Nov 26, 2020 in Medicine


The constitutional components of the health care sector are the same in both industrialized and developing countries. They depend on the organizational approach, pooling budget and delivering services. The constant tendency of health care development of the last century is the incensement of services cost and health care expenditures. This paper describes health care budget pooling models of the United States, Canada and Germany. It also describes health care salaries, reimbursement methods, factors that are causing the cost's rise and the ways to manage it. The percentage of gross domestic product (GDP) per year of the expenditures on health care sector of the United States, Canada and Germany are compared. The constitutional structure of each country's budget pooling is explained. At the example of Germany and the USA reimbursement methods are explained.

Key words: health care expenditures, health care cost, reimbursement methods, salaries of physicians.

Salaries and the Cost of Health Care


Health care system in every country consists of the same components. In both, industrialized and developing countries, key determinants of health care organizations are similar. They depend on organizational approach, financing and delivery of health services, institutional framework, health care strategies and policies (Busse & Blumel, 2014). The constant tendency of health care development is the growth of services cost and expenditures on this branch. At the examples of the United States, Canada and Germany health care salaries, reimbursement methods, factors that are causing cost's rise and the ways to manage it will be described in this paper.

Cost of Health Care

The United States' expenditures on health care are the largest in the world both in the terms of the sum amount, and per capita measures. Thereby, in 2011 the US spent $2.7 trillion on this branch. In the United States 48% of health-care expenditures are covered by public sources. The rest are distributed as 40% for private third party sources and 12% for individual out-of-pocket payments. Medicare and Medicaid covers only 30% of the US population. Meanwhile the majority, more precisely 54% of Americans, are covered by insurances (Rice, Rosenau, Unruh, Barnes, Saltman & van Ginneken, 2013).

As for Germany, which has the largest national economy in Europe, total expenditures on health care are about 11.4% of GDP per year. Between 1995 and 2011 the private share of health expenditures has risen from 18.3% to 23.5%. The part of public share of total health expenditures in Germany is about 72.9% (Busse & Blumel, 2014).

In Canada, almost 70% of total health expenditures are covered by the public sector. Yet, demographic aging has not been a major reason for the health expenditures growth. During the last twenty years prescription drugs cost was the major driver of the whole expenditures. Therefore, this issue was redirected into the hospitals' responsibility. General tax revenue covers almost all health spending. It covers Medicare, which includes necessary free hospital and physician services. The remaining amount covers long-term care and drugs prescription. Provinces budgets on health care sector are pooled both, through own-source revenues and through the Canada Health Transfer, which covers 1/4 of total expenditures. In 2011 the total spending on health care in Canada was $200 billion. Almost 43% of them were directed to hospital and physician services. This percent may be called "insured services under the Canada Health Act. Among this amount, almost 30% is covered by the private service, mostly dental and vision care. Additionally, the government has spent almost 25% on health infrastructure and non-Medicare subsidized publicly services. (Marchildon, 2013).

In the US pooling sources consist of revenue, financing and financial flows. The situation has started to change since the 1970s, when the out-of-pocket payments constituted 40% of budget funding. Currently this rate has fallen to 14%. Private health insurance (35%), Medicare (23%), Medicaid (16%), and other government programs (4%) including CHIP (joint-federal state initiative that finances health insurance to low-income families with children) are the main poolers of the American health care budget funding (Rice, Rosenau, Unruh, Barnes, Saltman & van Ginneken, 2013).

In Germany pooling of budget is divided between the public, governmental and private sources. Public sources consist of Social Health Insurance (almost 60%) and additional ones like statutory retirement insurance, statutory insurance for occupational accidents and disease, statutory for long-term care insurance. Governmental sources contributed 4.8%. Lastly, private sources (27%) consist of private households, including expenditure by nongovernmental organizations, private insurers, and employers (Busse & Blumel, 2014).

In Canada the basic source of health care budget pooling is taxation by the F/T/P governments. It covers 70% of the whole system. Out-of-pocket payments cover almost 15%, meanwhile almost 13% are sourced by private insurance (Marchildon, 2013).

Even though, the constitutional parts of health care budget funding are the same, each state establishes its own proportion of distribution of the contributions between stakeholders. Thus, the United States are individually oriented. The issue of having access to health care services is a question of personal responsibility as well as the coverage of this access. The Americans have an opportunity to insure their health according to the risks they expect to experience. In Germany the main responsible body for the health care expenditures are the employers as they cover health treating costs of the major part of population. Meanwhile in Canada health care expenditures are expected to be the state's priority. Each province may have its own features in covering the cost of health care, but still the main payer is the state.

Reimbursement Methods

The reimbursement system in Germany is case-based. The number of surcharges may be reduced due to to the innovative diagnostics and treatment procedure. It is possible to exclude the cost of current hospital services from the G-DRG list. Instead of hospital coverage it is proclaimed to refund them through the system of individually conditioned fees. G-DRG system was implemented in 2004 in Germany as a new payment system. According to it, such self-governing structures as the German Hospital Federation and The Associations of the Statutory Sickness Funds, and private health insurers are obliged to consider the complexity of the case in accordance with the DRG demands. The DRG covers medical treatment, nursing care, pharmaceuticals, therapeutic appliances, board and accommodation, accepts the capital costs (Busse & Blumel, 2014).

In the United States the Health Maintenance Organization unites insurance companies into a network. After provided services, the HMO refunds the amount of money spent on a particular patient to the hospital. If patient did not have the insurance and the case was an emergency or the patient was under the age of 65, the hospital will cover expenditures on treating, after that the state will reimburse the hospitals' expenditures (Rice, Rosenau, Unruh, Barnes, Saltman & van Ginneken, 2013).

As follows, regardless of the chosen funding model, the state is responsible for the patients who have a need in hospitalization. It provides reimbursement models to be implemented. The basic principle of reimbursement consists of covering the cost of health care expenditures for those, who fell out of the systematized scheme.

Factors that are Causing Costs to Rise

From the end of the World War II expenditures for healthcare are continuously increasing. As it is known, healthcare expenditures depend on demand, supply, industry structure and technological considerations. Statistical observations in the United States show the triple increase of healthcare expenditures in proportion to GDP in the period between 1960s and the early 1990s. The persistent trend of growth of healthcare expenditures is caused by the incensement of technical sophistication of treatments, the demand and the cost of provided services, and the inflation. Nowadays both politicians and public attention are focused on the cost of healthcare services (Scott, 2000).

Current Trends in Salaries for Physicians

In 2009 the Central Reallocation Pool was introduced in Germany in order to reorganize the system of collecting and distributing SHI contributions. Before the reform was implemented all sources were divided among the insured members by sickness funds. After the reform of 2009 the Central Reallocation Pool, which is under the administration of Federal Insurance Authority, collects money centrally. Further pooled money is subsequently reallocated between sickness funds according to a morbidity-based risk-adjustment scheme (Busse & Blumel, 2014).

As it is known, the way the employees are paid, influences their productivity. In the United States the career of the physician depends on chosen specialty (primary or else), location of practice (urban or rural) and self-promotion of professional skills. In the 1990s, primary care physician reimbursement was improved. However, there is still a gap between the salaries of primary care physicians and others. In 2003, the average salary of a primary care physician was nearly $147 thousand compared to $235 thousand for a specialist position. An average medical practitioner earned nearly $211 thousand, when an average surgical specialist earned $272 thousand in 2003. Compared to 10 other members of Organization for Economic Cooperation and Development the United States expenditures on primary care physicians' salaries are the highest after the Netherlands. Being a primary medical practitioner also contributes social interpretation of chosen position. Thus, chances of a primary practitioner to be elected as a dean of a medical school are lower than of any other specialty . The place where practice takes place is the next important factor of a practitioner's salary. The disadvantages of practicing in a rural location are in less specialty support and developing opportunities as well as fewer practice hours (Rice, Rosenau, Unruh, Barnes, Saltman & van Ginneken, 2013).


To conclude, regardless of the type of the country, whether industrial or developing, constitutional components of the health care sector are the same. It is built upon the principles of organizational approach, pooling budget, delivering services. Among these options, the increase of financial brunch is observed. The amount of expenditures on health care sector has been rising rapidly all over the world over the last century. The United States', Canada's and Germany's pooling models were presented in this paper as well as the total structure of their expenditures in health care. In order to manage the cost of services, health care systems distribute the expenditure parts among state, public and private bodies. Each state chooses a model it considers to be appropriate, but the fact is there is no ideal algorithms to avoid high expenditures on health care as it continuously becomes more expensive. The only issue to solve is choosing the body which is the most responsible for covering health expenditures: either state, individual or public sources.

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