major health care institutions serving Camden for the period between 2002 and 2009. Th ey results showed that 50% of Camden residents used the ED or the hospital in 1 year. Th ose individuals with the highest number of ED visits and hospi- talizations citywide (“super utilizers”) accounted for 324 visits in 5 years and 113 visits in 1 year. Th irty percent of costs were incurred by 1% of patients, 80% of costs were incurred by 13% of patients, and 90% of costs were incurred by only 20% of patients. Th e most expensive patient incurred $3.5 million in health care costs.

For vulnerable populations, crisis is the baseline. At the heart of crisis is the confl uence of economic, social, geographic, and demographic factors that create the conditions for poor health and make management of illness a diffi cult task. When conducting a spatial analysis of Camden hospital cost data, the coalition found areas of the city with high concentrations of utilizers. In fact, several build- ings each year were responsible for between $1 and $3 million in hospital costs. Furthermore, 6% of city blocks accounted for 18% of patients and 37% of billable visits.

Th e Camden team created an integrated model of care in response to these fi ndings. Members of the care team check in with individual patients to ask about issues including, but not limited to, their unfi lled prescriptions, reasons for miss- ing appointments, and any emerging health issues. All patients have access to the coalition’s health care crisis hotline, always staff ed by a health care provider who can off er advice in an emergency situation.

Since the coalition formed in 2003, analysis of the data from the fi rst 36 super utilizers has shown a 40% reduction in hospital and ED visits per month, and a 56% reduction in their average combined hospital bills (from $1.2 million to $500,000; Gawande, 2011).

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Improving Access to Community Health Centers

Considering the expanded availability of health insurance, particularly Medicaid, to low-income people, the ACA also included large investments in expanding FQHCs to improve care to this population. For instance, the law appropriated $11 billion in mandatory funding increase for Section 330 grants from 2011 to 2015. Th e law also boosts funding for FQHCs through increased payment rates for primary care physi- cians serving Medicaid benefi ciaries. As of 2014, Medicaid providers will be paid at 100% of the rate paid to Medicare providers. Th ese provisions will lead to increased access to primary care for vulnerable populations, both by increasing the capacity of this safety net and by creating a fi nancial incentive through increased reimbursement for physicians to accept more people covered by Medicaid.

Advancing Payment and Delivery Reform

With the objectives of improving the quality of care and containing the cost of care, the ACA sets in motion myriad eff orts to change how health care is paid for and deliv- ered in the United States. Common underlying themes drive the proposed models of care and payment structures: (a) a move toward value-based purchasing of health services; (b)  increased coordination of health, social services, and prevention; and (c)  better integration of physical and behavioral health services. Th e proposed models can potentially have a positive eff ect on the health outcomes of vulnerable populations while reducing the cost of services delivered to this population.

For example, the ACA encourages state Medicaid programs to develop medical homes, known as Health Homes, for Medicaid patients with two or more chronic conditions or patients who have one serious and persistent mental health condition. Th e CMS issued specifi c elements that need to be included as part of a Health Home. Th ese elements include comprehensive care management; intensive care transition services for patients moving out of acute care services (such as hospitals, home-based care, outpatient facilities, and so on); care coordination among physical health, behav- ioral health and social and community services (such as supportive housing); and indi- vidual and family support to patients.

Th rough better coordination of services through primary care, specialty and hos- pital care, behavioral health, social service support, and stronger patient monitoring, Health Homes could improve health outcomes and reduce unnecessary care. One study estimated that the U.S. health system would save approximately $175 billion over 10 years if primary care providers shifted to this coordinated system of care (Th e Lewin Group, 2009).

Th e ACA has also prompted a move away from the traditional FFS model to payment models that would align reimbursement and incentives to the value of care provided and hold providers accountable for health outcomes. Th is move toward value-based purchasing of services is central to a major Medicare demonstration sup- ported by the ACA: accountable care organizations (ACOs).

ACOs are groups of doctors, hospitals, and other health care providers who come together voluntarily to give coordinated, high-quality care to their Medicare patients (Bachrach, Bernstein, Karl, Manat, & Phelps & Phillips, 2012). As defi ned by the ACA, ACOs must manage the health care needs of a minimum of 5,000 Medicare benefi cia- ries for at least 3 years. Th e goal of an ACO is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplica- tion of services and preventing medical errors. Th is approach to care should lead to

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reductions in the total cost of care for the assigned population of patients. Providers participating in an ACO will share accrued savings with Medicare. In the end, pro- viders get paid more for keeping their patients healthy and out of the hospital—as opposed to getting paid more only for providing more services. If an ACO is unable to save money, it can potentially be at risk for losing money associated with the costs of investments made to improve care, or it may have to pay a penalty if it does not meet performance and savings benchmarks.

Additional payment reform eff orts enacted by the ACA include bundled payment demonstrations programs and reduced payments for potentially preventable read- missions and complications. Th e common goal of all of these eff orts is to improve the quality of care and rein in cost of health care, with a special focus on vulnerable populations.

Limitations of the ACA

Even taking the ACA into account, approximately half of the nation’s 48 million unin- sured could potentially remain without health insurance. Th e law allowed states to expand Medicaid eligibility to adults with incomes up to 138% of the federal poverty level. However, it is up to each individual state to expand eligibility for Medicaid. As of September, 2013, 26 states have rejected the Medicaid expansion. Th ese 26 states are home to about half of the U.S. population, and nearly 68% of the people living in these states are people living in poverty, uninsured Blacks, and/or single mothers. Because of their income status, many of these individuals do not qualify for federal subsidies to help them buy into the health exchanges. It is estimated that 8 million people will remain ineligible for insurance because they are not poor enough to qualify for Medicaid in its existing form—which has income ceilings as low as $11 a day in several states—yet do not meet the income eligibility for federal subsidies.

Th en there are the individuals and families who are undocumented immigrants. Th e ACA specifi cally excludes this group from its provisions, leaving out the approxi- mately 11 million undocumented immigrants who reside in the United States. Th ese same individuals and families are likely to live in poverty, experience language and cul- tural barriers to accessing health care services, and have higher risk factors for chronic conditions.

As a result of these ACA limitations, the safety-net hospitals that provide care to vulnerable populations will experience a signifi cant burden. Th is is especially troubling in the states with high concentrations of undocumented immigrants and a higher pro- portion of people who remain ineligible for insurance. Under the ACA, a reduction is scheduled in payments to disproportionate share hospitals, which have helped to absorb the eff ects of providing uncompensated care. Th is reduction will add to the strain on the resources of these institutions.

Another important limitation of the ACA that will aff ect the health and well- being of vulnerable populations is its narrow focus on the traditional health care sys- tem. Although the law sets in motion delivery system and payment transformations that will help to bridge traditional health care institutions with agencies, programs, and services that address some of the key drivers of poor health (such as housing, behavioral health services, and so on), it falls short of making the necessary invest- ments in the social service sector that will help vulnerable populations get on—and stay on—the path to a healthy life. Th e United States is one of only three industrial- ized countries to spend most of its health and social services budget on health care

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itself (Bradley & Taylor, 2013). For every dollar the United States spends on health care, an additional 90 cents is spent on social services. In peer countries, for every dollar spent on health care, an additional $2 is spent on social services. Research- ers who looked at spending across health care relative to social services found that countries with high health care spending compared with social spending had lower life expectancy and higher infant mortality than countries that favored social spend- ing. European countries that have made greater investments in social services rela- tive to health have experienced leaps in life expectancy (well over 80  years) and infant mortality rates that are half those in the United States. Most medical provid- ers concur with this logic. In a Robert Wood Johnson Foundation–funded national survey, four out of fi ve physicians agreed that unmet social needs lead directly to worse health.

If the United States is to make a dent in improving the health outcomes of vulner- able populations, we must go beyond shifting dollars from one part of the health care system to another. Rather, we must make a transformative shift in where the invest- ments are made—and accept that subpar social conditions have a direct consequence on health. As Bradley and Taylor state:

Homelessness isn’t typically thought of as a medical problem, but it often precludes good nutrition, personal hygiene, and basic fi rst aid, and it increases the risks of frostbite, leg ulcers, upper respiratory infections, and trauma from muggings, beat- ings, and rape. (Bradley & Taylor, 2013)

A program in Boston that tracked the medical expenses of 119 chronically home- less people found that, in a 5-year period, these individuals accounted for 18,834 emergency department visits estimated to cost over $12 million.

■ Conclusion

Vulnerable populations are at greatest risk of poor physical, behavioral, and social health. Th ey have the highest rates of disease burden and mortality. Vulnerable groups have the  hardest time accessing timely, high-quality health care and, when receiv- ing care, are more likely to have worse health outcomes than the general population. Despite an extensive body of literature and myriad federal eff orts to eliminate these inequities in health and health care between vulnerable groups and the general popu- lation, the United States has barely made progress.

To some extent, the topic of eliminating disparities has been diluted and over- used. It is almost as though the topic of health disparities has become an accepted

The prevalence of vulnerable populations is increasing; if we fail to institute policies and programs to improve the health of vulnerable populations, little will be done to contain the cost of care in the United States.

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part of our health literary repertoire. But this issue contains an underlying, explosive problem: Th e prevalence of vulnerable populations is increasing; if we fail to institute policies and programs to improve the health of vulnerable populations, little will be done to contain the cost of care in the United States. We will continue to spend more on health but have signifi cantly poorer health status compared with other industrial- ized countries.

In this chapter, we have off ered an integrated framework that sets vulnerable groups in the social context of their existence. As opposed to examining the health of discrete vulnerable subgroups, which are not mutually exclusive, the chapter provided a general overview of the predisposing and enabling factors that lead to vulnerability. Th e approach refl ects the co-occurrence of risk factors and helps to explain why existing approaches to meet the health needs of this population will continue to fall short. Th ough well intended, current policies and programs are a patchwork of categorical, fragmented, and uncoordinated attempts that cost a lot of money.

Vulnerability is primarily a social issue created through social forces. It will be addressed adequately only through broader social, communitywide investments. A shift to community-oriented policies and programs that address the social origins of vulnera- bility can lead to greater improvements in health outcomes. Th ese programs and policies should aim to produce networks of collaboration and integration—rather than wedges of bureaucratic division—across medical care, public health, social and economic solu- tions, and policies that permanently fi x the risks and consequences of vulnerability. Investing time, energy, and resources in improving the health of vulnerable populations as a national priority is more than a social and moral imperative—it is an economic one. Th e human and fi nancial costs of this problem weigh heavily on the future of the United States to continue as a beacon of justice and equality and a global fi nancial leader. Who are considered vulnerable populations, and what does this tell us about the nature of the problems that predispose and enable vulnerability in the United States?

■ Discussion Questions

1. How have shifting demographics, the rise in prevalence of chronic conditions, and the strained social service sector contributed to the growing number of vulnerable populations?

2. A wide array of medical and social services exists to help meet the complex needs of vulnerable populations; however, the United States has been unable to curb health care costs or improve health outcomes for this segment of the population. What are some of the underlying problems with the current approach to services for vulnerable populations?

3. How does the current payment system fall short in meeting the needs of vulnerable populations?

4. Review the limitations for meeting the needs of vulnerable populations in the ACA provisions. Propose ways in which you would address these limitations using (a) new policies, (b) existing policies and structures, (c) innovative ideas (such as public/private partnerships).

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The commissioner of health in a large, mostly urban county has secured your services

as a consultant to identify strategies to meet the needs of the growing refugee popula-

tion legally settling in her region. A refugee is a person who has fl ed from his or her

home country and cannot return because of a well-founded fear of persecution based

on religion, race, nationality, political opinion, or membership in a particular social

group. The commissioner of health has at her disposal both federal and state resources

and good relationships with colleagues from other county agencies, such as planning,

transportation, education, aging, and so on.

As a consultant, you have been asked to propose a coordinated plan to use

existing resources and relationships to better serve the needs of the growing refugee

population. When considering your plan, be sure to address the following questions:

1. What type of information would you collect, and how would you use it?

2. Whom else would you engage in developing a plan?

3. How will you ensure that the refugee population has access to existing and new


4. Explain how your plan will meet the immediate and long-term needs of this group

as part of an improved system of health care and social services.

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Devi, S. (2011). Native American health left out in the cold. Th e Lancet, 377(9776), 1481–1482. doi:10.1016/S0140-6736(11)60586-2

DeVol, R., Bedroussian, A., Charuworn, A., Chatterjee, A., Kim, I. K., Kim, S., & Klowden, K. (2007). An unhealthy America: Th e economic burden of chronic disease. Santa Monica, CA: Milken Institute. Retrieved from http://assets1b.milkeninstitute.org/ assets/Publication/ResearchReport/PDF/chronic_disease_report.pdf

Diez-Rouz, A. V. (2003). Residential environments and cardiovascular risk. Journal of Urban Health, 80(4), 569–589.

Do, D. P. (2009). Th e dynamics of income and neighborhood context for population health: Do long-term measures of socioeconomic status explain more of the Black/ White health disparity than single-point-in-time measures? Social Science and Medi- cine, 68(8), 1368–1375.

Findley, S., Matos, S., Hicks, A., Chang, J., & Reich, D. (2014). Community health worker integration into the healthcare team accomplishes the Triple Aim in a patient- centered medical home: A Bronx tale. Journal of Ambulatory Care, 37(1), 82–91. Retrieved from http://chwcentral.org/sites/default/fi les/Community_Health_ Worker_Integration_Into_the.10.pdf

Fontenot, T., & Stubblefi eld, A. G. (2011). Caring for vulnerable populations. American hospital association 2011 committee on research. Retrieved from http://www.aha.org/ research/cor/caring/index.shtml

Galewitz, P. (2012, June 6). Migrant health clinics caught in crossfi re of immigration debate. Kaiser Health News. Retrieved from http://www.kaiserhealthnews.org/sto- ries/2012/june/07/migrant-health-clinics-immigration-debate.aspx

Garr, E. (2011). Th e landscape of repression: Unemployment and safety net services across urban and suburban America. Metropolitan opportunity series: Vol. 12. Retrieved from http://www.brookings.edu/research/papers/2011/03/31-recession-garr

Gawande, A. (2011, January 24). Th e hot spotters: Can we lower medical costs by giving the neediest patients better care? Th e New Yorker. Retrieved from http://www.newy- orker.com/reporting/2011/01/24/110124fa_fact_gawande?currentPage = 3

Gourevitch, M. N., Malaspina, D., Weitzman, M., & Goldfrank, L. (2008). Th e public hospital in American medical education. Journal of Urban Health, 85(5), 779–786. doi:10.1007/s11524-008-9297-4

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Hawkins, D., & Groves, D. (2011). Th e future role of community health centers in a changing health care landscape. Journal of Ambulatory Care Management, 34(1), 90–99. Retrieved from http://www.nachc.org/client/documents/Th e_Future_Role_ of_Community_Health_Centers_in_a.11.pdf

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Hobfoll, S. E. (2001). Th e infl uence of culture, community, and the nested-self in the stress process: Advancing conservation of resources theory. Applied Psychology: An International Review, 50(3), 337–421.

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Knickman, J. K., & Snell, E. K. (2002). Th e 2030 problem: Caring for aging baby boomers. Health Services Research, 37(4), 849–884. doi:10.1034/j.1600-0560.2002.56.x

Lang, I. A., Hubbard, R., Andrew, M. K., Llewellyn, D. J., Melzer, D., & Rockwood, K. (2009). Neighborhood deprivation, individual socioeconomic status, and frailty in older adults. Journal of the American Geriatrics Society, 57(10), 1776–1780. doi:10.1111/j.1532-5415.2009.02480.x

Th e Lewin Group. (2009). Th e Path to a High Performance U.S. Health System: Technical Documentation. Washington, DC: Th e Lewin Group.

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National Center for Health in Public Housing (NCHPH). (2012). Public housing primary care program. Retrieved from http://www.nchph.org/wp-content/uploads/2013/11/ NCHPH-PHPC1.pdf

National Health Care for the Homeless Council (NHCHC). (2008). Th e basics of home- lessness. Retrieved from http://www.nhchc.org/resources/general-information/fact- sheets/

Partnership for Solutions. (2004). Chronic conditions: Making the case for ongoing care, September 2004 update. Baltimore, MD: Johns Hopkins University. Retrieved from http://www.partnershipforsolutions.org/DMS/fi les/chronicbook2004.pdf

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The subject matter now shifts to introducing readers to how the medical care system works to make people get back to a healthy state or to manage a health problem when they have an illness, a chronic disease, or an injury. Chapter 9, by Amy Yarbrough Landry and Cathleen Erwin, addresses the organization of our large and complex medical care system. Th e chapter describes the organization of care, examin- ing types of care and types of organizations. Th e current period is one of substantial change in the way care is being organized. Th e chapter explains key organizational forms that likely will emerge over the next 5 to 10 years.

In Chapter 10, Joanne Spetz and Susan Chapman focus on the challenges asso- ciated with making sure we have the right type of workforce to play the many roles required to deliver services and manage the delivery of services. It is a challenge to make sure we have adequate supplies of service providers and that we support this workforce in its eff ort to deliver high-quality care. Th e chapter explains how the com- position of the workforce is changing and what the future challenges are in developing a smoothly functioning labor market for health jobs.

Th e next two chapters turn to the issue of how we pay for medical care in the United States and how we ensure that our resources are being used wisely. In Chapter 11, James Knickman explains the sources of money that pay providers and the methods we use to make the fi nancial transactions that link purchasers and providers. Th e health care fi nancing system is complicated because most people pay for a good share of their care by purchasing health insurance policies or by relying on insurance policies provided by federal and state governments. Chapter 11 explains why there is dissatisfaction with the current payment system, which relies on fee-for-service pay- ments, and presents the main ideas for reforming how we pay for care.

Th ad Calabrese and Keith Safi an, in Chapter 12, turn to the question of whether or not the fi nancing system encourages effi ciency and high quality among providers. It is a challenge to make sure providers don’t have incentives to produce too much care, too little care, or the wrong types of care. Th e chapter lays out some ideas for how to get providers focused on what is called high-value care: aff ordable but eff ective and addressing important health concerns.

Chapter 13, authored by Carolyn Clancy and Irene Fraser, looks at the more tech- nical side of quality improvement and assurance and describes how providers actually go about preventing and responding to mistakes in care and making sure that care leads to the outcomes patients are promised. In Chapter 14, Anthony Kovner and Christy Harris Lemak shift the discussion from managing quality to managing the organization and delivery of care in general. Th is chapter focuses on how medical

III Medical Care: Treating

Americans’ Medical Problems

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care delivery organizations are governed and managed. Th e chapter makes the case that managers must be sophisticated leaders and should strive to develop evidence about what management practices lead to the most eff ective organizations and good outcomes.

Chapter 15, by Nirav Shah, turns to the new challenge of making the world of information technology work better in the health system. Medical care organizations have been slow adopters of information technology, but the pace of adoptions has picked up in recent years. Th e chapter explains how information technology can be used to better manage medical care provision and to improve both the cost and the quality of care.

9 Organization of Care Amy Yarbrough Landry and Cathleen O. Erwin


LEARNING OBJECTIVES o Defi ne and distinguish between types of health care services along the continuum

of care o Identify and discuss types of organizations in the U.S. health care delivery system o Increase awareness of new mechanisms for health system performance improve-

ments o Understand and discuss future trends in the health delivery system

TOPICAL OUTLINE o The current organization of the health care delivery system o Types of health care delivery organizations o The future of the health care delivery system o Examples of best practices in the organization of medical care

accreditation ambulatory care average length of stay (ALOS) certifi cation continuing care retirement community continuity of care continuum of care corporate medical practice horizontal integration instrumental activity of daily living (IADL) long-term care network

palliative care patient-centered medical home (PCMH) primary care privileges quaternary care rehabilitative hospital same-day surgery specialty hospital subacute care tertiary care transitional care urgent care center

In the United States, health care is delivered through a complex and multifaceted system of private and public institutions that operate in cooperation with, but largely independent of each other. Unlike many other countries, the United States has no central governmental agency to control the delivery of health care, although delivery is heavily infl uenced through health care legislation and the government’s role as a major

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purchaser of health care services through Medicare, Medicaid, and other public pro- grams. Th e continuum of care in the United States encompasses care from the cradle to the grave and includes services focused on both the prevention and the treatment of medical conditions and diseases as well as end-of-life care.

Th e individuals and organizations that provide care in the United States are faced with increasing pressure and scrutiny from the government, private insurance organizations, and the public to provide the highest quality of care while controlling costs and increasing access to underserved populations. Consequently, health care services and organizational structures are continuously being adapted to meet the demands and mandates of health care policy and to survive and thrive in this dynamic health care environment.

Th is chapter describes the current health care delivery system in the United States, including services, organizations, health system performance, and new innovations in care delivery.

■ Description of the Current Care Delivery System

By defi nition, the health system includes all organizations, institutions, and resources that have a primary purpose of promoting, restoring, and/or maintaining health (World Health Organization [WHO], 2015). From a broad, comprehensive perspective it includes clinical care as well as public health. Th e following sections provide a general discussion of the types of clinical health care services that are available in the United States and the types of organizations through which these services are delivered.


Health care services are provided for the purpose of contributing to improved health or to the diagnosis, treatment, or rehabilitation of sick people.

Health care services are provided for the purpose of contributing to improved health or to the diagnosis, treatment, or rehabilitation of sick people (WHO, 2013). Health care services include prevention, cure, rehabilitation, and palliation eff orts that are oriented to either individuals or populations.


Prevention of disease and maintenance of general good health are the focus of health promotion and preventive services. Health status is aff ected by a number of factors, including health policy, individual behavior, social determinants, physical determi- nants, biology and genetics, and availability of health services. Services associated with prevention may be focused on the health of an individual or the health of a popu- lation. Although prevention services have always been available in the United States, an even greater emphasis is placed on prevention because of its prominence in the Patient Protection and Aff ordable Care Act of 2010 (ACA) as an essential component

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of health insurance benefi ts. Most health plans must cover a set of preventive services at no cost to the benefi ciary.

Th e prevention fi eld often distinguishes interventions that are delivered by a health care provider (clinical prevention services) from those delivered by non– health care providers (community-based prevention initiatives). According to the Institute of Medicine (IOM, 2012), a holistic view of community-based prevention incorporates cultural, social, and environmental changes; also, community-based prevention is often more diffi cult to fund and staff than clinical interventions. Certain preventive services may be off ered through a clinical–community relationship that might entail a primary care provider making a connection with a community-based organization to provide specifi c services (such as a community-based weight-loss program) or collaboration between clinical and community-based organizations to network, coordinate, or cooperate on preventive services delivery. Additionally, the fi eld sometimes distinguishes between prevention initiatives that focus on individu- als one at a time and initiatives that are more population-based, working with larger groups of people (e.g., eff orts to increase the availability of healthy food in low- income neighborhoods).

Clinical prevention services are often categorized as primary, secondary, or tertiary, based on the stages of the disease they target.

Primary Prevention Services. Primary prevention services are focused on preventing or reducing the probability of the occurrence of a disease in the future. Services are provided through public and private institutions and are often focused on educat- ing the public about the risks associated with individual behaviors that can negatively aff ect their short- and long-term health.

Examples of primary prevention include immunizations for prevention of childhood diseases, smoking cessation programs to reduce the risk of lung cancer and heart disease, weight loss programs, prenatal and well-baby care, programs to increase workplace safety, and the promotion of hand washing to reduce the spread of infl uenza or other diseases. Th e services are provided through a wide variety of institutions, such as public health departments, physician offi ces, hospitals, places of employment, houses of worship, and broadcast media.

Secondary Prevention Services. Th ese services are focused on the early detection and treatment of disease in order to cure or control its eff ects. Th e goal is to minimize the eff ects of the disease on the individual. Secondary services are largely focused on routine examinations and tests such as blood pressure screenings, pap smears, routine colonoscopies, examination of suspicious moles, and mammograms. Early detection and treatment often increases the probability of a successful outcome.

Tertiary Prevention Services. Th ese services are targeted at individuals who already have symptoms of a disease in order to prevent damage from the disease, to slow down its progression, to prevent complications from occurring as a result of the disease, and ultimately to restore good health to the person with the disease.

Tertiary prevention includes services such as providing diabetic patients with edu- cation and counseling on wound care. It also includes institutional practices such as infection control in a hospital facility to prevent illness or injury caused in the process of providing health care.

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Acute Care

Acute care is short-term, intense medical care providing diagnosis and treatment of communicable or noncommunicable diseases, illness, or injury. Th e defi nition of acute care varies across the scholarly literature and textbooks. Acute care is some- times defi ned as being primary, specialty, tertiary, or quaternary in nature, centered around the care delivered by physicians and other providers in clinical settings (such as physician offi ces and hospitals). Acute care services may be provided on an outpa- tient basis (i.e., not requiring an overnight hospital or health care facility stay), or on an inpatient basis (i.e., requiring an overnight stay).

A more comprehensive defi nition of acute care includes not only these services but also the emergency services provided in the community given the time-sensitive nature of the need for diagnosis and treatment. One proposed defi nition of acute care includes the components of the health system where acute care is delivered to treat unexpected, urgent, and emergent episodes of illness and injury that could lead to disability or death without rapid intervention (Hirshon et al., 2013). Based on this defi nition, acute care encompasses a range of functions including emergency care, trauma care, prehospital emergency care, acute care surgery, critical care, urgent care, and short-term inpatient stabilization (Figure 9.1). Th e following sections outline the types of acute care based on the framework illustrated in Figure 9.1, although not all of the domains are dis- cussed because of obvious overlaps. Th e primary, specialty, tertiary, and quaternary care defi nitions are incorporated into the framework to show where these levels of care best fi t within the acute care model and to note relationships to other forms of care.

Emergency and Urgent Care. Emergency care is designed to provide immediate care for sudden, serious illness or injury, although it is sometimes utilized for nonemer- gent care by individuals who are uninsured or underinsured. A medical emergency is defi ned by what is known as the prudent layperson standard:

[A] condition with acute symptoms of suffi cient severity (including severe pain) such that a prudent layperson, who possesses average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in–(i) placing the health of the individual (or unborn child) in serious jeop- ardy, (ii) serious impairment of bodily functions, or (iii) serious dysfunction of any bodily organ or part. (Social Security Act § 1867)

Emergent types of care (such as trauma) can be classifi ed by the triage level, that is, by the emergency severity index (ESI). Th e ESI is a fi ve-level triage algorithm that clinically stratifi es patients into groups based on immediacy of the need to be seen, which includes the following levels:

1. Immediate (less than 1 minute) 2. Emergent (1–14 minutes) 3. Urgent (15–60 minutes) 4. Semiurgent (61–120 minutes) 5. Nonurgent (121 minutes–24 hours)

In 2010, 1.1% of emergency department (ED) visits were classifi ed as immediate, 10.2% as emergent, and 43.4% as urgent; the remaining 45.3% were either semiurgent

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or nonurgent or were not triaged (Centers for Disease Control and Prevention [CDC], 2010).

Th e Emergency Medical Treatment & Labor Act of 1986 (EMTALA) requires that all patients who present themselves for treatment at an ED must be screened and evaluated, provided the necessary stabilizing treatment, and admitted to the hospital when necessary, regardless of ability to pay.

Urgent care is used for an illness, injury, or condition that is serious enough for a reasonable person to seek care right away but not so severe as to require ED care. It is

F I G U R E 9 . 1









aTreatment of individuals with acute surgical needs, such as life-threatening injuries, acute appendicitis. or strangulated hernias. bTreatment of individuals with acute life- or limb-threatening medical and potentially surgical needs, such as acute myocardial infarctions or acute cerebrovascular accidents, or evaluation of patients with abdominal pain. cAmbulatory care in a facility delivering medical care outside a hospital emergency department, usually on an unscheduled, walk-in basis. Examples include evaluation of an injured ankle or fever in a child. dTreatment of individuals with acute needs before delivery of defi nitive treatment. Examples include administering intravenous fl uids to a critically injured patient before transfer to an operating room. eCare provided in the community until the patient arrives at a formal health care facility capable of giving defi nitive care. Examples include delivery of care by ambulance personnel or evaluation of acute health problems by local health care providers. f Th e specialized care of patients whose conditions are life-threatening and who require comprehensive care and constant monitoring, usually in intensive care units. Examples are patients with severe respira- tory problems requiring endotracheal intubation and patients with seizures caused by cerebral malaria. Source: Hirshon et al., 2013. Used with permission.

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considered ambulatory care, which means that the person in need of care can walk (or ambulate) into the facility. However, a patient in need of “ambulatory” care may need some assistance entering the facility depending on the nature of the illness or injury (e.g., severe ankle sprain). Services are provided by physicians and physician extend- ers (such as nurse practitioners or physician assistants) typically on a walk-in basis without a previously scheduled appointment because of the immediacy of the need. Urgent care services may be provided through a traditional physician practice or an urgent care center.

Prehospital Care. Prehospital care includes medical services provided in the com- munity, such as stabilization by emergency services before or during transportation to a health care facility. It also includes evaluation and treatment provided through local, community-based providers, as in a private physician practice setting.

Primary care. Primary care is the fi rst and most general source for routine treat- ment of illness and disease. Primary care providers may be physicians, physician assis- tants, or nurse practitioners who have trained in family medicine, internal medicine, pediatric medicine, gerontology, or other primary care “specialties,” such as obstetrics and gynecology. In the managed care environment, primary care delivery plays an important role in the coordination of care to help control costs and ensure that the appropriate level of care is sought for the health concern. Primary care providers are involved in delivering both acute care and preventive care.

Specialty care. Specialty care refers to care delivered through providers who are trained as specialists or subspecialists in the fi eld of medicine. Th is type of care some- times requires a referral from a primary care physician. Specialists focus on a particu- lar body system or on a specifi c disease or condition; they have the knowledge and expertise to handle medical conditions that are beyond the realm of primary care. For example, cardiologists diagnose and treat conditions involving the heart, endocrinolo- gists focus on hormone systems and may specialize in a disease such as diabetes, and neurologists are trained to diagnose and treat disorders associated with the nervous system—brain, spinal cord, and so on. Similarly to primary care, specialty care may be utilized to address both acute and preventive care needs.

Chronic care. Chronic care is the continual treatment and monitoring of conditions that can be controlled but not cured; it includes both physical and behavioral conditions. Examples of chronic conditions include diabetes, hypertension, and depression. As the life expectancy of the population has increased, so have the incidence and prevalence of chronic conditions. It is estimated that more than one fourth of all Americans and two out of three older Americans have at least two chronic conditions, and approximately 66% of the nation’s health costs are attributable to the treatment of people living with multiple chronic conditions (Agency for Healthcare Research and Quality, 2013).

Th e management and treatment of chronic conditions may be delivered by pri- mary and/or specialty care providers. By defi nition, chronic care is not considered acute care; however, chronic conditions can cause or exacerbate acute episodes of illness. Chronic care also fi ts within the category of preventive services, which include services that focus on the early detection and management of chronic conditions.

Tertiary Care. Tertiary care typically involves hospitalization for specialty care that requires highly specialized equipment and expertise and involves more complex therapeutic interventions, such as coronary bypass surgery, neurosurgery, advanced

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neonatal intensive care, or treatments for severe burns or injuries. Some tertiary care services may be provided on an outpatient basis, such as same-day surgeries. Patients are admitted to a tertiary facility through a practitioner order from a qualifi ed provider who has been granted admitting privileges by the facility.

Quaternary Care. Quaternary care, an extension of tertiary care, entails providing the most complex medical and surgical care for highly specialized and unusual cases. It may involve experimental procedures, experimental medications, or very uncom- mon surgeries or procedures. Examples of quaternary care are advanced trauma care and organ transplantation. Quaternary care is not off ered by every hospital or medical center; it is more likely to be found in academic medical centers.

Subacute Inpatient Care. Subacute care is a level of inpatient care needed by a patient immediately after or instead of hospitalization for an acute illness, injury, or exacerbation of a disease process. Th is level of care centers on providing one or more active medical conditions or administering one or more technically complex treat- ments. It requires more intensive skilled nursing care than is provided to the majority of patients in a skilled nursing facility (i.e., nursing home).

Th e term “subacute care” has been applied to a broad range of medical and reha- bilitative services and settings that provide care to patients after an acute care episode. It combines rehabilitation and convalescent services for patients who typically need 10 to 100 days of treatment, and is provided in settings other than in acute care hospital beds. Subacute care is delivered in facilities licensed to provide the appropriate level of care, which includes special units established by acute care hospitals and skilled nursing facilities.

Rehabilitative Care

Rehabilitative health care services are aimed at restoring a person to his or her origi- nal state of health (or as close as possible). Rehabilitation services help a person keep, regain, or improve skills and functioning for daily living that have been lost or impaired because of illness or injury. Services include physical therapy, occupational therapy, speech–language pathology, and psychiatric rehabilitation. Rehabilitative services are off ered in a variety of inpatient and outpatient settings.

Long-Term Care

Long-term care encompasses a range of services and support provided to meet per- sonal care needs on a long-term basis, most of which is not medical care. It encom- passes an array of services provided in a variety of settings for people who have lost some independence because of a medical condition, injury, or chronic illness. Long- term care is often used to provide assistance with activities of daily living (ADLs), such as bathing, dressing, using the toilet, transferring to or from a bed or chair, and eating, among others. Other common services and support assist with instrumental activities of daily living (IADLs), which are everyday tasks, such as housework, taking medica- tion, preparing meals, shopping, and responding to emergency alerts, among others.

Th e duration and level of long-term care needed by individuals varies and often changes over time. Long-term care services may be provided in an individual’s home or in a community setting or institution.

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End-of-Life Care

End-of-life care is provided in the fi nal hours or days of an individual’s life. Th is type of care includes physical, mental, and emotional comfort, as well as social support, for people who are living with and dying of terminal illness or a condition that is advanced, progressive, and incurable. End-of-life care requires a range of decisions. Th ese decisions may include preparing advanced directives to make end-of-life wishes clear to family and providers, as well as determining the types of treatment and care that will be utilized.

Palliative care is the treatment for discomfort, symptoms, and stress of serious illness, providing relief from pain, fatigue, nausea, shortness of breath, loss of appetite, or problems with sleep. Palliative care can be received at any stage of an illness but is always included in hospice care.

When the focus shifts from cure to care, a patient moves to hospice care. Hospice care is end-of-life care utilized when a patient is expected to live 6 months or less. It is provided by a team of health care professionals and volunteers in the home, a hospice center, a hospital, or a skilled nursing facility. Hospice programs also provide services to support a patient’s family. Th e interdisciplinary hospice team usually consists of the patient’s personal physician; hospice physician or medical director; nurses; hospice aides; social workers; bereavement counselors; clergy or other spiritual counselors; trained volunteers; and speech, physical, and occupational therapists, if needed.


Th is section discusses the wide range of organizations that exist to deliver health care services, including hospitals, health systems, physician offi ces, specialty hospitals, long-term care facilities, rehabilitation hospitals, home health agencies, and other health-related organizations.


By defi nition, a hospital (other than psychiatric) is an institution that is primarily engaged in providing, by or under the supervision of physicians, to inpatients, diagnostic and therapeutic services for medical diagnosis, treatment, and care of injured, disabled, or sick persons; or rehabilitation services for injured, disabled, or sick persons. Outpatient services are optional but have been growing in importance over time as more and more medical interventions can be done in an outpatient setting and as the fi eld sees growing importance to integrating primary care, specialty care, and inpatient care for reasons of both quality and effi ciency.

According to the American Hospital Association (AHA, 2013), the United States has approximately 5,724 registered hospitals, which include all community, federal, psychiatric, long-term care, hospitals and hospital units located in institutions (such as prison hospitals, college infi rmaries, and so on). Hospitals can be categorized in a number of ways, such as by purpose, size, ownership, location (urban or rural), teaching status, or system affi liation (Table 9.1). Most hospitals in the United States provide general medical and surgical services on a short-term basis. Th e four pri- mary categories for hospitals according to the AHA are (a) community, (b) special, (c) rehabilitative and chronic disease, and (d) psychiatric.

Hospitals are subject to federal and state regulations. A hospital must be licensed to operate; licensing is handled at the state level by the agency or entity that has been

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designated with such authority for the state. Licensure focuses on physical plant require- ments, sanitation, personnel, and equipment. In order to receive reimbursement for ser- vices provided to Medicare and Medicaid patients, hospitals must receive certifi cation from the federal government. Hospitals may choose to pursue accreditation by Th e Joint Commission, an independent, nonprofi t organization that accredits hospitals and other types of health care institutions. Th is voluntary participation in accreditation is a symbol of quality that indicates the organization has met certain performance standards. Th e Centers for Medicare & Medicaid Services (CMS) recognize accreditation as suitable proof that a hospital has met the minimum requirements to receive certifi cation.

Patients are referred to the hospital for services on the authority of a member of the medical staff (i.e., a physician) who has been granted admitting privileges in accordance with state law and criteria for standards of medical care established by the facility. Hospitals provide both inpatient (requiring an overnight stay) and outpatient services (not requiring an overnight stay). Outpatient services are sometimes referred to as ambulatory care, which means the patient is able to walk (ambulate) into the facility to receive diagnostic or therapeutic treatment. However, in actuality not all patients who receive outpatient services can ambulate (e.g., patients brought to the ED by ambulance).

Community Hospitals. By AHA defi nition, community hospitals are all nonfederal, short-term general, and other special hospitals that are accessible by the general pub- lic. General hospitals provide patient services, diagnostic and therapeutic, for a variety of medical conditions; the average length of patient stay (ALOS) is less than 25 days. Hospitals also provide diagnostic x-ray services, clinical laboratory services, and oper- ating room service with facilities and staff for a variety of procedures. Services are pro- vided on both an inpatient and an outpatient basis. Traditionally, hospitals primarily have delivered care on an inpatient basis, but over the past three decades more services have been moved to an outpatient, or ambulatory basis to contain costs. In addition to cost containment, medical practices have advanced enabling many procedures that previously required an overnight stay to become less invasive and therefore require a shorter recovery period that can be achieved at a patient’s home without nursing care.


Ty p e / O w n e r s h i p S t a t u s N u m b e r o f H o s p i t a l s

Community hospitals 4,973

Not-for-profi t community hospitals 2,903

Investor-owned (for-profi t) community hospitals 1,025

State and local government community hospitals 1,045

Federal government hospitals 208

Nonfederal psychiatric hospitals 421

Nonfederal long-term care hospitals 112

Hospital units of institutions (e.g., prison hospitals) 10

Source: American Hospital Association, 2013.

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Special hospitals provide diagnostic and treatment services for patients who have specifi ed medical conditions, both surgical and nonsurgical. Th ese hospitals must pro- vide the services that are deemed appropriate for the specifi ed medical conditions for which services are provided.

Community hospitals are grouped by ownership in three categories:

■ Voluntary, not-for-profi t (nonprofi t) ■ Investor-owned (for-profi t, proprietary) ■ Public (state or local government owned and managed)

Some community hospitals operate as free-standing single hospital entities, whereas others are part of a health system. A system is defi ned as either a multihospi- tal or diversifi ed single hospital system. Community hospitals may also be classifi ed as participating in a network, which is defi ned as a group of hospitals, physicians, other providers, insurers, and/or community agencies that work together to coordinate and deliver a broad spectrum of services to the community (AHA, 2013).

Hospitals may also be classifi ed by teaching status—teaching hospitals are affi li- ated with medical schools and provide clinical education, residencies, and internships for medical and dental students. Th ese teaching hospitals (along with other hospi- tals that are not affi liated with a medical school) also provide clinical education and training for nursing and allied health professions students. Teaching hospitals are typically voluntary, not-for-profi t or public, government-sponsored hospitals. Some teaching hospitals operate as part of an academic health center, which comprises an allopathic or osteopathic medical school, one or more health professions schools (e.g., allied health, dentistry, nursing, pharmacy, public health, veterinary medicine), and one or more owned or affi liated teaching hospitals or health systems. Academic health centers are heavily involved in clinical research and high-level tertiary and quater- nary care, in addition to providing advanced training and education for clinicians in primary and specialty care.

Rehabilitation Hospitals. Rehabilitation hospitals specialize in providing thera- peutic interventions to help patients regain functional ability to the highest possible level after an injury or illness that has caused some loss of ability. By Medicare defi nition, 75% of a rehabilitation hospital’s patients must require intensive (at least 3 hours per day) rehabilitative services to treat conditions related to stroke, spi- nal cord injury, major trauma, brain injury, or other debilitating disease or injury. Rehabilitative services provided within these facilities include physical therapy, occupational therapy, and speech-language therapy. Other services may also be provided to assist patients with psychological, vocational, or social needs related to their condition.

Psychiatric Hospitals. Th e primary function of a psychiatric hospital is to provide diagnostic and treatment services for patients who have a psychiatric-related illness. Some facilities specialize in short-term or outpatient therapy, whereas others may specialize in temporary or permanent care of residents who require routine assis- tance, treatment, or a specialized and controlled environment as a result of a psy- chological disorder. General hospitals may also operate psychiatric units within their organizations.

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Psychiatric hospitals are required to provide clinical laboratory and diagnostic x-ray services in addition to psychiatric, psychological, and social work services. Psy- chiatric hospitals have written agreements with general hospitals for the transfer of patients in need of medical or surgical services not available at the psychiatric institu- tion (AHA, 2013).

Other Hospitals. Th e federal government operates approximately 208 hospitals that are not accessible to the general public. Included among these hospitals are those that are operated by the Veterans Administration (VA) for the nation’s military veterans, the Department of Defense (DOD) for active duty military personnel, and the Indian Health Service (IHS) for American Indians and Alaska Natives.

Physician Organizations

In the United States, physicians have traditionally been self-employed, working in pri- vate medical practices that they own either solely or in partnership with other physi- cians. Hospitals establish relationships with physicians by granting them admitting privileges to provide inpatient and outpatient procedures and services to their patients that cannot be delivered within the physician practice setting. Th is is still the pre- dominant model, although there has been a trend in recent years toward the employ- ment of physicians by hospitals and other health care organizations. Th is trend has been attributed to a number of reasons, including stagnant reimbursement rates, a desire for better work-life balance for physicians, and eff orts by hospitals to increase market share (American Medical Association [AMA], 2013). Th e results of a physi- cian practice benchmark survey in 2012 conducted by the AMA indicate that 53.2% of physicians were full or part owners of their practices, 41.8% were employed, and 5% were independent contractors. Ownership had decreased by 8% from a prior study conducted in 2007. Th e 2012 survey indicated that having an ownership stake was less common among women physicians than men, and less common among younger physicians than older physicians (Kane & Emmons, 2013).

As mentioned, physicians may be employed by others (e.g., hospitals, government, medical schools) or be self-employed (i.e., in private practice). A variety of physician practice settings are utilized in the United States, which include solo practice, single specialty group practice, multispecialty group practice, corporate medical practice, and urgent care centers, among others.

Solo Practices. A physician practice operated by one physician is known as a solo practice. Approximately 20% of physician practicing in the United States are in solo practices, compared with 40.5% in 1983 (AMA, 2013). According to the AMA (2013), a majority of physicians in solo practices own their practice.

Single Specialty Group Practices. Th e most common type of physician practice is the single specialty group practice: a practice with two or more physicians that have the same medical specialty, such as internal medicine or cardiology. Forty-fi ve percent of the physicians in the United States are in a single specialty group practice (AMA, 2013).

Multispecialty Group Practices. A multispecialty group practice consists of two or more physicians who practice diff erent medical specialties. Approximately 22% of physicians in the United States are in a multispecialty group practice (AMA, 2013).

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Corporate Medical Practices. Corporate medical practices are physician practices that are owned by business corporations or entities. Th is is commonly known as the corporate practice of medicine (CPOM). CPOM is prohibited in some states: Th e types of prohibitions vary by state and may be found in various laws, regulations, or court rulings. A typical exception allows hospitals and health maintenance organizations (HMOs) to employ physicians because these businesses were established for the pur- pose of providing treatment to patients and are licensed entities. Most states allow physicians to provide services through a professional service corporation (P.C.), which is a business entity formed for the purpose of providing professional services, such as medical services. Some states have CPOM laws but do not enforce them. Such laws were established in an earlier era when concern about the commercialization of medi- cine led to great eff orts to ensure that medicine would be practiced only by licensed professionals.

Urgent Care Centers. Urgent care centers off er walk-in, extended-hour access to individuals with acute illness and injuries that aren’t bona fi de emergencies. In addi- tion to services found in the typical physician’s offi ce, urgent care centers usually can treat minor fractures and provide IV fl uids as well as perform on-site x-rays and laboratory test processing. Th ese centers are typically staff ed by physicians and other providers and operate 7 days a week, including holidays, from 8 or 9 a.m. until 7 or 9 p.m. Th is is a growth area in the health care delivery system, with more than 9,000 centers operating nationwide and approximately 300 new centers opening each year.

Community Health Centers. Community health centers (CHCs) provide health care services, focusing on primary and preventive care, to medically underserved and indigent populations. Approximately 22 million people are served by more than 1,200 CHCs in the United States (National Association of Community Health Centers, 2013). In order to receive care at a CHC, an individual must be a resident of the state in which the center is located, be uninsured, and be poor as defi ned by federal poverty guidelines. CHCs contract with the state or local health department to provide services to eligible individuals; they also help to provide linkages to social services and government- sponsored health insurance programs, such as Medicaid and the Children’s Health Insurance Program (CHIP). CHCs may be organized as part of a public health depart- ment or another health service organization, or as a nonprofi t organization.

Ambulatory Surgery Centers

Ambulatory surgery centers (ASCs) are facilities that provide surgical services for pro- cedures that are done on an outpatient basis. Th is is sometimes referred to as same- day surgery. ASCs are not physician offi ces, although physicians have taken the lead in their development.

Th e fi rst ASC was established in 1970 by two physicians. Today, physicians have some ownership in approximately 90% of the licensed ASCs in the United States. Community hospitals have also partnered with physicians to open and operate ASCs, and a small percentage of ASCs are entirely hospital owned.

Patients treated at an ASC have already been diagnosed by a physician and have elected to have an outpatient surgical procedure. All ASCs must have at least one dedicated operating room and the appropriate equipment to perform surgery safely and provide quality patient care. Th e most prevalent specialties served by ASCs are

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ophthalmology, orthopedics, gastrointestinal, pain management, plastic surgery, and urology (Ambulatory Surgical Center Association, 2013).

Long-Term Care Organizations

Long-term care organizations operate facilities for individuals who are not able to manage independently in the community. Th e services provided in these facilities vary depending on the level of assistance needed; services may range from custodial care and chronic care management to short-term rehabilitative services. Long-term care facilities (LTCFs) may be owned by government entities, nonprofi t organizations (including churches), or investor-owned corporations. LTCFs may be independent facilities that are either freestanding or operated within a continuing care retirement community. LTCFs may be part of a multifacility organization (that is, a chain) or may be hospital-owned as either an attached or a freestanding facility.

Independent Living Facilities. Independent living facilities are multiunit housing developments that may provide support services such as meals, transportation, house- keeping, and social activities. Th ese facilities are typically utilized by active senior adults who do not require assistance with ADLs.

Independent living facilities are sometimes operated as part of a continuing care retirement community, which provides a full range of long-term care facilities and ser- vices—an assisted living facility and a skilled nursing facility. Th is arrangement enables seniors to make a transition into a residence that meets their physical needs as they begin to require more medical assistance. Independent living facilities that do not pro- vide many services beyond a residence are sometimes referred to as senior apartments.

Assisted Living Facilities. Assisted living facilities are available for individuals who are basically able to care for themselves but may need some assistance with some daily activities. Assisted living facilities are residential facilities that provide services that may include meals, laundry, housekeeping, medication reminders, and assistance with ADLs and IADLs.

Most states require licensure for assisted living facilities, and the exact defi nition of what constitutes an assisted living facility varies among states. Approximately 90% of assisted living services in the United States are paid through private funds, although a few states allow payment for assisted living through Medicaid waivers.

Skilled Nursing Facilities. A skilled nursing facility (or nursing home) is licensed by the state in which it operates to provide 24-hour nursing care, room and board, and activities for convalescent residents and residents with chronic or long-term ill- nesses or conditions. Special populations served by skilled nursing facilities include physically or mentally challenged children and adults, and children and adults with debilitating diseases and/or conditions. Regular medical supervision and rehabilita- tion services must be available. Th e facilities are staff ed by health care professionals including a physician as medical director, registered nurses (RNs), licensed practical nurses (LPNs), and trained nursing assistants. Skilled nursing facilities are reimbursed through a variety of mechanisms, including private funds, long-term care insurance, Medicare (for short-term rehabilitation or subacute care), and Medicaid. Medicaid is the source of payment for about 70% of the residents in skilled nursing facilities.

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Rehabilitation Organizations

Rehabilitative services are provided in a variety of inpatient and outpatient settings, including inpatient rehabilitation hospitals, rehabilitation units in acute care hospi- tals, skilled nursing facilities, outpatient rehabilitation centers and units, and other medical rehabilitation providers.

Inpatient Rehabilitation Facilities. An inpatient rehabilitation facility is either a freestanding inpatient rehabilitation hospital or a unit of an acute care hospital. Inten- sive acute rehabilitation services are provided and generally include at least 3 hours of therapy per day for 5 to 7 days each week. Th erapy may include physical, occupational, speech, or recreation therapy.

Patients who cannot tolerate intensive therapy in an acute rehabilitation setting may be transferred to a transitional care, long-term care, or subacute care facility, where less intensive rehabilitation services are provided along with other medical ser- vices (e.g., 24-hour skilled nursing care) needed for convalescence and recovery.

Outpatient Rehabilitation Providers. Rehabilitation services may be provided on an outpatient basis—that is, the patient lives at home and visits the facility for therapy. Th erapy plans are developed on an individual basis and typically include 2 to 3 days of treatment per week. Nursing services are usually not included in the outpatient setting. Centers of care are facilities that provide outpatient rehabilitative services for patients with a particular, specifi c illness, such as multiple sclerosis, Parkinson’s dis- ease, or stroke.

Th ree types of providers may qualify for reimbursement for outpatient rehabilita- tion services by Medicare:

Rehabilitation agencies are organizations that provide integrated, multidisci- plinary programs designed to upgrade the physical functions of handicapped and disabled individuals through a specialized team of rehabilitation personnel.

Rehabilitation clinics are facilities that are established primarily to provide out- patient rehabilitative services by physicians. To meet the defi nition of a clinic, medical services must be provided a group of three of more physicians practicing rehabilitation medicine together, and a physician must be present in the facility at all times during the hours of operation to perform medical services.

Public health agencies are offi cial agencies established by state or local govern- ment that provide environmental health services, preventive medical services, and, sometimes, therapeutic services.

Integrated Delivery Systems

An integrated delivery system (IDS) is an organized, coordinated, and collaborative network that links various health care providers to provide a continuum of care to a particular patient population or community and to be clinically and fi scally account- able for the clinical outcomes and health status of the population it serves. Many believe that integrated delivery systems can help to address some of the problems associated with the fragmented delivery system in the United States and move toward the goals of improving the quality and accessibility of care while containing or reduc- ing costs (Enthoven, 2009).

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Integrated delivery systems have existed since the early 1900s, but it was in the 1990s when interest in the IDS concept began to spread as hospitals and physician practices consolidated through mergers and acquisitions in the face of changing reim- bursement methodologies from public and private insurers. Interest in IDSs has surged in recent years during the national health reform debate as experts have suggested that the IDS approach to health care delivery can improve quality and reduce costs. Research has shown that integrated delivery systems have a positive eff ect on quality, but there is little evidence of an eff ect on costs or health care utilization (Hwang, Chang, LaClair, & Paz, 2013).

Two types of integration—horizontal and vertical—are used to create an IDS. Horizontal integration involves linking organizations that provide the same level of care, such as a multispecialty group practice. Vertical integration involves linking organizations that provide diff erent levels of care, for example, preventive, primary, secondary, tertiary, and long-term care. One of the goals of an IDS is to provide con- tinuity of care for the patient, which includes continuity of information (e.g., shared medical records), continuity across primary and secondary care (e.g., discharge plan- ning from specialist to generalist care), and provider continuity (e.g., seeing the same provider each time).

Emergency Medical Services

An emergency medical service (EMS) provides acute care for medical emergencies that take place outside of the hospital setting. EMS is utilized within a community to treat those in need of urgent medical care or to stabilize and transport patients with illness or injuries who are unable to transport themselves to the appropriate medical facility. It is a system of coordinated response and emergency medical care involving multiple people and agencies.

EMS is regulated by federal and state governments, and may be provided by paid professionals or, in some communities, by volunteers. Th e organization of EMS var- ies from community to community, based on state regulation, population density, and topography, and may be provided via public institutions, private institutions, or a public–private confi guration. Prehospital EMS can be based in a fi re department, a hospital, an independent government agency (such as a public health agency), a non- profi t corporation (such as a rescue squad); EMS may also be provided by commer- cial for-profi t companies. Th e essential components of an EMS system are the same regardless of the provider.

Home Health Care Organizations

Home health agencies and organizations provide medical services in a patient’s home. Services are typically provided for elderly or disabled patients, or for patients who are unable to visit a hospital or physician’s offi ce because of weakness after surgery or other reasons. Care provided in the home may be acute, long-term, or end-of-life. Home health primarily involves the provision of skilled nursing services and therapeu- tic services (e.g., physical, occupational, and/or speech and hearing). A home health agency may be a public, nonprofi t, or proprietary agency and may be a subdivision of a larger organization. Th e agency must be licensed by the state in which it operates or receive approval that it has met all standards and requirements to operate. Th ese agen- cies are also subject to certifi cation requirements by CMS and may also seek accredi- tation from an independent accrediting organization. Home health agencies and

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organizations must have policies established by a governing body that must include at least one physician and one RN, and the services it provides must be overseen by a physician or a registered professional nurse.

Hospice and Palliative Care Organizations

Palliative care services are available for anyone with a serious illness as well as for patients who are terminally ill. Palliative care may be provided in a hospital, outpatient clinic, long-term care facility, or hospice facility. It is delivered by a team of specialists, including physicians, nurses, and social workers, and may include other professionals, such as massage therapists, pharmacists, and nutritionists. Each facility where pallia- tive care is provided typically has its own palliative care team; these professionals work in partnership with a patient’s primary physician and others involved in treating the individual.

Hospice care is provided to terminally ill patients either in their homes (hospice residential care) or in a health care facility (hospice inpatient care) owned and oper- ated by a hospice organization or health system. According to the National Hospice and Palliative Care Organization (2013), hospice care programs were fi rst established in 1974 and have grown in number to more than 5,500 programs, including both pri- mary locations and satellite offi ces, as of 2012. Th e majority of hospice programs are off ered by freestanding, independent agencies (57.4%), and the remainder are part of a hospital system (20.5%), home health agency (16.9%), or nursing home (5.2%). Hospice programs range in size from small organizations serving fewer than 50 patients on an annual basis to large, corporate chains operating programs on a national basis and car- ing for thousands of patients each year. In 2012, 32% of hospice programs registered with Medicare were nonprofi t organizations, 63% were for-profi t organizations, and about 5% were government owned and operated.


Medication is an integral part of health care delivery, and pharmacists play a signifi - cant role in ensuring the safe and eff ective use of medication to achieve desired health outcomes. Th e role of the pharmacist has traditionally been to dispense medication; that role is now expanding into the direct care of patients as the use of medication has grown and new technologies are employed in the medication dispensing and utiliza- tion processes.

Licensed pharmacies include retail pharmacies in the community setting and hospital or other institutional pharmacies. Community pharmacies include chain pharmacy organizations (e.g., CVS, Walgreens), pharmacies located within other large retail organizations (e.g., Walmart, Kroger), and independent, locally owned and operated pharmacies. Th e community pharmacy provides the public with access to medication, including administering fl u shots, and serves as a source of advice on health issues. Approximately 6 out of 10 licensed pharmacists work in the community setting. Institutional pharmacies control drug distribution within the facility, and help to ensure that each patient receives the appropriate drug and dosage. Institutional pharmacies are involved in highly specialized areas, including nuclear medicine, intra- venous therapy, and drug and poison information. A hospital or health system may also operate a retail pharmacy within its facilities in addition to its clinical pharmacy operation.

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Pharmaceutical Companies and Medical Device Manufacturers

Another integral part of the health care delivery system are the pharmaceutical companies and medical device manufacturers that develop and supply medications, medical supplies, durable medical equipment, and medical devices to health care organizations and sometimes directly to the public. Not only do these organizations supply materials needed for the direct care of patients, but they also play an important role in helping ensure safe and eff ective care.

Medical device manufacturers provide essential products for modern medical care, including devices that range from CT scanners and surgical robotic devices to blood pressure cuff s and thermometers. Under the ACA, medical device manufactur- ers are required to pay a 2.3% excise tax on gross sales. Th is legislation, along with other health policies, is having a large eff ect, especially on the smaller companies that employ fewer than 50 people that make up about 80% of the medical device indus- try. Many medical device manufacturers have become vulnerable to takeover by large pharmaceutical companies, and some manufacturers are moving their operations out of the United States to countries with more favorable tax and regulatory climates.

Th e biopharmaceutical industry comprises the pharmaceutical and biotechnol- ogy industries. Biopharmaceutical companies develop, manufacture, market, and dis- tribute drugs and vaccines used to prevent and treat diseases. It is made up of four sectors: (a) pharmaceutical and medicine manufacturers, (b) pharmacy wholesalers, (c) research and development services, and (d) management of companies and enter- prises. Biopharmaceutical companies spend up to $135 billion annually on research and development, and it is estimated that it takes up to 15 years to develop a medicine or vaccine. Th e biopharmaceutical industry accounts for nearly 20% of all research and development investment in the United States, where new drugs must be approved by the Food and Drug Administration (FDA) as safe and eff ective.

Th e industry is sometimes referred to as “Big Pharma” because of its size, its infl u- ence over health care legislation, and its eff ect on the cost of health care delivery. Th irty-six of the largest pharmaceutical companies comprise the membership of the industry’s professional association, the Pharmaceutical Research and Manufacturers of America (PhRMA), and invest more money in lobbying than any other industry in the United States.

Other Delivery Organizations

Telemedicine. Telemedicine uses electronic communications to exchange medical information between sites to improve a patient’s clinical health status. Telemedicine services may include primary care and specialist referral services, remote patient monitoring, consumer medical and health information, and medical education. Hospitals, specialty clinics, home health agencies, and physicians’ offi ces all use telemedicine. Th e services may be off ered within a single health care organization or between health care organizations. Emerging models of telemedicine delivery include off ering specialty consultation services through membership associations that match people in need of services with providers, and independent businesses that are organized to provide telemedicine consultation services but are not health care providers. Th ese independent businesses recruit appropriately licensed spe- cialists to provide telemedicine services and then market these services, handling contract negotiations and all legal and technical aspects of delivery.

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Retail Clinics

Retail clinics are medical clinics located in pharmacies, grocery stores, and “big box” stores such as Target. Th ese clinics provide routine care for acute conditions (e.g., bronchitis) as well as preventive care. Retail clinics began emerging in 2000; by 2010 there were approximately 2,100 clinics in operation. Retail clinics are often open extended hours and on weekends, off ering a convenient alternative for routine care, particularly when conventional physician offi ces are closed. A study by the Rand Cor- poration indicated that young adults (ages 18–44) account for 43% of patient visits, although the utilization of retail clinics by seniors is increasing (Rand Health, 2013). In 2010, 73% of the retail clinics in the United States were operated by three companies— CVS, Walgreens, and Target (Rand Health, 2013). Retail clinics are also operated by hospital chains and physician groups, accounting for about 11% of the market. It is anticipated that the full implementation of the ACA could lead to growth in retail clinics in order to meet the demand for primary care by the newly insured.


Although the United States spends more money per capita on health care than any other nation in the world, we are lagging behind other countries on a variety of quality indicators, including average life expectancy and infant mortality rates. Th e Institute of Medicine (IOM) estimates that more Americans are killed every year by medical errors than in automobile accidents. As a response to these staggering sta- tistics, the IOM released Crossing the Quality Chasm (2001), a landmark report that issued a mandate for improvement in U.S. health system performance. Addition- ally, a portion of the ACA is dedicated to improving quality and health system per- formance through funding research, aligning fi nancial incentives with performance outcomes, and identifying a national quality strategy. Although marginal improve- ments in quality and performance have been observed in the past decade, we still have a long way to go to achieve a high-performing health system.

Organizations such IOM, the Institute for Healthcare Improvement (IHI), and the National Committee for Quality Assurance (NCQA) are leading the health system improvement movement through initiatives including patient centeredness, Th e Triple Aim, and the patient centered medical home (PCMH). Th e CMS is fi nancially incentiv- izing the “meaningful use” of electronic health records (EHR) by health care providers to promote quality improvement in health care. Quality improvement eff orts of this type promote collaboration among health care providers, payers, the government, and other stakeholders with the goal of achieving real health system change. In the next sec- tion of this chapter, we provide an overview of some of the quality improvement initia- tives that demonstrate the most promise in improving U.S. health system performance.

The Triple Aim

The idea behind the Triple Aim is that to improve the delivery of health care in the United States, organizations must simultaneously pursue three dimensions: (a) improve the patient experience of care, (b) improve the health of populations, and (c) reduce the per-capita cost of health care.

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Th e IHI is a not-for-profi t organization that is dedicated to improving health and health care worldwide. Th e IHI (2013) promotes a learning initiative and a framework called the Triple Aim for health care organizations and communities. Th e idea behind the Triple Aim is that to improve the delivery of health care in the United States, organizations must simultaneously pursue three dimensions: (a) improve the patient experience of care, (b) improve the health of populations, and (c) reduce the per-capita cost of health care.

Achieving this triple aim is diffi cult, because one organization is rarely account- able for all three dimensions. However, the IHI has identifi ed fi ve system components that are necessary for fulfi llment of the Triple Aim:

■ Focus on individuals and families: Care should be customized at an individual level utilizing families and caregivers as partners.

■ Redesign primary care services/structures: A team of professionals must be estab- lished that can deliver the majority of necessary care.

■ Population health management: Partnerships within the community are necessary to promote prevention and wellness.

■ Cost control platform: Cooperative relationships with provider groups must be in place to control costs.

■ System integration and execution: Services across the continuum of care must be coordinated.

Although the Triple Aim initiative is ambitious, a few health systems have taken on the challenge and have succeeded. A strong focus on primary care, coupled with community alignment, is necessary to achieve positive patient experiences and improvement in population health. Additionally, active physician participation is crucial to reduce costs. A model of care centered around physician partners is one way to approach the Triple Aim. Genesys HealthWorks provides a good example of this physician-centered strategy.

Genesys HealthWorks represents a unique model of care developed by Genesys Health System in Flint, Michigan, with the goals of improving the patient experience of care and population health while controlling costs. Genesys employed three key approaches to achieve this triple aim (Klein & McCarthy, 2010):

1. Genesys created a physician–hospital organization that engaged community- based primary care physicians. Th e goal of this organization is to facilitate care coordination, emphasize primary care and prevention, and ensure the effi cient use of specialty care services.

2. Genesys deployed health navigators. Th e role of these navigators is to assist patients in the prevention and management of chronic diseases through healthy lifestyles.

3. Genesys partnered with community stakeholders in an attempt to extend their model to the entire community.

Th e Genesys HealthWorks model has demonstrated success among patients receiving care within the Genesys Health System and affi liated physician groups. Th is model has reduced utilization and cost of care while simultaneously improving phy- sician quality indicators. Additionally, the model has improved the health behaviors of other patients within the community. Genesys has extended the health navigator

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program to serve low-income patients enrolled in a county health plan. Th ese patients have improved their health status and decreased utilization as a result of the program.

Patient Centeredness

Th e IOM identifi ed patient centeredness as one of six domains that defi ne quality care. Patient-centered care is “care that is respectful of and responsive to individual patient preferences, needs, and values and ensures that patient values guide all clinical decisions” (IOM, 2001). Six dimensions to patient-centered care have been identifi ed (Gerteis, Edgman-Levitan, & Daley, 1993):

■ Respect for patients’ values, preferences, and expressed needs ■ Coordination and integration of care ■ Information, communication, and education ■ Physical comfort ■ Emotional support ■ Involvement of family and friends

Providing patient-centered care means giving patients the information they need to participate actively in decision making about their care with the goal of obtaining the most desirable outcome. If a patient is incapacitated or unable to participate in decision making regarding his or her care, then a family member or caregiver should be engaged. When a health care intervention cannot provide a cure, it should aim to alleviate the patient’s suff ering. Th e likelihood that an outcome desired by a patient can be achieved is increased by actively involving patients and family members in decision making regarding the provision of care.

Although we are making progress in this direction, research suggests that certain patient-centered practices are still rare. Movements toward the PCMH and patient- centered research are continuing to shift the momentum in the right direction; how- ever, there is still a long way to go. Th e achievement of a truly patient-centered health system will require the participation of patients, family members, physicians, nurses, and other health care providers involved in the provision of care.

■ The Future of the Delivery System

Recent years have seen the introduction of several innovative new models of care that have potential to realign incentives and improve overall health system performance in terms of cost, quality, and access. Th e ACA has encouraged the adoption of these new models, and a variety of new organizational forms have emerged from the private sector. Renewed interest in physician employment models also demonstrates poten- tial for increased integration and more closely aligned clinical and fi nancial incentives between physicians and other providers.


Patient-Centered Medical Homes

Th e PCMH is a model of primary care that emphasizes communication and care coor- dination. Patient centeredness is an important goal of PCMHs. Physician practices

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must meet certain standards to be designated as PCMHs. Th e National Commit- tee for Quality Assurance (NCQA) released revised standards for PCMHs in 2011 (see Table 9.2). Evidence suggests that the PCMH is eff ective at improving health care quality and reducing costs.


S t a n d a r d C o n t e n t

Enhance Access/


■ Patients have access to culturally and linguistically appropriate routine or

urgent care and clinical advice during and after offi ce hours ■ Practice provides electronic access ■ Patients may select clinician ■ Practice focuses on team-based care with trained staff


Patient Populations

■ Practice collects demographic and clinical data for population manage-

ment ■ Practice assesses and documents patient risk factors ■ Practice identifi es patients for proactive reminders

Plan/Manage Care ■ Practice identifi es patients with specifi c conditions including high-risk or

complex care needs ■ Care management emphasizes previsit planning, assessing patient

progress, addressing patient barriers to treatment goals ■ Practice reconciles medications ■ Practice uses e-prescribing

Provide Self-Care



■ Practice assesses patient and family self-management abilities ■ Practice works with patient and family to develop a self-care plan ■ Practice clinicians counsel patients on healthy behaviors ■ Practice assesses and provides/arranges for mental health or substance

abuse treatment

Track/Coordinate Care ■ Practice tracks, follows-up, and coordinates tests, referrals, and care at

other facilities ■ Practice manages care transitions



■ Practice uses performance and patient experience data to continuously

improve ■ Practice tracks utilization measures (e.g., hospitalizations, ED visits) ■ Practice identifi es vulnerable patient populations ■ Practice demonstrates improved performance

Adapted from NCQA’s Patient-Centered Medical Home (PCMH) 2011 Standards (National Committee for Quality Assurance, 2011).

Evidence suggests that the PCMH is effective at improving health care quality and reducing costs.

Group Health Cooperative (GHC) in Seattle, Washington, provides an example of a successful PCMH model. GHC is a nonprofi t health system that consists of physi- cian groups, medical facilities, and health plans that serve Washington and Northern Idaho. In 2006, the system decided to pilot test a PCMH practice. GHC’s pilot practice

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expanded staffi ng and emphasized the use of care teams. Th e ratio of patients to pri- mary care providers was reduced for the pilot practice, and their enhanced staffi ng model included physicians, medical assistants, LPNs, physician assistants/nurse prac- titioners, RNs, and pharmacists. Th e idea behind this increased staffi ng was to facilitate patient relationships and to allow for comprehensive coordinated care. Additionally, patient encounters with clinical staff increased from approximately 20 minutes to 30 minutes in duration, and time was set aside each day for teams to create coordinated care plans. After 2 years, the GHC’s PCMH pilot practice demonstrated improved patient experiences, improved quality, and reduced physician burnout compared with other GHC clinics (Reid et al., 2010).

Health Homes

Health homes were created by the ACA to give states an option for providing patient- centered, medical home–type services to Medicaid benefi ciaries suff ering from severe or multiple chronic conditions. Th e purpose of health homes is to create a system of care that facilitates and coordinates access to primary care, acute care, behavioral care, and long-term community-based services. Medicaid benefi ciaries with (a) at least two chronic conditions, (b) one chronic condition and high risk for another, or (c) a serious mental health condition are eligible for health home services.

Promoting care for the whole person, care that is individually tailored to each patient and family, is a goal of health homes.

Health home services are off ered by designated providers, teams of health profes- sionals that link to a designated provider, or a health team. Physicians, group prac- tices, community health centers, home health agencies, or any other provider deemed appropriate by the state is considered a designated provider. Health teams consist of a physician and other health care professionals such as nurses, social workers, and other appropriate professionals. Health homes provide care management, care coordina- tion, health promotion, transitional care from inpatient to other settings, individual and family support, follow-up care, and referral to community social support services. Additionally, health homes use health information technology to coordinate such ser- vices. Health homes must provide quality driven, cost-eff ective, culturally appropriate care. Promoting care for the whole person, care that is individually tailored to each patient and family, is a goal of health homes.

Accountable Care Organizations

Accountable care organizations (ACOs) are groups of providers that share responsibil- ity and fi nancial accountability for providing high quality, coordinated care to Medi- care patients. Th e goal of ACOs is to ensure that patients get the right care at the right time in the most effi cient way. ACOs are organized around primary care providers, and the high level of care coordination provided by ACOs is particularly important for the chronically ill. If ACOs are successful at meeting quality and cost savings tar- gets, these organizations qualify for fi nancial incentives or shared savings from the Medicare program.

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Th e ACA has facilitated the creation of ACOs for the Medicare program. Even though most are in the early stages of development, they demonstrate a promising approach to managing the health of particular patient populations. Additionally, pro- vider groups are creating “ACO-like” organizations that strive to facilitate comprehen- sive care coordination for patient populations beyond Medicare benefi ciaries.

Organizations with experience providing patient-centered, coordinated care were eligible to participate as Medicare Pioneer ACOs. First-year results for the Pioneer ACOs were mixed. Although all 32 participating Pioneer ACOs improved quality, only 13 achieved results worthy of shared savings with the CMS. In fact, nine organizations are either transferring to the shared savings program or dropping out of the pilot all together (CMS, 2013b).

Banner Health Network (BHN) in Arizona, is an example of an ACO with prom- ising fi rst year results. Banner Health is a nonprofi t health system that consists of a variety of provider organizations, including acute care hospitals, clinics, home health, hospice, behavioral health facilities, and a Medicare Advantage Plan. Banner made the decision to participate as a Pioneer ACO because this designation is congruent with its desire to deliver the triple aim of great patient experience, improved population health, with low costs.

BHN was created with three goals in mind:

■ First, BHN wanted to defi ne and deliver value-based care. Th is includes identifying appropriate participants, aligning incentives, and relying on delivery models such as PCMN that will support the care continuum.

■ Second, BHN wanted to leverage technology to facilitate information sharing and enhance care management.

■ Th e third goal of BHN was to align the fi nancial incentives of stakeholders, includ- ing providers, payers, and patients.

In its fi rst year, BHN was able to achieve shared savings of over $13 million and reduce hospital admissions, hospital lengths of stay, and hospital readmissions for its ACO members. Because of its success, BHN has developed ACO-like relationships with other payers, including Blue Cross Blue Shield of Arizona, Aetna, UnitedHealth- care, and Cigna (Nguyen, 2013).

Community-Based Solutions

Th e ACA has initiated community-based programs designed to keep Medicare ben- efi ciaries out of an inpatient hospital setting and in their communities. One program is the Community-based Care Transitions Program (CCTP), which tests models for improving care transitions to reduce avoidable readmissions. A transition in care occurs when a patient moves from one health care delivery setting to another. Among the Medicare population, it is very common for patients discharged from the hospital to be readmitted within the next 30 days. Th ese readmissions may occur because of inadequate care management resulting from a bumpy transition in care. Th e CCTP program provides support for community-based organizations (CBOs) to provide care transition services for Medicare patients in their communities who are at high risk for hospital readmission (CMS, 2013a).

Th e Northwest Triad Care Transitions Community Program (NTCTCP) is a pilot CCTP that is designated to address care transition needs of the patients of North

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Carolina. Seven acute care hospitals and four community-based organizations have part- nered to try to reduce the number of avoidable hospital readmissions and keep patients in their homes. Th is collaborative eff ort is focused primarily on Medicare patients with a diagnosis of heart failure, pneumonia, heart attack, or chronic obstructive pulmonary disease (COPD). NTCTCP is attempting to reduce readmissions through a case man- agement approach, with a heavy emphasis on information sharing and data manage- ment. Additionally, patient navigators facilitate transitional care by visiting the homes of participating patients to determine whether medical and social needs are met. Ensur- ing that prescriptions are fi lled, transportation to medical appointments is in place, and meal preparation is available are examples of issues patient navigators strive to address.


Physician–Hospital Alignment

Identifying ways to align the incentives of physicians and hospitals is vitally important to maximize the clinical quality of care while minimizing costs.

Th e alignment of physician and hospital goals and incentives is a critical success factor in the era of health reform. Traditionally, both types of provider have been reimbursed based on volume or productivity. However, reimbursement mechanisms are becom- ing more focused on quality and effi ciency. Identifying ways to align the incentives of physicians and hospitals is vitally important to maximize the clinical quality of care while minimizing costs.

Diff erent economic levels and approaches to physician–hospital alignment involve a variety of organizational arrangements. Loosely aligned physician–hospital arrangements involve a traditional independent practice model, in which physicians are still “volunteer” members of a hospital’s medical staff and alignment is sought through contractual arrangements to secure medical directors and physician admin- istrators. In this traditional alignment model, economic integration is not achieved. Closer alignment might be achieved through more strategic approaches, such as joint ventures or co-management agreements between physicians and hospitals with some level of shared economic interests. Th e ultimate level of physician–hospital alignment is achieved through employment relationships with full economic integration. With this level of alignment, physicians are truly employees and are required to comply with hospital policies and share goals (Sowers, Newman, & Langdon, 2013).

A well-regarded example of an integrated health system is Scripps Health (www. scripps.org), which includes acute care hospitals, outpatient centers, and home health and hospice services in the San Diego, California, area. Scripps employs more than 13,500 workers, and approximately 2,600 affi liated physicians provide care at Scripps facilities. Scripps Health is a success story in the area of physician–hospital alignment. In 1999, Scripps was losing millions of dollars a year and physician and employee confi dence was at an all-time low. A new CEO created an organizational turnaround by aligning physician and hospital interests more closely through a co-management approach. Although California law makes direct physician employment diffi cult,

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closer alignment was achieved through an integrated foundation model that empha- sizes transparency and open communication between physician and administrative leadership. Th e CEO was able to regain physician trust and leverage close alignment with physicians to achieve fi nancial and quality improvements. Since the turnaround, Scripps Health has been well positioned for growth, and the system has received numerous awards and accolades, including becoming one of Fortune magazine’s “100 Best Hospitals to Work For” (Scripps Health San Diego, 2013).

Physician Employment Models

More complex reimbursement systems are emerging from health reform and the quality movement. Physician payment is moving from a primarily fee-for-service or volume-based methodology to a model more dependent on quality and clinical out- comes. As a result of this shift, many physicians are no longer interested in private practice models. Instead, they are seeking affi liation and employment opportunities with health systems and hospitals. Physician employment models free up clinician time so that they can focus on providing patient care rather than the business of run- ning a practice. Employment can be advantageous for hospitals and health systems by increasing their level of alignment with physician providers. Physician employment models often tie compensation to quality and productivity metrics.

Th e Mayo Clinic (www.mayoclinic.org) is one successful model of physician employment. Physicians work together with other clinic staff to care for patients, and their work is centered on the philosophy that “the needs of the patient come fi rst” (Mayo Clinic, 2013). Th e culture of Mayo is unique, rooted in the values of its found- ers: teamwork, collegiality, professionalism, mutual respect, and commitment to progress for the organization and individuals. Care is provided by integrated teams of physicians, health care professionals, and scientists. Th e Mayo culture emphasizes team success over individual success. Although physician employees are provided with a vast array of resources and support, they are compensated with a salary. Th is salary structure eliminates any incentives to perform tests or procedures for fi nancial gain. Treatment is purely focused on what is best for the patient (Mayo Clinic, 2013).

■ Best Practices


So far in this chapter we have described several organizations that are using innovative approaches to delivering high-quality health care. Health care delivery organizations must continue to innovate if they hope to deliver high-quality care while controlling costs. Th is section highlights two organizations that have strong reputations as long- term innovators.

Intermountain Healthcare—Salt Lake City, Utah

Intermountain Healthcare (www.intermountainhealthcare.org) fosters a culture of innovation. Intermountain is a nonprofi t health care system comprising 22 hospitals, more than 185 physician clinics, and an affi liated insurance company. Th e system has more than 33,000 employees, who serve patients in Utah and southeastern Idaho. Th e mission of Intermountain Healthcare is “to provide clinically excellent medical

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care at aff ordable rates in a healing environment that’s as close to home as possible” (Intermountain Healthcare, 2013). In addition to pursuing the typical health care delivery activities of an integrated health system, Intermountain has several programs that nurture a learning environment and culture of innovation.

Intermountain has recently associated with technology partners to create a Healthcare Transformation Lab. Th e purpose of this lab is to bring innovation and technology to the patient’s bedside at a rapid pace. In addition to working with external technology partners, Intermountain’s Healthcare Transformation Lab also provides opportunities for Intermountain employees to develop ideas into new technology. Th e lab provides a place for clinicians to work with technology experts in developing inno- vative ideas that will improve the delivery of health care. Examples of projects targeted by the lab include designing the patient room of the future, creating a hand-washing sensor for providers, 3D printing of medical devices for clinical purposes, and creating a “Life Detector” to notify caregivers of changes in vital signs of patients.

Intermountain also houses the Institute for Health Care Delivery Research. As a leader in health care, Intermountain hopes to aff ect change in the delivery of health care through providing educational opportunities and conducting research throughout the system. Th e Institute off ers courses to Intermountain employees and to others hoping to advance their skills in leadership, quality improvement, or other related areas. Addition- ally, through its research the Institute aims to facilitate evidence-based practice through the generation and dissemination of evidence (Intermountain Healthcare, 2013).

The Cleveland Clinic—Cleveland, Ohio

Th e Cleveland Clinic (www.clevelandclinic.org) is a multispecialty academic medical center with a focus on clinical care and research. It houses more than 1,400 hospital beds at its main campus and works with more than 3,000 physicians and scientists. Th e Cleveland Clinic’s mission is “to provide better care of the sick, investigation into their problems, and further education of those who serve” (Cleveland Clinic, 2013). Quality and innovation are among its core values, and the clinic is consistently named in U.S. News and World Report’s “America’s Best Hospitals” survey.

Cleveland Clinic is innovating care delivery by negotiating directly with self- insured employers as part of its Program for Advanced Medical Care (PAMC). Th e idea behind PAMC programs is to allow employers to provide their employees with access to world-class health care at a reasonable price. Bundled payment programs and transparency in quality outcomes make the Cleveland Clinic a natural choice for large employers interested in securing greater value in their health care purchases. PAMC’s fi rst agreement of this kind began with Lowe’s Companies in 2010 to provide heart care for their more than 200,000 employees. Th e clinic recently expanded its cardiac program by contracting with Walmart and is now focusing on marketing packages of orthopedic procedures to large employers. Promoting this form of “domestic medi- cal tourism” may change the way care is delivered, or at least promote transparency among health care providers in terms of quality and pricing (Cleveland Clinic, 2013).

■ Looking Forward

Th e U.S. health care delivery system can look forward to many changes on the horizon. Th e implementation of the ACA will push providers to continually improve quality and

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manage costs. Innovative new forms of delivering health care will continue to emerge to meet the demands of both patients and purchasers of health care. Health care delivery organizations that fail to evolve and learn will face a diffi cult road. Th ose organizations that focus on innovation and knowledge creation will be well positioned for the future.

■ Discussion Questions

1. Th e U.S. health system is shifting its focus to wellness and prevention. Give an example of the three forms of prevention. How should emphasis on prevention alter the delivery of health services in a particular community?

2. Th e baby boomer generation, which represents a signifi cant portion of the U.S. population, is reaching an age when its utilization of health services will most likely increase. Additionally, life expectancy continues to improve with advancements in medicine and community health. Discuss how this aging of such a large segment of the population will aff ect specifi c health care delivery services and organizations.

3. Most health care in the United States is delivered in traditional settings such as hos- pitals, physician organizations, and long-term care organizations. However, access to new delivery settings is becoming more readily available, and demand for care delivery through telemedicine and retail clinics is increasing. Give an example of an application for telemedicine. Discuss how the utilization of telemedicine might aff ect cost, quality, and access to care in the U.S. health care system.

4. Although the United States spends more money per capita on health care than any other country in the world, its performance has much room for improvement. How can ideas such as the Triple Aim initiative or patient centeredness help to improve performance in the U.S. health system?

5. Discuss why coordinated care delivery approaches, such as PCMHs or ACOs, might improve care for patients. Discuss barriers and opportunities for implemen- tation of such coordinated care delivery approaches.


You have just been promoted to work as the assistant to the CEO of a large, partially

integrated health care delivery system. Your fi rst assignment is to identify several

innovative ways to improve health system quality, control costs, and maximize access

to care for citizens in your community. Opportunities exist to improve physician-

hospital alignment and to provide more integrated care across health system entities.

Draft a memo to your CEO that answers the following questions:

1. What are fi ve innovative ideas that your health system could implement to meet

improvement goals around cost, quality, and access?

2. What innovation or innovative idea is the most critical to ensure the health system

achieves its goals?

3. What innovation will be the most diffi cult to achieve? Why?

4. Why will the implementation of these innovative ideas improve health system


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Cleveland Clinic. (2013). Facts & fi gures. Retrieved from http://my.clevelandclinic.org/ about-cleveland-clinic/overview/who-we-are/facts-fi gures.aspx

Enthoven, A. C. (2009). Integrated delivery systems: Th e cure for fragmentation. American Journal of Managed Care, 15(10 Suppl), S284–S290.

Gerteis, M., Edgman-Levitan, S., & Daley, J. (1993). Th rough the patient’s eyes: Under- standing and promoting patient-centered care. San Francisco, CA: Jossey-Bass.

Hirshon, J. M., Risko, N., Calvello, E. J. B., de Ramirez, S. S., Narayan, M., Th eodosis, C., & O’Neill, J. (2013). Health systems and services: Th e role of acute care. Bulletin of the World Health Organization, 91, 386–388.

Hwang, W., Chang, J., LaClair, M., & Paz, H. (2013). Eff ects of integrated delivery systems on cost and quality. American Journal of Managed Care, 19(5), e175–e184.

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LEARNING OBJECTIVES o Understand the importance of the entire health workforce in delivering health

care services o Critically assess the reasons for shortages of health care providers o Review new models and new roles of deploying health workers o Assess the effects of health reform on the health workforce

TOPICAL OUTLINE o Components of the workforce o Workforce planning to ensure adequate supplies of providers o Approaches to educating the workforce o Issues and challenges related to the workforce o Future trends related to workforce quality and adequacy

The Health Workforce Joanne Spetz and Susan A. Chapman

KEY WORDS demand and supply health professionals interprofessional education job training labor markets

licensure maldistribution need-based demand scope of practice workforce planning

Th e health care workforce is essential to the delivery of health care; essentially all types of health services require the contributions of individual workers. Th e health care workforce includes well-known professionals such as nurses, pharmacists, and dentists; it also includes many other, less obvious professions that encompass a wide variety of technicians, therapists, assistants, administrative personnel, and managers. In 2011, there were approximately 14 million jobs in the health care industry in the United States, and compensation for these jobs accounted for nearly half of total health care spending—$846  million of the $1.7 billion spent on health care (U.S. Bureau of Economic Analysis, 2011). Th e health workforce’s central role in all aspects of health care and its signifi cant contribution to total health care costs guarantee that any poli- cies intended to change how health care is fi nanced or delivered will be fundamentally shaped by their interactions with the workforce. Th is fact becomes more complex when


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one recognizes that the health workforce plays an important role in economic devel- opment and income distribution. Health care jobs often pay well and are stable, and they are frequently fi lled by people living where the health care is provided (Gitterman, Spetz, & Fellowes, 2004; Zacker, 2011). As health reform reshapes the system of health care in the United States, we will continue to see major changes in the size, compo- sition, and practice of health professionals. Such changes will be complicated by the broader role of health care employment in our economy and society.

■ Who Is Part of the Health Workforce?

Th e health workforce includes all health professionals and workers who contribute to the delivery of health care. Th e determination of who falls into this defi nition can involve some debate. Many occupations are consistently classifi ed as being within the health workforce, such as physicians, radiation technologists, dental assistants, and nurses. Health occupations also include people who do not work in health care deliv- ery settings but instead provide health services in homes, educational institutions, and other places, such as home care aides, personal care assistants, and school nurses (Bipartisan Policy Center, 2011; Matherlee, 2003). In 2012, these and related health care occupations included more than 13 million people, accounting for more than 1 in 12 workers in the United States (U.S. Bureau of Labor Statistics, 2013).

Th e largest health care occupation is registered nurses (RNs), of whom about 2.6  million were employed in 2012 (U.S. Bureau of Labor Statistics, 2013). Regis- tered nurses work in nearly all health care settings; at least 60% work in hospitals (U.S. Bureau of Health Professions, 2010). Unlicensed nursing assistants are the second-largest health care occupation, with about 1.4 million workers employed. Unlicensed nursing assistants usually work in hospitals and long-term care facili- ties. About 620,000 certifi ed nursing assistants work in skilled nursing facilities (U.S. Bureau of Labor Statistics, 2013). Licensed practical/vocational nurses are the third-largest occupation, representing 718,000 workers, although it should be noted that there are more personal care aides (985,230) than licensed practical/ vocational nurses. Th ere were about 611,650 physicians employed in the United States in 2012.

Other large occupations in health care include home health aides, medical assis- tants, dental assistants, pharmacy technicians, and emergency medical technicians/ paramedics. Th e health care occupations also include licensed alternative and comple- mentary providers, such as chiropractors and acupuncturists. Table 10.1 presents the 16 largest health care occupations in the United States.

Th e broadest defi nition of the health workforce includes anyone who works in a health care occupation or the health care industry, even if that worker is not directly involved in providing health care services—for example, insurance billing specialists, facilities managers, accountants, and other occupations. Within the health care industry, about 2.7 million people are employed in offi ce and adminis- trative occupations, such as secretaries and administrative assistants, information and records clerks, food preparation and food service workers, and education and training workers.

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■ Traditional Approaches to Health Workforce Planning

Approaches to health workforce planning vary across countries. Countries with national health care systems often closely manage the employment of health pro- fessionals, as well as the pipeline of new graduates from education programs. Many countries, including the United States, do not have a highly centralized health care system and engage in limited national health workforce planning eff orts. Planning is left primarily to the private sector and local government agencies.

Th e traditional supply-and-demand approach to workforce planning compares the number of working health professionals to estimates of the demand for health workers. Projections of supply are typically built from data about the current num- ber of workers, the number of new entrants per year, the number leaving the pro- fession per year, and the share that is employed. In some cases, supply estimates account for other factors that may aff ect supply, such as the loss of health profes- sionals to international migration. However, supply estimates rarely can estimate changes in overall supply that might arise due to the development of new health care occupations.


O c c u p a t i o n N u m b e r o f

W o r k e r s , 2 0 1 2

Registered nurses 2,633,980

Nursing assistants 1,420,020

Personal care aides 985,230

Home health aides 839,930

Licensed practical nurses/vocational nurses 718,800

Physicians and surgeons 611,650

Medical assistants 553,140

Pharmacy technicians 353,340

Dental assistants 300,160

Pharmacists 281,560

Emergency medical technicians and paramedics 232,860

Radiological technologists 194,790

Physical therapists 191,460

Dental hygienists 190,290

Medical records and health information technologists 182,370

Medical and clinical laboratory technologists 160,700

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A growing body of research argues that new, integrated primary care delivery models, increased use of information technology, and expanded roles for nonphysician health professionals could solve shortages of primary care physicians.

Two fundamental shortcomings of workforce planning are that (a) it is usually tied to current care delivery models and (b) it treats each health professional inde- pendently. Innovative approaches to care delivery and team-based care could address many reported shortages of health professionals. For example, a growing body of research argues that new, integrated primary care delivery models, increased use of information technology, and expanded roles for nonphysician health professionals could solve shortages of primary care physicians (Auerbach et al., 2013; Bodenheimer & Smith, 2013; Rosenthal, 2014). In order to leverage such innovative approaches, pol- icies and regulations that limit the functions (scope of practice) that can be performed by some health workers may need to be reformed. In addition, health professional education needs to focus on interprofessional collaboration rather than reinforce professional silos.

■ Health Workforce Education

Educational and training requirements vary signifi cantly across health care occupa- tions: Some health workers enter the fi eld without a high school diploma, whereas others complete many years of postgraduate education. Many occupations, such as personal care aides and medical secretaries, require no formal preparation, and train- ing occurs on the job. In other occupations, such as medical assistants and pharmacy technicians, there is variation in employers’ preferences for formal education pro- grams versus longer-term, on-the-job training.

Most technical health care occupations require some formal postsecondary edu- cation but not a degree; such occupations include surgical technicians, licensed practi- cal/vocational nurses, and emergency medical technicians. A large share of education in these occupations occurs in private vocational schools; for example, about 90% of medical assistants are trained in private and for-profi t schools (U.S. National Center for Education Statistics, 2012a). Th ese schools often lack program-specifi c accredita- tion and standardized curricula. Some technical professions, such as dental hygienist,

Projections of demand are usually based on current approaches to providing health care services. Some demand projections attempt to establish a targeted num- ber of providers in order to deliver a desired level of services to the population. How- ever, this “ideal” need-based demand may not align with budgetary realities, and thus not match the demand we actually see in the labor market. For example, during eco- nomic recessions the demand for health workers usually drops even though demand for health services may remain stable, because employers have less money for hiring. If the amount of money available in the health system is not suffi cient to recruit workers and pay salaries, need-based demand and economic demand will diverge.

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respiratory therapist, clinical laboratory technician, and radiology technician, require at least an associate degree. Registered nursing requires a minimum of an associate degree in most states, but many RNs complete baccalaureate education before becom- ing licensed. Finally, professions such as medicine, pharmacy, physical therapy, and optometry require postgraduate education, typically at the doctoral level.

Postsecondary education is available from many institutions: private vocational schools, public adult school programs, community colleges, and public and private colleges and universities. Th e costs of educational programs vary signifi cantly. Private education is generally much more expensive than public education; in the 2011 to 2012 academic year, annual costs for public postsecondary education institutions averaged $14,292, whereas these costs averaged $33,047 for private institutions (U.S. National Center for Education Statistics, 2012b). Although prospective students might prefer to attend public institutions, these often have many fewer admission spaces than applicants. Health worker education is relatively expensive to deliver because it often requires the use of laboratories and involves closely supervised clinical training. Many public colleges and universities receive a fi xed amount of funding per student, regardless of the major fi eld of study. Th us, these schools face a fi nancial loss if they expand their health professions programs rather than expanding less-costly programs. Moreover, because most health care jobs have relatively high pay, it can be diffi cult for colleges to recruit faculty.

Differences in the costs of educational programs affect the choices made by students, especially when cost is compared with expected earnings.

Diff erences in the costs of educational programs aff ect choices made by students, especially when cost is compared with expected earnings. For example, the education of a primary care physician requires 4 years of post-graduate medical school educa- tion, followed by three or more years of residency. Preparation for a specialized fi eld of medicine such as cardiology typically requires more time; for example, a postresi- dency fellowship. Some research has demonstrated that medical students’ choice of specialty is infl uenced by potential earnings compared with medical school debt, and that the lower earnings of primary care physicians do not compare favorably, even though other fi elds of medicine require more years of residency and fellowship train- ing (Bodenheimer, Berenson, & Rudolf, 2007; Hauer et al., 2008). A mismatch between the cost of education and expected earnings can be found in other health occupations. For example, medical assistant wages averaged $14.12 per hour in 2012 (U.S. Bureau of Labor Statistics, 2014a), yet some medical assistants attend private training programs that charge tuition and fees of over $10,000 for a program of less than one year.


Health workforce education is traditionally focused on single professions. Physicians attend medical schools, nurses study in nursing schools, and dentists attend dental schools. Th ese siloed education programs rarely off er opportunities to learn together either in the classroom or through clinical experience. Alternative health care pro- fessionals, such as chiropractors, are rarely educated alongside physicians or other

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professionals. However, a growing body of evidence fi nds that interprofessional education (IPE) and subsequent interprofessional practice, can improve the abil- ity of health care professionals to provide high-quality patient-centered care (Barr, Koppel, Reeves, Hammick, & Freeth, 2005), including mental health care (Richards et al., 2013). Although the rapid emergence of initiatives to promulgate interprofes- sional education seems recent, their roots date back to more than 40 years ago, when the Institute of Medicine (IOM) published “Educating for the Health Team” (1972). Th e IOM’s second report on this subject, “Health Professions Education: A Bridge to Quality,” (2003) brought more attention to the imperative to revamp health workforce training. Th e report’s authors argued that the silo approach to educating health profes- sions contributes to continuing problems in the health care system.

Many private foundations, advocacy groups, and educational institutions are now actively developing and implementing IPE programs to address future health care needs. Th e Interprofessional Education Collaborative—a consortium including national organizations representing educators in allopathic and osteopathic medicine, dentistry, nursing, public health, and pharmacy—has made specifi c recommenda- tions regarding the competencies required for successful interprofessional collabora- tive practice (Interprofessional Education Collaborative, 2011). Th e competencies fall under four domains: (a) values and ethics for interprofessional practice, (b) roles and responsibilities for collaborative practice, (c) interprofessional communication, and (d) interprofessional teamwork and team-based care. Th e National Center for Inter- professional Practice and Education, established through a cooperative agreement between the federal government and four private foundations, is leading, coordinat- ing, and studying the advancement of interprofessional collaboration, with a particu- lar focus on the eff ect of IPE on quality, patient outcomes, and costs.

■ Critical Issues for the Health Workforce

Th e implementation of the Patient Protection and Aff ordable Care Act (ACA) and a growing focus on the aff ordability of health care have brought new urgency to the need to reform the delivery of health care in the United States. For nearly 15 years, it has been recognized that signifi cant changes are needed to improve the quality of care, increase the health status of the U.S. population, and control health care costs (IOM, 2000, 2001). Th ese changes, however, may be diffi cult to implement in the face of ongoing and worsening shortages of health professionals. Th e most critical issues facing the health workforce now, in addition to the educational reforms described earlier, include ongoing shortages; changes in health care fi nancing, which are rapidly spurring changes in the organization of care delivery; the role of new technologies in changing health professionals’ work; the increasing importance of health care labor unions and labor–management partnerships; and the need to revamp regulations so that health professionals can meet health care needs more effi ciently and eff ectively.

For nearly 15 years, it has been recognized that signifi cant changes are needed to improve the quality of care, increase the health status of the U.S. population, and control health care costs.

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Th e implementation of the ACA has been accompanied by concerns that there is not an adequate workforce to meet the health care needs of the population, especially those people who will become newly insured (Ormond & Bovbjerg, 2011). It has long been known that people who are uninsured—or whose insurance is inadequate—face greater diffi culty accessing care (Doescher, Skillman, & Rosenblatt, 2009; Shipman, Lan, Chang, & Goodman, 2011). Th e extension of insurance may lead to a surge in the demand for health services, as was observed when Massachusetts implemented health insurance reform. In that state, about 340,000 people gained health insurance in 1  year, and widespread shortages of primary care providers were reported (Sack, 2008). It has been widely expected that there will be a shortage of primary care pro- viders as the ACA is implemented, along with longstanding shortages of other health professionals, which have been reported for at least 15 years (Bodenheimer & Pham, 2010; Colwill, Cultice, & Kruse, 2008; Cooper, Getzen, McKee, & Laud, 2002; Cooper, Laud, & Dietric, 1998; Dill & Salsberg, 2008; Nicholson, 2009; U.S. Bureau of Health Professions, 2008; Whitcomb & Cohen, 2004).

As discussed previously, shortages exist when demand is greater than supply. Th e economic response to a shortage is an increase in wages, which leads to greater sup- ply (because compensation is more lucrative) and lower demand (because labor costs employers more). However, this normal economic response does not always occur in the labor markets for health professionals. First, wages may not change. Th e historic fee-for-service (FFS) reimbursement system favors specialized, complex, and proce- durally oriented services. Because standard offi ce visits receive lower payment, total compensation for primary care providers is lower. Signifi cant changes in payment methods will be needed to rectify this diff erential.

Th e second reason health care labor markets might not follow standard economic behavior is that their supply is constrained by licensure and educational requirements. Th e time required to prepare a new health care professional for entry into the work- force can be many years. As noted earlier, for example, the education of a primary care physician requires 4 years of medical school education, followed by three or more years of residency. Interest in primary care among medical school students has been drop- ping for years, with particularly little interest in family medicine (Council on Graduate Medical Education, 2010; McGaha, Schmittling, DeVilbiss Bieck, Crosley, & Pugno, 2010). Registered nurses, who also must be licensed by any state in which they practice, must complete at least 2 years of postsecondary education before they are qualifi ed to take a licensing examination (Buerhaus, Staiger, & Auerbach, 2009). Many other health professions, including physical therapists, medical technologists, and respiratory therapists, face similar licensing and education requirements. Several professions, such as physical therapy, occupational therapy, laboratory medicine, and speech therapy and audiology, have moved toward a clinical doctorate as the recommended or required entry-level education. Th is degree is not a PhD but is an advanced clinical degree that increases the number of years of education required to begin practice. Th ere is contro- versy over the value of clinical doctorates in some of these professions and whether the added costs to students and the added years of education will be valued in the health care delivery system (Siler & Randolph, 2007; Dickerson & Trujillo, 2009).

Further constraining the supply of health professionals are limits on educational capacity. Allied health educational programs exemplify some of the challenges in pro- ducing an adequate number of health professionals. Educational programs can be

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expensive to operate, with small class sizes and the cost of supplies for clinical practi- cums. Th is is true for many occupations, including radiologic technicians, imaging specialties, and medical laboratory technologists. Many allied health professions edu- cation programs are taught in community college settings, where fi nancial resources may be more limited than in universities and private colleges.

Th e aging of some health professions has been a major concern, including in the allied health workforce (California Hospital Association, 2009, 2014) and registered nursing (Buerhaus et al., 2009). In a survey conducted by the California Hospital Asso- ciation, hospitals reported that even a few vacancies of very specialized allied health workers aff ect patient care services (California Hospital Association, 2014).

In addition to the challenge of educating enough health professionals, there is often a problem with the geographic distribution of those workers. In the United States, it has historically been diffi cult to recruit professionals into rural and poorer urban areas, particularly when jobs are plentiful elsewhere (Bourgueil, Mouseques, & Tajahmadi, 2006; Buchan & Calman, 2004). Despite direct government interventions in the form of academic stipends and loan forgiveness programs, access to primary care in par- ticular remains a problem in many states and in specifi c regions of some states. Several analyses of health workforce needs for the ACA have reported that the maldistribution of professionals is a critical problem across professions (e.g., Bates, Blash, Chapman, Dower, & O’Neil, 2011). Th ese and other studies have reported that training and retain- ing allied health workers in rural areas is also a challenge (California Hospital Associa- tion, 2009). For this reason, many rural health care programs use a “grow your own” approach recruiting and training students from rural areas to increase the likelihood they will stay to work in the area (IOM, 2011).

Th e problem of inadequate supply was anticipated to persist even before the ACA was passed. Population growth, the aging of the U.S. population, and increased rates of chronic illness are expected to increase the workloads of primary care providers over the next 15 years (Colwill et al., 2008; IOM, 2008). Th e proportion of the U.S. population over age 65 is rising rapidly, from 12.8% in 2012 to a projected 20% in 2030 (U.S. Census Bureau, 2012). Th is is important for the health care workforce for several reasons:

Health care for older Americans costs more than for other age groups. Data from 2006 show average annual costs ranging from about $11,000, for those ages 65 to 74, to nearly $24,000 annually, for those over age 85 (Federal Interagency Forum on Aging-Related Statistics, 2010, p. 50). Th ose costs rise even more when one adds the cost of chronic conditions: Costs average $5,100 for those with no chronic con- ditions to over $25,000 annually for those with more than fi ve chronic conditions.

Older adults use more services from health professionals. Th ose over age 65 account for about 26% of all physician visits, 35% of all hospital stays, 34% of pre- scriptions, and 90% of nursing home use (IOM, 2008).

Many health professions’ curricula do not contain signifi cant content in caring for older adults. At a time when we will most need generalists and specialists in geriatric care, the U.S. workforce is ill-prepared for these challenges.

Members of the workforce that provides the bulk of long-term care in the home, community, and nursing homes are poorly paid, lack recognition for their work, and have high rates of job dissatisfaction and turnover (IOM, 2008).

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Th e growth of health information technology also has implications for the work- force. With electronic health records, some occupations, such as medical transcrip- tionist, have become obsolete, whereas others, such as health information technician, are projected to add 41,000 new jobs in the next decade—representing a higher-than- average growth rate of 22% (U.S. Bureau of Labor Statistics, 2014a). Another eff ect of information technology is the increased opportunity to use telehealth for remote treatment and referrals (Courneya, Palattao, & Gallagher, 2013; Green, Savin, & Lu, 2013). For example, photos of skin lesions can be sent to dermatologists for diagnosis and psychiatrists may provide psychotherapeutic services at a distance using video teleconference technology.


Some provisions of the ACA are intended to increase the effi ciency of health care delivery and are likely to aff ect the mix of health workers demanded. Performance- based payment programs, for example, will give health care organizations a fi nancial incentive to focus on implementing models of care that can increase the quality of care at a reasonable cost (Davis & Guterman, 2007). For example, many studies have found that higher RN staffi ng levels in hospitals are linked to better patient outcomes (e.g., Aiken, Clarke, Sloane, Sochalski, & Silber, 2002; Kane, Shamliyan, Mueller, Duval, & Wilt, 2007; Lang, Hodge, Olson, Romano, & Kravitz, 2004; Needleman, Buerhaus, Mattke, Stewart, & Zelevinsky, 2002). Historically, however, hospitals have had little fi nancial incentive to increase nurse staffi ng because higher-quality nursing care is not rewarded and nursing wages are expensive. Performance-based payment may lead hospitals to reconsider the value of increasing nurse staffi ng because there could be a fi nancial gain in improving quality ( Kurtzman & Buerhaus, 2008).

Bundled payments, which provide a single payment for hospital services during both initial hospitalization and any subsequent hospitalization for a fi xed period of time, are anticipated to lead hospitals to invest in services to prevent rehospitalizations.

Two other innovations in health care fi nancing are Medicare’s bundled payment and accountable care organization (ACO) programs, both of which create fi nancial incentives for health care providers to take full responsibility for an episode of care. Th is is a signifi cant change from the FFS approach and will allow health care organi- zations to retain fi nancial savings from delivering care effi ciently, as long as quality is improved or maintained. Th e potential for fi nancial gain will give health care provid- ers an incentive to reassess their processes for providing care. Employing care manag- ers, for example, may prove to be a good investment if their coordination of services leads to better outcomes and improved effi ciency. Bundled payments, which provide

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a single payment for hospital services during both initial hospitalization and any sub- sequent hospitalization for a fi xed period of time, are anticipated to lead hospitals to invest in services to prevent rehospitalizations. Postacute care services, such as nurs- ing case management, home care visits, continued monitoring, and expanded patient education, may receive more emphasis, and the IOM (2010) anticipates that the role of RNs in this area will expand.

Th e ACA also includes provisions to support the patient-centered medical home (PCMH) model of care. A PCMH engages a team of providers in the deliv- ery of care, typically including physicians, nurse practitioners (NPs), RNs, medical assistants, health educators, and pharmacists. Ideally, behavioral and mental health services are integrated into the PCMH (Bates et al., 2011). Th is and similar team- based approaches to providing primary care services may help to address anticipated shortages of primary care providers by increasing the roles of other health care profes- sionals ( Auerbach et al., 2013; Bates et al., 2011). In order for these models of care to be fully successful, however, educational programs need to be realigned to focus on interprofessional teams.


Th e rapid expansion of information technology in health care is changing the work of health professionals, as well as the way they communicate with each other and with family members. Electronic health records enable health workers to exchange infor- mation rapidly and to engage patients more actively in care. Recent research found that in one integrated health system there was a 25% decrease in primary care vis- its after the establishment of an electronic health record that facilitated greater use of telephone communication with patients (Chen, Garrido, Chock, Okawa, & Liang, 2009). Even though the expanded use of electronic health records shows promise to improve effi ciency, enhance quality, and increase patient engagement in health care, the implementation of such technologies demands notable changes in skills and work- fl ow. Electronic health records organize information diff erently than do traditional paper charts, and health professionals need to navigate through structured menus to enter information, rather than rely on simple templates and free text. Many organiza- tions have found that in the short term these systems disrupt workfl ow, and workers with poor typing and computer skills are challenged to use them (Spetz, Phibbs, & Burgess, 2012). To make the best use of these systems, health workers need enhanced computer skills, and health care organizations must carefully redesign workfl ow to take best advantage of what electronic health records off er.

Telemedicine also is rapidly changing the capacity of the health care work- force, particularly in rural areas. Early use of telemedicine was limited largely to telephone communication, but high-resolution digital imaging, real-time two-way video communication, and rapid transmission of electronic health records make it possible for remote clinicians to access enough information to engage in complex consultations remotely. Rural communities are increasingly using electronic con- sultations to give patients access to specialists without traveling. Widespread adop- tion of these technologies in both urban and rural settings could greatly expand the capacity of the current workforce to meet health care needs (Weiner, Yeh, & Blumenthal, 2013).

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Growing numbers of health care workers are represented by unions; this trend dates to the 1970s when regulations permitted employees of nonprofi t organizations to become unionized and eased the unionization of public-sector workers. About 14% of health practitioner and technical workers are represented by unions, as are 10% of health care support occupations (U.S. Bureau of Labor Statistics, 2014b). Unionized health workers tend to receive higher wages than those not represented by unions. Unions also have sought other concessions from employers, particularly hospitals, such as establishment of fi xed nurse-to-patient ratios, preferred shifts based on employment tenure, and improved health and retirement benefi ts. Health care workers have engaged in highly visible strikes and labor actions; they are politically active, supporting legislation and candidates.

Some employers have developed good working relationships with their unions. For example, in 1997 the Service Employees International Union, which represents mul- tiple health occupations, and 10 other unions partnered with Kaiser Permanente in a landmark agreement. Th e partnership focused on multiple goals, including improving quality of care for members, making Kaiser Permanente more competitive in its mar- kets, making Kaiser Permanente an “employer of choice,” and providing Kaiser Per- manente employees with the “maximum possible employment and income security” (Kochan, McKersie, Eaton, & Adler, 2009). Since then, the unions and Kaiser Perma- nente have worked closely together to establish internal training programs, scholar- ships and grants for pursuing advanced education, and job transition programs. When Kaiser Permanente established a systemwide health information technology system, it worked with the union to ensure that employees received training and to fi nd new roles for workers, such as clerks, whose jobs would be obviated by the electronic records. Although this partnership has not been without challenges, it has served as one model of a collaborative labor–management approach, rather than an adversarial relationship.


Th e growth of team-based models of care, such as the PCMH, and continuing con- cerns about shortages of physicians have led many researchers and policy analysts to argue that nonphysician providers can and should play a larger role in the deliv- ery of primary care. For example, about 65% of nurse practitioners provide primary care  services (American College of Physicians, 2008). Many studies demonstrate that the quality of care delivered by NPs is at least equivalent to that of physicians, and some research has found that NPs have stronger patient communication skills ( Horrocks, Anderson, & Salisbury, 2002; Lenz, Mundinger, & Kane, 2004; Newhouse et al., 2011). However, NPs face scope-of- practice laws that require them to work under physi- cian supervision and limit their ability to prescribe medications (Sekscenski, Sansom, Bazell, Salmon, & Mullan, 1994; Wing, O’Grady, & Langelier, 2005). Removal of these barriers would enable NPs to practice to their fullest potential to meet health care needs (IOM, 2010). Regulations also limit the work of other health professionals, such as licensed practical nurses (LPNs) and medical assistants (Seago, Spetz, Chapman, Dyer, & Grumbach, 2004).

Th e often-stated purpose of scope-of-practice regulation across the professions is consumer protection: safeguarding consumers who cannot independently evaluate

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the skills or competence of health practitioners. State regulations, including licensure requirements, are meant to outline the basic education, skills, and competency of a health care professional. Sometimes these regulations outline what practitioners of a particular profession can do safely, and in some cases the regulations focus on what members of the profession are not allowed to do. Both the breadth of work permitted and prohibitions can be found in some state regulations.

Th e eff ect of NP scope-of-practice regulations has been studied more than those of other professions. Th ere is substantial variation in the scope of practice permitted across states (Christian, Dower, & O’Neil, 2007). In 22 states, NPs are permitted to pro- vide care independently, but in other states NPs are not permitted to practice without physician collaboration or supervision, often requiring written practice protocols, and sometimes including restrictions on the number of NPs with whom a physician may collaborate (Christian et al., 2007; National Council of State Boards of Nursing, 2013). Even when NPs can practice independently, they may be required to have a collaborative or supervisory relationship with a physician to prescribe medications. Restrictive scope- of-practice regulations for NPs have been linked to lower utilization of primary care ser- vices (Stange, 2013) and higher costs in retail health care clinics (Spetz & Parente, 2013). At the same time, several systematic reviews have concluded that primary care services provided by NPs are of similar quality as physician care (Horrocks et al., 2002; Lenz et al., 2004; Newhouse et al., 2011). In order to fully leverage the capacity of the health workforce and align care processes to emerging fi nancial incentives, scope-of-practice regulations may need to be reconsidered.

■ Conclusion: Building the Future Health Care Workforce

Th e health workforce is central to the health care system, and changes in its deploy- ment and utilization will have signifi cant eff ects on health care quality and costs. Th e ACA and rising concerns about the effi ciency of health care delivery are bringing renewed attention to the importance of team-based care models, interprofessional education, and scope-of-practice regulations. At the same time, concerns and ongoing and emerging shortages of health workers persist. Th e U.S. Bureau of Labor Statistics estimates that the number of people employed in health occupations will rise to over 15 million by 2022, accounting for more than 1 in 11 jobs. Th e importance of this workforce to both health care and the overall economy will keep the health professions in the policy spotlight for the foreseeable future.

■ Discussion Questions

1. What are advantages of need-based models of demand? What are disadvantages of this approach to estimating demand?

2. If changes to scope-of-practice regulations could help to abate health worker short- ages, why are such changes not made?

3. What are the potential risks in relying more on telemedicine and electronic com- munication to help meet the need for health care services?

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LEARNING OBJECTIVES o Understand trends in U.S. health care spending over time o Explain the fl ow of funds into the health system (who pays) and the fl ow of funds

through the system (how providers are paid) o Understand the major categories of services purchased o Differentiate between public and private spending and purchasing in addition to

the categories of health plan types within the public and private systems o Explain how 2010 federal health reform legislation is changing the health care

fi nancing system o Describe the major reimbursement mechanisms for health care services o Understand current policy issues in health care fi nancing

TOPICAL OUTLINE o General overview of health care fi nancing o What the money buys and where it comes from o How health insurance works o How health reform may affect the fi nancing system o Reimbursement approaches o Current policy issues in fi nancing

Health Care Financing James R. Knickman

KEY WORDS accountable care organizations (ACOs) consumer-driven health care diagnosis-related groups (DRGs) health maintenance organizations

(HMOs) individual insurance market payer mix

preferred provider organizations (PPOs)

private insurance public insurance safety-net provider third-party payers

No matter what role an individual or an organization plays in the U.S. health care sys- tem, the complex way that we pay for health services in this country infl uences what is done and how it is done. Almost every aspect of how we organize health care services and how we manage them is shaped by how services are paid for. Most attempts to improve quality or to shift resources from one type of health care to another (e.g., from


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hospital care to primary care or from acute care services to preventive services) also are shaped by how these services are funded.

Th is chapter explains the processes used to pay for health care in the United States. Over the past 5 to 10 years, there has been substantial fl ux in our national approach to paying for care. Th e Obama administration’s ambitious Patient Protection and Aff ord- able Care Act (ACA) of 2010 has extended health insurance coverage to large numbers of Americans—perhaps as many as 24 million people—aff ecting both individuals and providers. In addition, ongoing national concern about the aff ordability of medical care has led to much activity among payers—especially government payers—to fi nd new payment approaches that moderate expenditure growth trends.

Th is chapter considers the types of care that are paid for, how individuals go about paying for care, and how providers are paid. Th e chapter also explains the types of insurance and how each works, how the 2010 federal health reforms changing fi nanc- ing, and how reimbursement systems have evolved for paying providers and creating incentives for quality and effi ciency. Finally, it describes emerging approaches for limiting the growth of health expenditures in the years to come.

■ General Overview of Health Care Financing

If we think of health care as a service that people need to purchase, we fi nd that the approach used to purchase this service is far different from the typical approach for purchasing other kinds of services or commodities in our economy.

What do we mean by the “fi nancing of health care”? Th is overarching question includes not only how we pay for care, but also who pays for care, how transactions between users and providers are handled, and how many total dollars are spent on care. If we think of health care as a service that people need to purchase, we fi nd that the approach used to purchase this service is far diff erent from the typical approach for purchasing other kinds of services or commodities in our economy.

For most goods and services other than medical care (such as an automobile or a massage), we use a simple payment system: If you want an item, you pay money for it directly. Suppliers of goods and services set prices they think make sense; if a purchaser is willing to pay the price (sometimes there may be a bit of haggling) the transaction happens, and the purchaser buys the service. In the U.S. market-based economy, the consumer needs only to have enough money to make the purchase, and the transaction occurs with little intervention from the government or anybody else.

Health care is not a normal commodity or service, however, because of two features:

■ Th e need for health care varies starkly from one individual to another: 20% of Americans use 80% of all health care dollars expended in any given year.

■ Th e cost of health care is very high, and many people could not aff ord it if they had to pay cash each time they needed a service. For example, in 2011 a typical 5-day

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stay in a hospital could cost well over $25,000. An MRI to diagnose the presence of a tumor could cost anywhere between $1,000 and $12,000, depending on where it is done and who is paying for it.

To overcome the obstacle of high costs, the United States has developed an insur- ance system that allows us to pay for services collectively. Put most simply, we pool our risks for needing health care. In essence, each individual pays an insurance com- pany the average annual costs of health care across the group of people covered by the insurance company. When these premiums are pooled across a population of peo- ple (often employees of a company), there is enough money to pay the expenses of the minority of people who need costly health care. Most of the time, people pay for health insurance but never use many (or any) of the dollars they put into the pool. In a year when someone has high health care needs, however, that person benefi ts from being able to tap many more resources from the insurance pool than he or she contributed.

Th is description greatly oversimplifi es how the fi nancing system really works across a range of dimensions. In fact:

■ Th ere are many types of health insurance; some are publicly paid for through taxes, some are paid for by employers, and others are paid for by individuals directly.

■ Insurance does not pay for the entire costs of an individual’s health care. Usually, insurance pays only a share of the costs and the individual pays the rest. How this copayment arrangement is structured varies greatly from insurance plan to insur- ance plan and can be quite complex.

■ When insurance becomes involved in the transaction between a service provider and a user of the service, there are rules regarding which services the insurer will pay for and how much it will pay for them. Th ese insurance reimbursement rules also can become incredibly complex and confusing.

■ When people do not directly and fully pay for services, economists worry that they will use more services than they need or that a provider will deliver more care than needed. An insurance system must create incentives to avoid overuse and oversup- ply, or systemwide expenditures could skyrocket.

Th e U.S. health care fi nancing system has evolved since World War II, when the fi rst health insurance products began to be marketed. In the 1960s, wide-scale public insurance programs were enacted: Medicare, which is insurance for the elderly and the permanently disabled, and Medicaid, which is an insurance-type system for low- income Americans (see Chapter 3).

Th e U.S. system of fi nancing health care is quite distinct from those used in other developed nations (see Chapter 4). Most other developed countries have a system that involves a set of services to which every citizen is entitled, which is paid for by the cen- tral government. In these situations, private insurance companies either help to man- age the government-fi nanced system or off er supplementary or alternative coverage.

Th e emergence of insurance in the United States in the 1940s occurred as new, more eff ective types of health care technology and practices were being developed. Th e combination of insurance and rapidly expanding clinical advances led to an expen- diture explosion in the 1970s, which has continued ever since. In 1970, U.S. health expenditures totaled $74.9 billion and represented 7.2% of the nation’s gross domestic product (GDP)—that is, 7.2% of all goods and services purchased in our economy

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were health related. By 2020, health expenditures are expected to reach nearly $4.4 trillion, or 19.2% of GDP (see Table 11.1 and Figure 11.1).

■ What the Money Buys and Where It Comes From

If we consider all types of expenditures in the health system, the total national bill in 2013 was $2.9 trillion dollars. Th e overwhelming share of this money ($2.5 trillion, or 86%) paid for personal health care services to individuals, whereas the balance paid for public health services, research, and administrative costs associated with running the


A c t u a l P r o j e c t e d

Ty p e o f E x p e n d i t u r e 1 9 7 0 2 0 1 3 2 0 2 0

Total National Health Expenditures $74.9 $2,914.7 $4,416.2

Total of All Personal Health Care 63.1 2,452.3 3,717.8

Hospital Care 27.2 929.0 1,397.4

Physician and Clinical Services 14.3 588.8 890.4

Prescription Drugs 5.5 262.3 397.9

Program Administration and Net Cost of

Private Health insurance 2.6 217.1 339.1

Sources: 2005–2015 data (Centers for Medicare & Medicaid Services, 2007); 1970 and 2000 data (Levit, Smith, Cowan, Sensenig, Catlin, & the Health Accounts Team, 2004).

F I G U R E 1 1 . 1

1970 2013 2020

7.0% 18.0% 19.2%



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delivery and fi nancing system (see Table 11.1). Among personal health care services, 73% of expenditures focus on three types of care: (a) hospital care, the largest type by far; (b) physician and other clinical services; and (c) prescription drugs. Administra- tive costs associated with running the health insurance and other regulatory systems represent 9% of expenditures for personal health care services.


We begin with basics, considering how individuals pay for health care when they become ill or injured. In essence, there are two main ways an individual pays for a service: (a) through the person’s insurance coverage or (b) out-of-pocket from income or savings. For people who are uninsured and have no money, there is a third option: Th ey can attempt to obtain the service free, as a charity case, through a safety-net pro- vider. States have various laws about when providers must give charity care, and the insurance system—especially public insurance—gives providers some money to help reimburse them for the charity care they deliver.

People who have either a public or a private insurance policy usually can receive services after showing their insurance card. Th e provider then bills the insurance com- pany directly, although some providers demand that the individual pays the bill when the service is provided, in which case the individual must seek reimbursement from the insurer. If a person’s insurance will pay for only part of the bill, the individual is usually responsible for paying the balance at the time services are delivered.

■ How Health Insurance Works

A range of insurance types cover diff erent subsets of the U.S. population. Th e fi rst key diff erentiation among them is public programs versus privately sponsored insurance products.

Public insurance programs include Medicare, for the elderly and disabled; Medicaid, for low-income individuals; and other public insurance systems for low- income individuals, such as the Children’s Health Insurance Program (CHIP), which covers children who are ineligible for Medicaid. Other public insurance programs cover veterans, public employees, members of the armed services and their families, and Native Americans.

Private insurance coverage varies depending on who pays for it. Small employ- ers can purchase coverage for their workers through commercial companies (such as Blue Cross plans or insurance companies like UnitedHealthcare, Aetna, or Kaiser Permanente). Individuals who work for employers that off er no coverage or who are self-employed or unemployed also may buy insurance through commercial compa- nies. Individuals also can buy insurance through the insurance exchanges that were established by the ACA. Th ese exchanges link individuals to a range of commercial insurance off erings, and the federal government subsidizes the premiums charged within the exchange for families with earnings between 138% and 400% of the fed- eral poverty level (FPL). Large employers can buy coverage from commercial com- panies, or they can self-insure. Large employers often can save substantial costs by self-insuring, which they can do because they have so many employees that the risks

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balance out. When an employer does self-insure, it usually engages a commercial insurance company to manage the plan and enforce its rules.



Medicaid originally was designed to assist recipients of public assistance—primarily single-parent families and low-income people who are aged, blind, or disabled (see Chapter 3). Over the years, Medicaid has expanded to include additional groups and now covers poor children, their parents, pregnant women, the disabled, and very poor adults (including those 65 and older). Much public attention is given to Medicaid’s role in covering children’s care; in reality, however, 64% of its expenditures support care for the 35% of enrollees who are elderly or disabled (see Figure 11.2).

Medicaid is administered by the states, and state and federal governments both fi nance the program. Except for minimum mandatory benefi ts, the federal govern- ment gives states fl exibility in implementing and administering Medicaid to best meet the needs of their residents. As a result, there are many seemingly arbitrary diff erences in eligibility and coverage across states.

Th e ACA has provisions to expand the range of services covered by each state through the Medicaid program. Th e ACA also uses federal funds to expand the income eligibility for Medicaid to all individuals living in families with incomes below 138% of the FPL. However, court challenges to this provision have led to allowing states to opt out of accepting federal funds to expand coverage. In 2014, 22 states had chosen not to expand Medicaid eligibility (Kaiser Family Foundation, 2015).

A major change in Medicaid occurred when many states adopted a managed care approach in the early 1990s. In this payment strategy, the state usually pays a fi xed, or “capitated,” payment to an insurer, who then is responsible for keeping average costs for Medicaid patients below this fi xed payment level. It has been dif- fi cult, however, for many states to accrue savings using a managed care approach. In most states, Medicaid already paid providers rates that were below (sometimes signifi cantly below) commercial levels, and it was diffi cult for managed care insur- ers to reduce them further. Additional reductions would have squeezed safety-net providers, which largely depend on Medicaid revenues, jeopardizing their fi nancial viability.


Administered by the federal government, Medicare originally targeted people 65 and over, but it was quickly expanded to cover people with disabilities and severe kidney disease. To qualify, an individual must be a U.S. resident for a specifi ed number of years and pay the Federal Insurance Contributions Act (FICA) payroll tax for at least 10 years. Th e entitlement was expanded in 1972 to allow people who did not meet the latter requirement to pay a premium for coverage. Even though enrollment in Medicare has doubled since its passage, annual expenditures have increased about 40-fold, making the federal government the nation’s single largest payer of health care expenses.

Medicare has two parts: Part A, which is hospital insurance, and Part B, which is supplemental medical insurance covering physician services and outpatient care. Th e Balanced Budget Act of 1997 established the Medicare+Choice program,

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designed to build on existing Medicare managed care programs and expand options under Part B.

In the 1980s and 1990s, Medicare experienced a series of changes to its payment mechanisms, which appear as dips in the overall growth rate of national health expen- ditures. In the 1980s, Medicare started paying hospitals under a payment system that set fi xed prices (varying by region and the intensity of service required) for each stay in a hospital by a Medicare-covered patient. By the 1990s, Medicare also had started paying physicians diff erently using fi xed payment schedules for diff erent types of physician services.

Th e George W. Bush administration added pharmaceutical coverage to Medicare through the Medicare Modernization Act, passed in December 2003. Th is coverage was expanded for Medicare enrollees as a part of the ACA of 2010.

F I G U R E 1 1 . 2
















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Other Public Programs

In addition to Medicaid and Medicare, the United States has a patchwork of govern- ment health care programs for special populations: active duty and retired military personnel and their families, Native Americans, and injured and disabled workers.

Programs for Active Duty and Retired Military Personnel. Historically, most health care needs of active duty military personnel have been handled in military facilities, where retirees and families also could receive free treatment on a space-available basis. U.S. Department of Defense spending on medical care more than tripled from 1988 to 2005, rising from $14.6 billion to $49 billion.

Th e Veterans Health Administration, the health care system of the Department of Veterans Aff airs (VA), operates the largest integrated health care system in the United States, providing primary care, specialized care, and related medical and social sup- port services to U.S. veterans and their dependents. In recent years, the VA has faced stiff criticism for its waiting lists for services due to a large number of returning vet- erans from the Iraq and Afghanistan confl icts as well as the aging of many veterans who served during the Vietnam War. Th ere have been expanded initiatives to allow veterans to use community-based services when they fi nd it diffi cult to gain access to services provided directly by VA-run health care facilities.

Th e Indian Health Service. In 1921, the Snyder Act established a program of health services for Native Americans, known today as the Indian Health Service (IHS) and administered by the U.S. Department of Health and Human Services (DHHS). Eligible are members of federally recognized Indian tribes and their descendants. Th e pro- gram’s budget is approximately $3  billion to $4 billion annually, and it serves approxi- mately 1.9 million of the nation’s estimated 3.3 million American Indians and Alaska Natives (DHHS, 2010).

Workers’ Compensation. Workers’ compensation is an insurance system intended to protect workers against the costs of medical care and loss of income resulting from work-related injuries and, in some cases, illnesses. Underlying workers’ compensation is the premise that all job-related injuries, regardless of fault, are a result of the risks of employment, and the employer and employee should share the burden of loss. Work- ers’ compensation programs are operated by the states, each with its own authorizing legislation and requirements. Th e fi rst such law was enacted in New York in 1910; by 1948, all states had a workers’ compensation program.


Th e private share of health care expenditures is made up of direct payments by indi- viduals (representing 18% of total expenditures) and payments made by private insur- ance companies (representing 35% of expenditures). Public payments represent the balance at 47%.

Employer-Based Insurance

During the Great Depression, hospitals found that most Americans could not aff ord to pay their bills. Th e hospital industry, through the American Hospital Association,

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supported the growth of the fi rst major health insurers: the Blue Cross plans in each state that pay for hospital care and the Blue Shield plans that pay for physician and other outpatient services. Over time, these nonprofi t insurers had to compete with for-profi t insurance companies, which emerged during World War II when unions began fi ghting for medical insurance to be part of employee benefi ts packages.

Growth in the health insurance market was a by-product of wartime wage and price controls; because wages couldn’t be increased, enhanced benefi ts packages were one way unions and employees could obtain increased compensation. Growth acceler- ated after a decision by the Internal Revenue Service that employers could take a tax deduction for the cost of employee health insurance. Th e growing costs of health care would have led to increased private or public insurance coverage eventually.

During the next several decades, the employer-based health insurance system became increasingly entrenched. By the end of 2002, more than 64% of Americans received health insurance through their employer (Glied & Borzi, 2004). Since then, the percentage of Americans obtaining employer-based health insurance has slowly but steadily decreased, reaching 61% in 2008 and 56% in 2012.

The Individual Insurance Market

Although employer-based insurance dominates the private health insurance sector, a signifi cant number of people must arrange and pay for health insurance on their own. Th e Employee Benefi t Research Institute found that, in 2008, even though more than 160  million nonelderly Americans were covered by employment-based health benefi ts, about 16 million purchased coverage for themselves and family members in the individual market (Fronstin, 2009). As implementation of insurance exchanges supported by the ACA began in 2014, however, individual coverage grew quickly, totaling 8 million people the fi rst year of the exchanges—with an expectation that this number could grow to 24  million by 2024. Th is growth is due in part to the substantial premium subsidies supported by the ACA and also to a mandate that imposes tax penalties on individuals who meet the criteria for purchasing individual policies.

As described later in this chapter, the ACA off ers substantial subsidies for many Americans to purchase insurance as individuals. Almost 14 million people purchased subsidized private insurance after the law was implemented in 2014 and the number is expected to grow to at least 16 million.


Th e Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1985 attempts to reduce gaps in insurance coverage for individuals who are between jobs. Th e act requires employers to extend health insurance benefi ts to former employees for up to 18 months. Depending on qualifying circumstances, coverage may be extended for a spouse or dependent children for up to 36 months. Employees generally pay the entire premium for the coverage.

COBRA coverage can be expensive because many employers off er insurance that is generous in scope. It is likely that policies off ered by the insurance exchanges will be less expensive than COBRA for many people, so COBRA might represent a diminish- ing share of insurance coverage over time.

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■ How Providers Are Paid for the Health Services They Deliver


In recent years, as public insurance rates have either decreased or not increased as fast as health care infl ation, a number of providers have stopped serving Medicare or Medicaid patients.

Most services delivered by medical care providers are paid for through the complex insurance system described in the previous section. In the case of public payers (mostly Medicare and Medicaid), payment rates for providers are fi xed by a complex set of rules and formulas that are set in place by public policy. Th e rates are in essence a “take it or leave it” off er from the federal government. In recent years, as public insurance rates have either decreased or not increased as fast as health care infl ation, a number of providers have stopped serving Medicare or Medicaid patients.

Private insurers go through a negotiation process with hospitals, physicians, and other providers to establish what will be paid by the insurer for each type of service. Th ese negotiations can be quite complex and quite heated as both the payer and the provider seek rates that are favorable to them. Physicians often have less clout in these negotiations than hospitals unless they are organized into large groups or are in com- munities with physician shortages. In most areas, there are enough physicians to give insurers the upper hand in bargaining. Th e diffi culty of negotiating good rates is one factor driving physicians to either join preferred provider organizations (PPOs) or to take salaried positions within hospital systems or in large corporate medical practices.

Th e various approaches to paying physicians used by Medicare, Medicaid, and private insurers have resulted in decreased payments to many physicians and falling or static incomes for many types of physicians over the past 5 to 10 years. In addition to tighter payment approaches, the recession of 2008 to 2010 decreased the demand for physician services. More people were uninsured and very price sensitive during the diffi cult economic times, and volumes have not recovered since that period.

Hospitals, by contrast, often have good negotiation positions because there are fewer hospitals in each community and many people insist on having access to hospi- tals they perceive as high in quality. Smaller hospitals or community hospitals that are not academic medical centers sometimes have substantially less negotiating power. Just like physicians, however, hospitals have felt intense pressure on revenues since the recession of 2008 to 2010.

Any provider that does not negotiate rates with an insurer through a contract is considered an out-of-network provider by that insurer. Often, insurers do not reim- burse patients who use out-of-network providers, or they provide only a specifi ed amount and make the patient responsible for the diff erence between this amount and a hospital’s charges.

In general, actual payment rates vary markedly across types of payers. Private insurers often pay the best rates because of the negotiation process; Medicare pays the second-highest rates generally, and Medicaid payment rates tend to be lowest. One exception to this pattern is Federally Qualifi ed Health Centers, which often care

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for low-income people and have high reimbursement rates paid by public payers. Th ese high rates refl ect a priority to ensure access to care for low-income people and to compensate for what is often higher-than-average health care complexity for populations served by community health centers.

Th e fi nancial viability of any given hospital, physician, or other provider often is crucially associated with the payer mix among the provider’s patients. Providers that do not have a healthy share of patients covered by private insurance sometime have a diffi cult task covering costs.


In recent years, more and more physicians have decided to be out-of- network providers, putting more payment responsibility on individual patients.

Th e other key source of reimbursement in health care comes directly from payments made by individuals. Individuals without insurance must pay cash for services, and individuals who use out-of-network providers also must pay cash and then seek reimbursement from their insurers. In recent years, more and more physicians have decided to be out-of-network providers, putting more payment responsibility on indi- vidual patients. Th is is particularly the case for specialty physicians in urban markets who serve wealthy patients, and even more so for physicians who have reputations for high quality.

On the payer side, insurers also are contributing to the growth in out-of-network providers as insurers move to so-called narrow networks of providers with whom they contract. Insurers are fi nding that they can off er lower rates if they concentrate their business among a small set of providers. Increasing numbers of consumers and employers seem willing to trade access to a large network of providers for the oppor- tunity to pay less for insurance. Most notably, the fi rst few years of the insurance products off ered in the insurance exchanges set up by the ACA have off ered narrow networks.

Th e prices charged by providers, especially hospitals, have become increasingly controversial. Many hospitals set very high rates for the relatively few patients who pay out of pocket for hospital care. In addition, these rates are rarely transparent; most patients are not told what care will cost until after they have received the care. Such practices have spurred a movement pushing for more transparency of prices charged by hospitals and more logic to the basis for setting prices.

■ Specialized Payment Approaches Used by Payers

Over the past 20 years, a range of new payment approaches has been developed in the attempt to achieve two goals: (a) reduce the high rate of year-to-year cost infl ation in health care and (b) create incentives for providers to deliver higher-quality care and to use more effi cient practices to manage patient care.

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Th e biggest change in the privately fi nanced portion of the U.S. health care system over the last three decades is the shift toward various forms of managed care: prepaid health plans, preferred provider organizations, accountable care organizations, and consumer-driven health care. Large businesses and government payers steered this shift in an attempt to reduce their health insurance costs.

Prepaid Health Plans

Managed care plans structure and reimburse care diff erently than conventional insur- ance does. Very strict managed care plans, such as health maintenance organizations (HMOs), use capitated payments and control which providers participate in their net- work. Capitated payments are fi xed annual payments for each person for whom the provider is responsible to provide care, regardless of the amount and kinds of services eventually needed. HMOs also require primary care physicians to be gatekeepers to other types of services, by requiring referrals for diagnostic tests and specialty care.

The theory was that capitation would encourage providers to think more carefully about the necessity of costly tests and procedures and discourage unnecessary referrals to expensive specialists.

Th e theory was that capitation would encourage providers to think more carefully about the necessity of costly tests and procedures and discourage unnecessary refer- rals to expensive specialists. Despite capitation’s limits on reimbursement, providers were expected to participate because they would have a captive audience of patients— in other words, they could make up any reimbursement shortfall by having increased numbers of patients. Patients, in return for giving up the freedom to use whichever physician or hospital they chose, would receive more organized care, with specialist and primary care more eff ectively coordinated.

HMOs generally act as both the insurer and the provider of services. However, HMOs use a range of approaches to providing services. Some employ physicians and own hospitals, whereas others contract with networks of physicians and with local hospitals. Th e best known HMO, Kaiser Permanente, uses a defi ned network of physi- cians and owns its hospitals.

In the late 1990s, after a period of high cost infl ation, the less organized approaches to managed care began to spread widely. Consumers began to dislike these approaches, however, because they perceived many features as overly restrictive. Th ey wanted to choose their own physicians, resented specialty care gatekeeping and other managed care hassle factors, and demanded more plan options. Consumers complained loudly to employers, who eventually moved toward off ering less tightly controlled plans, which were not capitated for providers. Th is trend was in stark contrast to Medicaid managed care, which enrolls about two thirds of Medicaid recipients nationwide into capitated programs in order to control spending. Similarly, some states are moving toward using managed care plans exclusively for Medicaid recipients.

Today, most consumers do not choose to enroll in HMO plans. Only in California and, to a lesser extent in the other west coast states, do HMOs represent a signifi cant

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share of the insurance and service delivery market. In many areas of the country— including most of the eastern half—HMO penetration is minimal.

Preferred Provider Organizations

At the liberal end of the managed care spectrum are PPOs, rapidly growing organiza- tions that encourage plan members to use a list of physicians with whom they have negotiated discounts. Plan members are rewarded with lower out-of-pocket costs (deductibles, copays, and co-insurance). Patients who use an out-of-network provider often must pay the diff erence between the insurer’s reimbursement rate and whatever the physician charges.

Accountable Care Organizations

Despite the dislike of managed care in the 1990s, the 2010 national health reform law and many private insurers are again promoting a new version of managed care, called accountable care organizations (ACOs; see Chapter 12). Why the reconsidera- tion? Quickly rising health costs and the prospects of sharply rising direct copayments (deductibles and coinsurance) suggest that consumers may be more amenable to trad- ing freedom of provider choice for more coordination of care and lower copayments. In addition, in some versions of the ACO model, the consumer remains free to choose providers outside the ACO.

An ACO has strong fi nancial incentives from insurers to enroll a high percentage of eligible people. If most eligible people do not use ACO services, the ACO is much more likely to lose money based on its contract with an insurer.

Consumer-Driven Health Care and High Deductibles

An approach to insurance that focuses on making consumers sense price signals when they purchase health care is often called consumer-driven health care. Th is approach generally involves setting a high deductible that individuals must pay before they receive insurance benefi ts. In some cases, costs of care during a deductible period can be paid by a savings account that employers or employees set up for health-related costs.

In many ways, consumer-driven health care—which puts individuals at risk to pay the bulk of everyday health care and pharmaceutical needs—off ers a stark alternative to the managed care option. Consumers have very free choice but face sizable personal fi nancial risk. Th is fi nancial risk is particularly diffi cult for people with chronic health conditions.

Another feature of consumer-driven health care is a set of eff orts to make health care costs more transparent to the user of the services and to improve access to medi- cal care. For example, in some cases this type of plan insists that payers set fi xed prices, which enrollees can be made aware of, before a service is provided. Other features include greater use of e-mail and phone calls to facilitate patient-provider interaction and walk-in hours that allow patients to see a provider on the same day they become ill.


In 1983, the federal government introduced a new hospital reimbursement system that dramatically altered the way it pays for Medicare benefi ciaries’ hospital care. Th e

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diagnosis-related group (DRG) system set rates prospectively—that is, a payer said up-front that it would pay a fi xed amount for the hospital stay of a patient with a spe- cifi c diagnosis and no more (with some outlier exceptions), no matter how much the patient’s care eventually cost or how long the hospitalization turned out to be. Fixed payments give hospitals a powerful incentive to increase effi ciency, minimize unnec- essary tests and services, and shorten patients’ hospital stays.

In concept, the early idea of DRGs is being expanded by the emerging concept of bundled payments, which pay both the physician and the hospital a fi xed amount to provide an episode of care or, in the case of patients with chronic conditions, a specifi ed time period of care. Various provisions of the ACA encourage use of bundled payments and capitated payments in the health system.


A companion idea to DRGs as a basis of reimbursing hospitals for patients with vary- ing needs is the federal government’s approach to using standardized principles to set rates for diff erent specialists and for patients with diff erent medical needs. Th e system is called the resource-based relative value scale (RBRVS; Hsiao, et al., 1988). Rates are determined through detailed research measuring the expected time and other resource inputs that physicians need to deliver a specifi c service.

Each state’s Medicaid program also developed physician reimbursement rates, generally adopting the federal approach of using formulas to set rates rather than negotiate with physicians. Medicaid rates are often much lower than Medicare rates for the same services. Th e ACA mandates that state Medicaid programs raise physi- cian reimbursement rates to at least 60% of the rates paid by Medicare. Th is provision is designed to increase the number of physicians willing to care for Medicaid patients.

■ Issues Shaping the Future of Health Care Financing

Th e years between 2015 and 2020 will likely be dominated by attention to ongoing implementation of the wide-ranging features of the ACA. When passed, the main fea- ture of the Act seemed to be the ambitious expansion of insurance coverage through subsidized private policies and through expanded Medicaid eligibility. However, the law also provided funding to spur changes in the way health care is organized and fi nanced, with an aim of slowing the growth rate of health care expenditures.

For example, the ACA set aside $11 billion over a 5-year period to support expan- sions of community health centers around the country; these centers would be eligible for generous reimbursement rates as FQHCs. Th e logic of this funding is to expand pri- mary care access so that the newly insured can see physicians and receive services that would keep them from ending up in emergency departments or acute care hospitals.

Th e ACA also mandates demonstrations to test the concept of ACOs, which could lead to greater use of capitated payments, instead of fee-for-service payments, for service delivery. Th e act also funds $10 billion of demonstrations and experiments through a new Center for Medicare & Medicaid Innovation to help providers learn how to integrate and coordinate services across provider organizations and how to use care management approaches for patients with the most chronic and complex medical challenges.

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We focus attention on three key issues that will aff ect the future of health care fi nancing as stimulated by the ACA: (a) the challenge of encouraging new delivery systems that can better manage quality and costs of care, (b) the challenge of rethink- ing how health care is actually reimbursed by public and private insurers, and (c) the challenge of implementing smoothly operating insurance exchanges.


Delivery system reform is a recent “big bet” to achieve a health system that delivers more aff ordable medical care. Th e general idea is to make medical care more forward looking, meeting the needs of people before they become so sick that they require expensive care in hospitals.

In the past, physicians and hospitals have been set up to be reactive, waiting for patients to seek care when they feel in need of it. However, a more proactive approach involves keeping in touch with patients through care managers to make sure patients  are doing self-management of their health problems between provider visits; this is particularly important for people who are dealing with diffi cult chronic conditions such as diabetes or heart disease. Ideally, a care manager working with a physician or an advanced practice nurse can help to meet the broad set of needs that a chronically ill patient might face: taking the right medications regularly, making appointments with specialty physicians when appropriate, and perhaps getting social services that could help to mitigate their illnesses.

A second strategy for being proactive in the care of patients is to have close ties with a wide range of medical care providers. Care providers that are integrated across service types may be able to better manage and coordinate the needs of patients with complicated medical conditions. Th us, outcomes might be better if hospitals have close ties to primary care physicians, as well as to specialty physicians and other pro- viders such as home care service organizations, laboratories and testing centers, men- tal health providers, and substance abuse service professionals.

Th e simplest example of why this is important is what happens when a person leaves the hospital. If the hospital does not make sure the patient is linked to a special- ist or primary care physician or to a home care agency (depending on the patient’s postdischarge needs), that person likely will not continue to recover and may require readmittance when a medical setback occurs.

Th e public payment system—especially the Medicaid program—uses a range of incentives to encourage providers to establish integrated networks of diff erent types of providers who can develop protocols for working together in a smooth, eff ective manner. Th e federal Center for Medicare & Medicaid Services, for example, is initiat- ing programs in many states to off er substantial fi nancial rewards to integrated sets of providers that meet one or more of these goals: (a) achieve an agreed-upon goal related to improving medical outcomes for a set of individuals, (b) improve the over- all health of the entire population in the community where the providers work, or (c) lower the expected costs of medical care. One major program, called the Delivery System Reform Incentive Payments (DSRIP) program, makes large supplemental payments to provider systems that achieve a specifi ed goal related to health system improvement.

In New York, for example, the state government is overseeing a DSRIP program that can support up to $8 billion in initiatives across New York to achieve cost and

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outcome goals associated with system reform; these goals focus primarily on creating networks of providers that can work cooperatively to meet all of the needs of com- plex patients. Th is is called a pay-for-performance approach to encouraging improve- ment: Th e costs of implementing the improvement are paid for if the health system achieves the goal it sets. In the long run, both government payers and providers can save resources if the initiative is successful.

Private payers also are experimenting with structures such as ACOs. Th ese initia- tives often involve establishing a group of patients covered by the payer and served by the ACO. Concrete reimbursement incentives are established if the providers involved with the ACO achieve quality and effi ciency goals.

Th e present is marked by incredible energy to transform the organization of health care in the United States. Much of the current activity involves trying ideas about care management and integration as approaches to improve quality, outcomes, and effi - ciency that have not been thoroughly tested through demonstration initiatives. When demonstration initiatives have tested these ideas, the fi ndings have been mixed. Evolu- tion of the organization of care likely will happen slowly but surely, with many changes along the way. Th ere is consensus that the current approach is not optimal, but there is no consensus about which changes will work.


Almost every person who interacts with the U.S. health care system (whether as an expert or a patient) comes to an awareness that our payment approach makes little sense. Hospitals post incredibly high prices for services that are charged only to a tiny fraction of people who fall into loopholes in the payment system. Every payer bargains or dictates diff erent payment rates, forcing hospitals and physicians to cross-subsidize diff erent types of patients and often penalizing those whose prac- tices focus on the most needy and poor patients. Providers are overpaid for some of the things they do and sharply underpaid for other, important services, such as counseling patients. Th is creates incentives to focus on services that lead to high revenues.

Th e core problem seems to be the use of fee-for-service payments that reward the volume of services delivered rather than the value of the services or the outcomes associated with the services. Despite broad dissatisfaction with the current payment system, it is diffi cult to design a new system that creates logical incentives encourag- ing valuable services and good outcomes yet does not fi nancially hurt any of the three principal parties in health care: patients, providers, and payers.

It is useful to begin the payment reform process by establishing a set of principles to guide the reform:

■ New payment approaches should encourage primary care and preventive care. Th ese are important services because, when done well, they frequently can avoid the need for more expensive services. Despite our perception that primary care and prevention can help people avoid uncontrolled chronic conditions, we currently spend only about 5% of all health care dollars on primary care.

■ Any new payment approach should encourage high-quality care and attention to optimizing the patient experience. Providers that achieve quality and service amenities should be rewarded.

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■ Payment approaches should discourage duplication and waste by not letting provid- ers benefi t fi nancially when these occur. Too frequently patients have unnecessary or duplicated tests because providers are not coordinating care with one another.

■ Th e large variations across localities in how people are treated and in the cost and outcome of care must be reduced. A payment system must encourage providers in diff erent locations to learn from one another and to adopt effi cient practices that lead to good outcomes.

■ Payment systems also should encourage investments in population health that support a range of community-based and prevention-oriented activities focused on keeping people healthy. In the long run, this strategy is what best leads to good health outcomes and lower costs of medical care.

What types of payment system meet these principles and should be candidates for payment reform eff orts? Five candidates have emerged, and each works in a diff erent context:

■ Reference pricing: Th is system involves a payer exploring the range of prices charged by diff erent providers for a specifi c service in a given community. Th e payer then identifi es a subset of providers that charge a fair price and have good health out- comes. Th e payer can set this price as the reference price and establish a rule that the people covered by the insurance plan receive no more than the reference price as a reimbursement, even if they choose a provider that charges more than the ref- erence price. Th e aim of this system is to force high-price providers to rethink how they manage the procedure in question and how they can reduce the costs of pro- viding the service. Providers that cannot do this will lose business to the lower-cost providers—as happens in most markets for goods and services in our economy.

■ Bundled or episodic payments: Th is payment approach moves away from paying a fee for every discrete activity a provider performs for an individual patient. Instead, a spec- ifi ed health condition for a patient is associated with a fi xed price and/or a fi xed period of time. Th is bundled payment is designed to pay for the range of services a patient is likely to require. Th e approach encourages effi ciency and good outcomes; across a panel of patients, physicians will do well fi nancially when they operate effi ciently.

■ Pay for performance: As discussed earlier in this chapter, this approach involves off ering extra payments when providers achieve very good health outcomes at aff ordable prices.

■ Capitation: Th is approach—which has been used by HMOs for many years and is on the rise again nationally—gives a provider an annual fi xed payment to provide all of the care a specifi c person needs during the year. Again, providers who are effi cient in caring for the person will do well fi nancially across a panel of patients. However, this approach requires a covered person to agree to receive services from a single provider group during the year.

■ Global budgets: Th is is the most aggressive approach; it involves a set of providers agreeing to meet the health care needs for an entire community or a large subset of a given community. In return, providers receive a budget that is designed to sup- port the services needed across the entire covered group. Th is approach very much encourages population health initiatives to keep a population healthy. Th e best way to manage a global budget is to keep people healthy and to use primary care to decrease the need for high-cost emergency department care and inpatient hospital care.

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Th e eff ort to transform payment approaches has been happening piecemeal across the United States. Th e federal Medicare program has been aggressively developing pay- for-performance and capitation approaches, which often are implemented as a voluntary option. Private insurers also have been experimenting with a wide range of alternative payment approaches, including bundled payments, reference pricing, and various forms of capitation.

Some states, however, have been working to develop more comprehensive pay- ment reforms that attempt common incentives for providers no matter which payer is covering an individual. One example is Massachusetts, where a law passed in 2012 mandates that health care expenditures should not grow any faster than overall spending in the Massachusetts economy. Th e law encourages global budgets for large provider systems to care for specifi ed groups of people and established a state com- mission to monitor expenses and quality of care and to make recommendations if targets are not met.

In 2014, state-level reform eff orts were also underway in Vermont, Maryland, Oregon, Arkansas, and California. Many lessons must be learned before these reforms are fully implemented. Th ese state-level approaches will continue to evolve, along with the range of other piecemeal approaches to payment reform.

However, key ingredients for success seem to be emerging from the activities in the early adopter states. It is important to success that a state has experience in negoti- ating state-based eff orts to improve the quality, organization, and fi nancing of medical care. Local champions in government, private industry, and medical care must emerge to forge consensus and the compromise needed to bring about meaningful reform. State legislators must pass legislation that drives reform. Finally, collaboration across sectors seems to be a common attribute of all successful state-level initiatives toward payment reform.


A key feature of the ACA is the creation of insurance exchanges that off er private insurance policies with premium rates subsidized by federal dollars. Families with incomes below 400% of the FPL (in 2014, an income of $95,400 was 400% of the pov- erty level for a family of four) are eligible for insurance subsidies on a sliding scale. In addition, everyone is required to buy some form of insurance policy, as long as at least one off ering by a private insurer meets aff ordability tests for that person or family.

Th e exchanges are intended to play at least three key roles: (a) calculating the amount of the subsidy for a given family, (b) explaining the features of each private insurance off ering, and (c) linking each family to the insurance option the family selects. Exchanges determine which insurance off erings meet federal qualifi cations to be off ered on the exchange; they also have the power to limit the number of insur- ers off ering policies on the exchange. In addition, some states choose to have their exchanges facilitate enrollment in public insurance plans, such as Medicaid.

Th ese are diffi cult roles to play for new organizations with signifi cant challenges and few organizational precedents. Complicated consensus-building processes that involve insurance companies, consumer groups, and policymakers are necessary to accomplish this in a timely way. A large task has been the development of new eligibil- ity information systems that can translate income levels into subsidy amounts, verify the accuracy of reported incomes, and explain the insurance off erings available to a

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specifi c individual or family. Most states also needed new laws to bring state insurance regulations in line with federal requirements and to set governance rules and fi nanc- ing approaches to pay for the operation of the exchanges.

Perhaps the greatest challenge in establishing the insurance exchanges under health reform is to ensure seamless enrollment.

Perhaps the greatest challenge in establishing the exchanges is to ensure seamless enrollment in unsubsidized private policies, subsidized private policies, and the pub- licly supported Medicaid program. A family that has a change in income status may also have a change in the type of insurance it qualifi es for: When income exceeds 400% of the federal poverty level, an unsubsidized policy is required; in most states, income between 133% and 400% of the poverty level require purchase of a subsidized policy; and when income is below 133% of the poverty level, individuals are eligible for free Medicaid insurance (in states that have accepted the federal fi nancing available to sup- port most of this Medicaid expansion).

If enrollment and income documentation systems vary from one insurance category to another, many families will have diffi culty making transitions among insurance types. In particular, people who become eligible for Medicaid coverage may fail to comply with complex enrollment processes. A successful integration of diff ering enrollment requirements could result not only in increased private cover- age but also in better take-up rates for the Medicaid program. Th is would represent an impressive achievement for the ACA.

Th e initial launch of the exchanges demonstrated how diffi cult these tasks are to achieve. In many states and in the exchanges run by the federal government in states that did not develop a state-based exchange, the enrollment systems did not work well initially, with some unable to enroll individuals for many weeks. Some of the electronic enrollment systems could not handle the capacity of demand, and the complex soft- ware developed to manage enrollments often failed to work. Making the exchanges work more smoothly is a task that will be a priority throughout the period of 2015 to 2020.

■ Conclusion

Th e ACA represents the largest change in the nation’s health care fi nancing system since the initiation of Medicare and Medicaid in the mid-1960s. If implemented as expected, the Act will likely lead to changes in reimbursement approaches for nearly all providers and dramatically expand the number of Americans with health insur- ance. In addition, the ACA will require many currently uninsured middle-income Americans to purchase subsidized private policies.

However, the law will endure only if health care costs can be contained. If costs con- tinue to increase year after year—especially at a pace exceeding that of the overall econ- omy—either subsidized insurance will become unaff ordable or the federal government will be forced to increase the subsidies. Th e latter course may not be feasible at a time

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when federal budget defi cits already are considered burdensome and state resources to cover Medicaid costs are threatened. Cost increases also will put pressure on reim- bursement rates and the generosity of private insurance coverage. Th is, in turn, will make it increasingly diffi cult for health care providers to remain fi nancially viable.

One hope is that emerging reimbursement reforms and new incentive payment schemes will soon slow the growth rate of health care costs. We have been through a period of early experimentation with various incentive payment schemes and have many viable approaches to try. However, fi rm evidence that they will work is not yet available.

Another hope is that, as a nation, we will make progress on the public health and prevention tasks of helping people to live healthier lives and avoid the health and medi- cal care cost consequences of chronic diseases such as diabetes, heart disease, and asthma. Th e best way to slow the rate of growth of health care is to reduce the incidence of chronic disease. Helping people to eat better, exercise more, use alcohol responsibly, and avoid the use of tobacco and addicting drugs is crucial to both population health and the economic health of our country.

One fi nal challenge for the U.S. health system is to care for the 5% of people living in America who will not have insurance coverage, even if insurance reform is fully and eff ectively implemented. Our health system will continue to require a safety-net for the vulnerable and the uninsured. A world of tight reimbursements will make it increasingly diffi cult for hospitals and other providers to pay for safety-net care by shifting dollars from other payers and revenue sources.

What will happen if federal health reform does not achieve the anticipated expan- sions of access and control over the growth in health care costs? One of two radical options will most likely emerge: (a) collapse of the private approach to health care fi nancing, which would lead to a single-payer public system like those in most other parts of the developed world (see Chapter 4), or (b) the emergence of a three-tiered sys- tem of care that maintains great access to care for wealthy Americans with comfortable incomes but restricts access moderately for middle-income Americans and rations care brutally for low-income Americans. Either option goes against fundamental principles engrained in U.S. history and politics: free enterprise on one hand, and equality and equity on the other. Th e task of implementing a 21st-century fi nancing system that will endure must engage new thinkers, new leaders, and new researchers who can reinter- pret these principles in light of current realities.

■ Discussion Questions

1. What complications does our current fi nancing system cause for providers of care? 2. What complications does our insurance system cause for individual consumers? 3. What are some of the promising new approaches to changing our health system so

that it has incentives to provide more effi cient care? 4. Some people view increases in health care spending as a response to consumer

demand, whereas others see these increases as potentially wasteful spending. When other industry sectors consume a rising share of GDP, it is viewed as a posi- tive development. Should we be concerned about the rising cost of health care and its share of our GDP? What types of health care spending might be classifi ed as valuable? As wasteful?

C h a p t e r 1 1 . H e a l t h C a r e F i n a n c i n g 251


You are the chief executive offi cer of a large, technology-intensive hospital in a

community of 200,000 people. The community includes two other, smaller commu-

nity hospitals and a wide range of physicians and other providers working in private

practice. Currently, you are paid a fi xed amount by Medicare—the federal insurance

program for the elderly—for every eligible admission to your hospital, based on the

severity of the patient’s needs. Physicians and other providers in your community are

paid fee-for-service.

The federal government has offered to form an ACO in your community that could

accept a capitated annual payment for each person eligible for Medicare. Answer the

following questions:

1. How would you go about deciding whether to accept the government’s offer?

2. Would you want to lead the ACO or just be a part of it?

3. Would you argue for or against accepting the federal offer? Why?

4. If you wanted to proceed and lead the effort to form an ACO, how would you

coordinate with the other local hospitals and providers?

5. How might you change the way care currently is organized in your community,

given the new fi nancial incentives embedded in a capitated rate?

■ References

Fronstin, P. (2009). Sources of health insurance and characteristics of the uninsured: Anal- ysis of the March 2009 Current Population Survey (Issue Brief No. 334). Washington, DC: Employee Benefi t Research Institute.

Glied, S. A., & Borzi, P. C. (2004). Th e current state of employer based health care. Journal of Law, Medicine, and Ethics, 32, 404–409.

Hsiao, W. C., Braun, P., Becker, E. R., Causino, N., Couch, N. P., DiNicola, M., . . . Douwe, B. Y. (1988). A national study of resource-based relative value scales for physician services: Final report to the Health Care Financing Administration (Publication 17-C- 98795/1-03). Boston, MA: Harvard School of Public Health.

Hurley, R., & Somers, S. (2003). Medicaid and managed care: A lasting relationship? Health Aff airs, 22, 77–88.

Kaiser Family Foundation. (2015). Status of state action on the Medicaid expansion deci- sion. Kaiser State Health Facts. Retrieved from http://kff .org/health-reform/state- indicator/state-activity-around-expanding-medicaid-under-the-aff ordable-care-act/

Levit, K., Smith, C., Cowan, C., Sensenig, A., Catlin, A., & Th e Health Accounts Team. (2004). Health spending rebound continues in 2002. Health Aff airs, 23, 147–159.

U.S. Department of Health and Human Services Indian Health Service. (2010). IHS fact sheets, IHS Year 2010 Profi le. Washington, DC: Author.

12 Health Care Costs and Value Thad Calabrese and Keith F. Safi an

Th is chapter focuses on health care costs and value—concepts that are inextricably linked yet routinely analyzed separately. In 2015, Americans will spend nearly $3.2 trillion on health care, nearly one fi fth of all economic activity in the United States and equal to nearly $9,000 per person. If we as a society perceived that we were extracting value at least equal to this spending, it is unlikely that concerns about the “crisis” in health care spending would be so commonplace. For example, in other sectors, such as cable televi- sion and Internet service, the United States also has seen huge growth in expenditures. But, in this case growth is based on individual consumers deciding that these expendi- tures have value that is worth the cost. In the case of health care, this assessment is more diffi cult to make because of the role of insurance in paying for medical care. As a result, there is a growing sense that our massive spending on health care is not leading to value


LEARNING OBJECTIVES o Understand potential contributing factors to the growth in health care costs in the

United States over the past 60 years o Explain value in terms of health care o Recognize confl icts embedded within the health care delivery system that drive

up costs and reduce value o Identify why attempts at cost control have not succeeded

TOPICAL OUTLINE o Why health care spending is a national concern o The concept of value in the health sector o The challenge of reducing costs but not value o Technology as a driver of expenditures o The issue of the prices of inputs in the health sector o Initiatives to address expenditure/value tradeoffs

accountable care organization (ACO) centers of excellence (COE) defensive medicine electronic medical records (EMRs)

medical malpractice overconsumption rationing value-based purchasing (VBP)

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worth this spending. Th is chapter explores the relationship between costs and value and considers ways to improve the payoff s from our health spending.

■ The Issue of Health Care Spending Growth

In 1963, before the implementation of our major public insurance programs (see Chapter  3), national spending on health care totaled about $261 billion in current dollars. (Actual spending in 1963 was $34.7 billion, but there has been natural infl a- tion in the economy over time. At today’s infl ation-aff ected prices, this $34.7 billion is equivalent to $261 billion. We present the infl ation-adjusted fi gures when refer- ring to 1963 expenditures in order to focus on “real” changes in spending.) On a per capita basis, this 1963 spending equaled $1,440 per person in infl ation-adjusted dol- lars. Per capita spending grew more than 550% in real terms between 1963 and 2012, reaching nearly $9,000 per person in 2012. Importantly, the average annual growth in health care spending between 1963 and 2012 was nearly 9.5%, whereas nominal gross domestic product (GDP) growth during this period was 6.8%—meaning that health care spending grew faster than other economic activity over the past fi ve decades. Th e implication of these trends is that health care is an increasing share of all spending in the economy. Trying to understand why this is occurring is important.

Figure 12.1 shows how expenditure growth follows the pattern of GDP growth but health expenditure growth relentlessly exceeds GDP growth (U.S. GDP changes come from the Bureau of Economic Analysis). Interestingly, the only time this was not true was between 1993 and 2000, when there was a substantial eff ort to change the orga- nization and fi nancing of health care during the Clinton administration. After these eff orts had failed, expenditure growth spurted back up.

F I G U R E 1 2 . 1

19 63







19 65

19 67

19 69

19 71

19 73

19 75

19 77

19 79

19 81

19 83

19 85

19 87

19 89

19 91

19 93

19 95

19 97

19 99

20 01

20 03

20 05

20 07

Change in health care cost GDP

20 09

20 11


C h a p t e r 1 2 . H e a l t h C a r e C o s t s a n d V a l u e 255

Why is there so much concern about the growth in health care expenditures in the United States? Th e important reason is that a great deal of health care expenses are paid by government and employers—and the growth greatly aff ects these two key sectors of our economy.

Th e federal government, each state government, and many local governments spend a great deal of their tax revenues on health care. Th e federal government fi nances (a) the Medicare program, which provides insurance for elderly Americans; (b) more than half of the Medicaid program, which pays for health care received by low-income Americans; (c) Veterans Aff airs and Department of Defense health care expenses; and (d) the costs of extensive research, public health, and training activities. State governments pay for as much as half of the Medicaid program directly, as well as for extensive activities in public health and regulation. Local governments generally support public health expenditures and some safety-net medical care.

The large share of tax dollars allocated to health care is crowding out expenditures on other important needs in our economy, such as expenditures on education and infrastructure.

In 1963, federal, state, and local governments fi nanced only about $6 billion (equivalent to about $46 billion today) of total health care spending. Th is spending represented about 3% of total public spending. By 2012, governments were spending nearly $1.2 trillion (of the $2.8 trillion total) on health care, comprising more than 19% of total public spending. Th ere are two key concerns with this growth in government costs. First, these costs are putting a great strain on taxes paid by workers and employ- ers, and this strain is seen by many as decreasing the vibrancy of our economy. Second, the large share of tax dollars allocated to health care is crowding out expenditures on other important needs in our economy, such as expenditures on education and infrastructure. Th is is especially true at the state and local levels, where government spending on health has increased by 154% over the past 40 years but expenditures on education have been “crowded out” and increased by just 74% over the same period.

Health care costs are not purely a public fi nance issue, however. Private busi- nesses—which purchase health insurance for employees and their families— frequently cite increasing costs as problematic. For example, the cost of health insurance was cited as the top concern of small business owners in 2008 and 2012 (Wade, 2012). As a result, as health insurance costs have increased, employers provide fewer salary increases because resources are instead devoted to increased health insurance costs (again, health expenditures are “crowding out” expenditures on salaries). Addition- ally, fewer employers continue to off er group health insurance to employees—or they limit dependents of employees who can access coverage. For example, in August, 2013, United Parcel Service began excluding health insurance coverage for spouses with access to health insurance at their own places of employment. Buchmueller, Carey, and Levy (2013) found that even though employers off ered health insurance to more than 112 million employees in 2000, this number had declined to 108 million employ- ees in 2011, or 4% fewer workers covered in one decade.

Beyond simple fi nancial costs, studies fi nd that increasing health insurance costs decreases full-time employment and also decreases hours worked for employees that

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work part time (Baicker & Chandra, 2005; Sood, Ghosh, & Escarce, 2009). Health care costs are implicitly part of national discussions about unemployment and job creation.

Of course, health spending also is a burden on American families, which—despite the large expenditures by government and employers—also pay a sizable amount for health care in their family budgets.

Table 12.1 analyzes how a typical family allocates its income across diff erent types of expenditures. In 2012, total health care spending actually paid by the typical fam- ily was $3,556, which ranks it only the sixth largest item consumed, behind hous- ing, transportation, and food costs (see Table 12.1). According to the Bureau of Labor Statistics, the average household spent more on gasoline purchases in 2012 ($2,549) than on health insurance ($2,061). But, the typical family is not every family. Families without insurance coverage and families that include someone with a chronic disease tend to spend a much larger share of after-tax income on health care.

Th ese expenditure patterns explain a large part of the diffi culty in making sure we, as a nation, are not spending too much on health care. A typical American might not realize how much he or she ultimately pays for health care (or the protection against health care costs aff orded by insurance) because so much of this cost is paid by government and employers. In the end, however, these government and employer payments markedly aff ect the total after-tax incomes of families.

A fi nal consideration related to American health care spending is that our health care spending far outpaces other western developed nations (see Chapter 4). In 1980, the United States devoted more of its GDP to health care spending (9%) than other western developed nations, but the diff erence was not extraordinary. By 2011, how- ever, U.S. spending as a share of GDP far exceeded other comparable nations (see Table 12.2). Certainly other nations have experienced increased health care spending,


Av e r a g e A n n u a l E x p e n d i t u r e s i n D o l l a r s , 2 0 1 2

C h a n g e f r o m P r e v i o u s Ye a r

Housing 16,887 0.5%

Transportation 8,998 8.5

Personal Insurance and Pensions 5,591 3.1

Food, at Home 3,921 2.2

All Other Expenditures 3,557 5.2

Health Care 3,556 7.3

Food, Away From Home 2,678 2.2

Entertainment 2,605 1.3

Cash Contributions 1,913 11.2

Apparel and Services 1,736 –0.2

Total 51,442

Source: U.S. Department of Labor, Bureau of Labor Statistics.

C h a p t e r 1 2 . H e a l t h C a r e C o s t s a n d V a l u e 257

but the United States is unique in the degree of its increase—far outpacing even the nation with the second largest growth.

To return to the primary issue—if the United States spent signifi cantly more on health care and received signifi cantly better health outcomes, then health care cost growth might not be considered problematic. However, according to the Organisation for Economic Co-operation and Development (OECD), the United States ranks 26th out of 36 member countries for life expectancy, and just below the OECD average for life expectancy (see Figure 2.5 in Chapter 2). When fatal injuries are removed, U.S. life expectancy rankings improve dramatically, but they are still only comparable with other OECD nations. Further outcomes (such as infant mortality) are also at best only comparable with other nations, despite our spending. On these measures of outcomes, therefore, it does not appear the U.S. system is getting results for its increased spending.


1 9 8 0 2 0 1 1 I n c r e a s e R a n k

United States 9.0% 17.7% 8.7% 1

Sweden 8.9 9.5 0.6 21

Denmark 8.9 10.9 2.0 19

Germany 8.4 11.3 2.9 14

Ireland 8.2 8.9 0.7 20

Netherlands 7.4 11.9 4.5 4

Austria 7.4 10.8 3.4 11

Switzerland 7.3 11.0 3.7 10

Norway 7.0 9.3 2.3 18

France 7.0 11.6 4.6 3

Canada 7.0 11.2 4.2 7

Japan 6.5 9.6 3.1 13

Iceland 6.3 9.0 2.7 16

Finland 6.3 9.0 2.7 16

Belgium 6.3 10.5 4.2 6

Australia 6.1 8.9 2.8 15

New Zealand 5.9 10.3 4.4 5

Greece 5.9 9.1 3.2 12

United Kingdom 5.6 9.4 3.8 9

Portugal 5.3 10.2 4.9 2

Spain 5.3 9.3 4.0 8

Sources: 1980 data (Chandra & Skinner, 2012); 2011 data (OECD, year).

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A more nuanced view of U.S. health care spending, however, is to consider that our increased costs are related to quality of life issues rather than just to life exten- sion. For example, in the United States it is not uncommon for patients in their 70s to have expensive surgeries (such as knee or hip replacements) so that they can maintain or return to physical activities, whereas such procedures would not be as common abroad. Hence, health care value relative to outcomes largely tied to longevity in these international comparisons is frequently defi ned in a very limited way.


One major problem with discussions about health care spending is that value is diffi - cult to defi ne, let alone measure. Very often, people mistakenly think that cutting cost is the central way of producing value. Th ird-party payers often argue that the “value” they add is reducing payments to health care providers, thereby reducing the cost of health care to the employer, taxpayer, or individual who is the actual payer. Many health care professionals who think and work on quality issues, by contrast, focus on ensuring that consumers get the best treatment available at the correct time (Robert Wood Johnson Foundation, 2013).

Yet value is not just about cost or just about patient outcomes; rather, value is best defi ned as the best patient outcomes relative to the amount of money we as individu- als or as a society are able and/or willing to pay to stay healthy or to recover from illness. Th is conception of value focuses on results and not merely on the inputs used to achieve these results. It is possible to increase value by improving the quality, out- comes, and patient experience of medical care, and it is possible to increase value by achieving the same quality, outcomes, and experience at a lower total cost by improv- ing effi ciency.

So what has been our experience with improving value? Across some dimensions, the quality of medical care and outcomes are improving markedly in the United States (see Chapter 13). Deaths associated with stroke and heart disease are down sub- stantially, and most would agree this is due to improvements in medical know-how, pharmaceuticals, and emerging technology. Cancer mortality also is improving due to better treatment approaches. Longevity after age 75 is higher in the United States than in many other countries, again perhaps due to the health services associated with medi- cal care. Disparities in health outcomes between people of color and White Americans decrease after age 65, and most experts associate this with the near-universal acces- sibility of medical care that happens when people become eligible for Medicare.

In addition, beginning around 2008, health care expenses did increase more slowly than in previous years. Th is trend seems to have started with the deep recession at the beginning of this period but also seems to be related to a fl urry of eff orts among health care providers to restructure their approaches to health care delivery (see Chapter 11).

Value is best defi ned as the best patient outcomes relative to the amount of money we as individuals or as a society are able and/or willing to pay to stay healthy or to recover from illness.

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Th is slowdown, however, may be temporary. Health care costs increased signifi cantly at the end of 2013 (increasing nearly 6% in the fi nal quarter) and at the beginning of 2014 (increasing nearly 10% in the fi rst quarter).

In other dimensions, there are serious concerns about the value of medical care. Most importantly and as mentioned earlier, despite our spending vast sums of money on medical care, the health of Americans is not very good compared with that of resi- dents of other developed countries. If we are not getting health and longevity as out- comes associated with our large medical care investment, why are we spending so much on medical care?

Th e best answer to this question from a value perspective is that Americans seem to strongly value “getting better” after they become seriously ill, even at advanced ages and even when the value of treatments is highly uncertain—or when treatment has a chance of ending up hurting more than helping a condition. However, we cannot really prove that Americans value medical care as much as it appears because—as econo- mists emphasize—we can only really be sure that value exceeds costs when people actually pay the costs to get a service.

What must be kept in clear focus is that spending on medical care does not address the key determinants of the overall health of a population. Th e best way to keep people healthy is through public health initiatives, prevention initiatives, and social policies that make healthy choices possible and likely. Th ese strategies are not what the medi- cal care enterprise is about; medical care restores health more than it ensures that a population is healthy over its life span. A key question for public policy is to think through how much should be spent to create population health and how much should be spent on recovery-oriented medical care (see Chapter 5).

Emerging data show that many other developed countries spend more per capita than the United States on social programs that encourage health and well-being and less per capita on medical care. Th ese developed countries end up with higher health status over the life cycle than the United States.


A fi rst step in eff orts to increase the ratio of value to costs in medical care delivery is to consider what expenditures do not create value and what steps might elimi- nate or reduce these expenses. We consider three broad categories of expenses: (a)  waste in production, (b) overconsumption of services, and (c) high prices of labor and inputs.


A large part of what leads to high health care costs in the United States is caused by the uncoordinated approach we use to take care of people with medical prob- lems and the lack of attention to effi ciency in producing care to make people better. “Waste” in this context is most frequently defi ned as those health care services that do not benefi t patients. For example, Berwick and Hackbarth (2012) estimate that 20% of all health care expenditures are wasted. Th ey identify several primary sources of waste, including overtreatment, lack of care coordination (which may lead to hospital readmission, medical complications, or duplicate tests), failure to execute best practices (which might lead, for example, to less than optimal outcomes),

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administrative complexity (such as incompatible health information systems, third- party payers requiring diff erent insurance forms for similar procedures, and so on), and outright fraud and abuse (which includes money devoted to determining and stopping such eff orts). Th e Institute of Medicine (IOM; 2012) estimates waste at one third of all health care spending, citing unneeded procedures that actually reduce the quality of life. If these estimates are correct, the United States wastes between $560 billion and $950 billion (or between $1,700 and nearly $3,000 per capita) annu- ally on health care—waste that could be eliminated with no harm to consumers. Th e IOM estimates that administrative complexity alone costs in excess of $360 billion annually.

Statistics suggest that the lack of coordination of care for patients with the most complex medical conditions aff ects our health care spending signifi cantly. Just 5% of the total population incurs half of all costs, and 20% of the total population is respon- sible for 80% of total spending (Commonwealth Fund, 2013). Chronically ill patients might have heart conditions, mental health issues, or diabetes (as some examples)— and frequently have multiple diagnoses. As these patients move among various spe- cialists, hospitals, outpatient providers, long-term care facilities, home care, and so on, there often is not an eff ective way to make sure these services are all needed or delivered effi ciently.

Emerick and Lewis (2013) cite overscreening and treatment as a fundamental aspect of waste in health care. As advances in technology and medical condition diag- noses have made detection of potential health problems easier and less invasive, the likelihood of detecting nonthreatening medical conditions, which pose little risk to the patient, also increases. For example, screenings may fi nd lesions or potentially cancer- ous cells on organs—leading the medical provider to treat the patient (with surgery, medicine, and so on). Yet, these medical conditions may not be problematic or lead to health complications. As such, they lead to increased costs with no certainty of an accompanying increase in value. As one example, U.S. patients receive heart surger- ies and angioplasties at more than twice the rate of patients in other countries, yet our health outcomes are identical (OECD, 2013). Hospital visits for chronic health conditions are far more frequent in the United States, as well; hospitalization rates for diabetes and asthma, for example, are nearly twice as high as those in other nations (OECD, 2013).


In a normally functioning marketplace, the costs of these additional services would be borne by consumers. Hence, if the consumer valued the services, he or she would choose to purchase them. Health care spending, however, is not like other goods or services bought and sold in a competitive marketplace. Importantly, consumers in health care do not make most of the decisions about which services to consume— doctors do. Most doctors want to do everything to help a patient, which increases the health care services consumed. In addition, because third-party insurance programs cover the vast majority of consumers (patients), the goods and services consumed by patients are largely fi nanced by these insurers. As a result, patients may consume more health care than is optimal because they do not face the total cost of the good or service. Th is moral hazard (as economists refer to it) leads to overconsumption of health care or to patients not taking suffi cient care to prevent incurring health care costs—because they do not bear the costs.

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Defensive Medicine. If overdiagnosis and treatments drive up health care spending with uncertain increase in health benefi ts, why do they occur? Although these practices may not improve health outcomes, health care providers may want to protect them- selves from medical malpractice claims that they did not do enough to help patients. One study estimates that malpractice and defensive medicine cost approximately $56 billion annually—or less than 3% of total health care spending (Mello, Chandra, Atul, Gawande, & Studdert, 2010), whereas another estimates that it costs between $120 billion and $216 billion—or 5% to 9% of total spending (Kessler & McClellan, 1996). Th ese costs include not just the insurance premiums paid by doctors and health care providers, but also the legal fees, settlements, and judgments of such suits. How- ever—and what the monetary fi gures fail to capture—is that even the hint of mal- practice is enough to ruin the careers of medical providers and the reputations of health care institutions. For most health care providers, the fear of a lawsuit is greater than the fear of lost revenue for providing a noncovered service or test. Providers will default to increasing services as a result. Hence, defensive medicine may be perfectly rational from the perspective of a provider.

Given the potential for malpractice lawsuits, it seems logical for primary care phy- sicians to refer patients to specialists to protect themselves professionally from mal- practice exposure and also to ensure patient health outcomes. Th is referral itself drives up health care spending. Furthermore, we have a system in place that pays these spe- cialists more than primary care physicians—even for the same services. Th e Relative Value Scale Update Committee (RUC) is an American Medical Association (AMA) panel that recommends to Medicare the relative values of health procedures. Th e fed- eral government (through the Centers for Medicare & Medicaid Services [CMS] and, in the past, through the Health Care Financing Administration) uses these recom- mendations in the setting of payments for Medicare patients; however, these rates also infl uence non-Medicare payers and, as a result, have a large eff ect on payments to phy- sicians. Th e RUC has largely advocated for (and the federal government has accepted) payment increases to specialists. Th us, referrals to specialists lead to patient visits that are more costly compared with primary care physician visits, driving up health care spending as a result.

Fee-for-Service Rather Th an Fee-for-Value. Providers and institutions are largely paid on a fee-for-service basis. Hence, more procedures lead to more revenue. When third- party insurers—especially public insurers—reduce or limit the price they will pay for procedures—which has become an almost annual ritual for Medicare and Medicaid— providers can partially off set this constraint (a declining or fl at price) by increasing volume. Again, as costs will tend to increase over time (due to salary increases, the need to replace fi xed assets, and so on), the need to increase revenues is rational to ensure fi nancial sustainability. As a result, increasing procedures is an avenue providers can take to maintain their own fi scal health.

Th ese explanations focus on the health care provider making decisions for patients. Because of the complicated decisions to be made in health care, this may be true much of the time—and as a result, health care providers might make decisions in the best interests of themselves rather than the patient (the so-called principal- agent problem). In many cases, however, patients may advocate strongly for specifi c treatments, and so a health provider supplies them. For example, drug companies in the United States advertise expensive prescription drugs directly to consumers,

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hoping such advertising leads patients to ask for and receive the drugs, thereby driving up sales.

Demographics. In 2008, nearly 34% of the U.S. population was defi ned as obese; other OECD nations had obesity rates of between 4% and 27%. Finkelstein, Trogdon, and Cohen (2009) estimate that obesity costs the U.S. health care system $147 billion annually; obese patients are estimated to cost the health care system 42% more than patients of normal weight—with prescription drug costs making up the largest amount of this increase. Treating the diseases associated with obesity (such as diabetes) is a huge health care cost driver, and obesity rates are not evenly distributed through the U.S. population.

Well-intentioned government mandates also increase costs in many ways. For example, with increasing diversity comes the reality that health care providers need to communicate with an increasingly diverse population. Health care providers are required to provide certifi ed medical translators for patients so that staff may commu- nicate with patients; providers must also have forms and consents available in patients’ languages. Certainly such government-mandated services are important to make sure that patients are fully informed about their health care, but the cost of translators is frequently not reimbursable from insurance companies despite the public mandate to provide them. Th is is but one example of regulations that drive up hospital costs but may not be applied equally to physician-owned or corporation-owned facilities.

End-of-Life Care. A fi nal factor aff ecting our health care spending patterns bears discussion. End-of-life care is costly, with estimates pegging nearly 32% of Medi- care spending to those patients in their last 2 years of life suff ering from chronic illnesses (Dartmouth Atlas, 2014). Th is fraction of spending represents over $170 billion annually. Furthermore, Hagist and Kotlikoff (2006) show that health care spending in the United States increases signifi cantly after age 65. Just as variation exists across the country in Medicare spending, end-of-life care spending by Medi- care is not evenly distributed across the country. Patients receiving more aggressive end-of-life care (and, by extension, spending more resources) do not have improved survival or better quality of life than others. For example, many terminal cancer patients choose to undergo chemotherapy during the last 10 to 30 days of life, which is expensive and only marginally extends the patients’ lives (see, for example, Har- rington and Smith [2008], who note that 43% of terminal lung cancer patients in the United States receive chemotherapy in the last month of life, compared with just 23% in Italy). However, patients, families, and doctors likely feel more satisfi ed that they tried everything.

The Role of High Input Prices in Driving Health Expenditure Levels

A popular health policy article has the provocative title, “It’s the Prices, Stupid: Why the United States Is so Diff erent From Other Countries” (Anderson, Reinhardt, Hussey, & Petrosyan, 2003). In addition to the complexity of costs and value calculations in U.S. health care is this simple fact: Almost every actor in the health sector has managed to command very high prices for the role he or she plays. U.S. physicians earn higher salaries than in almost every other country (Laugesen & Glied, 2011), pharmaceutical prices are much higher in the United States than in other countries, hospital prices are much higher, and hospital administrators earn more in the United States than

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Why have actors in the health system been able to charge such high prices for their services? Because of the high stakes involved in medical care, patients often fi nd price to be an irrelevant consideration. In addition, insurance and extensive government contributions to fi nancing medical care mean that consumers (i.e., patients) have not exerted market power as usually happens for other goods and services in the U.S. economy.

Another factor is the barriers to entry in health care. Because of federal regula- tions, there are a limited number of slots in medical schools and residency training programs, which helps maintain high input prices. Even if building more hospitals were possible and could drive down prices through increased competition, federal reimbursements are already below costs. For most of the past 20 years, Medicaid and Medicare reimbursements have been below hospital costs; as these public pay- ers make up an increasing share of providers’ revenues, the implication is obvious— private payers must make up the diff erence. In 2012, Medicaid paid about 89% of hospital costs to treat its benefi ciaries, whereas Medicare paid only 86% (American Hospital Association, 2012). Private insurers must make up the diff erence through increased payments, which drives up costs further.

It is more diffi cult to explain why employers who pay for their employees’ health insurance do not bargain more for lower prices through the insurance companies they use. To date, employees have placed a great deal of value on having access to all or most providers in a community so that they have as much choice as possible. Th is preference, however, impedes the ability of their employers to negotiate prices with local health care providers. Employers have spent more energy in recent years add- ing copayments and premium sharing for employees to attempt to address their ever- rising costs for insurance.


Not all of the rising expenditures on health care are due to overspending on items that do not create value. In fact, new pharmaceuticals, new technology, and ever-emerging new medical know-how are constantly identifying better ways to address illness and disease. Th ese inventions and innovations are impressive and the United States (both the pri- vate and public sectors) has been a leader in sponsoring the research that has expanded our ability to solve more and more medical challenges. With emerging understanding of genes and bioengineering and new ways of using big data to test new approaches in medical procedures, it is likely that more and more possibilities for expanding the tools we have to address illness and disease will continue to grow for the foreseeable future (see Chapter 16).

elsewhere. Even professors in health policy and management programs tend to have higher salaries than professors of history or English literature.

Because of the high stakes involved in medical care, patients often fi nd price to be an irrelevant consideration.

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Most of these new possibilities in treating medical conditions, however, are expensive and will add to the burden of health care in our economy. We will be drawn to spend more and more on health care as new possibilities emerge. Some of the new approaches will have value that exceeds costs, and some will not. Deciding how to measure the value of new approaches relative to cost will be key.

Our experience to date in making choices about what new procedures to cover and what not to cover has been troubling. In many ways, we often seem to allow almost unlimited access to new technologies and procedures. For example, studies fi nd that the United States has more magnetic resonance imaging (MRI) machines, computed tomography (CT) scanners, positron emission tomography (PET) scanners, and mammographs than other developed countries; importantly, the United States uti- lizes these more expensive technologies relative to other nations, which increases costs (Squires, 2012).

Although referring doctors do not receive any revenues from referring patients to specialists, fear of malpractice claims (discussed earlier) is a potential driver of this increased usage. Furthermore, patients in many cases request these tests even though doctors might not otherwise order them, leading to consumer-driven waste.

Chandra and Skinner (2012) developed a typology of medical technology based on average cost-eff ectiveness:

■ Category I technologies are “home runs” that are cost-eff ective for nearly every rel- evant patient. Examples of Category I technologies include antibiotics, improved health behaviors (surgeons washing hands, for example), and most vaccines.

■ Category II technologies are potentially cost-eff ective, but the benefi ts vary by patient. For example, angioplasty is benefi cial to some, but not to other patients; imaging technologies may not be cost-eff ective for all patients, and so on.

■ Category III technologies have modest or uncertain eff ectiveness. Examples include surgeries designed to treat quality of life rather than acute health conditions.

Unsurprisingly, most studies fi nd that Category II and III technologies have spread through the U.S. system more widely than in other countries. Th is helps explain why the United States spends more—on technology and health care in general—but some outcomes are no better, because we tend to adopt ineff ective technologies (from a cost- eff ectiveness perspective) more frequently than many other countries.


Most agree that attempts to control health care costs too often have either modest or no success. Th e current system tends to reward increased volume of services, but the services may not be justifi ed when one examines the value-added of the service. Th is issue ties back to Emerick and Lewis’s (2013) discussion about overscreening and overdiagnosis by providers; it also relates to employers paying for an increasing amount of health insurance benefi ts for employees that may not add health value but do add costs.

Other countries have managed to control costs by limiting or rationing some ser- vices. Although the United States will treat “marginal” patients who are ill, Europe rations such treatments based on age, gender, and other health factors. For example,

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the U.S. health care system accepts twice as many end stage renal disease (ERSD) patients for treatment as Europe and 40% more than Canada (USRDS, 1999). With dialysis treatments costing more than $70,000 annually per patient, the U.S. health care system spends signifi cantly more on this service than other nations simply because we do not ration care. Limitless care becomes expensive, and Americans are uncomfort- able limiting such care.

Other attempts to control costs involve reducing payments to doctors and pro- viders. As Medicaid has exploded as a share of state budgets, public offi cials have increasingly turned to limiting reimbursements as a means of controlling public spending. As a result, some doctors have begun refusing new Medicaid patients. Th is is especially true among more expensive specialist doctors (Jackson Healthcare, 2012). As a result, many patients do not have access to medical professionals despite expensive public insurance, which does not pay enough for practitioners to take on new patients. Th ese patients either end up using the more expensive option of the emergency department or fail to get treatment for treatable chronic conditions. In both cases, the ultimate costs of health care increase. A recent study fi nds that people in Oregon who received Medicaid benefi ts did use doctors more than those without health insurance, but these same people also used the emergency depart- ment more—thereby driving up health costs (Taubman, Allen, Wright, Baicker, & Finkelstein, 2014).

Finally, attempts to address demographic factors have had mixed success at best. Although public health campaigns and increased taxation have reduced tobacco con- sumption in the United States, we still have a signifi cant population that smokes; fur- thermore, public eff orts to address obesity through diet restrictions (such as New York City’s attempt to limit sales of “supersize” sodas) or increased exercise have not been very successful because obesity rates continue to increase nationally. Th is is even as health insurance coverage has frequently added wellness programs (and, as a result, added costs) designed to change unhealthy behaviors. However, such programs are used by only a fraction of the covered populations or often are not cost-eff ective. It is estimated that less than half of eligible employees partake in off ered wellness pro- grams and, even though health outcomes apparently improve, cost savings do not seem to materialize as expected (Huang, Van Busum, Khodyakov, & Shier, 2013).


So far, this chapter has explained why health care costs have increased signifi cantly over time without producing the better outcomes and more value that one might expect from our investments in the health system. We now turn to some options that might address this ongoing dilemma.

Reforming Medical Malpractice

Medical malpractice reform could result in providers reducing the level of defensive medicine, leading to fewer tests and consultations, which would in turn reduce costs. Furthermore, malpractice insurance costs would not decrease evenly for all medical providers. Capping noneconomic damages is estimated to reduce insurance premi- ums by more than 25% for obstetrics doctors, 21% for general surgeons, and nearly 18% for internal medicine doctors (Robert Wood Johnson Foundation, 2007). To the

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extent that that these specialists are more expensive service providers, reducing mal- practice costs will reduce health care spending.

Choosing Less Costly Treatments

One option that is frequently discussed as a source of savings is a move from more expensive procedures to less expensive treatments that do not negatively aff ect health outcomes. However, determining what these expensive procedures are and what the equally eff ective cheaper alternatives are is not easy (if it were, we would have done it already). For example, new beta blocker drugs are frequently as eff ective as stents for treating chronic heart disease; physical therapy frequently leads to superior out- comes over back surgery. Many health care providers disagree that these alternative treatments, however, are equally eff ective.

Importantly, both of these examples rely on patients following a medical protocol whereas the more expensive options put the doctor in control of ensuring that a pro- tocol is followed. To the extent that less expensive options rely on patients following through on tasks, we risk not getting value or cost savings because patients are noto- rious for failing to follow doctors’ orders. Furthermore, the cost-eff ective nature of stents (and other treatments for that matter) usually rests on a limited number of stud- ies (Rosenbaum, 2013). Medical trials—with free medications and services, dedicated medical providers, and close monitoring of patients—do not resemble the day-to-day realities of health care practice. In other words, despite the apparent ease of control- ling overtreatment or expensive treatment, achieving this control is in fact diffi cult.

Paying Fixed Amounts for Procedures

Another option is for insurers to pay only a certain fi xed amount for a procedure. Th is fi xed amount might be the average cost in an area, perhaps controlled for qual- ity. If the cost of the procedure exceeds the amount the insurer will pay, the patient (the insured) pays the diff erence. Th e insurance company provides the insured with a list of providers who charge at or below the fi xed amount. In doing so, the insured is more likely to choose the less expensive providers with no negative implications for quality. In fact, such a program was implemented in California for public employees; as a result, health care costs were reduced by 19%. By providing consumers (patients) with information and giving them incentives to keep costs down (fewer out-of-pocket costs), such an approach could potentially reduce health care costs.

Using Electronic Medical Records

Electronic medical records (EMRs) hold promise for reducing duplicate tests and improving the quality of care. National policy currently expects savings from EMRs. However, one study (McCormick et al., 2012) actually found that physicians were more likely to order additional tests in the presence of EMRs. Th is study focused on offi ce- based doctors, whereas most other studies that found cost savings focused on large medical centers. Th e cost outcome for EMRs is likely to be mixed, based on the type of provider.

However, if EMRs can push the overall health care system toward greater standard- ization of computer interfaces, part of the administrative complexities that cost hun- dreds of billions of dollars annually might also be saved. Th e federal government could incentivize such standardization through the Aff ordable Care Act (Cutler et al., 2012).

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Using Value-Based Purchasing

Value-based purchasing (VBP) might also help to generate savings while increasing value. In VBP, payers (including governments) hold providers accountable for cost and quality of care. For example, a physician group might share generated savings with payers if spending growth is kept below some agreed-upon threshold; or a hospi- tal might receive bonus payments for high-quality or increasing quality performance. Unlike fee-for-service payments, which eff ectively reward volume regardless of cost or quality, VBP is meant to encourage specifi c quality and cost outcomes based on agreed-on performance measures. One way to accomplish this, advocates argue, is to bundle payments so that outcomes rather than volume drives reimbursements to health care providers. Furthermore, VBP should publicize provider performance so that patients may select high-value providers.

However, VBP requires systems to measure and report performance—that is, it requires spending to achieve future cost reductions and value improvements. Th e key to whether VBP can be successful is whether we can achieve value from this spending or, alternatively, whether we can reallocate current health care spending to VBP and get more value. One option is to replace Medicare’s sustainable growth rate (SGR) for- mula with a value-based formula (Guterman, Zezza, & Schoen, 2013; Schroeder and Frist, 2013). Given the diffi culty in measuring performance in health care, VBP is not an easy solution, despite its obvious appeal.

Reducing the Cost of End-of-Life Care

Changing how we spend on end-of-life care is also critical. One reform is to increase the use of hospices to provide low-cost, high-quality end-of-life care. Currently, most patients and families do not avail themselves of hospices; however, even though a majority of patients say they would prefer to die at home, most actually die in hospitals— suggesting that less aggressive treatments and hospice care at life’s end might be possible for and even preferred by patients.

Taking Responsibility for One’s Own Health

Personal responsibility to maintain one’s health is a critical factor to controlling health care costs. Citizens should exercise, avoid tobacco products, receive proper vaccina- tions, and maintain healthy body weights. Personal choices such as using tanning beds—which are known to increase incidents of skin cancer—should be discouraged. Th e U.S. health care system suff ers from these self-infl icted costs that are, in many respects, refl ective of our nation’s economic success. Th is is perhaps the greatest source of savings, and the hardest to deliver.

Some employers have begun to take matters into their own hands. For example, the Cleveland Clinic will no longer hire workers who smoke tobacco and monitors

Unlike fee-for-service payments, which effectively reward volume regardless of cost or quality, value-based purchasing is meant to encourage specifi c quality and cost outcomes based on agreed-on performance measures.

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employees’ blood levels; Proctor & Gamble, United Parcel Service, and several state governments (such as Wisconsin and Washington) charge smokers if they do not complete a smoking-cessation program (Kingsbury, 2013). As health costs continue to climb, employers apparently are determined to bring these costs under control.

The Cost of Value

One potential problem with any attempt to control costs, however, is whether the intervention lowers costs simply by lowering standards. If quality controls are elimi- nated, costs will decline but quality will suff er. If we make consumers more aware of prices and more responsible for their choices in consuming health care services, will they choose lower-quality health care now that simply drives up health care costs later? For example, if MRI costs are greater at a particular hospital because two radi- ologists read the same fi lm, will patients choose to have MRIs at private practices where only a single radiologist reads the fi lm? Th is option would certainly be cheaper, but will quality suff er as a result of losing the second radiologist’s evaluation?

Ensuring quality and value costs money. Popular press accounts of markups by health care providers are increasingly common. Rosenthal (2013) notes, for example, that a California health care provider charges nearly $37 for Tylenol with codeine when the market price of each pill is only 50 cents. In the case of dispensing a simple over-the-counter medicine to patients, the following steps occur:

1. A doctor orders the patient pain reliever. 2. A registered nurse (RN) receives the order from the doctor. 3. Th e RN forwards the pain reliever order to the pharmacist. 4. Th e pharmacist enters the order into the electronic information system. 5. Th e pharmacist then analyzes the patient’s drug profi le to reduce the likelihood of

drug interactions and complications. 6. A pharmacy technician retrieves the pain reliever drug. 7. Th e pharmacist verifi es it is the correct drug and scans it into an electronic infor-

mation system. 8. Th e technician delivers pain reliever to patient’s medication drawer and delivers

it to the RN. 9. Th e RN retrieves the drug and brings it to the patient.

10. Th e RN verifi es the patient’s identity to ensure the correct patient is receiving the drug.

11. Th e RN scans the drug so information is captured by the electronic information system.

12. Th e RN verifi es the order in the electronic system. 13. Th e RN administers the drug to the patient. 14. Th e RN records and documents drug administration in the electronic system.

In this very simple example, if each step takes on average 4 minutes, nearly 1 hour of labor is consumed simply to dispense a simple pain reliever. If average labor costs are approximately $50 per hour, this 50 cents’ worth of drugs can actually cost $50 to dispense—in large part due to (valid) quality and value concerns of patient treatments.

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■ Conclusion

Over the past several decades, health care spending in the United States has increased faster than general economic growth. Part of this trend is attributable to our system of health care fi nancing, in which third-party payers, rather than consumers, pay the bulk of the costs. Th is upward trend is also infl uenced by citizen demand for limitless health care services and well-intentioned but costly regulations on providers. Further- more, personal behavioral choices (poor diet, lack of exercise, drug abuse, and so on) also drive up health care costs.

Attempts at slowing cost growth have largely focused on reducing payments to providers or on restraining services covered by insurance companies. Th ese attempts ultimately end up being undone or result in patients’ being unable to use their insur- ance because providers opt out of accepting it.

Th ere are no easy structural fi xes—or large pot of money to be found—that will solve the issue of health care cost growth. Importantly, we need to gather data on ongoing programs designed to address the issue. Whether it is accountable care organi- zations (AC