Health Inequality: Challenges and Opportunities in the American Healthcare System

Health Inequality: Challenges And Opportunities in The American Healthcare System Name Institution Course and Code Professor Date Health Inequality: Challenges And Opportunities in The American Healthcare System Introduction Health disparities by gender identity, race, sexual orientation, ethnicity, community level, and economic factors like employment, location, and poverty remain in the United States despite large investments to enhance access to high-quality healthcare. Whitman et al. (2022) found that individuals who identify as Black, Asian American, Latino, American Indian and Alaska Native, LGBTQ+, and who live in rural areas or are disabled, fare worse than their White, urban counterparts who identify as heterosexual and do not have disabilities. Many health outcomes, such as heart disease, diabetes, chronic illness, hypertension, cancer, disability, substance abuse, mental illness, and total life expectancy, exhibit these differences. On top of the negative effects on spending and outcomes within the healthcare system, health inequalities can have substantial consequences on the quality of life and economy. In the US, health disparities cause around $42 billion losses in productivity annually, not including extra economic losses as a result of premature fatalities (Bhatt et al., 2022). Healthcare inequalities can have significant impacts on individuals, healthcare organizations, and the world if left unaddressed. Health care costs potentially will rise to levels that are unsustainable, resulting in declining health and productivity for the population and unaffordable bills (Bhatt et al., 2022). Therefore, investigating health inequality in the American healthcare system is imperative for understanding the root causes, consequences, and potential solutions to this pressing issue. How the System Works The United States is supported by a healthcare system made up of patients receiving care, payers, and providers. Coverage Overview The healthcare system in the US does not offer universal coverage. It combines market coverage that is privately financed with publicly financed government Medicaid and Medicare. Payments that are out-of-pocket and market provision of coverage dominate as healthcare provision and financing means (ISPFOR, 2024). Healthcare Financing The financial flow within the US Healthcare system involves hospitals, physicians, private insurers, and public programs (as shown in figure 1 below). Hospitals obtain payments from both private and public sources, using ambulatory payment classifications and diagnostic-related groups for inpatient and outpatient care respectively (ISPFOR, 2024). Current Procedural Terminology (CPT) codes are used to bill physician fee separately, reflecting a fee-for-service model. Private insurers frequently compensate hospitals above the real expenses through negotiated agreements, while public programs like Medicare and Medicaid sometimes reimburse hospitals at rates below the actual costs, leading to financial difficulties. Private Insurance Plans Private health insurance is common in the US, provided by national, regional, or self-insured plans. Employers often contribute to premiums, either fully or partially, for their employees, while individuals can also purchase private insurance through health insurance marketplaces (ISPOR 2024). Insurers pay providers based on agreed-upon amounts which covers significant proportions of service costs, especially for plans with low deductibles. Figure 1: The flow of funds in US health care Public Insurance Programs Public insurance programs are operated by the Centers for Medicare and Medicaid Services and funded primarily by government taxes (ISPOR 2024). Medicare covers seniors aged 65 and older, while CHIP offers health insurance for children under 18 from low-income families. Medicaid serves low-income families and individuals. Individual Financing Patients with health insurance often face premiums, copayments, deductibles, and coinsurance as part of their out-of-pocket spending. This spending amounted to $406.5 billion in 2019, with uninsured individuals bearing the full cost of care (ISPOR 2024). Regulation and Policymaking Congress enacts Federal healthcare laws, with the Department of Health and Human Services overseeing healthcare organizations nationally. States may also pass additional laws, provided they align with federal regulations (ISPOR 2024). Theoretical Model The structure and function of the US healthcare system are influenced by a combination of factors such as economic and political forces, which align with theoretical model of demand and supply. One characteristic that shapes the US healthcare system is the absence of universal coverage. From a demand and supply perspective, the demand for healthcare coverage is influenced by factors such as income, health status, and perceived need for medical services (Kong & Kim, 2020). For instance, individuals that have higher incomes may demand more comprehensive coverage compared to those that have less income (as shown in figure 2 below), contributing to a fragmented coverage landscape where there is coexistence between privately and publicly financed coverage options. Figure 2: When income increases, the demand shifts to the right (increases) The healthcare systems’ mixed nature can be explained by demand and supply. On the supply side, the surge in private health insurance plans and market-driven coverage provision reflect the demand for choice and healthcare financing competition. According to Goodell (2022), private insurers compete for customers by offering various plans with different benefits and premiums. This competition mirrors the supply and demand principles where providers respond to consumer demands for flexibility, customization, and access to a range of healthcare services. On the other hand, public insurance programs like Medicaid and Medicare impact an individuals’ willingness and ability to seek healthcare services, therefore influencing demand. The system’s financing mechanisms which include fee-for-service reimbursement and negotiated payments between insurers and providers, also reflect supply and demand interactions. According to Matchar et al. (2023), fee-for-service reimbursement incentivizes healthcare providers to maximize revenue by increasing the volume of services. This can be attributed to supply and demand side factors like profit motive and patient expectations respectively. Moreover, the different reimbursement rates between public programs and private insurers create financial incentives that shape provider behavior. Demand and supply can also explain the government’s role in regulation...