/ Health Care in the United States: An Evolving System


Today's health care system is complex and very different from "what it used to be." This article reviews the economic factors driving the change to a managed care system, its impact on consumers, and what needs to be done in order to successfully navigate the system and advocate for further change, especially in terms of access for all.

Key Words: health care, health care expenditures, hospitals, insured, managed care, uninsured.

    1. Thomas P. Conklin, MSW, is Executive Director of Catholic Family Service of the Diocese of Saginaw, Saginaw MI 48602. He is also Adjunct Faculty Member in the Sociology Departments at Saginaw Valley State University and Delta College, University Center, 48710. Electronic mail may be sent via the Internet to tpc517@aol.comreturn to text

    Today's health care system is not only complex, it is significantly different from "what it used to be." The changes are many and represent the major shifts involved in moving from an indemnity plan, based primarily on what the patient wanted, to a managed care system. The American health care system has not only undergone drastic changes within two generations but also continues to evolve. What are the factors that are driving the changes? How is health care delivered differently than in the past? How are the changes impacting families, both in Michigan and across the nation? What can be done? What does the future hold? All of these are important questions as our population continues to age, as health care costs continue to increase, as treatments become more costly, and as increasing numbers of people are without health care coverage. This article will address these five questions in order to improve awareness of the evolving reality of health care in the U. S. in a way that may help individuals and families better navigate the system.

    What Factors Are Driving the Change?

    Weiss and Lonnquist (2000) wrote about the key factors that shape a culture's approach to health and to its health care delivery system. In addition to cultural beliefs and values, there are important economic and situational factors. Many of the changes that have led to a managed care system are rooted deeply within economic realities. The spiraling cost of health care in the United States is evidenced by both per capita expenditures, and also by measuring health care expenditures in relationship to the Gross Domestic Product (GDP).

    According to the Health Care Financing Administration (1998) increases in U. S. Health Expenditures are as follows:

    National Health Care Expenditures: 1960 – 1996
    YearIn BillionsPer Capita
    In reviewing cross-cultural data, Weiss and Lonnquist (2000) described the United States as having the most expensive health care system in the world. During the last four decades, health care spending has grown more rapidly than any other sector of the economy.

    Another way to view the rapid growth in expenditures, is to examine national health care expenditures in relationship to the GDP. According to Levit, Lazenby, and Braden (1998), for the past 40 years Americans have seen steady cost increases in excess of the growth of the rest of the economy. Health care's share of GDP went from 5 percent in 1960 to nearly 14 percent in 1990. Though stabilizing somewhat, the figure is anticipated to reach 15.6 percent or higher in 2010.

    A variety of factors have influenced this rapid and significant growth. They include:

    • Growth in the U. S. population, as well as an increasing number and percentage of elderly people in the population;
    • Increases in key health care technologies and related costs;
    • Growth of allied health care professions;
    • Increased reliance on drugs and related pharmaceutical costs;
    • Rising cost of individual and family health care insurance; and
    • Higher malpractice insurance, case settlements, and jury awards.

    Data on rising costs indicate the need for some type of action. The action taken by a health care system seeking correction and balance has been to look for ways to contain costs.

    How Has Health Care Delivery Changed?

    Dranove (2000) traces the economic evolution of American Health Care using the phrase "from Marcus Welby, M. D. to managed care." While it could appear a bit simplistic, it accurately defines the kinds of changes that the population has been experiencing over the years, some of which are confusing to many people and reflect very different ways of doing business in health care.

    Marcus Welby was a fictional T. V. physician, played by Robert Young, who operated an office out of his home. In each episode, he displayed sincere caring and concern for each of his patients, following them from the examining room, to the hospital, and home. He had time for everyone and frequently spent a great deal of effort in helping them address not only physical concerns but also their overall life situations. Few of the episodes addressed who was paying the bill: the physician's bill, the hospital bill, the bill for the lab work, the bill for prescription medication, and—in today's world—the bill for home health care or nursing home care.

    For most of the twentieth century the traditional U. S. health care system, according to Dranove (2000) had three defining features:

    1. patients relied on autonomous physicians to act as their agents;
    2. patients received complex care from independent, non profit hospitals; and
    3. insurers did not intervene in medical decision making and reimbursed physicians, hospitals, and other providers on a fee-for-service basis.

    Clearly, it was a situation that easily resulted in significant spiraling cost increases. Managed care—on the other hand—reflects a significant change in doing business that has gradually reached most areas of the health care arena. Dranove (2000) describes managed care as beginning with Health Maintenance Organizations (HMOs) as focusing on the following:

    • optimizing health through preventive care;
    • reducing overutilization and unnecessary utilization of expensive services; and
    • standardizing and controlling the widely varying quality of care offered by traditional fee-for-service providers.

    While many variations of managed care exist, Bodenheimer and Grumbach (1998) defined it quite simply as "organizations that foot the bill for a patient's care have taken the role of managing the patient's care. Payers and insurers no longer simply write checks; they become involved in decisions about how much care a patient receives, what kind, and by which providers" (p. 78).

    The Institute for the Future (2000) described the growing influence of managed care as a system where future internal managers in provider organizations as well as external managers working for intermediaries and insurance plans will assume increasing authority in managing physicians' behavior and patient compliance. Good bye, Marcus Welby.

    Managed care is not new however. Dranove (2000) traces its origins to the 1890s, when physicians agreed to provide prepaid medical care to lodges, fraternal orders, unions and other associations of workers. These groups already supplied members with social benefits such as life insurance, so paying for health care was a natural extension for them. Prepaid group practice also traces its beginnings to the early twentieth century when industrial medicine and health care began to be provided for a prepaid monthly fee. Currently, a significant portion (55 percent) of American health care insurance is provided by employers who now, along with employees, are responsible for paying the bill. Understandably, insurers who could offer to reduce or contain costs as much as possible appealed to many and have kept health insurance "more affordable."

    Managed care advanced rapidly in the 1990s. According to a survey conducted by Business & Health Magazine (Employer Sponsored Health Benefits Survey, 1997), in 1990,62 percent of health benefit plans were of a "conventional" indemnity nature, and only 38 percent were characterized as managed care. In 1997 the ratio had shifted dramatically with only 18 percent defined as conventional and 82 percent as managed care. The Institute for the Future (2000) reported that employment-related health plans are being quickly converted to managed care plans or being discontinued. Other health insurance programs, such as Medicare and Medicaid as well as privately purchased plans (25 percent of the health care insurance total), also are covered increasingly by managed care programs.

    In Michigan, the Access to Health Care Coalition (2002) estimates that for the current year the increase in health insurance costs will be 16 percent, or an average of $6,230 per employee. Such increases further widen the gap between the insured and the uninsured, with employers and employees struggling to keep up. In addition, the situation is worsened for families not covered under employment health insurance plans who struggle to pay their own health care and health insurance costs.

    How Are the Changes Impacting Families?

    While debate continues on both the success and the future of managed care, one cannot deny the increased emphasis on cost containment. The results of managed care and the continuing evolution of the American health care system are both quantitative and qualitative. They range from a reduction in hospital admissions and stays to an increase in ambulatory care, out-patient surgeries, and home care; from an emphasis on prevention and better decisions by consumers about health-related behaviors to the sometimes limited choices by consumers in selecting practitioners and in utilizing benefits; from increasing limitations in coverage with higher deductibles and co-pays to the reality of a still significant portion of the population among the disenfranchised or uninsured; and from quality of care and treatment to issues and concerns around trust. Four of these areas will be addressed in greater detail below.

    Hospital Admissions, Out-patient Surgeries & Home Health Care

    The number of hospitals increased each year from the mid-1940s through 1979 when it began to decline (Weiss & Lonnquist, 2000). The following table from a publication by the American Hospital Association (1997) illustrates the fluctuation over four decades in the availability of hospitals, beds, and admissions:

    American Hospital Trends: 1950 – 1996

    19506,7881.46 million18.48 million
    19606,8761.66 million25.03 million
    19707,1231.62 million31.76 million
    19806,9651.37 million38.89 million
    19906,6491.21 million33.77 million
    19966,2011.06 million33.31 million

    In Michigan, the Access to Health Care Coalition (2002) recently reported similar decreases in the number of hospitals and beds available in the state. For example, in 2001 and 2002, two of the largest health care systems in southeastern Michigan (i.e., Metropolitan Detroit) were hit with significant losses that resulted in hospital and clinic closures. These closures result in additional strains on remaining hospitals, creating even greater stresses for an already fragile system.

    While hospital closings and mergers create many issues and concerns, both the declining number of beds and the declining number of admissions is related to a significant decline in the number of in-patient surgeries. In 1985, in-patient surgeries totaled 82 percent and out-patient surgeries totaled 18 percent of all hospital surgical procedures (Weiss & Lonnquist, 2000). By 1995, the respective percentages of in-patient and out-patient surgeries were 42 percent and 58 percent. While the cost savings to insurers is real, although difficult to calculate, the impact on formal and informal after-care services and in home health care is equally difficult to estimate. Now many more patients return home on the same day of their surgeries. For individuals with familial and social supports this reality may not be as challenging as for patients who live alone and have little if any family or social network on which to depend.

    Prevention & Choice

    An advantage of many managed care programs is the coverage provided for prevention, annual physicals, early detection of illness, certain types of regular screening, and education around specific illnesses. HMOs and other forms of managed care programs, working under capitated rates (wherein they are paid the same amount per person per month/year, regardless of utilization) have realized the value of effective prevention. In today's world, most of the leading causes of death are related to life style. It is calculated by the Institute for the Future (2000) that 40 percent of sickness is related to life style and health behavior choices. Clearly education and early case finding are paramount.

    Prevention has proven effective for individuals or families who have made life style and health behavior changes. However, for many patients, changing to a managed care program, or switching between managed care programs, changes and limits the choices of providers to those on preferred panels. In many plans, if a patient wants to see a provider with whom he or she is familiar, but who is not included as a provider in their "new" plan, an option may exist for obtaining "out of network" services, but it almost always comes with a significantly higher out-of pocket co-pay.

    Some reviewers (Drovane, 2000; Weiss & Lonnquist, 2000) have indicated that the criticism that managed care programs steer and restrict patient choice is misplaced, claiming that except for selecting a primary care physician, patients rarely select hospitals, specialists, and other health care providers on an independent basis.

    The Insured, the Underinsured, & the Uninsured

    While employers struggle to keep up with the increasing costs of providing health care insurance, many plans are covering less and including higher deductibles and co-pays. Some employers are covering fewer persons. Some are passing the increases on to employees and requiring higher levels of employee contribution. And some employers are just doing away with health care benefits all together. While reductions in the "value" of an existing plan adversely impact employees, the ability to contain insurance costs helps for more people to at least remain covered in some fashion—even if their coverage is only for very serious illnesses.

    The number of people in the population without health care has increased. Currently it is estimated that 42 million people, or 16 percent of the population, is without any form of health care insurance. According to the Kaiser/ Commonwealth Health Insurance Survey (1997), half of the people without health insurance do not have a regular doctor, and 40 percent had to make changes in their way of life to pay needed medical bills. The Institute for the Future (2000) projected that the number of uninsured will reach 48 billion by 2010. While this statistic usually rises during times of recession and decreases in times of expansion, the number of uninsured has increased even during the expansion of the late 1990s and early 2000s. The Institute for the Future (2000) also reported that the number of non-elderly persons covered by employment related health insurance dropped from 69.2 percent in 1987 to 63.5 percent in 1993.

    In Michigan, for example, the Access to Health Care Coalition (2002) reported that between 1999 and 2000 the percent of residents without health insurance decreased from 10.1 percent to 9.8 percent, representing a total of 982,000 persons. However, given the relationship between the economy and the availability of health insurance, this decrease appears temporary. An increase is expected in the number of uninsured, especially in light of the economic downturn of 2001. Of the uninsured in Michigan, an estimated 106,000 are children—despite programs aimed at improving children's health like Healthy Kids and MIChild. While not all eligible children have been enrolled in these programs, a considerable number are not eligible based on family income exceeding a percentage of the Federal Poverty Level (FPL). Mirroring national trends, Michigan is struggling with rising unemployment, a budget deficit, and growing demands for health services and insurance coverage.

    Often the underinsured and uninsured use the emergency room, the most expensive form of health care service, for any illness. Ninety-five percent of acute care hospitals have emergency room units open 24 hours a day that are designed to provide care for acutely ill and injured patients, and that the emergency room has become something of a family physician for many people (Weiss & Lonnquist, 2000). Weiss and Lonnquist (2000) reported that uninsured emergency room care visits totaled 93 million in 1996. In approximately half of the cases, urgent care was not needed, nor did the individuals seeking care have a regular physician or other option for gaining access to health care services.

    The Institute for the Future in Health and Health Care 2010 described three tiers of coverage in today's evolving health care system and projected how individuals and families may experience this changing system based on which tier of health coverage describes their particular situation (2000). Their observations are summarized below:

    Tier 1: The securely enfranchised. The first group represents 38 percent of the population. It consists of empowered consumers with considerable discretionary income, who are well educated and use technology, including the Internet,, to get information about their health. Usually they are able to make choices in their plans and coverages. They are able to educate themselves about health behaviors as well as health care issues and concerns. They are likely to engage in shared decision making with physicians and other allied health professionals. Because access and benefit/ coverage security are not issues for them, and because they are more likely to be politically active, their tier will be the most likely to influence changes in legislation and health care structure.

    Tier 2: The insecurely enfranchised. The second group represents 34 percent of the population who have access to some health insurance but little if any choice when changes in plans and/or coverage occurs. Their primary concern is benefit security and the issue of value as plans become more restrictive. People included in this group include those with unstable job security, both employers and employees, and also early retirees who are waiting for Medicare to begin. Though they have limited access to information, they are likely to focus on learning more about plans and coverages. They are also likely to become more empowered due to some of the voluntary associations to which they belong who focus on problems in the health care system.

    Tier 3: The disenfranchised. The third group represents 28 percent of the population whose main concern is access to health care. It includes people under 65 who are uninsured as well as children who have no coverage or are covered by Medicaid. Access to care for this tier is severely limited because the safety net has frayed. People in this tier depend on the limited resources and strained generosity of safety net funding streams and providers. While some are covered by Medicaid, this plan offers only limited choices and benefits depend on funding which often competes with prisons and schools. Generally poor and lacking education, most people in this tier have serious trouble overcoming the information gap between patients and providers. They may be largely ineffective in changing legislation or the structure of health care. If the problem of access is to be solved, it will need to be driven from the top two tiers.

    Quality & Trust

    Most research indicates that HMO enrollees and indemnity insurance enrollees are about equally satisfied with the quality of care in their plans—even patients who were sick when they were surveyed (Dranove, 2000; Weiss & Lonnquist, 2000). Trust however is another issue. Mechanic's elements of trust (cited in Dranove, 2000) are as follows:

    • Patients trust that providers will act unselfishly, putting the patients' interest above their own
    • Patients trust that providers have the technical competence necessary for proper diagnosis and treatment, and
    • Patients trust that providers can control and coordinate the resources necessary to deliver quality care.

    Survey results indicated that only 30 percent of patients in managed care plans trusted that their plan would do the right thing for their care, while 55 percent in traditional plans trusted their plans. Also, fewer than 30 percent of patients trusted their HMOs to control costs without adversely affecting quality of care (Dranove, 2000). Managed care has a long way to go in persuading the public that managed care is actually care management, although they frequently advertise high quality at a reasonable cost.

    What Can Be Done?

    All of this information may be overwhelming, although it represents only a brief overview of the issues and concerns related to our evolving health care system. Nevertheless, there are several practical steps that we can take both individually and collectively:

    • Practicing more health promotion behaviors and using preventive services;
    • Preparing to bear a higher burden of health insurance cost (if one has coverage) or preparing to bear a higher burden of actual "out-of-pocket" health care costs;
    • Being ready to provide more home care services to assist friends and family members whose surgical procedures will involve limited hospitalization;
    • Anticipating further limitations in selecting one's own primary care provider;
    • Knowing your own plan and any intended changes;
    • Developing assertiveness skills in dealing with your own insurers, providers, and case managers;
    • Keeping abreast of broader issues and concerns, such as how the entire system bears the cost of the underinsured and, especially, the uninsured;
    • Advocating for policy changes at the legislative level, especially for those without access to even basic health care services.

    What Does the Future Hold?

    While trends can be traced and often predicted, there are a significant number of "wild cards" in the future that make the evolution of the American health care system uncertain and volatile. Some of these, according to the Institute for the Future (2000), include

    • Demographic trends and increasing numbers of elderly people in the population;
    • Reimbursement rates for home health care services; new cost containment and cost-shifting strategies;
    • Increasing technology;
    • Economic recessions or expansions; legal and mandatory restrictions on managed care plans;
    • Malpractice insurance, settlements, and jury awards; universal health insurance legislation; and
    • Switching from a private and public insurance model to a national health insurance system.

    One solution is to learn from other health care delivery models. A review of the health care systems of five different countries suggests that the United States system is not necessarily the best health delivery system in terms of access —especially when compared to that of England and Canada (Weiss & Lonnquist, 2000). Perhaps we could benefit both by learning more about other systems (especially from countries with high levels of access), and also by beginning to advocate for needed changes in the American health care system.

    Indeed, the greatest changes may come about as consumers make their concerns known to providers and to state and federal policy makers. It would also make strategic and tactical sense for providers to partner with consumers and policy makers to bring about needed changes. Given our current reality, the focus of change will need to address both access and affordability.


    Access to Health Care Coalition (2001). Closing the gap: Improving access to health care in Michigan. Blue Cross Blue Shield of Michigan. Retrieved March 1, 2002 from http://bcbsm.com/blues/pdf/access_to_hc.pdf

    American Hospital Association (1997). Hospital statistics: A comprehensive summary of U. S. hospitals. Chicago, IL: Author.

    Bodenheimer, T. S., & Grumbach, K. (1998). Understanding health policy: A clinical approach (2nd ed.). Stanford, CT: Appleton & Lange.

    Dranove, D. (2000). The evolution of American health care. Princeton, NJ: Princeton University Press.

    Employer-Sponsored Health Benefits (1997). Business & Health Magazine, 15, 60.

    Institute for the Future (2000). Health and health care 2010: The forecast, the challenge. San Francisco, CA: Jossey-Bass.

    Kaiser/ Commonwealth Health Insurance Survey (1997). National Survey of Health Insurance. New York: Commonwealth Fund.

    Levit, K. R., Lazenby, H. C., Braden, B. R., and the National Accounts Team (1998). National health spending trends in 1996. Health Affairs, 17, 35-51.

    Weiss, G. L., & Lonnquist, L. E. (2000). The sociology of health, healing, and illness (3rd ed.). Upper Saddle River, NJ: Prentice Hall.