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Updated: Jul 11, 2020

The USA is a public and private healthcare system.

  • Medicare is a federal program which funds for the healthcare for adults higher than 65 years, patients with disabilities, for veterans

  • Medicaid for low-income people, children, pregnant women

  • Veteran administration and TRICARE cover veterans

  • Private insurance dominated the market and majorly contributed by employers

  • 15% of insured people have multiple sources of coverage

  • 8.5% of the population are uninsured


The United States healthcare system is a mix of public and private health insurance systems. Medicare and Medicaid are the major government programs, and most of the population is covered by private insurance. Private insurance is funded mostly by premiums.


Key stakeholders in the USA
Key stakeholders in the USA


The US Department of Health and Human Services is responsible for the health and well-being of all Americans.


The Center for Medicare and Medicaid Services (CMS) administers the nation’s major healthcare programs. The CMS oversees Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).


The Centers for Disease Control and Prevention (CDC) is a part of HHS and is involved in protecting the safety and health of Americans through the control and prevention of the disease, injury, and disability in the USA. It is majorly involved in controlling infectious diseases, foodborne pathogens, environmental health, and injury prevention.


It is a part of HHS involved in conducting and supporting medical research.


The Agency for Healthcare Research and Quality (AHRQ) knowledge, tools, and data in order to improve the healthcare system.


The US Food and Drug Administration is responsible for drug and medical equipment approvals.

The Center for Drug Evaluation and Research (CDER) is responsible for ensuring the safety and efficacy of prescription drugs and over-the-counter drugs. CDER and Center for Biologics Evaluation and Research (CBER) are responsible for the approval of the biologics. CBER ensures that biologics are safe and effective for use. The Center for Devices and Radiological Health (CDRH) is responsible for the safety and efficacy of medical devices and safe radiation-emitting products.



Payroll taxes and federal general tax fund Medicare.


Federal and state taxes fund Medicaid.


The funding is from the premiums.


Medicare is a federal health insurance system. People aged more than 65 years, patients with disabilities, and patients of all groups with end-stage renal diseases.

In 2017, Medicare covered 58 million people. The money for Medicare comes from two Trust Funds.

Hospital insurance trust fund

  • It is funded through payroll taxes, income tax paid on Social Security benefits, interest earned, Medicare Part A premium (people who are not eligible for free Part A)

  • It pays for Medicare Part A

Supplemental health insurance trust fund

  • It is funded majorly from the premium paid for Part B and Part D

  • It covers the cost of Part B benefits and prescription drugs

Medicare has four parts.

Part A: Part A is hospital insurance, which includes the cost of inpatients hospital care, nursing facilities, hospital care, and some health care.

Most people do not pay for Part A as they or their spouse have paid while working through payroll taxes.

Part B: Part B is medical insurance, which covers doctor’s service and outpatient care. It also includes physical and occupational therapists and some healthcare. People pay premiums to cover Part B services.

In 2020, the standard Part B premium cost is $144.60

Part D: Part D includes prescription drug coverage. People should opt for a plan approved by Medicare to avail Medicare drug coverage. People pay premiums to cover Part D services.

Part C: Part C is Medicare Advantage. Private health insurance companies provide Part C. This plan offers more benefits in addition to Medicare benefits. Usually, private insurance companies combine Part A, Part B, and Part D to provide a single comprehensive plan. Patients who want Medicare Advantage plan has enrolled in Part and Part B, then signup with a private insurer to choose the Medicare Advantage plan.


Medicaid and Children Health Insurance Program (CHIP) are social welfare programs, which provide health coverage for free or less cost. Medicaid and CHIP cover low-income families, children, pregnant women, the elderly, and patients with disabilities. Medicaid has 64.5 million people enrolled.

Medicaid coverage varies from state to state.


Private health insurance is the predominant health insurance in the United States. Private insurance includes both group-insurance (predominantly from the employer-sponsored insurance) and non-group insurance (individual purchase).


United States Healthcare System | Funding flow | Organisation of healthcare in the US
United States Healthcare System | Funding flow | Organisation of healthcare in the US

PRIMARY CARE: One-third of doctors in the US are primary care physicians. It is delivered by three specialties: family medicine, general internal medicine, and general pediatrics—these specialties provide direct patient care.

Primary care physicians are usually paid through negotiated fees (private insurance), capitation (private insurance and some public insurance), and administratively set costs (public insurance).

OUTPATIENT SPECIALITY CARE: Outpatient care is provided by specialists both in the hospitals and private groups. They are free to choose the insurance which they would like to accept.

Co-payment for the patients is paid during the visit.

HOSPITAL CARE: Hospitals are free to choose the type of insurance they would like to accept. Most of the hospitals accept Medicare and Medicaid. In addition, hospitals accept private insurance, which is the most dominant insurance in the US.

LONG-TERM CARE: There is no universal rule to cover patients for the long term. Medicare and employed based insurance plans cover only post-acute services. Purchasing long-term private insurance is uncommon in the US.


The US is a free pricing system and is considered as one of the most liberal pricing countries in the world.

Drug pricing and reimbursement in the US
Drug pricing and reimbursement in the US

Insurance companies conduct their own pharmacoeconomic evaluation for formulary decisions. The negotiations are mostly based on the rebates rather than considering the cost-effectiveness, unlike the UK. Medicare Part D drugs have no negotiation; however, state Medicaid can do the negotiation.


Institute for Clinical and Economic Review (ICER) is considered as USA’s NICE. ICER reviews clinical and cost-effectiveness, using Quality-Adjusted-Life-Year (QALY) in their cost-effectiveness analyses.

There is a growing influence of ICER in the decision making of reimbursing the products.

ICER considers treatment affordability and budget impact in its analysis.

Veteran Affairs and various private insurances are considering the outcomes of ICER for decision making. CVS Caremark gave an option for its customers to exclude the drugs from the formulary, which does not achieve the benchmark of $100,000 per QALY.

The challenge for ICER is less transparency, as it sometimes depends only on its own data collection.



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