Healthcare Systems

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A healthcare system can be defined as the method by which healthcare is financed, organized, and delivered to a population. It includes issues of access (for whom and to which services), expenditures, and resources (healthcare workers and facilities). The goal of a healthcare system is to enhance the health of the population in the most effective manner possible in light of a society's available resources and competing needs. By the beginning of the twenty-first century access to healthcare had come to be regarded by most countries and the United Nations as a special good that is necessary either as a matter of or pursuant to basic human rights. An examination of healthcare systems therefore includes consideration of the ways in which a particular system addresses commonly held values.

The extent and form of a specific system are influenced by a variety of factors, including the unique culture and history of a population or country. What is considered healthcare can vary markedly in accordance with a country's level of development, culture, and social values. Some populations put emphasis on the prevention of disease, whereas others emphasize only the care for or cure of particular illnesses. Definitions of health and disease and of appropriate healthcare providers also are subject to cultural variability.

A second major influence derives from the priorities given to various ethical values: "There is no way to adjudicate disputes among the Holy Trinity of cost, quality and access unless a court of values is available to dispense its wisdom" (Reinhard, pg. 1). Those values include respect for the autonomy of both patients and providers, the maximization of benefit, and the promotion of justice or fairness, understood as equality or liberty.

Balancing those values has posed a dilemma in the United States. Public opinion polls have revealed that most Americans see access to healthcare as a fundamental right. However, Americans' equally strong belief in individual autonomy and responsibility, the use of the market as a means for distributing goods and services, and fears about government interference create conflict and have led to a fragmented healthcare system.

A third influence on the structure of a healthcare system is the level of economic resources available. There is a strong positive correlation between economic resources as measured by the per capita gross domestic product (GDP) and both healthcare expenditures and the proportion of a nation's GDP that is spent on healthcare (Gerdtham and Jonsson). This indicates that although healthcare generally is valued, countries and individuals may consider food, shelter, and in some instances spending for the military more important. However, although the economic resources available to a country have a great effect on that country's overall expenditures on healthcare, there is nearly as much variation in the forms of the healthcare systems in countries that are economically poor as there is in wealthy countries.

Public versus Private Control

All governments have some degree of involvement in healthcare because essentially all countries have a centrally funded agency that is concerned with public health issues. The proportion of healthcare expenditures spent on public health tends to be higher in low-income countries, although the level of effort varies greatly from country to country. Government involvement usually includes surveillance of communicable diseases and interventions to prevent or curtail epidemics. Some countries have more extensive government involvement through direct delivery of services (e.g., immunizations, well-child care, screening for developmental disabilities, and treatment of communicable diseases) and programs of health promotion. Public health efforts in the United States are fragmented but have begun to receive more attention as the costs of personal, diseaseoriented healthcare and concerns about bioterrorism have increased.

Beyond public health measures, healthcare systems vary dramatically with regard to the degree of public versus private control (Anderson et al.). In fact, the extent of government control is probably the most distinguishing characteristic among systems. In most member countries of the Organization for Economic Cooperation and Development (OECD) the healthcare system is dominated by the public sector. The OECD countries with a high percentage of revenues from the public sector in 2000 included Luxembourg (93%), the Czech Republic (91%), and the Slovak Republic (90%) (OECD). In a few countries the majority of revenues come from the private sector. In the United States the private sector accounts for about 56 percent of healthcare expenditures. The only other OECD countries that receive a majority of funds (more than 50%) from the private sector are South Korea (56%) and Mexico (54%).

The public side of healthcare systems in industrialized countries can be placed into two categories: countries with comprehensive programs and strong government control of virtually all aspects (financing, delivery, quality monitoring) of the system, such as Great Britain, the Scandinavian countries, and the countries of the former Soviet Union, and countries in which the government's role is limited to financing or guaranteeing enrollment for all citizens in a health insurance plan, such as Germany, Belgium, France, and Canada. Both types of systems are characterized by public financing or mandates that guarantee universal coverage, payment that is negotiated between the public sector and providers, and policies regarding facilities and healthcare workers that are modulated predominantly by the public sector.

In countries in which the private sector is the dominant payer for healthcare universal coverage is less common, payment varies from provider to provider and insurance company to insurance company, and policies regarding healthcare workers are negotiated in the marketplace. In the United States, for example, patient and professional autonomy are dominant (Reinhard). Most individuals or employers are free to choose from among multiple insurers and providers, and most provider groups have the freedom to choose whom to serve, how much to charge, and what credentials are required to join the group.

Especially notable has been the strong distrust of government interventions except when they are deemed necessary to guarantee access to a group that is seen as entitled because of a special service it has rendered (retirees, veterans) or special need (disability, poverty). However, even in the United States there have been a number of occasions (as in 1910, 1935, 1948, 1965, 1972, and 1994) when a reasonably strong attempt was made to provide a substantial increase in government involvement in the healthcare system. Except in 1965 those attempts failed because of a combination of factors, including provider opposition, lack of public consensus, fears of increased government involvement, and relatively comprehensive healthcare benefits that most working Americans receive from employment-based private insurance.


The means of financing healthcare, perhaps more than any other aspect of a healthcare system, mirror the values and priorities of a society. As was noted above, unlike the case in the majority of the OECD countries, healthcare financing in the United States is mostly private. There is also little public financing of healthcare in most low-income countries. Because of the high cost of many interventions and the unequal distribution of healthcare costs among individuals, lack of a broad-based system of public financing creates a system in which healthcare is rationed on the basis of the ability to pay.

Beginning with Germany in 1883, most industrialized nations have implemented a government-coordinated or government-controlled system of financing for personal healthcare services. This varies from the systems in countries such as Great Britain and the former Soviet Union, in which virtually all healthcare is financed through general tax revenues collected by the national government, to systems, such as Canada's, that are financed from both state and national revenues, to those of Germany, France, Belgium, and the Netherlands, in which financing is mandated by the national government through required participation in a communityor employment-based insurance funds.

In the third type of system most funds are obtained through required contributions based on wages. All countries with strong central control have at least a small market of privately financed healthcare that is used predominantly by the rich and the politically connected. For example, in Germany and the Netherlands the most affluent people are not required to purchase health insurance, and most choose to purchase private health insurance, which gives them better access to medical services. Some countries with mixed systems (e.g., Japan and Australia) have a small market for private health insurance that complements the public-sector benefits.

The proportion of public financing of healthcare in the United States has been increasing steadily, rising from about 23.3 percent in 1960 to nearly 44.3 percent in 2000 (OECD). In spite of these increases, there is no universal government-guaranteed or compulsory health insurance. Employer-based or individually purchased private insurance is the most common way people obtain health insurance coverage. A variety of publicly financed programs (e.g., Medicare and Medicaid) provide insurance to persons over age sixty-five and some poor people. They are financed by a spectrum of public financing mechanisms, including federal and local government revenues, the use of income and employment-based taxes, and in some states the revenues from a lottery.

Financing for active-duty military personnel, veterans, and Native Americans mirrors the centrally controlled healthcare systems of Great Britain and the former Soviet Union. Revenues come from the federal income tax, and services are provided by public-sector employees. The Medi-care program is financed primarily from a wage tax, whereas Medicaid (for certain categories of disabled and low-income persons) is financed from a combination of state and federal general tax revenues. Financing for some care for the poor who are not eligible for Medicaid comes from general tax revenues at the state or local level that are paid to city and county public hospitals and state mental hospitals.

The dominance of a private system of financing in the United States is a reflection of not only that nation's values but also of a number of historical events. The Blue Cross program began in Texas when Baylor Hospital enrolled schoolteachers in an insurance system during the Great Depression as a method to guarantee that hospitalized patients could pay their health bills. Private health insurance grew slowly during the 1930s.

The real spread of private health insurance occurred during World War II, when wages but not fringe benefits were frozen as a wartime price-control measure. As more firms began to offer health insurance as a benefit, private insurance companies saw the potential for expanding their markets and encouraging those enrolled in health-insurance plans to buy their other insurance products. Another impetus to the market was the decision by the federal government to exempt healthcare benefits from federal income tax. The large number of insurance plans in the United States, each with its own marketing, benefit packages, premiums, deductibles or copayments, billing, and payment requirements, together with the thousands of private physicians, clinics, and hospitals, has created an immense administrative bureaucracy with aggregate administrative spending of $89.7 billion in 2001 (Center for Medicare and Medicaid Services; Levit et al.).

Access and Delivery

A second major characteristic of a healthcare system is access, which has multiple definitions, including the following:

  1. The ability to obtain needed care
  2. The potential and actual entry of a given population into the health system
  3. The timely use of personal health services to achieve the best possible outcome
  4. The timely use of needed, affordable, convenient, acceptable, and effective personal health services

Different countries approach the issue of access in various ways and define the term differently. Health systems with strong central control, such as those in Great Britain, the Scandinavian countries, and the countries of the former Soviet Union, emphasize equal access to care for all their citizens. Those countries have a single-payment system, with most healthcare providers working as salaried government employees and a single government-defined set of benefits. There tends to be strong emphasis on primary care by general practitioners and relatively tight control of the number and distribution of providers and facilities that provide highly technical services. In some countries this degree of government control results in substantial waiting times for some services and limited access to advanced technologies. Thus, whereas this approach produces an apparently high level of equal opportunity to obtain needed health services, it may deny some individuals access to lifesaving technologies and restrict both provider and patient choices. This depends on the level of spending a country is willing to commit to healthcare.

Countries with less centralized systems vary more in regard to the level of access. In some countries access to healthcare for the poor is restricted by the ability to pay. Moreover, providers' freedom to choose their patients can restrict access to medical services among insured low-income individuals. For example, many providers in the United States refuse to serve Medicaid recipients because of the low payment rates. In countries with less centralized health systems working individuals employed in low-paying jobs often face financial barriers (high out-of-pocket expenses for copayments, deductibles, or premiums) to receive needed care (Lee and Tollen). Similarly, the limited control of healthcare workers and facility location tends to result in geographic maldistribution of providers and healthcare facilities.

The degree of access varies widely in the United States. Financial barriers to access are substantial for more than 41 million Americans without health insurance coverage and about the fifth of insured individuals who have inadequate insurance (Mills; Hadley and Holahan; Kaiser Commission on Medicaid and the Uninsured). Studies have shown that those who are poor and have no health insurance have a markedly lower use of almost all forms of healthcare despite their tendency to have a lower baseline health status. This lack is especially great in terms of primary care and preventive services (Bayer and Fiscella). Although the uninsured have some access to high-technology care, especially in urban areas, through use of the emergency rooms and outpatient clinics of public hospitals, research has shown that they have poorer outcomes of hospitalization (controlling for severity) and a markedly lower use of high technology compared with those who have insurance. There is also growing evidence that limited access to primary care results in not only poorer health outcomes but also higher overall costs through delayed treatment, reduced patient adherence to therapeutic regimens, and increased emergency room and hospital admissions.


The level and means by which providers of healthcare are paid has a substantial effect on access, costs, and the quality of care. In countries that rely on a private healthcare delivery system (the United States, Canada, France, and Belgium) the predominant mode of payment for physicians who provide ambulatory care is fee-for-service. In most instances physicians bargain with insurers or the government over a fee schedule. In some countries there is a provision that physicians can charge patients more than the allowed fees in certain circumstances. There is concern that the financial incentives inherent in a fee-for-service system result in over utilization of services, especially those reimbursed at higher levels relative to other services. However, the autonomy of providers is preserved, and there is an incentive for increased productivity. Additionally, there is no conflict between the financial interests of providers and their duty to provide all services that are of benefit to patients. Cost-or charge-based reimbursement for institutions (hospitals, nursing homes, etc.) has similar risks and benefits.

Some insurers in the United States and the Netherlands use capitation (a set payment per person per year) or a set payment per case to pay providers. Capitation payments provide an incentive for healthcare workers and facilities to limit the volume of provided services and allow providers to determine precisely which services to provide. At the same time, case-based payment and capitation create a conflict between the financial incentive of the provider and the interest of the individual patient in receiving all services that are of possible benefit. This can be a problem for people with multiple chronic conditions, who are often the most expensive to treat.

In many countries, hospitals are paid on prospectively negotiated global budgets and hospital-based providers, including physicians, are paid on a salaried basis. These methods of payment have little apparent effect on the provision of services to individuals. However, the level of payment may have a profound effect on which technology is acquired and on whether providers expend the time and effort required to provide a given service in general.

Expenditures and Cost Controls

Since 1960 in virtually every country expenditures for personal healthcare services have been rising in absolute terms and in relation to GDP (Anderson et al.). Health expenditures have been increasing at a rate nearly double that of other major sectors of some national economies. In some countries concerns are being raised that spending on medical care is occurring at the expense of other socially desirable goods and services. This is especially true in the United States, where despite the highest per capita and GDP-adjusted healthcare spending in the world, healthcare is still not accessible to all, and there is growing concern about other social problems such as deteriorating schools, homelessness, poverty, and crime.

One reason for controlling health spending is that there is strong evidence that more healthcare spending does not necessarily buy better health (Newhouse). Even more compelling is the growing evidence that a substantial number of medical-care services may provide only small marginal benefits. Although small benefits and high cost are the norm in industrialized countries, many developing and economically disadvantaged countries cannot provide their populations with even basic public health measures such as immunization and sanitation.

In many industrialized countries cost controls have created the potentially unpopular phenomenon of waiting lists. Some countries, notably the United Kingdom and the Scandinavian countries, have implemented a policy of increasing health spending to eliminate waiting lists.

The response of different healthcare systems to the growing problem of cost has in general reflected the basic organization and values of each country. In countries with strong central control there has been increasing pressure to create fixed budgets and establish tight control over the acquisition of advanced technologies (supply-side control). Access to basic health services for everyone has been maintained at the expense of not providing expensive services that are potentially lifesaving for a few individuals.

By contrast, in the United States there are relatively fewer advocates for global budgeting. Efforts to reduce costs have focused primarily on enhanced competition (demand-side control). These cost-control mechanisms appear to have produced some one-time reductions in healthcare spending but have had a very modest effect on the rate of growth of expenditures.

Because of the seemingly inexorable rise in costs in the United States, employers have been shifting more of the cost of healthcare to employees by increasing employee-paid premiums, eliminating coverage for dependents, increasing copayments and deductibles, or eliminating coverage altogether. The response of private insurance companies to growing cost concerns has been to refuse to insure high-risk employees (medical underwriting) or to tie premiums directly to the previous year's expenditures by a particular group (experience rating). Employers became more aggressive in eliminating benefits such as health insurance for retirees when the labor market became looser and profits decreased. All these factors, along with a rise in the number of part-time workers and employment in small, nonunion service industries that lack medical benefits, have been primary determinants in the increase in the number of working-age individuals in the United States who are without health insurance.


The most visible aspects of any healthcare system are the facilities and personnel involved in the delivery of healthcare. Centralized systems have attempted to provide greater equality in the distribution of facilities and healthcare workers by focusing on the needs of a community rather than on the autonomy of providers and patients. In some centralized systems the national government may determine how many and which types of physicians, nurses, and other healthcare workers are produced; the location of hospitals and the technology they may purchase; and the location of hospital-based and outpatient-care providers. Care is strongly regionalized, with easily accessible primary care for most common healthcare problems, some specialty care available in regional hospitals, and subspecialty and tertiary care confined to a few large teaching centers.

In contrast to most other countries, the healthcare system in the United States provides little central control. There has been almost complete autonomy for providers, starting with a system of health-professional education with a substantial number of private schools and little or no restriction on specialty choice, practice, or hospital location or on the availability of technology. Because of the prestige and generous payments for new technology nearly all hospitals provide a full array of high-technology services. This complements a strong trend toward subspecialization among health professionals. In the case of physicians the percentage of generalists versus specialists declined from nearly 50 percent in 1961 to the current 28 percent; if OB/GYN and emergency medicine physicians are included in the generalist category, the figures are 32 percent primary care physicians and 68 percent specialists (Bureau of Health Professionals; Council on Graduate Medical Education). The abundance of specialists, especially those who are trained to perform high-technology procedures, is thought to exacerbate the over utilization of some healthcare services. Conversely, the decline in the number of generalists is believed to be a contributing factor in the poor access to healthcare experienced by persons in rural areas and those with low incomes in urban areas.

Choices for the Future

All countries are continuing to search for better cost-containment and cost-effectiveness mechanisms, including the difficult task of placing limits on the healthcare technologies that provide small marginal benefits to a few individuals at a great cost to the community.

Tension will grow between the values of individual autonomy (reflected in the assumption by patients that the right to healthcare includes all interventions that are of possible benefit and the assumption by providers that they have the right to set prices and choose where and whom to serve) and concern for the good of the community and other societal needs. Attempts to achieve equality in the systems of financing, payment, cost control, and delivery will have to take into account increasing competition for limited resources and the perceived infringement on personal freedom. Balancing these competing claims will be especially difficult in the United States with its multiple systems and distrust of government involvement in human services.

A renewal of a sense of community and a careful balancing of values will be necessary in achieving a reasonable solution. Although the future is unclear, the United States probably will reconsider policies for rational allocation between healthcare and other sectors of the economy, government regulation to require universal and equitable access to defined basic insurance policies, mandated employer-based insurance with a publicly financed safety net, payment based on capitation with some adjustment for the severity of illness in a specific group of patients, and incentives (including scholarships and loan forgiveness) for providers who choose to provide primary care in shortage areas.

l. gregory pawlson

jacqueline j. glover (1995)

revised by varduhi petrosyan

gerard f. anderson

SEE ALSO: Advertising; Health Insurance; Health Policy in International Perspective; Health Policy in the United States; Healthcare Institutions; Healthcare Resources, Allocation of; Hospital, Contemporary Ethical Problems of


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