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The U.S. healthcare system has frequently experienced change and reform to how care is delivered and how services are reimbursed. These changes are frequently induced by new policies that govern how health services are paid for by governmental insurance programs including Medicare and Medicaid. Collectively, these policies influence revenue and delivery models that have historically included fee-for-service, prospective payment models, and managed-care models. More recently, reimbursement policies have resulted in updated revenue and delivery models including integrated delivery systems (IDSs), bundled payments, and accountable-care organizations.

To many observers, the recent pace and intensity at which change is occurring appears to be greater than usual. For example, the United States is experiencing increases in the number of physician employees (as opposed to independent practitioners), practice consolidation into larger groups, information technology adoption, a consumerism movement in healthcare, high deductible health plans, and a focus on population health management each of which make it challenging for health providers and administrators to adapt to the evolving environment. All of this change can be challenging to fully appreciate and understand. However, a grounding in the historical health financing milestones that have led us to today can aid the reader to better understand how and why these changes are occurring. Further, understanding the historic content that has influenced revenue and delivery models will allow the reader to anticipate further changes that may affect the U.S. healthcare system.

Thus, the purpose of the current chapter is to briefly describe important attributes of the U.S. healthcare system and to highlight key historical milestones that have affected how care is reimbursed; and thus how care is delivered. Changes to the U.S. healthcare system are typically motivated by improving quality, reducing costs, and/or improving access to care.1 At least one of these three goals, which are together known as the “iron triangle,” are frequently the subject of health policy interventions included in any healthcare reform initiatives. To illustrate this, we organize our historical discussion by decade starting with the 1960s and illustrate lessons learned for each era in terms of affecting the components of the iron triangle at the societal level. In our description, we will discuss how each payment reform, throughout the decades, has affected revenue and delivery models. Figure 48-1 summaries these major changes that occurred by decade. We will conclude the chapter with recommendations pertinent to health administrators and public health practitioners.


Major revenue and delivery models brought upon by U.S. reimbursement policies by decade.


In 1965, President Truman signed the historic Social Security Amendments Act that created Medicare and Medicaid. In the decades prior, health insurance coverage was becoming increasingly common for Americans who primarily received such coverage via their employers.2–5 For a variety of reasons and market forces, federal policies encouraged employers to ...

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