U.S. Healthcare System Explained

If you are thinking of moving to the USA from the UK, or already have firm plans in place, then you will need to know as much as possible about how life will change for you.

One very important factor, whether you are moving by yourself or with your family, is healthcare. Unlike the UK’s NHS, the U.S. operates on a primarily private healthcare system that can be complex, costly, and varies significantly based on factors like employment, location, and coverage options.

Let 1st Move International give you a breakdown of how the U.S. healthcare system works.

History of Healthcare in the USA

Going back to the late 1800s and early 1900s, the U.S. government had very little involvement in healthcare, and care was provided mainly by independent doctors and hospitals. This meant that there were many Americans who just couldn’t afford healthcare.

During the Second World War, there was a shortage of doctors and nurses, but in 1942 the US government introduced something called the Stabilization Act to try to control rising inflation and stabilize prices, wages and salaries. This allowed hospitals to pay their employees more which increased the number of healthcare workers.

Private health insurance grew in popularity after the war, but it remained at a high cost meaning many were without insurance. In 1965, to try to combat this, Medicare and Medicaid were created, which assisted in providing healthcare for the elderly and those on low incomes.

The U.S. Healthcare System Explained

The U.S. healthcare system is known for being one of the best in the world, with access to top professionals and cutting-edge technology, largely due to the funding provided through Americans’ health insurance. However, the way healthcare is funded presents significant challenges. Many Americans remain without coverage simply because they cannot afford it.

Obamacare attempted to address these imbalances by making healthcare more affordable and accessible to a broader population, but it faced resistance and underwent changes with subsequent political shifts. It’s crucial for anyone moving to the USA to thoroughly research this aspect of living and incorporate healthcare costs into their financial planning.

Key Features of the US Healthcare System

The US healthcare system is a complex mix of public and private financing. Publicly funded programs like Medicare and Medicaid coexist with private insurance plans. As of recent data, approximately 50% of citizens receive private insurance through their employers, while about 20% rely on Medicaid and 14% on Medicare. Despite these options, there remains a significant portion of the population, around 9%, who are uninsured.

Healthcare Financing Structure

Hospitals in the U.S. receive payments from both public and private sources. Payments are often made through diagnostic-related groups (DRGs) for inpatient care, assigning a fixed amount for specific conditions regardless of actual treatment costs. Outpatient services use Ambulatory Payment Classification (APC) codes, which follow a fee-for-service billing structure.

Physician fees are separately billed using Current Procedural Terminology (CPT) codes, highlighting the fee-for-service nature of U.S. healthcare. Private insurers employ various payment schemes, such as case rates and per diems, often resulting in reimbursements that exceed hospital service costs, unlike Medicare and Medicaid, which typically reimburse less.

To aid your understanding of available services and costs, here are some leading health insurance companies in the USA:

• United Healthcare
• Kaiser Foundation
• Anthem
• Cigna

Medicare and Medicaid

Medicare was introduced as a federal health insurance program for Americans who are 65 or older and for people with certain disabilities such as Alzheimer’s, Parkinson’s and Multiple Sclerosis.

There are 4 parts to Medicare coverage:

• Part A covers hospital insurance
• Part B covers medical insurance
• Part C covers Advantage plans, which include both parts A & B plus other benefits
• Part D which is coverage for drugs.

Each part has different costs, and these are funded by both payroll taxes and premiums paid for by beneficiaries.

Medicaid is a joint federal and state program providing health coverage to families and individuals on low incomes, utilised by around 20% of Americans. This provides services such as primary, hospital and long-term healthcare. Some services not covered by Medicare, such as optical and dental services, are covered by Medicaid, as well as coverage for children and pregnant women.

The Affordable Care Act (ACA)

Healthcare in the USA has continued to evolve and, in 2010, the then President Barack Obama introduced the Affordable Care Act, which came to be known as “Obamacare”. The idea was to make health insurance more accessible for Americans, as well as more affordable, by expanding Medicaid and by introducing “health insurance marketplaces”.

These “health insurance marketplaces” provide the opportunity for Americans to have government subsidies towards insurance plans, based on their income. The ACA also required insurance companies to cover pre-existing conditions, prohibited lifetime limits on coverage.

The ACA really reduced the number of Americans who did not have health insurance, but faced a lot of opposition in the government. When President Trump came into power, changes were made meaning that there was no provision to fine anyone who did not health insurance, and also giving individual states more leeway to seek certain waivers where they so wished.

Comparing the UK and USA Healthcare Systems

If you move from the UK to the USA, you will see many differences in the healthcare systems that you have access to. In the USA, healthcare is provided largely by private companies, and is funded predominantly by individuals purchasing their own insurance, or through health insurance policies provided by the companies that they are employed by. This means that the result is a fragmented system that gives varying levels of access and healthcare depending on how much you are able to afford.

In the UK, we have access to the National Health Service (NHS), which is funded through taxes and has no cost at the time of the provision of services. Although this provides healthcare for all, mainly at the same level of care throughout, as we know it has its own challenges in terms of funding.

Another difference is with the level of involvement that the government has in the UK and USA in respect of the provision on health services. In the USA the government has a smaller role, whilst in the UK the government is responsible for the majority of health care provision.

Both healthcare systems have their pros and cons, but you need to be aware, and factor into your financial planning, that in the USA you will need to fund your healthcare provision yourself through health insurance, albeit through your own policy of via your employer.

US Healthcare System Pros and Cons

Pros of the US Healthcare System:

• Access to advanced medical technology and treatments.
• Some of the best hospitals in the world.
• Highly trained workforce of doctors, nurses and other healthcare professionals
• Provides top quality care

Cons of the US Healthcare System

• High cost
• Large disparity of healthcare access amongst different racial and ethnic groups
• Lack of universal coverage, leading to many individuals without health insurance and no access to basic healthcare services.

Removals from the UK to the USA

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