Health Care Financing Approaches

Comparison

Questions Market-Based Approach Government-Funded Approach
1. Who is provided access? Access is provided to all individuals. However, the barrier of access is the pricing of health care services and insurance. Therefore, only those able to afford to finance their healthcare without support from government programs are provided access. A government-financed approach provides access to all citizens and residents of specific jurisdiction. However, there are often barriers and limitations to the necessary qualifications for eligibility or amount of services available.
2. How much coverage is provided? In a free market health care, access is provided to all individuals. However, the barrier of access is the pricing of health care services and insurance. Therefore, only those able to afford to finance their healthcare without support from government programs are provided access. All basic services are commonly included with healthcare costs fully or mostly covered by the government. Complex treatments and surgeries may require co-payment. For Medicare or Medicaid programs, level of income and medical necessity are taken into consideration when determining coverage.
3. How are the services paid for? Services are paid by individuals through selected healthcare plans offered by health insurance companies. Each month customers pay a set premium, and when healthcare is received, a deductible is paid. Both amounts depend on selected insurance plan which can vary depending on the level of income and health status of the individual. Healthcare providers record patient information and treatment. This information is sent to appropriate government agencies which then provides payment per beneficiary discharge. The rate is determined based on pre-established diagnosis criteria and patient characteristics.
4. How does reimbursement apply? In a free-market system, customers are not directly reimbursed for out of pocket healthcare costs. However, it is possible to gain reimbursement through an individual’s employer. For example, a Health Reimbursement Arrangement is a plan which creates an IRS deductible employer-funded health benefits account that can cover a range of medical expenses and insurance premiums. Patients do not typically receive reimbursements since medical services are paid for. Additional out-of-pocket expenses may potentially be tax deductible.
5. Are there limitations on care? In true market-based healthcare, there are few limitations to care. Most healthcare organizations, both private and public, have the necessary expertise and tools to provides any potential care that a patient requires. The extent of care is limited by the ability of the patient to finance it through insurance or out-of-pocket costs. Government-funded care is often limited to basic services with more complex procedures either not offered, or the demand greatly exceeds supply. For example, in the UK’s public health system, NHS, the waitlist for a day case surgery has exceeded tens of thousands of people, many of which waited for over six months.
6. What guides care decisions for patients? Care decision is guided based on medical expertise and available information on the diagnosis and patient analyses. Essentially, the benefit and needs of the customer are the primary consideration. However, a patient may evaluate a number of factors when making decisions, including healthcare coverage and the ability to finance treatment. Welfare of the population is the primary objective. However, there are often certain regulations or recommendations which guide care decisions. For example, long hospitalizations are unaffordable and create wait lists in public healthcare, emphasizing transition of care. (NHS England, n.d.). Availability of services is a critical guiding factor in care decision-making.
7. What is the quality of services? Despite the high costs of healthcare in a market system, excellent quality is not always a guarantee. Providers, particularly private practices, are able to use high incomes to enhance quality. However, the current state of the market is forcing many hospitals to implement cost-cutting policies which potentially causes lower quality (Johansen, 2017). Quality of care in a government-funded system depends directly on the financing and regulation. European public healthcare systems dedicate approximately 10% of their GDP and have focused on creating extremely efficient, well-regulated systems which offer high-quality services (Carroll & Frakt, 2017).
8. Are there competitive options? The market-based approach is fundamentally based on competition and thrives off it. A wide variety of healthcare providers, insurers, and pharmaceutical companies offer their products and services with the patient have the freedom to choose which best suits their needs. Usually, there are no competitive options in a government-funded system, with the federal system providing all coverage and services.
9. How much are prevention and wellness emphasized? In the modern healthcare system prevention is strongly emphasized as even with high medical expenses, medical providers are often overwhelmed. Significant initiatives are enacted to ensure that public health and re-admission rates remain low. There is a strong emphasis on wellness and disease prevention. It relieves the burden on the national healthcare system but also improves a number of demographic indicators which are vital for governments.
10. How are health care costs managed and controlled? The free market system is unable to manage costs if the consumer is not an active participant in decision-making based on prices. The government regulates costs to some extent and insurance companies providing coverage. The system is fully regulated by the government, setting all fees and costs of services. The government could either enable regulations or rely on supplementary insurance that would drive independent pharmaceutical prices down.
11. How are medical advances generated? The market economy drives medical advances. Providers and companies seek to improve the healthcare process and offer the most advanced treatments as well as achieving efficiency potential that innovation provides (HealthCare Institute of New Jersey, 2017). Government funded research would be the primary source of medical advances. Federal government institutions such as the NIH are the leading organizations for medical research spending.
12. How is health care reform established? Reform is established through the cooperation of relevant stakeholders including government, providers, insurers, and patients. Market trends and government regulations are the primary influences in this approach. The government serves as the primary and majority stakeholder which allows it to enable rapid reforms through legislation. The chain of command is straightforward as government clinics automatically adapt or seek funding to do so.

Discussion

As evident, both systems have their advantages and disadvantages. The market-based approach has the advantage of more freedom of choice for the consumer and no limitations on possible treatments if the patient is able to afford it. The disadvantage is high costs which lead to certain segments of the population lacking access to basic necessary health services. A government-funded approach offers the advantage of universal coverage which offers fundamental health services to meet basic needs.

Depending on the setting, there is commonly more efficiency to reduce waste of resources. Its primary disadvantage remains the limitations of eligibility and services that it offers. It may also lead to an overwhelmed system which stagnates delivery of care.

The components that require most reform in the current market-based healthcare system are competition and costs. Despite a wide selection, the system is insurance-driven with true costs hidden from the consumer outside of the paid deductible. Increasing costs of US healthcare are often due to overwhelming expenses of insurance administrative support, lack of transparency, and excessive markups on medical services and pharmaceuticals. In the current system, health is inelastic; it will always be demanded despite high costs, causing such skyrocketing prices. Unlike a true free market economy, healthcare is not consumer driven since for most industries where quality and cost are primary indicators for a consumer (Ladd, 2017).

For government-funded healthcare, the primary aspects of reform would be to expand the number of services offered to patients. Modern healthcare challenges are requiring more comprehensive assessments and treatments, utilizing an expansive number of diagnostic tools and resources. Government-funded healthcare does not have the financial resources to provide highly technological treatments for the whole population. However, it is possible to increase efficiency and develop a holistic approach to care that encompasses a wider range of services.

References

Carroll, A. E., & Frakt, A. (2017). The best health care system in the world: Which one would you pick? The New York Times. Web.

HealthCare Institute of New Jersey. (2017). Value of medical innovation. Web.

Johansen, R. (2017). Free market health care. Web.

Ladd, C. (2017). There is never a ‘free market’ in health care. Forbes. Web.

NHS England. (n.d.). Quick guide: Supporting patients’ choices to avoid long hospital stays. Web.