JANUARY

How is the delivery system organized and financed?
UNITED STATES
Publicly financed health care: In 2013, public spending accounted for about 48 percent of total health care
spending, although this figure is expected to increase post-ACA (OECD, 2015). Medicare is financed through a
combination of payroll taxes, premiums, and federal general revenues. Medicaid is tax-funded and administered
by the states, which operate the program within broad federal guidelines. States receive matching funds from
the federal government for Medicaid at rates that vary based on their per-capita income—in 2014, federal
matching ranged from 50 percent to 73 percent of states’ Medicaid expenditures (ASPE, 2014). The expansion
of Medicaid under the ACA is fully funded by the federal government through 2017, after which the
government’s funding share will be phased down to 90 percent by 2020. Federal premium subsidies on the
exchanges are offered as tax credits.
Privately financed health care: In 2013, private health insurance spending accounted for about 33 percent
of total health care spending (CMS, 2015a). Private insurers, which can be for-profit or nonprofit, are regulated
by state insurance commissioners and subject to varying state (and federal) regulations. Private health insurance
can be purchased by individuals but is usually funded by voluntary, tax-exempt premiums, the cost of which
is shared by employers and workers on an employer-specific basis, sometimes varying by type of employee.
The employer tax exemption is the government’s third-largest health care expenditure (after Medicare and
Medicaid), reducing tax revenues by $260 billion per year (NBER, 2014).
Some individuals are covered by both public and private health insurance. For example, many Medicare
beneficiaries purchase private supplemental Medigap policies to cover additional services and cost-sharing.
Private insurers, in general, pay providers at rates higher than those paid by public programs, particularly
Medicaid. This disparity leads to wide variations in provider payment rates and revenues, which depend to
a large extent on payer mix and market power.
Medicare’s payment rates are typically determined according to a fee schedule, with various adjustments based
on cost of living and other local and provider characteristics. Medicaid rates vary by state. Private health insurers
typically negotiate payment rates with providers.
Primary care: Primary care physicians account for roughly one-third of all U.S. doctors. The majority operate
in small self- or group-owned practices with fewer than five full-time-equivalent physicians, although larger
practices are becoming increasingly common. Practices—particularly large ones—often include nurses and other
clinical staff, who are usually paid a salary by the practice. Patients generally have free choice of doctor, at least
among in-network providers, and are usually not required to register with a primary care practice, depending
on their insurance plan. Primary care doctors have no formal gatekeeping function, except within some
managed care plans.
Physicians are paid through a combination of methods, including negotiated fees (private insurance), capitation
(private insurance), and administratively set fees (public insurance). Physicians also can receive financial
incentives, made available by some private insurers and public programs like Medicare, based on various quality
and cost performance criteria. Insured patients are generally directly responsible for some portion of physician
payment, and uninsured patients are nominally responsible for all or part of physicians’ charges, although those
charges can be reduced or waived.
Outpatient specialist care: Specialists can work in both private practice and hospitals. Some insurance plans
(such as health maintenance organizations, or HMOs) require a referral by a primary care doctor to see a
specialist, and limit patients’ choice of specialist, while other plans (such as preferred provider organizations,
or PPOs) allow patients broader and direct access. Access to specialists can be particularly difficult for Medicaid
beneficiaries and the uninsured, as some specialists refuse to accept Medicaid patients owing to low
reimbursement rates, and because safety-net programs for specialist care are limited. Like primary care
physicians, specialists are paid through negotiated fees, capitation, and administratively set fees, and are
typically not allowed to bill above the fee schedule for services offered in-network. Multispecialty and singlespecialty
groups are increasingly common. Specialists can see patients with either public or private insurance.
International Profiles of Health Care Systems, 2015 173