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What is covered?

  • Australia

    Services: The federal government defines Medicare benefits, which include hospital care, medical services, and pharmaceuticals, to name a few. States provide further funding and are responsible for the delivery of free public hospital services, including subsidies and incentive payments in the areas of prevention, chronic disease management, and mental health care. The Medicare Benefits Scheme (MBS) provides for limited optometry and children’s dental care.

    Pharmaceutical subsidies are provided through the Pharmaceutical Benefits Scheme (PBS). Pharmaceuticals need to be approved for cost-effectiveness by the independent Pharmaceutical Benefits Advisory Committee (PBAC) to be listed. War veterans, the widowed, and their dependents may be eligible for the Repatriation PBS.

    Nearly half (48%) of federal support for mental health is for payments to people with a disability; remaining support goes to payments to states, payments and allowances for caregivers, and subsidies provided through the MBS and PBS. State governments are responsible for specialist and acute mental care services.

    Home care for the elderly and hospice care coverage are described below in the section “How Is the Delivery System Organized and Financed?”

    Cost-sharing and out-of-pocket spending: Out-of-pocket payments accounted for 18 percent of total health expenditures in 2013–2014. The largest share (38%) was for medications, followed by dental care (20%), medical services (e.g., referred and unreferred private health insurance), medical aids and equipment, and other health practitioner services.

    There are no deductibles or out-of-pocket costs for public patients receiving public hospital services. GP visits are subsidized at 100 percent of the MBS fee, and specialist visits 85 percent. GPs and specialists can choose whether to charge above the MBS fee. About 83 percent of GP visits were provided without charge to the patient in 2014–2015. Patients who were charged paid an average of AUD31 (USD20).

    Out-of-pocket pharmaceutical expenditures are capped. In 2015 the maximum cost per prescription for low income earners was set at AUD6.10 (USD3.97) with an annual cap of AUD366 (USD238). For the general population, the cap per prescription is AUD37.70 (USD24.55) per prescription, which reverts to the low income rate cap if they incur more than AUD1,454 (USD947) in out-of-pocket expenditure within a year. Consumers pay the full price of medicines not listed on the PBS. Pharmaceuticals provided to inpatients in public hospitals are generally free.

    (Please note that, throughout this profile, all figures in USD were converted from AUD at a rate of about AUD1.54 per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD (2015) for Australia.)

    Safety nets: Beginning in January 2016, a new Medicare Safety Net will replace the previous Original Medicare Safety Net, the Extended Medicare Safety Net, and the Greatest Permissible Gap arrangements. Medicare will reimburse 80 percent of out-of-pocket costs (up to a cap of 150 percent of the MBS fee) for the remainder of the calendar year once annual thresholds are met: AUD400 (USD260) for concessional patients (including low-income adults, children under 16, and certain veterans); AUD700 (USD456) for parents of school children and singles; and AUD1,000 (USD651) for all other families.

    In addition, patients with out-of-pocket expenses for disability aids, attendant care, or aged care can claim the income-tested Net Medical Expenses Tax Offset. This arrangement had applied more broadly to out-of-pocket expenses but is being phased out. The remaining offset will be eliminated in July 2019.

  • Canada

    Services: To qualify for federal financial contributions under the Canada Health Transfer, provincial and territorial insurance plans must provide first-dollar coverage of medically necessary physician, diagnostic, and hospital services (including inpatient prescription drugs) for all eligible residents. There is no nationally defined statutory benefits package; most public coverage decisions are made by provincial and territorial governments in conjunction with the medical profession. Provincial and territorial governments provide varying levels of additional benefits, such as outpatient prescription drugs, nonphysician mental health care, vision care, dental care, home health care, and hospice care. They also provide public health and prevention services (including immunizations) as part of their public programs.

    Cost-sharing and out-of-pocket spending: There is no cost-sharing for publicly insured physician, diagnostic, and hospital services. All prescription drugs provided in hospitals are covered publicly, with outpatient coverage varying by province or territory. Physicians are not allowed to charge patients prices above the negotiated fee schedule. In 2012, out-of-pocket payments represented about 14.2 percent of total health spending, going mainly toward prescription drugs (21%), nonhospital institutions (mainly long-term care homes) (22%), dental care (16%), vision care (9%), and over-the-counter medications (10%).

    Safety net: Cost-sharing exemptions for noninsured services such as prescription drugs vary among provinces and territories, and there are no caps on out-of-pocket spending. For example, the prescription drug program in Ontario exempts low-income seniors and social assistance recipients from all cost-sharing except a CAD2.00 (USD1.60) copayment, which is often waived by pharmacies. Low income is defined as annual household income of less than CAD16,018 (about USD12,700) for single people and less than CAD24,175 (USD19,168) for couples.

    There are no caps on out-of-pocket spending. However, the federal Medical Expense Tax Credit supports tax credits for individuals whose medical expenses, for themselves or their dependents, are significant (above 3% of income). A disability tax credit and an attendant care expense deduction also provide relief to individuals (or their dependents) who have prolonged mental or physical impairments, and to those who incur expenses for care that is needed to allow them to work.

  • China

    Services: Publicly financed insurance covers primary, specialist, emergency department, hospital, and mental health care, as well as prescription drugs, and traditional medicine. A few dental services (e.g., tooth extraction, but not cleaning) and optometry services are covered, but mostly they are paid for completely out-of-pocket. Home care and hospice care are often not included either. Local health authorities define the benefits package. Preventive services such as immunization and disease screening are included in a separate public-health benefits package funded by central and local government; every citizen and migrant is entitled to these without copayments or deductibles. Coverage is person-specific; there are no family or household benefit arrangements.

    Cost-sharing and out-of-pocket spending: Inpatient and outpatient care, including prescription drugs, is subject to different deductibles, copayments and reimbursement ceilings. There are no annual caps on out-of-pocket spending. In 2013, out-of-pocket spending per capita was CNY2,327 (USD636) to CNY3,234 (USD886) and CNY1,274 (USD348) in urban and rural areas, respectively—representing about 34 percent of total health expenditures.

    Most out-of-pocket spending is for prescription drugs. Reimbursement ceilings are significantly lower for outpatient care than for inpatient care. For example, in 2013, ceilings were CNY3,000 (USD820) for outpatient care and CNY180,000 (USD49,180) for inpatient care in the rural new cooperative medical scheme in Beijing.

    Provider networks are specific to the insurance scheme, normally at the prefecture-level for urban employment-based basic health insurance and urban resident basic health insurance (which may share the same network, but with different benefits) and at the county-level for new cooperative medical scheme. People can use out-of-network health services (even across provinces), but these have higher copayments. There are no universal cost-sharing arrangements, and each risk pooling unit (network) has its own policies. Cost-sharing in primary care facilities (village clinics, rural township hospitals, and urban community hospitals) and secondary/tertiary hospitals is also different, with the lowest copayments in the former. Secondary and tertiary hospitals are accredited by the local health authorities based on their qualifications, and both provide primary care, outpatient specialists, and inpatient hospital care. Migrant populations face much higher cost-sharing and out-of-pocket spending, since they often use care out-of-network. Fee schedules for primary and secondary care are regulated by the local health authorities and the Bureaus of Commodity Prices, and it is unlawful to charge patients above the fee schedules.

    Safety net: For individuals who are not able to afford individual premiums for publicly financed health insurance or out-of-pocket spending (which is not capped), a medical financial assistance program, funded by local governments and social donations, serves as safety net in both urban and rural areas. In Beijing, the individual poverty level in 2015 was defined as CNY670 (USD183) per month in rural areas and CNY710 (USD194) in urban areas; poverty levels for other provinces may be lower than Beijing. Medical financial assistance programs prioritize inpatient care expenses. Funds are mainly used to pay for individual deductibles, copayments, and medical spending exceeding annual caps, as well as individual premiums for publicly financed health insurance. In 2013, 63.6 million people (approximately 5% of the Chinese population) received such assistance for health insurance enrollment, and 21.3 million people (1.6% of the population) received funds for direct health expenses.

    There are other financial assistance programs to help with unreimbursed emergency department expenses and other health expenses. Mostly these are funded by local governments.

  • Denmark

    Services: Publicly financed health care covers all primary, specialist, hospital, and preventive care, as well as mental health and long-term care services. Dental services are fully covered for children under 18. Outpatient prescription drugs, adult dental care, physiotherapy, and optometry services are subsidized. Home care and hospice care are organized and financed by the regions as described below.

    Decisions about levels of service and new medical treatments are made by the regions, within a framework of national laws, agreements, guidelines, and standards. Municipalities decide on the service level for most other welfare services. There is no defined benefits package, but very few restrictions exist for treatments that are evidence-based and clinically proven.

    Cost-sharing: There is no cost-sharing for hospital and primary care services. Cost-sharing is applied to dental care for those age 18 and older (coinsurance of 35% to 60% of total cost), outpatient prescriptions, and corrective lenses. Out-of-pocket payments represented 12.4 percent of total health expenditures in 2013, covering mostly outpatient drugs, corrective lenses, hearing aids, and doctor and dental care. Patients with outpatient drug expenses of more than 3,045 DKK (USD394) per year receive the highest reimbursement rate—85 percent. Private specialists, hospitals, and dentists are free to set their own fees for patients not covered by public funding.

    (Please note that throughout this profile, all figures in USD were converted from DKK at a rate of about DKK7.59 per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD (2015b) for Denmark.)

    Safety net: There are cost-sharing caps for children, and municipalities provide means-tested social assistance to older people. If personal assets are DKK77,500 (USD10,217) or less, 85 percent of all prescription drug costs are covered. Chronically ill people with high drug usage and costs can apply for full reimbursement above an annual out-of-pocket ceiling of DKK3,775 (USD498). The terminally ill can also apply for full coverage of prescriptions. Municipalities may grant financial assistance to individuals certified as otherwise unable to pay for needed medicine.

  • England

    Services: The precise scope of the National Health Service (NHS) is not defined in statute or by legislation, and there is no absolute right for patients to receive a particular treatment. However, the statutory duty of the Secretary for Health is to ensure comprehensive coverage. In practice, the NHS provides or pays for preventive services, including screening, immunization, and vaccination programs; inpatient and outpatient hospital care; physician services; inpatient and outpatient drugs; clinically necessary dental care; some eye care; mental health care, including some care for those with learning disabilities; palliative care; some long-term care; rehabilitation, including physiotherapy (e.g., after-stroke care); and home visits by community-based nurses.

    The volume and scope of these services are generally a matter for local decision-making, but the NHS Constitution also states that patients have a right to drugs or treatment approved in technology appraisals carried out by the National Institute of Health and Clinical Excellence (NICE), if recommended by their clinician. For drugs or treatments that have not been appraised by NICE, the NHS Constitution states that Clinical Commissioning Groups (CCGs) shall make rational, evidence-based decisions (a total of 533 appraisals were carried out between March 2000 and August 2014). There is no routine reporting of how individual clinical commissioning groups make decisions, but a study of predecessor organizations found considerable variation. There is also evidence of wide variations in access to some treatments, such as hip replacements.

    Cost-sharing and out-of-pocket spending: There are limited cost-sharing arrangements for publicly covered services. Out-of-pocket payments for general practice are limited to services that fall outside the purview of the NHS, including examinations for employment or insurance purposes and the provision of certificates for travel or insurance.

    Outpatient prescription drugs are subject to a copayment (currently GBP8.20, or USD11.60, per prescription item in England); drugs prescribed in NHS hospitals are free. NHS dentistry services are subject to copayments of up to GBP222.50 (USD314.00) per course of treatment. (Throughout this profile, all figures in USD were converted from GBP at a rate of GBP0.71 per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD, 2015).These charges are set nationally by the Department of Health. Out-of-pocket expenditure on health by households accounted for 11.9 percent of total expenditures in the U.K. in 2013. In 2013, the largest portion of out-of- pocket spending (34%) was for pharmaceuticals, followed by about 20 percent on medical appliances and equipment (Office for National Statistics, 2015; including consumer spending on drugs and medical products not covered by the NHS, such as glasses, dental treatment, and spending on hospital and outpatient care).

    Safety net: People who are exempt from prescription drug copayments include children under age 16 and those 16 to 18 in school full time; people age 60 or older; people with low income; pregnant women and those who have had a baby in the past 12 months; and people with cancer, certain other long-term conditions, or certain disabilities. Patients who need large amounts of prescription drugs can buy prepayment certificates costing GBP29.10 (USD41.10) for a period of three months and GBP104 (USD147) for 12 months. Users incur no further charges for the duration of the certificate, regardless of how many prescriptions they need. In 2013, 90 percent of prescriptions in England were dispensed free of charge. Young people, students, pregnant and recently pregnant women, prisoners, and those with low incomes are not liable for dental copayments. Vision tests are free for young people, those over 60, and people with low incomes, and financial support to meet the cost of corrective lenses is available to young people and those with low incomes. Transportation costs to and from provider sites also are covered for people who qualify for the NHS Low Income Scheme.

  • France

    Services: Lists of covered procedures, drugs, and medical devices are defined at the national level and apply to all regions of the country. The Ministry of Health, a pricing committee within the ministry, and SHI funds all play roles in setting these lists, rates of coverage, and prices.

    Statutory health insurance (SHI) covers the following: hospital care and treatment in public or private rehabilitation or physiotherapy institutions; outpatient care provided by general practitioners, specialists, dentists, and midwives; diagnostic services prescribed by doctors and carried out by laboratories and paramedical professionals; prescription drugs, medical appliances, and prostheses that have been approved for reimbursement; and prescribed health care–related transportation and home care. It also partially covers long-term hospice and mental health care, and provides only minimal coverage of outpatient vision and dental care.

    While preventive services in general receive limited coverage, there is full reimbursement for targeted services and populations, e.g., immunization, mammography, and colorectal cancer screening.

    Cost-sharing and out-of-pocket spending: Cost-sharing takes three forms: coinsurance; copayments (the portion of fees not covered by SHI); and balance billing in primary and specialist care. In 2013, total out-of-pocket spending made up 8.8 percent of total health expenditures (excluding the portion covered by supplementary insurance), a lower percentage than in previous years, possibly because of the agreement signed between physicians’ unions and government to limit extra billing. In exchange for a voluntary restriction on extra billing to no more than twice the official fee, this contract offers patients partial reimbursement of extra billing by SHI and reduced social charges for physicians.

    Most out-of-pocket spending is for dental and optical services, for which official fees are very low, not more than a few euros for glasses or hearing aids and a maximum of EUR200 (USD241) for dentures, but all of these are commonly balance-billed at amounts over 10 times the official fee. The share of out-of-pocket spending on dental and optical services is decreasing, however, while that on drugs is increasing, owing to increased VHI coverage of dental and optical care and increasing numbers of delisted drugs, as well as a rise in self-medication.

    Coinsurance rates are applied to all health services and drugs listed in the benefit package, and vary by:

    • type of care (inpatient, 20%; doctor visits, 30%; and dental, 30%)
    • effectiveness of prescription drugs (highly effective drugs, like insulin, carry no coinsurance; rates for all other drugs are 40%–100%, based on therapeutic value)
    • compliance with the recently implemented gatekeeping system

    The table below lists nonreimbursable copayments for various services. These apply up to an annual ceiling of EUR50 (USD60). There are no deductibles.

    EurosU.S. Dollars
    Inpatient hospital day1822
    Doctor visit1.001.20
    Prescription drug0.500.60
    Hospital treatment above EUR1201822

    Safety net: People with low incomes are entitled to free or state-sponsored VHI, free vision care, and free dental care, with the total number of such beneficiaries estimated at around 10 percent of the population. Exemptions from coinsurance apply to individuals with any of 32 specified chronic illnesses (13% of the population, with exemption limited to the treatments for those conditions); individuals who benefit from either complete state-sponsored medical coverage (3% of the population) or means-tested vouchers for complementary health insurance (6% of the population); and individuals receiving invalidity and work-injury benefits. Hospital coinsurance applies only to the first 31 days in hospital, and some surgical interventions are exempt. Children and people with low incomes are exempt from paying nonreimbursable copayments.

  • Germany

    Services: Statutory health insurance (SHI) covers preventive services, inpatient and outpatient hospital care, physician services, mental health care, dental care, optometry, physical therapy, prescription drugs, medical aids, rehabilitation, hospice and palliative care, and sick leave compensation. Home care is covered by long-term care insurance (LTCI). SHI preventive services include regular dental checkups, child checkups, basic immunizations, checkups for chronic diseases, and cancer screening at certain ages. All prescription drugs are covered unless explicitly excluded by law (mainly so-called lifestyle drugs) or disallowed following evaluation. While the broader framework of the benefits package is legally defined, specifics are decided upon by the Federal Joint Committee. Long-term care services are covered separately by the LTCI scheme .

    Cost-sharing and out-of-pocket spending: Out-of-pocket (OOP) spending accounted for 13.6 percent of total health spending in 2013, mostly on nursing homes, pharmaceuticals, and medical aids.

    Copayments include EUR5.00 (USD6.40) to EUR10.00 (USD12.70) per outpatient prescription, EUR10.00 per inpatient day for hospital and rehabilitation stays (for the first 28 days per year), and EUR5.00 to EUR10.00 for prescribed medical devices. Sickness funds offer selectable tariffs with a range of deductibles and no-claims bonuses. Preventive services do not count toward the deductible. Statutory health insurance (SHI)-contracted physicians are not allowed to charge above the fee schedule for services in the SHI benefit catalogue. However, a list of “individual health services” outside the comprehensive range of SHI coverage may be offered to patients paying OOP.

    Safety nets: Children under 18 years of age are exempt from cost-sharing. For adults, there is an annual cap on cost-sharing equal to 2 percent of household income; part of a household’s income is excluded from this calculation for additional family members. About 0.4 million statutory health insurance (SHI) insureds exceeded the 2 percent cap in 2013 and were exempted from further cost-sharing. The cap is lowered to 1 percent of annual gross income for qualifying chronically ill people; to qualify, those people have to demonstrate that they attended recommended counseling or screening procedures prior to becoming ill. Nearly 6.5 million people, or around 9 percent of all the statutory health insurance (SHI)-insured, have benefited from this regulation in 2013. Unemployed people contribute to SHI in proportion to their unemployment entitlements. For the long-term unemployed, government contributes on their behalf.

  • India

    Services: Covered services, some of which require copayments, include preventive and primary care, diagnostic services, and outpatient and inpatient hospital care. Medications on the essential drug list are free (if and when available), while other prescription drugs are purchased from private pharmacies.

    Services available through the national health programs are free to all. India has one of the world’s largest publicly financed HIV drug programs, and all drugs and diagnostic services for vector-borne diseases, such as dengue fever and malaria, are free, as are insecticide-treated bed nets for malaria control. Immunizations and maternal and child health (MCH) services are free as well.

    Under the National Rural Health Mission, public health institutions in rural areas are being upgraded to meet the benchmarks for quality laid down by the Indian Public Health Standards, which specify essential and desirable services that must be available in each type of health care facility. For example, at primary health centers these include outpatient services; emergency care provided mainly by nursing staff; referral and inpatient services; MCH-related services; school health and adolescent health services; care for noncommunicable diseases; basic laboratory services; linkages with secondary care providers and community health centers; basic surgical procedures; and medications on the state essential drug list and those required under national programs. The standards also cover necessary infrastructure and human resources. In practice, however, the availability of staff, equipment, and drugs varies significantly between and within states.

    Cost-sharing and out-of-pocket spending: Most states have some user charges for outpatient visits, hospital admission, diagnostic and prescription drugs, though there is huge variation in fee policies among the states. More than 70 percent of total health expenditures are financed through user fees, and most out-of-pocket spending is for hospital admissions. Nearly all admission, even to public hospitals, lead to catastrophic health expenditures, and over 63 million people are faced with impoverishment every year because of health care costs. In 2011–12, out-of-pocket spending on health care as a share of total monthly household spending per capita was 6.9 percent in rural areas and 5.5 percent in urban areas.

    Under the National Rural Health Mission, free treatment in public hospitals, as part of the Janani Suraksha Yojana, was extended to maternity, newborn, and infant care and to control of tuberculosis, malaria, and HIV/AIDS. For all other services, user fees continue to apply, especially for diagnostics and drugs excluded from the state’s essential drug list. (Janani Suraksha Yojana (JSY) is a safe motherhood intervention under the National Rural Health Mission with the objective of reducing maternal and neonatal mortality through the promotion of institutional delivery among poor pregnant women.)

    Defined as monthly per capita consumption expenditure of INR972 (USD55) in rural areas and INR1,407 (USD79.50) in urban areas. Please note that, throughout this profile, all figures in USD were converted from INR at a rate of INR17.7 per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD (2015) for India. The poverty ratio at the all-India level is 29.5 percent.

    Safety nets: Safety nets for the poor and other vulnerable groups are provided by a number of government-funded health insurance schemes that have been introduced in recent years. These are intended to improve access to hospitals and reduce out-of-pocket payments. Some states finance hospital care through health insurance programs. The RSBY protects mostly those below the poverty line. Evaluations of such schemes show improved utilization of hospital services (mainly private), especially among the poorest 20 percent of households.

    Another program, designed to reduce maternal mortality, is Janani Shishu Suraksha Karyakarm, launched in 2011 and currently implemented all over India. It entitles all pregnant women to free delivery, including by caesarean section, in public health institutions. Women receive free food, drugs, and consumables, as well as free diagnostics. Free transportation is also provided. Similar entitlements are available for all sick infants (up to age 1) at public health facilities.

  • Israel

    The mandated benefits package includes hospital, primary, and specialty care, prescription drugs, certain preventive services, mental health care, dental care for children, and other services. Dental care for adults, optometry, and home care are generally excluded, although the National Insurance Institute does provide some funding for home care, dependent on need. Limited palliative and hospice services are included in the national health insurance (NHI) benefits package as well.

    Israel has a well-developed system for prioritizing coverage of new technologies within an annual overall budget set by the Cabinet (which includes Parliament members from the ruling parties). Proposals for additions are solicited and received from pharmaceutical companies, medical specialty societies, and others. The Ministry of Health then assesses costs and benefits of the proposed additions, and a public commission combines the technical input with broader considerations to prepare a set of recommendations. These are usually adopted by the Minister of Health and subsequently by the Cabinet.

    Cost-sharing and out-of-pocket spending: In 2012, out-of-pocket spending accounted for 26 percent of national health expenditures. Some of this was for services not included in the NHI benefits package, including dental care for adults, optical care, institutional long-term care (for those not eligible for means-tested assistance), certain medications, and medical equipment. The other major component was copayments for NHI services, such as pharmaceuticals, visits to specialists, and certain diagnostic tests. Dental care and pharmaceuticals are the two largest out-of-pocket components.

    There are no copayments for primary care visits or for hospital admissions. There are also no quarterly or annual deductibles with NHI coverage. Within the NHI system, physicians are not allowed to balance-bill.

    Safety net: There are a variety of safety-net mechanisms in place. For pharmaceuticals there is a quarterly ceiling for the chronically ill, and discounts for the elderly based on age, income, and health status. Holocaust survivors are exempt from copayments for pharmaceuticals. With regard to specialist visits, there are exemptions for elderly welfare recipients, children receiving disability payments, and people afflicted with certain severe diseases. There is a quarterly ceiling on total copayments for these visits at the household level, which is 50 percent lower for elderly people. In addition, people earning less than 60 percent of average wages pay a reduced health tax of 3 percent of income, instead of 5 percent.

  • Italy

    Services: Primary and inpatient care are free at the point of use. Positive and negative lists are defined using criteria related to medical necessity, effectiveness, human dignity, appropriateness, and efficiency in delivery. Positive lists identify services (e.g., pharmaceuticals, inpatient care, preventive medicine, outpatient specialist care, home care, primary care) offered to all residents. Outpatient optometrist visits are covered, while corrective lenses are not. Negative lists, on the other hand, identify services not offered to patients (e.g., cosmetic surgery), services covered only on a case-by-case basis (e.g., orthodontics and laser eye surgery) and services for which hospital admissions are likely to be inappropriate (e.g., cataract surgery). Regions can choose to offer services not included in the essential levels of care but must finance them themselves.

    Essential levels of care do not include a specific list of mental health, preventive, public health, or long-term care services. Rather, national legislation defines an organizational framework for mental health services, with local health authorities obliged to define the diagnostic, curative, and rehabilitative services available. Essential levels of care also outline general community and individual levels of preventive services to be covered by the National Health Service, including hygiene and public health, immunization, and early diagnosis tools. They broadly state that rehabilitative and long-term inpatient care are to be delivered as part of a standard, inpatient curative care program.

    Prescription drugs are divided into three tiers according to clinical effectiveness and, in part, cost-effectiveness. The first tier is covered in all cases; the second, only in hospitals; and the third tier is not covered. For some categories of drugs, therapeutic plans are mandated, and prescriptions must follow clinical guidelines.

    Dental care is included in the essential levels of care for specific populations such as children (up to 16 years old), vulnerable people (the disabled, people with HIV, those with rare diseases), people in economic need, and individuals with urgent/emergency need. For others, dental care is generally not covered and is paid for out-of-pocket.

    Cost-sharing and out-of-pocket spending: Procedures and specialist visits can be prescribed either by a general practitioner (GP) or by a specialist. While there are no user charges for GP consultations and hospital admission stays, patients pay a copayment for procedures and specialist visits up to a ceiling determined by law—currently, at €36.15 (USD48) per prescription. Therefore, a patient who receives two separate prescriptions (e.g., an MRI scan and a laboratory test) after a visit pays €36.15 (USD48) for each prescription.

    (Please note that throughout this profile, all figures in USD were converted from EUR at a rate of about €0.76 per USD, the purchasing power parity conversion rate for GDP in 2013 reported by OECD for Italy.)

    To address rising public debt, in July 2011 the government introduced, along with other economic initiatives, an additional €10 (USD13) copayment for each prescription. Copayments have also been applied to outpatient drugs at the regional level, and a €25 (USD33) copayment has been introduced for “inappropriate” use of emergency services (although some regions have not enforced this copayment). No other forms of deductibles exist. Public and private providers under a contractual agreement with the National Health Service are not allowed to charge above the scheduled fees.

    All individuals with out-of-pocket payments over €129 (USD170) in a given year are eligible for a tax credit equal to roughly one-fifth of their spending, but there are no caps.

    In 2013, 18 percent of total health spending was paid out-of-pocket, mainly for drugs not covered by the public system and for dental care (OECD, 2014). Out-of-pocket payments can be used to access specialist care and, to a lesser extent, inpatient care delivered in private and public facilities to paying patients.

    Safety net: Exemptions from cost-sharing are applied to people over age 65 and under age 6 who live in households with a gross income below a nationally defined threshold (approximately €36,000 [USD47,360]); people with severe disabilities, as well as prisoners, are exempt from any cost-sharing. People with chronic or rare diseases, people who are HIV-positive, and pregnant women are exempt from cost-sharing for treatment related to their condition. Most screening services are provided free of charge.

  • Japan

    Services: All public health insurance system (PHIS) plans provide the same benefits package, which is determined by the national government, usually following a decision by the Central Social Insurance Medical Council, a governmental body. The package covers hospital, primary, and specialist ambulatory and mental health care, approved prescription drugs, home care services by medical institutions, hospice care, physiotherapy, and most dental care. It does not cover corrective lenses unless recommended by physicians for children under age 9, or optometry services provided by nonphysicians. Home care services by nonmedical institutions are covered by long-term care insurance. Preventive measures, including screening, health education, and counseling, are covered by health insurance plans, while cancer screenings are delivered by municipalities.

    Cost-sharing and out-of-pocket spending: All enrollees have to pay a 30 percent coinsurance rate for services and goods received, except for children under age 3 (20%), adults between 70 and 74 with lower incomes (20%), and those 75 and over with lower incomes (10%). There are no deductibles. Annual expenditures on health services and goods, including copayments and payments for balance billing and over-the-counter drugs, between JPY100,000 (USD 950) and JPY2 million (USD19,000) can be deducted from taxable income. (All figures in USD were converted from JPY at a rate of about JPY105 per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD. In 2012, out-of-pocket payments for cost-sharing accounted for 14 percent of total health expenditures. Some employer-based health insurance plans offer reduced cost-sharing. Providers are prohibited from charging extra fees except for some services specified by the Ministry of Health, Labor and Welfare, including amenity beds, experimental treatments, the outpatient services of large multispecialty hospitals, after-hours services, and hospitalizations of 180 days or more.

    Safety net: Catastrophic coverage stipulates a monthly out-of-pocket threshold, which varies according to enrollee age and income—for example, JPY80,100 (USD761) for people under age 70 with an average income; above this threshold, 1 percent coinsurance applies. There is a ceiling for low-income people, who do not pay more than JPY35,400 (USD336) a month. Subsidies (mostly restricted to low-income households) reduce the burden of cost-sharing for people with disabilities, mental illness, and specified chronic conditions. There is an annual household health and long-term care out-of-pocket payments ceiling, which varies between JPY340,000 (USD3,230) and JPY1.26 million (USD11,970) per enrollee according to income and age, above which such payments can be reimbursed. Enrollees with employer-based insurance who are on parental leave are exempt from payment of premiums. Enrollees in Citizens Health Insurance (for the unemployed, self-employed, and retired, and those others under 75) with low income and those with moderate income who face sharp, unexpected income reductions are eligible for reduced premium payments. Reduced coinsurance rates apply to patients with 306 designated long-term diseases, varying by income, when using designated health care providers.

  • The Netherlands

    Services: In defining the statutory benefits package, government relies on advice from the National Health Care Institute. Health insurers are legally required to provide a standard benefits package including, among other things, care provided by general practitioners (GPs), hospitals, and specialists; dental care through age 18 (coverage after that age is confined to specialist dental care and dentures); prescription drugs; physiotherapy through age 18; basic ambulatory mental health care for mild-to-moderate mental disorders, including a maximum of five sessions with a primary care psychologist; and specialized outpatient and inpatient mental care for complicated and severe mental disorders. In case the duration exceeds three years, the last of these is financed under the Long-term Care Act (see below).

    Some treatments, such as general physiotherapy and pelvic physiotherapy for urinary incontinence, are only partially covered for some people with specific chronic conditions, as are the first three attempts at in vitro fertilization. Some elective procedures, such as cosmetic plastic surgery without a medical indication, dental care above age 18, and optometry, are excluded. A limited number of effective health improvement programs (e.g., smoking cessation) are covered, and weight management advice is limited to three hours per year.

    As of 2015, home care is a shared responsibility of the national government, municipalities (day care, household services), and insurers (nursing care at home), and is financed through the Health Insurance Act. Hospice care is financed through the Long-term Care Act. Prevention is not covered by social health insurance, but falls under the responsibility of municipalities.

    Cost-sharing and out-of-pocket spending: As of 2015, every insured person over age 18 must pay an annual deductible of EUR375 (USD455) for health care costs, including costs of hospital admission and prescription drugs but excluding some services, such as GP visits.

    (Please note that, throughout this profile, all figures in USD were converted from EUR at a rate of about EUR0.83 per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD (2015) for the Netherlands.)

    Apart from the overall deductible, patients are required to share some of the costs of selected services, such as medical transportation or medical devices, via copayments, coinsurance, or direct payments for goods or services that are reimbursed up to a limit, such as drugs in equivalent-drug groups. Providers are not allowed to balance-bill above the fee schedule. Patients with an in-kind insurance policy may be required to share costs of care from a provider that is not contracted by the insurance company. Out-of-pocket expenses represented 13.8 percent (45% through deductible) of health care spending in 2013 (author’s calculation).

    Safety net: GP care and children’s health care are exempt from cost-sharing. Government also pays for children’s coverage up to the age of 18 and provides subsidies (health care allowances), subject to asset testing and income ceilings, to cover community-rated premiums for low-income families (singles with annual income of less than EUR26,316 [USD31,896] and households with income less than EUR32,655 [USD39,580]). Approximately 5.4 million people receive allowances set on a sliding scale, ranging from EUR5.00 (USD6.10) to EUR78.00 (USD95.00) per month for singles and from EUR9.00 (USD11.00) to EUR 149.00 (USD181.00) for households, depending on income.

  • New Zealand

    Services: The publicly funded system covers preventive care; inpatient and outpatient hospital services; primary care via private providers (excluding services such as optometry, adult dental services, orthodontics, and physiotherapy); inpatient and outpatient prescription drugs included in the national formulary; mental health care; dental care for schoolchildren; long-term care; home help; hospice care; and disability support services. Government sets an annual overall budget and benefits package, based largely on political priorities. It also sets national requirements for publicly funded services, to be implemented by the 20 DHBs. Rationing and prioritization are applied largely to nonurgent services, and vary by district health boards (DHB).

    Cost-sharing and out-of-pocket spending: Out-of-pocket payments, including both cost-sharing and other costs paid directly by private households, accounted for approximately 12.6 percent of total health expenditures in 2014 (OECD, 2015), with the largest portion going to outpatient services. There are no deductibles in the public sector, although copayments are required for general practitioner (GP) services and many nursing services provided in GP clinics. The average copayment for a GP consultation for an adult ranges from NZD15 to NZD45 (USD10–USD31), but copayments vary significantly, as there are no limits to these set by GPs. An exception applies to the one-third of New Zealanders residing in low-income areas, where a higher annual per-patient capitation rate is paid and, in return, patient copayments are capped at NZD17.50 (USD12.00) per visit.

    (Please note that, throughout this profile, all figures in USD were converted from NZD at a rate of about 1.47 NZD per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD, 2015b for New Zealand.)

    GP copayments fell during the period 2002–2008, when there were significant increases in government funding for primary care, but copayments have been increasing since then.

    Copayments are also required for drugs prescribed by GPs and private specialists (NZD5.00 [USD3.40] per item); after copayments are made for 20 prescriptions per family per year, they are free. There are no charges for residents treated in public hospitals, although there are some user charges, such as those for crutches and other aids supplied upon discharge. There are various means-tested subsidies, resulting in some copayments for long-term care, as discussed in the relevant section below.

    Safety net: Primary care is mostly free for children age 13 and under, and is subsidized for the 98 percent of the population enrolled in the networks of self-employed providers known as primary health organizations (PHOs). PHOs include general practitioners (GPs), practice nurses, and allied practitioners. Additional PHO funding and services are available for treating people with chronic conditions and for improving access to care for groups with greater health needs. A “high-use health card” is also available, upon application, to patients who have had more than 12 GP visits in a year. Subsequent capitation payments for those patients are set at a higher level to reflect this high-utilization pattern, although patients continue to make copayments.

  • Norway

    Services: Parliament determines what is covered, although there is no defined benefits package except for new and costly treatments and technologies (see below). In practice, national health care covers planned and acute primary, hospital, and ambulatory care, rehabilitation, and outpatient prescription drugs on the formulary (the “blue list”). It also covers dental care services for children up to 18 years of age and other prioritized groups, such as people with rare diseases or chronic diseases that increase the risk of dental problems, patients with chronic mental disabilities, and patients in permanent nursing homes. Dental care for 19–20-year-olds and dental orthopedics (braces) for children are partially covered. Nonmedical eye care, aesthetic surgery, and complementary medicine are not covered.

    Primary, preventive, and nursing care are organized at the local level by municipalities. The municipality, often in cooperation with the county, decides on public health initiatives or campaigns to promote a healthy lifestyle and reduce social health disparities. Preventive services for mental health are directed toward children and adolescents through the school system. Psychological care for children under the age of 18 is fully covered. Primary care for mental health is provided by general practitioners (GPs) and municipal psychologists. Long-term care, including palliative end-of-life care, is provided on the basis of need, either at home or in nursing homes. There are few designated hospice facilities. The substantial government funding for municipalities is generally not earmarked, and budgets are set locally, but provision of some services is statutory, particularly those related to pediatric and long-term care.

    Cost-sharing: GP and specialist visits, including outpatient hospital care and same-day surgery, require copayments (NOK141 [USD15] and NOK320 [USD34] per visit in 2015, respectively), as do physiotherapy visits (in varying amounts), covered prescription drugs (up to NOK520 [USD55] per prescription), and radiology and laboratory tests (NOK227 [USD24] and NOK50 [USD5]). Public providers cannot charge patients more than these amounts, except for bandages and other supplies. Consultations for antenatal and postnatal follow-up, for prevention and treatment of transmittable diseases for particularly vulnerable individuals, and treatment of sexually transmitted diseases are also exempt from copayments. Hospital admissions and inpatient treatment are free. Out-of-pocket payments finance about 14 percent of total expenditure.

    Home-based and institutional care for older or disabled people require high cost-sharing (up to 85% of personal income), but are means-tested.

    Safety net: The major safety net mechanisms are annual caps for out-of-pocket expenditure set by Parliament, above which fees are waived. For 2015, the cost-sharing ceiling for most services is NOK2,105 (USD223). A second ceiling is set at NOK2,675 (USD283) for services such as physiotherapy and certain dental services. Long-term care and prescription drugs outside the “blue list” do not apply toward these ceilings.

    Children under the age of 16 receive free treatment and access to essential drugs on the blue list. Pregnant women receive free medical examinations during and after pregnancy. Residents eligible for minimum retirement pension or disability pensions, which amount to about NOK162,000 (USD17,134) per year, receive free essential drugs and nursing care. Individuals with specified communicable diseases, including HIV/AIDS, and patients with work-related injuries receive free medical treatment and medication. Taxpayers with high expenses (above NOK5,880, or USD622) as a result of permanent illness receive a tax deduction. “Basic benefits” (NOK653–NOK2,264, or USD69–USD239 per month) may be provided, upon application, to patients who regularly incur additional expenses due to permanent illness, injury, or disability.

  • Singapore

    Services: Subsidies are available for care provided by public hospitals and polyclinics, as well as by government-funded intermediate and long-term care providers. MediShield, the second of the “3Ms,” provides low-cost insurance coverage for treatments in the subsidized wards of public hospitals and outpatient care for certain conditions, including kidney dialysis and cancer treatments. As a catastrophic insurance program, MediShield generally does not cover primary care, prescription drugs, preventive services, mental health care, dental care, or optometry. MediShield is operated by the Central Provident Fund Board.

    Cost-sharing and out-of-pocket spending: The government of Singapore contributes to building and maintaining the system and subsidizing a portion of the cost of patient care, based on the individual’s ability to pay. Copayments after subsidy can be covered by MediShield insurance or paid for through Medisave savings. For MediShield, an annual deductible against claims must be met before coverage can begin. Coinsurance for inpatient bills ranges from 20 percent to 10 percent as the bill increases. Therefore, after government subsidies, MediShield pays between 80 percent and 90 percent of the claimable amount that exceeds the deductible for selected outpatient treatment charges claimable under MediShield (e.g., kidney dialysis, chemotherapy for cancer, and erythropoietin for chronic kidney failure). Other outpatient services are fully paid from private funds or, in some cases, employer benefits. Deductibles do not apply to outpatient treatments. Instead, a 20 percent coinsurance is imposed. There is no annual cap on out-of-pocket spending.

    The health care system requires individuals to be ultimately responsible for their own health and to share in the cost of the services they use. Consequently, patients approach their health care choices knowing that they will pay a portion of the bill. In the Singapore system, patients are responsible for copayments and deductibles that are often higher than in other nations. According to the World Health Organization (2013), private spending amounts to 69 percent of total health care expenditure, of which 88 percent is out-of-pocket, including costs that are covered and reimbursed by employer medical benefits.

    Safety net: Medifund, the third of the Singapore system’s “3Ms,” is an endowment program funded by the government as a health care safety net. It was established in 1993, and its mission is to help the poor pay for their care. Money from the fund is disbursed each year to approved institutions, and a committee at each institution evaluates and approves financial assistance to patients. Government-funded providers (whether public or private institutions, or voluntary welfare organizations) are able to tap Medifund assistance for their patients.

    Medifund generally covers necessary medical treatment, including drugs, services, and tests. Medical social workers are in place to assist patients with the application process required before aid is granted. The amount of aid granted is determined by the patient’s and the family’s income, the social circumstances of the patient, the medical condition, and treatment costs. More than 90 percent of patients whose applications are approved receive assistance amounting to 100 percent of the outstanding portion of subsidized bills that they are unable to pay.

    The ElderCare Fund is another government-established endowment fund established by the government. The endowment, which stands at SGD3 billion (USD3.4 billion), provides grants to intermediate and long-term care facilities to subsidize the care of low- and middle-income patients (Ministry of Health, 2013).

    (Please note that throughout this profile, all figures in USD were converted from SGD at a rate of about SGD0.88 per USD, the purchasing power parity conversion rate for GDP in 2013 reported by the World Bank (2014) for Singapore.)

  • Sweden

    Services: There is no defined benefits package. The publicly financed health system covers public health and preventive services; primary care; inpatient and outpatient specialized care; emergency care; inpatient and outpatient prescription drugs; mental health care; rehabilitation services; disability support services; patient transport support services; home care and long-term care, including nursing home care and hospice care; dental care and optometry for children and young people; and, with limited subsidies, adult dental care. As the responsibility for organizing and financing health care rests with the county councils and municipalities, services vary throughout the country.

    Cost-sharing and out-of-pocket spending: In 2013, about 16 percent of all expenditures on health were private, and of these 93 percent were out-of-pocket (Statistics Sweden, 2015a). The majority of out-of-pocket spending is for drugs.

    The county councils set copayment rates per health care visit and per bed-day, leading to variation across the country. Providers cannot charge above the scheduled fee. The table below shows fee ranges for 2014.  

    ServiceFee Range (2014)
    Swedish KronerU.S. Dollars
    Primary care physician visit100–30011–34
    Hospital physician consultation200–35022–39
    Hospitalization per day80–1009–11
    Source: SALAR, 2015.

    (Please note that, throughout this profile, all figures in USD were converted from SEK at a rate of about SEK8.95 per USD, the purchasing power parity conversion rate for GDP in 2014 reported by OECD, 2015 for Sweden.)

    Nationally, annual out-of-pocket payments for health care visits are capped at SEK1,100 (USD123) per individual. In all county councils, people under age 18—and in most county councils, people under 20—are exempt from user charges for visits.

    Dental care: Dental and pharmaceutical benefits are determined at the national level. People under 20 have free access to all dental care. People 20 or older receive a fixed annual subsidy of SEK150–SEK300 (USD17–USD34), depending on age, for preventive dental care. For other dental services, within a 12-month period patients 20 or older pay the full cost of services up to SEK3,000 (USD335), 50 percent of the cost for services between SEK3,000 and SEK15,000 (USD1,676), and 15 percent of costs above SEK15,000. There is no cap on user charges for dental care.

    Prescription drugs: Individuals pay the full cost of prescribed medications up to SEK1,100 (USD123) annually, after which the subsidy gradually increases to 100 percent. The annual ceiling for out-of-pocket payments for prescriptions is SEK2,200 (USD246) for adults. A separate annual out-of-pocket maximum of SEK2,200 applies collectively to all children belonging to the same family. For certain prescription drugs not on the National Drug Benefits Scheme and not subject to reimbursement, patients must pay the full price.

    Safety net: Because the Swedish health care system is designed to be socially responsible and equity-driven, all social groups are entitled to the same benefits. The ceilings on out-of-pocket spending apply to everyone, and the overall cap on user charges is not adjusted for income. Children, adolescents, pregnant women, and the elderly are generally targeted groups, exempted from user charges or granted subsidies for certain services such as maternity care or vaccination programs.

  • Switzerland

    Services: The Federal Department of Home Affairs (FDHA) defines the statutory health insurance (SHI) benefits basket by evaluating whether services are effective, appropriate, and cost-effective. It is supported in this task by the Federal Office of Public Health (FOPH) and by Swissmedic, the agency for authorization and supervision of therapeutic products.

    SHI covers most general practitioner (GP) and specialist services, as well as an extensive list of pharmaceuticals, medical devices, home health care (called Spitex), physiotherapy (if prescribed), and some preventive measures, including the costs of selected vaccinations, selected general health examinations, and screenings for early detection of disease among certain risk groups (e.g., one mammogram per year for women with a family history of breast cancer).

    Hospital services are also covered by SHI, but highly subsidized by cantons. Care for mental illness is covered if provided by certified physicians. The services of nonmedical professionals (e.g., psychotherapy by psychologists) are covered only if prescribed by a qualified medical doctor and provided in his or her practice. SHI covers only “medically necessary” services in long-term care. The FOPH and Swiss Conference of Cantonal Health Ministers aim to eliminate the gaps in financing of hospice care. Dental care is largely excluded from SHI, as are glasses and contact lenses for adults (unless medically necessary), but these are covered for children.

    Cost-sharing and out-of-pocket spending: Insurers are required to offer minimum annual deductibles of CHF300 (about USD219) for adults under SHI, although insured persons may opt for a higher deductible (up to CHF2,500 [USD1,825]) and a lower premium. In 2013, 23.5 percent of all insured persons opted for the standard CHF300 deductible; the other 76.5 percent chose a higher deductible or another model with a gatekeeping element.

    Insured persons pay 10 percent coinsurance above deductibles for all services (including GP consultations), but is capped at CHF700 (USD511) for adults and at CHF350 (USD255) for minors (under age 19) in a given year. There is also a 20 percent charge for brand-name drugs with a generic alternative. For treatment in acute-care hospitals, there is a CHF15 (USD11) copayment per inpatient day. Cost-sharing in SHI and VHI accounted for 5.6 percent and 0.1 percent of total health expenditure in 2013.

    Moreover, out-of-pocket payments for services not covered by insurance (and in addition to cost-sharing) accounted for 18.1 percent of total health expenditure. Most of these direct out-of-pocket payments were spent on dentistry and long-term care. Providers are not allowed to charge prices higher than SHI will reimburse.

    Safety net: Maternity care and some preventive services are fully covered and thus exempt from deductibles, coinsurance, and copayments. Minors do not pay deductibles or copayments for inpatient care. Federal government and cantons provide income-based subsidies to individuals or households to cover SHI premiums; income thresholds vary widely by canton (Swiss Conference of Cantonal Health Ministers, 2015a). Overall, 28 percent of residents (in 2013) benefit from individual premium subsidies. Municipalities or cantons cover the health insurance expenses of social assistance beneficiaries and recipients of supplementary old age and disability benefits.

  • United States

    Services: The Affordable Care Act (ACA) requires all health plans offered in the individual insurance market and small-group market (for firms with 50 or fewer employees) to cover services in 10 essential health benefit categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health services and substance use disorder treatment; prescription drugs; rehabilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including dental and vision care. Each state determines the range and extent of specific services covered under each category by selecting a benchmark plan that covers all 10 categories; most states choose one of the largest small-group plans as the benchmark. Specific covered services vary somewhat by state.

    Private insurance plans sometimes use narrow networks of providers, with limited or no coverage if patients receive out-of-network care. Private coverage for dental care and optometry is also available—sometimes through separate policies—as is long-term care insurance. Private health insurance is required to cover certain preventive services (with no cost-sharing if provided in network).

    Medicare provides coverage for hospitalization, physician services, and, through a voluntary supplementary program, prescription drug coverage. The program also has eliminated cost-sharing for a number of preventive services. Medicare offers a choice between “traditional” Medicare, which is open-network and pays predominately on a fee-for-service basis, and Medicare Advantage, under which the federal government pays a private insurer for a network-based plan. Medicare covers postacute care but not long-term care, while Medicaid offers more extensive long-term care coverage (see below). In addition, Medicaid covers a broad range of core services, including hospitalization and physician services, with certain optional benefits varying by state.

    Cost-sharing and out-of-pocket spending: Cost-sharing provisions in private health insurance plans vary widely, with most requiring copayments for physician visits, hospital services, and prescription drugs. High-deductible health plans—those with a minimum annual deductible of $1,250 per individual or $2,500 per family—can be paired with tax-advantaged health savings accounts (i.e., deposited funds are not subject to federal income tax). The ACA includes cost-sharing subsidies for the purchase of plans through the insurance exchanges, with the largest subsidies aimed at people with incomes below 250 percent of the federal poverty level (FPL) (the FPL is $20,090 for a family of three, as of 2015) (ASPE, 2015b).

    Medicare requires deductibles for hospital stays and ambulatory care and copayments for physician visits and other services, while Medicaid requires minimal cost-sharing. Most public and private insurers prohibit providers from balance billing—charging patients more than the copayment required by their insurance plan—if they have an agreement with the payer to accept their set or negotiated payment amounts. Out-of-pocket spending accounts for 12 percent of total health expenditures in the U.S. The ACA caps cost-sharing for most private insurance plans at $6,600 for individuals and $13,200 for families per year in 2015.

    Safety nets: A variable and patchwork mix of organizations and programs deliver care for uninsured, low-income, and vulnerable patients in the United States, including public hospitals, local health departments, free clinics, Medicaid, and CHIP. Under the ACA, 30 states and the District of Columbia have expanded Medicaid coverage to cover individuals with incomes up to 138 percent of FPL, and premium and cost-sharing subsidies are now available to low- and middle-income individuals through the insurance exchanges (plan premium subsidies for incomes of 133%–400% of FPL; cost-sharing subsidies for incomes of 100%–250% of FPL). Hospitals that provide care to a high percentage of low-income and uninsured patients receive disproportionate share hospital (DSH) payments from Medicare and Medicaid to partially offset their uncompensated care; however, these payments are being substantially reduced as the ACA reduces the number of the uninsured. The federal government also funds community health centers, which provide a major source of primary care for underserved and uninsured populations. In addition, private providers are a significant source of charity and uncompensated care.

    Publicly financed health care: In 2013, public spending accounted for about 48 percent of total health care spending, although this figure is expected to increase post-ACA. (8) Medicare is financed through a combination of payroll taxes, premiums, and federal general revenues. Medicaid is tax-funded and administered by the states, which operate the program within broad federal guidelines. States receive matching funds from the federal government for Medicaid at rates that vary based on their per-capita income—in 2014, federal matching ranged from 50 percent to 73 percent of states’ Medicaid expenditures. The expansion of Medicaid under the ACA is fully funded by the federal government through 2017, after which the government’s funding share will be phased down to 90 percent by 2020. Federal premium subsidies on the exchanges are offered as tax credits.

    Privately financed health care: In 2013, private health insurance spending accounted for about 33 percent of total health care spending. Private insurers, which can be for-profit or nonprofit, are regulated by state insurance commissioners and subject to varying state (and federal) regulations. Private health insurance can be purchased by individuals but is usually funded by voluntary, tax-exempt premiums, the cost of which is shared by employers and workers on an employer-specific basis, sometimes varying by type of employee. The employer tax exemption is the government’s third-largest health care expenditure (after Medicare and Medicaid), reducing tax revenues by $260 billion per year.

    Some individuals are covered by both public and private health insurance. For example, many Medicare beneficiaries purchase private supplemental Medigap policies to cover additional services and cost-sharing. Private insurers, in general, pay providers at rates higher than those paid by public programs, particularly Medicaid. This disparity leads to wide variations in provider payment rates and revenues, which depend to a large extent on payer mix and market power.

    Medicare’s payment rates are typically determined according to a fee schedule, with various adjustments based on cost of living and other local and provider characteristics. Medicaid rates vary by state. Private health insurers typically negotiate payment rates with providers.