Types of Health Care: HMOs, PPOs, Socialized Medicine & Direct-Fee System

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  • 0:05 Health Care
  • 0:54 Direct-Fee System
  • 1:54 Health Insurance
  • 3:19 HMOs and PPOs
  • 5:04 Socialized Medicine
  • 6:26 Lesson Summary
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Lesson Transcript
Instructor: Erin Long-Crowell

Erin has an M.Ed in adult education and a BS in psychology and a BS in management systems.

In this lesson, we discuss health care as a social institution and how health care systems differ worldwide. We also discuss several different ways that health care is paid for by patients, organizations and government.

Health Care

What do you think of the health care that's available in our society? Healthcare provides the services from medical and health professionals that are needed to diagnose, treat and prevent disease, as well as improve health. Sociologists study the distribution of health care systems worldwide. While technology and scientific advancements have improved the practice of medicine and overall health, not all people have the same quality of or access to health care. Costs vary around the world, and health care systems look different even among high-income nations. In this lesson, we'll discuss several ways that individuals pay for medical care, including a direct-fee system, HMOs, PPOs and socialized medicine.

Direct-Fee System

Let's begin by taking a look at the healthcare industry in the United States. Here, health care is treated much like any commodity for sale: those who can afford it get it, and those who can't, don't. This is a direct-fee system, where patients pay directly for the services of doctors and hospitals. Americans pay more for healthcare than the citizens of any other country. In 2010, Americans spent an average of $8,233 per person. The country with the second highest expenditures spent about $3,000 less per person. And, like other commodities for sale, health prices have spiraled upwards with higher demand. In total, Americans paid almost $2.6 trillion for health services and medication in 2010, which is even double the amount we spent just ten years earlier.

Health Insurance

Pie chart showing the percentage of Americans with health insurance
Health Insurance Pie Chart

Of the adults who did have health insurance in 2010, an average 9% had public health insurance - Medicare or Medicaid. With our system of publicly funded health care, the extremely poor and the elderly and disabled receive health insurance through the government that is paid for by taxes. As we'll discuss a little later in this lesson, almost every other industrialized nation uses a universal system of publicly funded health care, in which everyone receives health care paid for by taxes. In America, however, the majority of the adult population - about 65% - has private health insurance through an employer or by purchasing coverage on their own.

HMOs and PPOs

Most Americans who have private health insurance are enrolled in some type of managed health care plan. The two most common types are HMOs and PPOs. Both vary in their benefits and costs, but neither typically provides full coverage. A Health Maintenance Organization (HMO) is an organization that provides or arranges comprehensive medical care to subscribers for a fixed fee. An individual with an HMO makes regular payments in order to be a member of the organization, which in turn pays a portion of the member's medical expenses. However, the member must choose a primary care physician that acts as a kind of gatekeeper for medical care. If a patient needs care from any other physician or a service, like a lab test or x-ray, the primary care physician must provide a referral first, and the medical provider or service must be within the organization's 'network.'

The other common managed health care plan is a Preferred Provider Organization (PPO), an organization that consists of a group of medical providers that offer their services to specific groups of patients at discount prices. Like HMOs, PPOs require a membership fee, although it's normally higher. Unlike HMOs, the member does not have to select a primary care physician. Instead, the member can see any doctor but receives significant discounts by using doctors within the network. If the member chooses someone outside of the network, the cost will be higher.

Socialized Medicine

Canada and the U.K. are examples of nations with universal health care
Publicly Funded Health Care
socialized medicineuniversal health care

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