I'm going to talk about the healthcare system which can seem really complicated. We'll focus on a concrete patient and try to understand how money flows as a way of understanding the US healthcare system. Let's go ahead and start here with a patient. This patient may have a medical problem.
Say they fractured their ankle or developed pneumonia or some other medical problem that needs attention. So in some way, shape, or form, that patient is going to have to go ahead and pay for that care. So I've just drawn that here as a dollar sign. And that patient is going to be seeing either a doctor or a nurse practitioner or a nurse or some other type of health care professional.
And they'll also be seeing them in, say, a hospital or a clinic. or some other setting. And together we're going to refer to this group as the health care provider. And that provider is going to be providing medical care to that patient.
And that can really take two forms, either goods or services. Now let's say our patient has fractured his or her leg. So goods might be, say, a bottle of pills right here maybe they're pain pills to assist with the pain during recovery perhaps they've gotten a cast to put on that foot maybe they have crutches and so those are all concrete goods that are going to be given to the patient in addition to that the provider is going to be giving time as well as their skill and expertise in giving services so there might be a radiologist that performs an x-ray and says, well, hey, look at these strong bones here.
Maybe you have a little fracture right there. Maybe they need to set your bones properly so you can heal. So this is sort of the typical relationship between a patient and provider getting goods and services to handle a medical problem.
Now every now and then a patient is going to develop a real serious medical problem that needs a lot of goods and services. Maybe they have cancer or a heart attack or something else very serious. And so this is where insurance companies come in because insurance companies can help patients make sure that they don't get completely wiped out if they have unexpected large medical costs.
Well, how do they do this? Well, let's say that there's a group of patients and not all of them have really gotten sick yet, but most of them are still pretty healthy. But they're trying to think ahead and protect themselves. from that future major medical expense.
And so they're all going to actually send money to an insurance company as individuals right here. And that money is referred to as a health care premium. So the insurance company builds up a cushion of a lot of money.
And so if any of their subscribers or patients does develop a real serious medical problem, they have the ability to actually pay those additional costs. Now let's think about what just happened here. Because the patients went ahead and pooled their money together, they also pooled their risks together.
So this is called risk sharing. Risk sharing, which is a very important way in which people can get together to make sure that they are protected against rare but very serious events. So if patients do have insurance, they don't necessarily have to pay the large amount directly to the insurance company, but instead might pay a smaller amount called a copay or a deductible to help defray a small amount of those costs. But again, the lion's share of that money is going to come from the insurance company.
So I'm going to go ahead and erase some of these extra people here to keep our. board clean and then introduce the next important entity in this system and that is the employer. So the employer is going to work with the patient because remember they're not just patients in society they're also workers and workers will offer goods and services to their employer. So suppose the employer owns a car dealership, so you're a mechanic there, you're going to be fixing cars for that employer, or if they own a restaurant, you might be waiting tables.
And in return for those goods and services that you provide to the employer, the employer is going to be paying wage and salary back to the patient. Many employers also, in addition to paying the patient a wage and salary, will also pay the premium to the insurance company. so that their employees also have health insurance.
That's seen as a good way to keep workers around, keep them healthy, and it's an important benefit. So in addition to giving salary to the workers, they're also providing them with health insurance by paying their premiums. Now, not only are people patients and workers, but remember they're also citizens, and many of them will pay taxes to the government.
So I'm just going to draw money going this way, a dollar sign indicating taxes, and a marker here for the government. And so the government is also going to provide services in return for those taxes. And remember, it's not just one person, but just as with an insurance company, there are many citizens that are going to be paying taxes to the government.
So in a sense, the government is also assisting with risk sharing. They are providing services like education, they're providing roads, but government is also involved in providing health care through two major programs called Medicare and Medicaid. There are a few other programs as well including ones that cover members in the military But for purposes of our discussion, we're going to focus mostly on Medicare and Medicaid.
I'm just going to erase some things here so that, again, we can keep our board a little bit clean. And say, well, how does Medicare and Medicaid work? Well, they will directly pay for goods and services for a certain group of citizens. And remember that even if they get really sick, they'll pay.
the larger amounts because they have the money from many taxpayers and Medicare and Medicaid also under certain conditions may purchase insurance directly for certain citizens. But I'll just put a star there because that's a smaller amount than the other function of paying directly to providers. So where does that leave us at this point? Well let's try to get a sense of how many people have each of these forms of healthcare. So I'm just going to draw a pie chart here that's going to represent all of Americans.
Let's say the U.S. population is estimated to be somewhere above 300 million people. And so let's try and understand how roughly that 300 million people get healthcare. So to do that, I'm just going to come back here and remind us of each of these different ways in which people get care. So the first way was patients who pay money directly to their providers.
The second way is patients purchase health insurance by paying premiums directly to insurance companies. The third way is that workers get health care because their employers pay premiums to get them onto insurance plans. And the fourth way I'll indicate right here is when the government goes ahead. and offers them health insurance.
So let's talk about the most common way in which Americans get health insurance. That's fully half of Americans. You can try to guess which one it is. If you guessed employers then you're correct.
So that's number three. So the majority of Americans, somewhere around half or a little more than half, get their health insurance through their employers and they do have risk-sharing so they only pay deductibles and co-pays for that care. I'm just going to change colors here for a second and now look at the next big piece of the pie. About a third of Americans, this group right here, will get their health care through, you guessed it, the government. And roughly speaking, about half of that care in the government, in that piece of the pie, is gonna be Medicare and the other half here, that other piece of that part of the pie, will be Medicaid.
Now there's a little sliver of the pie right here, which is going to be people who pay for their own insurance to insurance companies. That's number two. So I'll just add that right there, which leaves this larger amount, this big piece of the pie right here, which is a group of people that don't have any insurance at all. And so whenever they need medical care, they just have to pay the bills. They have to pay what we call out of pocket.
And if they get really sick, that can be a lot of money. These people can lose their houses. They can become bankrupt. And so this is the uninsured. In this group of people, depending on how it's counted, if you count people who are uninsured for an entire year or part of the year, and depending who's counting, is variously estimated to be between 47 and 60 million people.
So this is an introduction to generally how we pay for health care and in future videos we're going to talk about each of these groups in a lot more detail.