Financing Hospital Care in the United States

Since the 60’s, Medical costs have risen dramatically in the U.S. The greatest increase comes from hospital care. Most hospitals have been granted large wage increase and installed expensive modern equipments. To meet these large expenditures, hospitals raised charges to their services by about 600 percent.

hospitalThere are three main methods of financing hospital care in the country: (1) private insurance, (2) government funding, and (3) customer payments.

Private Insurance. Approximately 80% of Americans have health insurance of some kind. The employee, employer, and the government pays a certain amount for medical benefits. Private health insurance are offered either by insurance companies, medical service plans, employers, or organizations.

Medical service plans provide service benefits. This service is a direct payment to the physician or hospital for medical care. On the other hand, Health Maintenance Organizations (HMO’s) provide nearly complete health care services for a monthly or annual fee. Despite the complete services provided, patient’s options are limited or are bonded by the HMO’s restrictions. There are also employers who pay for the health care cost for their employees rather than buying insurance.

Government Funding. About 40 percent of all health care cost is paid by the government. Of course, the Federal government pays for the larger portion. Hospitals that receive such funding are those managed by the Public Health Service and the Department of Veterans Affairs.

Medicare is the biggest government funded health care program in the U.S. IT helps senior citizens pay for out patient, nursing and hospital care.

Customer Payments. Most insurance do no pay for cost of medicine, medical appliances, dental , and eyeglasses. Some only cover a portion of the outpatient care. Patients will need to cover part of the cost themselves. Nearly 25% of health care cost is paid by patients.

Hospital Benefit Plans

Hospitals and health and fitness systems are generally considered as companies that handle the ill and, more progressively, motivate precautionary health and fitness. However, hospitals are also companies and some of the greatest companies at that. In non-urban areas, a hospital is generally the prominent company, and it’s not unusual to find a health and fitness program with thousands of employees. With that comes a large benefit program for employees, which can be very costly and a big part of a hospital’s financial strategies. Consulting company Towers Watson lately finished its “2012 Hospital Industry Benefits Benchmarking Study,” which analyzed the benefits plan conditions of 48 hospitals and health and fitness systems across the country. The average number a survey participant was 5,000 to 10,000 employees, while the average size was 20,000 employees.

Two Towers Watson benefits experts, Joey Dizenhouse, senior health and fitness and group benefits advisor, and Sue DeFelice, senior pension benefits advisor say hospital benefit programs are going through a period of major change right now, just like those in the rest of the industry and in other sectors as well.

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Medical centers are interested in guiding their employees to their own suppliers and services. The expenses of health and fitness benefits signify more than one-third of a hospital’s total benefits expenses for employees, higher than most other sectors. As both a company and provider, hospitals have a unique advantage over other types of companies: They can direct their employees to use the system’s “domestic providers” to save on expenses, Mr. Dizenhouse says. This strategy is growing in reputation for two reasons. Medical centers are able to better handle the health and fitness of their employees, and their payments for worker medical care reuse to their own program instead of going to a competitor. “If employees use household suppliers when possible, a medical care facility is able to cure employees as sufferers,” Mr. Dizenhouse says. “That has always been key.”

Group health and fitness programs are being targeted toward hospital employees. Through outreach and education, hospitals have ramped up their initiatives to advertise maintenance in their areas. If people regularly see their doctor, that may lead to less trips in the more costly hospital inpatient setting.