Department of Public Health

Methodical Instruction № 6 for the 5-st year students` for practical work in
studying Social Medicine
Theme: COMPARATIVE HEALTH CARE SYSTEMS AND HEALTH
SYSTEM REFORM.
Many industrialized countries either provide health care directly through
the government or provide publicly funded health insurance with
comprehensive coverage. Rather than describing details about the health care
programs of dozens of countries, we will characterize the basic types of systems
employed and develop a few examples in detail.
Why we have differences in our health care systems?
Cultural differences may motivate health care consumers. Ranchers in
Montana have different attitudes about seeing the doctor or going to the hospital
than do residents of Manhattan. The largely Mormon residents of Utah exhibit
substantially better health habits than do residents of neighboring Nevada.
Approaches to childbirth in France, an innovator in the reliance on midwifery,
differ from the mix of approaches applied in Holland. If these cultural
differences have consequences for health costs, are higher health costs
necessarily a problem?
U.S. patients demand the latest health technologies when a serious illness
occurs or threatens. Correspondingly, high-tech scanners and other new
diagnostic equipment are much more common in the United States, and their
use has significant cost consequences. Are costs that are inflated for this reason
to be considered inefficiencies or merely questions of taste?
Similarly, medical anthropologists argue that cultural differences among
countries influence both the diagnosis and treatment of common mental
illnesses; historically, U.S. physicians apply the diagnosis of schizophrenia to
patients much more commonly than do European physicians. Furthermore, the
patient's approach to mental illness depends in important ways on his or her
culture.
Finally, a number of European health systems reflect European perceptions
of illness and the human need for recuperation. Europeans used to visit the
health spa, while under prescription from a physician and fully covered by the
health insurance system. Daily regimens require vigorous and healthful
activities. Yet a proposal in the United States to offer universal access to basic
health care, including access to the health spa when needed, would hardly be
treated seriously.
A typology of HCS.
1. Traditional sickness insurance is fundamentally a private
insurance market approach with a state subsidy. Countries with this system
include Austria, Belgium, France, Germany, Luxembourg, and the Netherlands.
2. National health insurance involves a national-level health
insurance system. Countries with this system include Canada, Finland, Norway,
Spain, and Sweden.
3. National health services have the state providing the health care.
Countries with this system include Denmark, Greece, Italy, New Zealand,
Portugal, Turkey, and the United Kingdom.
4. Mixed systems contain elements of both traditional sickness
insurance and national health coverage. Countries with this system include
Australia, Iceland, Ireland, Japan, Switzerland, and the United States.

In comparing economic data across countries, Table 1 shows per capita

health expenditures expressed in U.S. dollars in many countries for 2009–2010.
We adjust these figures by the purchasing powers of the local currencies
(known as purchasing power parity or PPP). Other columns show each
country’s health care spending as a percent of GDP for selected years.
The countries vary substantially. Many European countries (including
Italy, Iceland, Norway, Belgium, Austria, France, Finland, and Germany) spend
larger percentages on inpatient care than does the United States. It may surprise
readers to discover that in percentage terms, for 2008, the U.S. pharmaceutical
expenditures were among the lowest percentages of spending, although they do
constitute large absolute amounts, almost $950 per person, due to the overall
size of U.S. expenditures.
Several countries have lower crude death rates than the United States rate
of 8.0 deaths per 1,000 population, including Canada with a rate of 7.1. Many
countries also have higher life expectancies at birth. The United States has the
largest expenditures per capita ($7,960). It is also the biggest spender as a share
of GDP (17.4 percent by OECD figures). These figures, as well as concerns
about access to health care, are the sorts of indicators that have led many to
question what Americans are getting for their spending.
 However, high expenditures may have three meanings:
1. High average level of services
2. High resource costs for services
3. Inefficient provision of services
Table 1

In examining cross-country differences, we note that high levels of

services reflect at least the possibility that populations have chosen to spend
their incomes in this fashion. We have noted previously that higher income
levels lead to higher consumption levels of all normal goods, including health
care. Cross-national studies indicate a substantial responsiveness of health care
expenditures to increased income (relatively large income elasticity). U.S.
expenditure levels reflect in part the higher per-capita income level in the
United States.
As shown by the comparative data in Table 2, the resources available
across countries can vary widely. All of the countries in the table have more
inpatient beds per 1,000 population than the United States (3.1 beds per 1,000),
and France (6.9), Germany (8.2), Hungary (7.1), Japan (13.8), and South Korea
(7.8) have more than twice as many beds. Germany, Hungary, and the United
Kingdom have more practicing physicians per 1,000 than the United States,
while South Korea and Japan have fewer. Although current data for the United
States are not available, there is a wide range of practicing nurses across the
countries that provide data.
Table 2

For a better perspective of the relative success of various health systems in

controlling inflation, examine Figure 1. The upward trends in expenditures
continued into the early 1990s for the United States, and eased some through the
1990s. U.S. expenditures accelerated in the first years of the twenty-first century
and jumped in the “Great Recession” of 2008–2009, as they did in Canada,
France, Germany, and the United Kingdom. The recent jump is due in part to a
fall in the denominator (GDP per capita) for these countries. Nonetheless,
comparing the United States with these other countries shows an increasing
spread in expenditure shares.
Figure 1
 UNITED STATES – PRIVATE MARKETS & PLURALISM
The United States has no single nationwide system of health insurance.
Health insurance is purchased in the private marketplace or provided by the
government to certain groups. Private health insurance can be purchased from
various for – profit commercial insurance companies or from non – profit
insurers. About 84% of the population is covered by either public (26%) or
private (70%) health insurance. Approximately 61% of health insurance
coverage is employment related, largely due to the cost savings associated with
group plans that can be purchased through an employer (Santerre and Neun 46).
Employers voluntarily sponsor the health insurance plans. Rather than
purchasing an insurance policy from an external party (commercial insurance
company) employer and employee premiums sometimes fund an internal health
insurance plan. The fully self-insured firm assumes all the risk for its
employees’ health care costs. A partially self-insured firm limits the risk it
assumes by purchasing “stop loss” insurance coverage, which protects it from
incurring costs over a specified maximum amount. In either case, the firm
usually contracts with a third party to administer the health insurance program.
A conventional health insurance plan, which allows unrestricted choice of
health care provider and reimburses on a fee for service basis, presently covers
less than 30% of all employees. Even these plans provide some type of
utilization management program (e.g. preadmission certification, concurrent
review of length of stay, and mandatory second opinions for surgery).
Traditional plans differ depending on the medical services that are covered and
the co-payment and deductible amounts. Rather than enroll employees in a
traditional insurance plan, most employers have turned to managed care health
insurance plans. Managed care organizations are defined as “systems that
integrate the financing and delivery of appropriate health care services to
covered individuals by means of: arrangements with selected providers to
furnish a comprehensive set of health care services to members; explicit criteria
for the selection of health care providers; formal programs for ongoing quality
assurance and utilization review; and significant financial incentives for
members to use providers and procedures associated with the plan”(SBHID
167).
In addition to private health insurance nearly 26% of the U.S. population is
covered by public health insurance. The two major types of public health
insurance, both of which began in 1966 are Medicare and Medicaid.
 However, another category of individuals exists: those who are uninsured.
This does not mean these individuals are without access to health care services.
Many uninsured people receive health care services through public clinics and
hospitals, state and local health programs, or private providers that finance the
care through charity and by shifting costs to other payers. Nevertheless, the lack
of health insurance can cause uninsured households to face considerable
financial hardship and insecurity. The uninsured often find themselves in the
emergency room of a hospital after it is too late for proper medical treatment.
The U.S. health care system is much diversified in terms of production
methods. Government, not – for – profit, and for – profit institutions all play a
role in health care markets. Primary care physicians in the United States
function in the private for – profit sector and operate in group practices,
although some physicians work for not – for – profit clinics or in public
organizations. In the hospital industry, the not – for – profit is the dominant
form of ownership. Not – for – profit hospitals control about 70 percent of all
hospital beds. A different picture can be seen in the nursing home industry,
where 70 percent of all nursing homes are organized on a for – profit basis
(Santerre and Neun 52).
Up to the early 1980s most insured individuals had full choice of health
care providers in the United States. Consumers could choose to visit a primary
care giver or the outpatient clinic of a hospital, or see a specialist if they chose
to. The introduction of various Managed Care Organizations and such new
government policies as selective contracting (a situation when a third party
contracts exclusively with a preselected set of medical providers) have limited
the degree to which consumers can choose their own health care provider. For
example, those individuals belonging to a staff HMO must receive their care
exclusively from that organization; otherwise they are fully responsible for the
ensuing financial burden. The primary care giver acts as a gatekeeper and must
refer the patient for additional care. The lower premiums of a staff HMO
compensate consumers at least to some degree for the restriction of choice.
Even those individuals belonging to the less restrictive PPO face a financial
penalty when choosing health care providers outside the network.
Reimbursement process
Unlike in Canada and Europe, where a single payer – system is the norm,
the United States possess a multiplayer system in which a variety of third –
party payers, including the federal and state governments and commercial
health insurance companies are responsible for reimbursing health care
providers. Reimbursement takes on various forms depending on the nature of
the third party payer. The most common form of reimbursement is fee – for –
service, although prospective payment (a method of payment used by third –
party payers in which payments are made on a case by case basis) and prepaid
health plans are becoming more popular. Most traditional health insurance plans
reimburse health care providers on a fee for service basis. Health care providers
contacting with most MCOs are paid on a fee – for – service basis.
Physician services under Medicare (and for the most part Medicaid as
well) are also reimbursed on a fee for service basis, but the fee is fixed by the
government. Traditionally, the fees were based on the “usual, customary and
reasonable fee”. This means the fee was limited to the lowest of the three
charges: the actual charge of the physician, the customary charge of the
physician, or the prevailing charge in the local area. Since 1992 physician
services to Medicare patients are reimbursed according to a point system called
the “Resource Based Relative Value Scale” RVS system. Various physician
services are assigned points based on resource costs, such as the time and
intensity of the physician’s work, practice expenses and malpractice insurance
expenses. The RVS is transformed into a schedule of fees when it is multiplied
by a dollar conversion factor and a geographic adjustment factor that allows
fees to vary in different locations (Santerre and Neun 49).
Under both Medicare and Medicaid, the physician can choose to accept
assignments of patients. If the physician accepts the assignment, he or she
agrees to accept the government determined fee in full and cannot charge the
patient an additional amount beyond the normal 20 percent co-payment. The
physician must also agree to treat all Medicare patients for all services. A
physician who does not accept assignment can charge patients a price higher
than the Medicare fee and accept patients on a case-by-case basis. Without
assignment, a patient pays the actual physician charge and receives
reimbursement for 80 % of the Medicare fee.
In contrast to the fee – for – service method, some health care providers are
paid on a fixed – fee or prospective basis. For example, the consumer prepays
the staff HMO, and physicians are paid on a salary basis. The consumer also
prepays the individual practice association HMO, however, health care
providers are usually paid on a fee – for service or capitation basis.
Since 1983, the federal government has reimbursed hospitals on a
prospective basis for services provided to Medicare patients. This Medicare
reimbursement scheme, called the “diagnosis related group” (DRG) system,
contains around 500 different payment categories based on the characteristics of
the patient (age and sex), primary and secondary diagnosis, and treatment. A
prospective payment is established for each DRG. The prospective payment is
claimed to provide hospitals with an incentive to contain costs. Beginning in the
early 1980s, many states instituted selective contacting, in which various health
care providers competitively bid for the right to treat Medicaid patients. Under
selective contracting, recipients of Medicaid are limited in the choice of health
care provider. Moreover, to better contain health care costs and coordinate care,
the federal government and various state governments have attempted to shift
Medicare/Medicaid beneficiaries into MCOs. As of 1997, about 48% of all
Medicaid recipients and roughly 15% percent of all Medicare beneficiaries are
enrolled in MCOs (Santerre and Neun 50).
Equity and efficiency – Analysis and Evaluation
The advanced state of technology is the greatest strength of the U.S. health
care system. Premature babies for example, face relatively good chance of
surviving if they are born in the United States because of the state of
technology. A relatively high life expectancy after age 80 is another reflection
of the advanced state of health care technology in the United States. People 80
years and older in the U.S. tend to live longer than their counterparts in most
other countries because of the abundance of advanced medical technology. Also
the United States continues to be the world leader in pharmaceutical innovation.
These products save, extend and improve the quality of lives.
Unfortunately, the U.S. health care system is not without weaknesses. Its
most glaring weakness is exemplified by the fact that more than 42 million
people are without health insurance. The lack of health insurance creates
medical access problems and subjects a family’s income to the vagaries of
health status. The inability to successfully control costs is another major
weakness of the U.S. health care system. The growth of health care costs
continues unabated, although the pace has slowed in recent years mostly due to
the influence of managed – care organizations. Whether managed care can
continue to slow the growth of health care costs remains questionable.
Eliminating the weaknesses while maintaining the strengths is a challenge faced
by any plan for changing the U.S. health care system.
Health Care Resources.
As shown by the comparative data in Table 3, the resources available across
systems can vary widely. The United States has 10 percent fewer hospital beds
per capita than provided in the United Kingdom, but it has 59 percent more
 physicians. The United States has slightly fewer nurses per 1,000 than does
Germany. Germany, by comparison, has more than twice as many beds and
physicians per capita as the United Kingdom, but only about 30 percent of the
nursing staff per bed. Korea has smaller staffs of physicians and nurses than do
the other four countries.
TABLE 3 Health Care' Resources
Inpatient % of Practicing %of U.S. Reg. Cert. %of U.S
Beds/1,000 U.S. Physicians/1,0 Nurses/1,000
(2010) 00 (2010) (2010)
United 3.9 2.7 8.3
States
Korea 4.8 123.1 1.3 48.1 1.3 15.7
Germany 9.4 241.0 3.5 129.6 9.6 115.7
United 4.3 110.3 1.7 63.0 5.0 60.2
Kingdom
Canada 4.7 120.5 2.1 77.8 7.5 90.4
Source: Organization for Economic Cooperation and Development (OECD)
Health Data Copyright 2010.

The United Kingdom is featured as an example of a national health

service. Germany is important as the birthplace of compulsory insurance
schemes, and it represents an example of the traditional sickness insurance.
South Korea is a newcomer to the community of nations that have universal
health insurance. Though that country's program has received little publicity, its
mandated approach offers important insights to other countries, including the
United States, that have considered or are considering a plan based on
mandatory employer coverage.
THE UNITED KINGDOM NHS
Great Britain's National Health Service (NHS) was established in 1946 and
provides health care to all British residents. It is financed largely (about 85
percent) through general revenues, with capital and current budget filtering
from the national level down to the regional, and then to the district level. The
plan pays general practitioners on a capitation basis and hospital physicians
largely on a salaried basis. In addition to the NHS, there is also a private sector
health system. About 10 percent of Britons purchase private health insurance.
Services are not entirely free. Patients desiring private rooms pay extra, and
there is a small surcharge for drug prescriptions filled outside the hospital.
Dental care and eyeglasses also require patient copayments.
The general practitioner, or GP, serves as the gatekeeper to the health care
system. GPs are not government employees. Rather, they are self-employed and
receive about half their incomes from capitation contracts. They typically treat
routine conditions and will refer patients to hospitals for more specialized care.
The referral usually will be to a district hospital. Once at the hospital, the
patients are under the care of physicians (consultants) who are allocated staffed
beds and junior hospital staff to work under their direction.
Referring to Table 3, we see that spending per capita ($1,763) in the United
Kingdom in 2000 was just 38.1 percent of the United States level ($4,631) and a
little more than half when expressed as a ratio to GDP (7.4 % as opposed to
12.9 percent). How does the United Kingdom keep its health care expenditures
this much lower while providing universal access to health care? Though
patients have relatively easy access to primary and emergency care, specialty
care is rationed through long waiting lists and a limit on the availability of new
technologies.
Health services in England are mainly financed by government through
general taxation and NICs and are largely free at the point of use. Established in
1948, the NHS provides preventive medicine, primary care and hospital services
to all those “ordinarily resident” in England. Around 13% of the population is
covered by voluntary health insurance. In England, this is most commonly
referred to as Private medical insurance (PMI), and henceforth this is the term
used in this report. PMI mainly provides access to acute elective care in the
private sector (Laing & Buisson 2009).
 Responsibility for publicly funded health care rests with the Secretary of
State for Health, who is accountable to the United Kingdom Parliament. The
Department of Health is the central government body responsible for setting
policy on the NHS, public health, adult social care and other related areas. The
Treasury plays a key role through its influence in setting the national budget for
publicly funded health care. Leadership in the Department of Health is provided
by the Permanent Secretary, who is responsible to the Secretary of State and
parliament for the way the department functions, and the Chief Executive of the
NHS, who provides strategic leadership for the NHS and social care.
At a national level, the Department of Health is assisted in setting and
monitoring standards and regulating the health system by a range of government
and independent bodies, often called “arm’s-length” bodies.
The most significant of these are:
 The Care Quality Commission (CQC) was established in 2009 to take on
the roles of the Healthcare Commission, the Commission for Social Care
Inspection and the Mental Health Act Commission. It promotes quality
improvement in the NHS and the independent sector 3 and is responsible
for assessing the performance of NHS and independent-sector
organizations.
 Monitor (the Independent Regulator of NHS Foundation Trusts) regulates
FTs.
 Health Protection Agency (HPA) is responsible for protecting public
health.
 National Institute for Health and Clinical Excellence (NICE) was
established in 1999, primarily with responsibility for assessing and
issuing guidance on new and existing medicines, treatments and
procedures in the NHS. Since then, its role has been extended to include
guidance on public health.
 The Department of Health
The Department of Health has three core roles; it is:
• a department of state, run by the Secretary of State for Health and a civil
servant, the Permanent Secretary;
• the national headquarters of the NHS, run by the NHS Chief Executive;
• the agency responsible for setting policy on public health, clinical quality,
health improvement and protection, and many other related topics, run by the
Chief Medical Officer.
The main role of the Department of Health is to support the government
in improving the health of the population in England. It sets overall health
policy and strategy, as well as dealing with legislation and regulation. It
negotiates the level of funding for the NHS with the Treasury and allocates
resources to the NHS. Although the Department of Health does not directly
provide health services, it is responsible for ensuring service quality, building
the capacity of the NHS to meet the needs of the population and ensuring value
for money.
The Department of Health also sets the strategic framework for adult
social care and gives advice and guidance to local authorities, whose
responsibility it is to manage social care funding. It is also responsible for
policies on public health as well as those relating to the health consequences of
environmental and food matters.
Decentralization and centralization
England is governed through a centralized parliamentary system
consisting of elected representatives from the United Kingdom as a whole.
Central government raises taxes and is responsible for the main functions of the
state: defence, foreign policy, law and order, education, health, welfare and
transport. Elements of the administration of these functions are often
decentralized. In addition, there is a range of different types of local authority
with different functions and responsibilities; these may be further subdivided
into parishes. Local authorities may be responsible for administering education,
social services, public transport, planning, council housing (state-provided
housing), managing public spaces and collecting rubbish. Again, the
administration of these functions is often decentralized.
Four forms of decentralization of system organization have been identified
(Mossialos, Allin & Thomson 2007):
• deconcentration, which involves administrative duties previously performed at
central level being moved to local level but remaining subordinate to central
government;
• devolution, which involves transfer of responsibility and a degree of
independence to a local level;
• delegation, which involves passing responsibilities to local organizations
outside the structure of central government (e.g. nongovernmental bodies);
• privatization, which involves the transfer of ownership and government
functions from public to private bodies.
Financing
Health services in England are mainly financed from public sources,
primarily general taxation and NICs. However, some care is funded privately:
through PMI, by user charges for NHS services although most are provided
free, by direct payments by individuals for items such as OTC drugs and
medical appliances, or by direct payments by individuals for health care
delivered by NHS, private-sector or voluntary-sector providers
Public sources of finance for health care are allocated by central government
(HM Treasury has responsibility for this) to the Department of Health, which is
then responsible for the further disbursement of monies. Since 1998, the size of
the Department of Health’s budget for the following three years has been fixed
every two years following a process of negotiation with the Treasury known as
the Spending Review (Fig. 1).
 The NHS publicly funded system consists of organizations that deliver
services (service providers) and organizations that contract for (commission)
services (mainly PCTs). Each year, the Department of Health allocates around
80% of the total NHS budget to PCTs using a weighted capitation formula.
PCTs are responsible for purchasing primary, community, intermediate and
hospital-based services from a range of providers, mainly in the public sector
but including private- and voluntary-sector providers. Since 1999, there have
been significant changes to the way in which PCTs pay for health services,
particularly in the hospital sector, with the introduction in 2003–2004 of
activity-based funding – developed in England as PbR. Important changes have
also been made to the system of paying GPs and specialist doctors (consultants).

Author: as. Akhmedova A. A. Approved in the department meeting

“__” _______ 20__ Protocol № __

Head of the Public Health Department prof. Ocheredko O. M.