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The Modern Health Care Maze: Development and Effects of the Four-Party System

By Kroncke, Charles; White, Ronald F. | Independent Review, Summer 2009 | Go to article overview

The Modern Health Care Maze: Development and Effects of the Four-Party System


Kroncke, Charles, White, Ronald F., Independent Review


Our national health care system is so dauntingly complex that reform efforts seem hopelessly adrift. How should we proceed in reforming that system? As a rule, any "realistic" reform project must begin with a survey of its principal stakeholders. A stakeholder, by definition, is any party who has a "stake" in the outcome--that is, anyone who stands to benefit or to suffer from either maintaining or changing the status quo. Our health care system today comprises many and often competing stakeholder groups. The four most visible ones are first-party patients, who seek access to an imponderable variety of health care products and services; second-party providers of these products and services, including hospitals, physicians, nurses, physical therapists, dentists, and pharmaceutical companies; third-party payers, including private insurance companies, government programs such as Medicaid and Medicare, and their employees; and fourth-party employers, who purchase health insurance for their employees and thereby obtain a deductible expense in calculating their federal income-tax liability.

Other stakeholder groups are less visible, but nonetheless salient. There are scientists engaged in research and development of medical products and services. Some are employed by research laboratories affiliated with private corporations, and others are employed by government labs. Most are funded by government research grants. Many scientists teach at tuition-driven public and private educational institutions that train future researchers, providers, and institutional administrators. There are also financial institutions that lend tuition money to ambitious college students in the health care professions and provide capital to hospitals, laboratories, and other facilities. And we must not forget the vast number of lawyers and law firms that specialize in medical malpractice litigation and the insurance companies that sell malpractice insurance. Many stakeholders directly or indirectly earn paychecks by building, maintaining, and managing the aforementioned institutions and programs, and many of these people are affiliated with labor unions or professional societies. Many of us invest in mutual funds that hold stock in the health care sector. The most ephemeral of all stakeholder groups are those that lack favorable tax status and therefore indirectly finance our health care system.

In the United States, politics--that is, each stakeholder group's capacity to influence powerful legislators--drives health care reform. Some groups stand to benefit from maintaining the status quo, whereas others stand to benefit from reform. Therefore, politically sensitive presidential candidates and lawmakers tend to "nibble around the edges" for fear of alienating a stakeholder group. Revolutionary change therefore is highly unlikely.

Health care is, indeed, much more complex than the traditional doctor-patient relationship suggests. The health care industry in the United States accounts for at least 14 percent of the gross domestic product (GDP), with approximately $5,267 spent per person annually (Cannon and Tanner 2007). Between 2007 and 2017, growth in health care spending is expected to remain steady at about 6.7 percent per year, but by 2017 health care will account for about one-fifth of the U.S. economy (Keehan et al. 2008, w145), which greatly exceeds its proportion in other nations. Moreover, the government's role in financing health care is expanding. Prior to Medicare's creation in 1965, the public sector accounted for approximately 25 percent of health care expenditures; today its portion is 45 percent (Sharp, Register, and Grimes 2008, 446). The U.S. government funds the lion's share of the medical research done in this country, from which the entire world benefits. The National Institutes of Health alone spend about $28 billion annually.

Prevailing discourse on health care reform aims at the simultaneous realization of three extraordinarily idealistic goals: universal access to high-quality health care at a reasonable cost.

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