F/O Architecture & Ekistics, Jamia Millia Islamia

Final Report Title-

HEALTHCARE ECONOMICS-II
Healthcare planning-III
Assignment, M Arch
(25thth November 2021)

1. Name of Student DANISH RAIS

…………………………………………………
2. Roll number
………………
…………………………………………………
3. Enrolment No.
………………

Teacher: Ar. Mohd Arqam Khan

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1. Overview of Healthcare costs

1.1 Health Expenditure of various countries

The ratio of spending on health care goods and services compared to total
spending in the economy can vary over time due to differences in the
growth of health spending compared to overall economic growth. During
the 1990s and early 2000s, health spending in OECD countries was
generally growing at a faster pace than the rest of the economy, leading to
an almost continual rise in the health expenditure to GDP ratio. After a
period of volatility during the economic crisis, the average share has
remained relatively stable in recent years, as growth in health spending
across the OECD has broadly matched overall economic growth

Gross Domestic Product (GDP) is the sum of final consumption, gross capital formation
(investment) and net exports. Final consumption includes goods and services used by
households or the community to satisfy their individual needs.

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1.2 Health Spending by various countries

The U.S. leads the world in government healthcare spending at $9,008 per
capita – over 1.5 times that of Norway, the next-highest country examined.
While per-capita government spending on healthcare in the U.S. is the
highest in the world, this has not necessarily brought about better outcomes
(such as longer life expectancy) compared to other developed nations.

It’s also worth mentioning that the above figures do not cover all healthcare
costs incurred by citizens, as they do not account for private insurance
spending or out-of-pocket expenses. According to OECD data, these
additional costs tend to be the highest in places like Switzerland and the
United States.

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2. The Four Healthcare models
 Each nation´s health care system is a reflection of its:
o History
o Politics
o Economy
o National values
 They all vary to some degree However; they all share common principles
There are four basic health care models around the world

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1. THE BEVERIDGE MODEL
Developed in 1948, by Sir William Beveridge in the United Kingdom, the
Beveridge model is often centralized through the establishment of a
national health service. Or, in the case of the UK, the National Health
Service.

Essentially, the government acts as the single-payer, removing all

competition in the market to keep costs low and standardize benefits. As
the single-payer, the national health service controls what "in-network"
providers can do and what they can charge.

Funded by taxes, there are no out-of-pocket fees for patients or any cost-
sharing. Everyone who is a tax-paying citizen is guaranteed the same access
to care, and nobody will ever receive a medical bill.

One criticism of the Beveridge model is its potential risk of

overutilization. Without restrictions, free access could potentially allow
patients to demand healthcare services that are unnecessary or wasteful.
The result would be rising costs and higher taxes.

However, that's why many of these systems have regulations in place to

manage usage and proactive prevention campaigns.

Characteristics:

 Providers and payers are private

 Private insurance plans – financed jointly by employers and
employees through payroll deduction
 The plans cover everyone and do not make a profit
 Tight regulation of medical services and fees (cost control)

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There is also criticism around funding during a state of national
emergency. Whether it's a war or a health crisis, a government's ability to
provide healthcare could be at risk as spending increases or public revenue
decreases.

Used by the United Kingdom, Spain, New Zealand, Cuba, Hong Kong, and the
Veterans Health Administration in the U.S.

2. THE BISMARCK MODEL

The Bismarck model was created near the end of the 19th century by Otto
von Bismarck as a more decentralized form of healthcare.

Within the Bismarck model, employers and employees are responsible for
funding their health insurance system through "sickness funds" created by
payroll deductions. Private insurance plans also cover every employed
person, regardless of pre-existing conditions, and the plans aren't profit-
based.

Providers and hospitals are generally private, though insurers are public. In
some instances, there is a single insurer (France, Korea). Other countries,
like Germany and the Czech Republic, have multiple competing insurers.
However, the government controls pricing, much like under the Beveridge
model.

Unlike the Beveridge model, the Bismarck model doesn't provide universal
health coverage. It requires employment for health insurance, so it allocates
its resources to those who contribute financially.

The primary criticism of the Bismarck model is how to provide care for
those who are unable to work or can't afford contributions, including aging
populations and the imbalance between retirees and employees.
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Used by Germany, Belgium, Japan, Switzerland, the Netherlands, France, and some
employer-based healthcare plans in the U.S.
Characteristics:

Healthcare is provided and financed by the State through tax payments

 There are no medical bills

 Medical treatment is a public service
 Providers can be government employees
 The government controls costs as the sole payer

3. THE NATIONAL HEALTH INSURANCE MODEL

The national health insurance model blends different aspects of both the
Beveridge model and the Bismarck model. First, like the Beveridge model,
the government acts as the single-payer for medical procedures. However,
like the Bismarck model, providers are private.

The national health insurance model is driven by private providers, but the
payments come from a government-run insurance program that every
citizen pays into. Essentially, the national health insurance model is
universal insurance that doesn't make a profit or deny claims.

Since there's no need for marketing, no financial motive to deny claims, and
no concern for profit, it's cheaper and much simpler to navigate. This
balance between private and public gives hospitals and providers more
freedom without the frustrating complexity of insurance plans and policies.

The primary criticism of the national health insurance model is the

potential for long waiting lists and delays in treatment, which are
considered a serious health policy issue.

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Used by Canada, Taiwan, and South Korea, and similar to Medicare in the U.S.
Characteristics:

 Providers are private

 Payer is a State-run insurance program that every citizen pays into
 National insurance collects monthly premiums and pays medical bills
 Can control costs by: (1) limiting the medical services they will pay for or
(2) making patients wait to be treated

4. THE OUT-OF-POCKET MODEL

The out-of-pocket model is the most common model in less-developed
areas and countries where there aren't enough financial resources to create
a medical system like the three models above.

In this model, patients must pay for their procedures out of pocket. The
reality is that the wealthy get professional medical care and the poor don't,
unless they can somehow come up with enough money to pay for it.
Healthcare is still driven by income.

Used by rural areas in India, China, Africa, South America, and uninsured or
underinsured populations in the U.S.
Characteristics: Only the rich get medical care; the poor stay sick or
receive minimal services by public and humanitarian institutions Most
medical care is paid for by the patient, out-of-pocket No insurance or
government plan

OTHER MODEL: USA MODEL

THESE FOUR MODELS SHOULD be fairly easy to understand, because
they have elements of all of them in our convoluted national health care
apparatus:
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• For most working people under sixty-five, they are Germany, or
France, or Japan. In standard Bismarck Model fashion, the worker and the
employer share the premiums for a health insurance policy. The insurer
picks up most of the tab for treatment, with the patient either making a co-
payment or paying a percentage.

• For Native Americans, military personnel, and veterans, they are

Britain, or Cuba. The VA and much of the Pentagon’s TriStar system
involve doctors who are government employees working in government-
owned clinics and hospitals. Following the Beveridge Model, Americans in
these systems never get a medical bill. The Indian Health Service also
provides free care in government clinics.

• For those over sixty-five, they are Canada. U.S. Medicare is essentially
a National Health Insurance scheme, with the nearuniversal participation
and the low administrative costs that characterize such systems. Americans
with end-stage renal disease, regardless of age, are also covered by
Medicare; this group had enough political clout to get what it wanted from
Congress, and the “dialysis community” opted for coverage under the
government-run NHI system.

• For the 45 million uninsured Americans, they are Cambodia, or

Burkina Faso, or rural India. These people have access to medical care if
they can pay the bill out of pocket at the time of treatment, or if they’re sick
enough to be admitted to the emergency ward at a public hospital, or if they
have access to a charity clinic.

• And yet they are like no other country, because the United States
maintains so many separate systems for separate classes of people, and
because it relies so heavily on for-profit private insurance plans to pay the
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bills. All the other countries have settled on one model for everybody, on
the theory that this is simpler, cheaper, and fairer. With its fragmented
array of providers and payers and overlapping systems, the U.S. health care
system doesn’t fit into any of the recognized models.

Summarizing

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FACTORS
Bismarck Beveridge NHI
Social Health Tax Based National Health
Insurance Financing Insurance
Financer Employer and Government taxes Government taxes
employee
Insurer Decentralized Government Government
insurance groups-
Statutory Health
Insurance

Hospital Public (50%), Mostly public, some Public/private, mostly

ownership private for-profit private not-for- profit
(17%), private
nonprofit (33%)
Primary Fee-for-service Mix capitation /fee for Mostly fee-for- service,
Care service/pay for some capitation
performance, salary
Provider
for some
Payment
Manag- Independent Government Market Driven/
ement Government/ Public-
Private Partnership
Advantages o Low Waiting o Free at the point of o Less Complex System
o Good use o Promote equality
Accessibility o Are available to
Competition b/w every citizen
operators- more
consumer-oriented
healthcare
Criticism o Problem with o Overutilization o Long waiting lists
aging o Leading to High o Delays in treatment
populations Costs o Potential for
o Imbalance o Higher Tax corruption.
between retirees o Funding state of o Decreased quality of
and employees national emergency care.
o Overutilization as no
copayments

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Health models in respective Countries Compared

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1.UNITED STATES

UNITED STATES HEALTH SYSTEM COSTS

Largest spender on health care health care

 16% of GDP
 2.3 trillion in 2007
 Why so high?
o Providers make more money
o High malpractice insurance
 Only country that relies on profit-making health insurance company’s
 Private insurance industry has the world’s highest administrative costs
of any health care payer in the world
 Most fragmented health care system in the world

GREAT BRITAIN COSTS

Insured

o 100% of population insured

Spending

o 7.5% of GDP

Funding

o Single payer system funded by general revenues (National Health

System); operates on huge deficit

Private Insurance

o 10% of Britons have private health insurance

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o Similar to coverage by NHS, but gives patients access to higher quality of
care and reduce waiting times

Physician Compensations

o Most providers are government employees, paid under salary and

according to number of listed patients.

GREAT BRITAIN CHARACTERISTICS

Physician Choice

o Patients have very little provider choice

Copayment/Deductibles

o No deductibles Almost no copayments (prescription drugs)

Waiting Times

o Huge problem

Benefits Covered

o Offers comprehensive coverage

o Terminally ill patients may be denied treatment

CANADA COSTS
Insured

Single payer system – 100% insured

Each province must make insurance:

o Universal (available to all)

o Comprehensive (covers all necessary hospital visits)

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 o Portable (individuals remain covered when moving to another
province)
o Accessible (no financial barriers, such as deductible or copayments)

Funding

o Federal government uses revenue to provide a block grant to the

provinces (finances 16% of healthcare)
o The remainder is funded by provincial taxes (personal and corporate
income taxes)

Spending

o 9% of GDP

Private Insurance

o At one time all private insurance was prohibited; changed in 2005

o Many private clinics now offer services

CANADA CHARACTERISTICS

Physician Compensation

o Physicians work in private practice

o Paid on a fee-for-service basis
o These fees are set by a centralized agency; makes wages fairly low

Physician Choice

o Referrals are required for all specialist services

o Great difficulties for a family doctor

Copayment/Deductibles

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o Generally, no copayments or deductibles
o Some provinces do charge insurance premiums

Waiting Times

o Long waiting lists

o Many travel to the U.S. for healthcare

FRANCE COSTS

Insured

About 99% of population covered

Cost

3rd most expensive health care system – 11% of GDP

Funding

13.55% payroll tax (employers pay 12.8%, individuals pay 0.75%) – 5.25%
general social contribution tax on income

Taxes on tobacco, alcohol and pharmaceutical company revenues

Private Insurance

“more than 92% of French residents have complementary private

insurance” – These funds are loosely regulated. The only requirement is
renewability – These benefits are not equally distributed (creates a two-
tiered system)

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FRANCE CHARACTERISTICS

Physician Compensation – Providers paid by national health

insurance system based on a centrally planned fee schedule – fees are
based on an upfront treatment lump sum – However, doctors can charge
whatever they want – The patient or the private insurance makes up the
difference – Medical school is free

Physician Choice

Fair amount of choice in the doctors they choose

Copayment/Deductible

10% to 40% copayments

Waiting Times

Very little waiting lists/times

GERMANY COSTS

Insured

o 99.6% of population
o Those with higher incomes can buy private insurance –
o The federal Gov. decides the global budget and which procedures to
include in the benefit package

Funding

o Sickness funds are financed through a payroll tax (avg. 15% of income)
o The tax is split between the employer and employee

Private insurance
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o 9% of Germans have supplemental insurance; covers items not paid for
by the sickness funds
o Only middle- and upper-class can opt out of sickness funds

GERMANY CHARACTERISTICS

Physician Compensation

o Reimbursement set through negotiation with the sickness funds

o Providers have little negotiating power
o Very low compensation
o Significant reimbursement caps and budget restrictions

Copayment/Deductibles

o Almost no copayments or deductibles

Benefits Covered

o There is an extensive benefit package which even includes sick pay (70%
to 90% of pay) for up to 78 weeks

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