C9 Healthcare Financing Flashcards
Healthcare costs continue to rise for the following?
1) the aging of the population, resulting in
more individuals requiring more health care
2) the
pandemic increased healthcare expenditures
because of COVID-19 care
3) the increase in
innovative care, which can be effective but costly
Payment for healthcare services in the US?
-Out-of-pocket payments or cost sharing from patients
who pay entirely or partially for services rendered
-Health insurance plans, such as indemnity plans or
managed care organizations (MCOs)
-Public or governmental funding, such as Medicare,
Medicaid, and other governmental programs
-Health savings accounts (HSAs) and consumer-driven
health plans (CDHPs), such as health reimbursement
accounts (HRAs)
As a result of the ACA of 2010
the government has played an
initiative-taking role in developing a healthcare
system that is more consumer oriented (more hc insurance benefits, insurers provide more information to members)
Health Insurance is?
is a financing mechanism
intended to protect insured individuals from
using their personal funds when expensive
care is required
3 categories of voluntary health insurance?
voluntary health insurance (VHI), social insurance,
and public welfare insurance
VHI?
a type of
private health insurance that is provided by
nonprofit and for-profit health plans, such as
BCBS
Social insurance?
provided by the government at
all levels: federal, state, and local. An example of
this type of insurance is Medicare
Public welfare insurance
based on financial
need. The primary example of public welfare
insurance is Medicaid
Employer-Based Insurance
-formed from teachers
-foundation of the
nonprofit Blue Cross Blue Shield.
-It is still the major method of providing health
care in the United States
Who signed into law Medicaid and Medicare?
President Johnson
Health Maintenance Act of 1973
focused on
effective cost measures for health delivery and
was the basis for the current health maintenance
organizations (HMOs). - Nixon
DRGs are?
diagnosis-related groups to provide directions for treatment
What happend in Massachusetts with Health Insurance?
▪In 2006, Massachusetts passed a bill requiring
health coverage for all citizens
Four types of private insurance?
group insurance, individual private health
insurance, self-insurance, and managed care
plans
Group insurance?
anticipates that a large group
of individuals will purchase insurance through
their employer, and the risk is spread among
those paying individuals
Private health insurance?
Unlike group insurance, the risk is determined
by the individual’s health. Premiums,
deductibles, and copayments are much higher
for this type of insurance for self-employed
Self funded programs
health insurance
programs that are implemented and controlled
by the company itself
Managed care plans?
type of health
program that combines administrative costs
and service costs for cost control
Consumer Driven Health Plans (CDHPs)?
which are tax plans with high-deductible coverage.
The plans are high deductible and paired with a type
of savings account for healthcare services
Most common CDHPs
HRAs and HSAs.
HRAs, or personal care accounts- began bc IRS regs
HRA?
funded by the employer but is owned by
the employees and remains with the company if the
employee leaves. This has been an issue because it
has no portability. (encourages cost conscious since out of pocket)
HSA?
is a portable
account, which means it can be transferred to
another employer when the employee changes jobs
and the funds never expire. HSAs
encourage consumers to understand healthcare
service pricing because these accounts are paired
with a high deductible
2 forms of insurance payment?
fee for service (FFS) and prepayment
3 stages of HC plans?
▪“Provider-driven” traditional fee-for-service
medicine
▪“Payer-driven” managed care
▪“Consumer-driven” health care (“CDHC”)
CDHC plans have 3 basic elements?
▪High deductible insurance coverage
▪Health spending accounts (tax-sheltered)
▪Wellness/care management resources
CDHC plans provide employees with ___ to change to informed consumers?
▪Greater financial stake in medical spending,
including choice between spending and saving
available funds
▪More choice in health care providers
▪More information about provider costs and quality
▪More information about their own health problems,
treatment alternatives and lifestyle choices affecting
their health
HSA?
Health Savings Account
HRA?
Health Reimbursement Arrangement
Health Flexible Spending Account (health FSA)
▪ Permitted under I.R.C. for more than 25 years; precursor to
CDHC
▪ Usually offered as a component of cafeteria plans
(no accumulation)
HSA components
▪HSAs permit pre-tax employee and employer
contributions (usually through cafeteria plans) and taxfree withdrawals for qualified medical expenses
▪Assets are held and invested in separate account by
outside custodian or trustee
▪Assets are never forfeited to employer and unspent
funds accumulate year-to-year; no use-it-or-lose-it rule
▪No employer review and approval (adjudication) of
account withdrawals; employees may withdraw for
non-medical spending subject to paying taxes and
(generally) 10% penalty
▪Eligibility for contributions to HSA conditioned on
employee coverage under high deductible health plan
(HDHP) and only limited coverage under low
deductible plans
▪To qualify as HDHP, insurance coverage must satisfy
minimum deductible and annual out-of-pocket
maximum for single/family coverage (min/max limits
apply for in-network expenses)
▪Primarily regulated by IRS; HSAs are not subject to
ERISA if certain requirements are met; other federal
health laws generally not applicable
HRAs
▪HRAs permit tax-free employer contributions and taxfree withdrawals for qualified medical expenses
▪Employee contributions not permitted; employer
contributions must be outside cafeteria plan
▪Usually unfunded; employer “contributions” are
credited to bookkeeping reserves within employer
general assets
▪Use-it-or-lose-it rule is not required (but is permitted).
Employees may thus accumulate unspent account
assets from year to year, but employer may set limit
on permitted carryover
▪Employer or third party administrator reviews and
approves (“adjudicates”) employee spending from
HRA
▪Forfeitures of unspent amounts permitted at
termination of employment
▪High deductible insurance coverage not required, but
in practice most employers offer HRAs in conjunction
with some form of high deductible plan
FSAs
▪Health FSAs permit pre-tax employee contributions
and tax-free reimbursements for qualified medical
expenses
▪Usually funded by crediting employee salary
reductions under cafeteria plans to bookkeeping
reserves within employer general assets
▪Employer or third party administrator reviews and
approves (“adjudicates”) employee spending from
account
▪Use-it-or-lose-it rule applies: unspent funds are
forfeited to employer at end of year; 2½ month grace
period at year-end if plan so provides
▪Uniform coverage rule applies: entire annual salary
reduction available for employee to withdraw at
beginning of year
Most insurance plans require contribution from individual?
copayment-(payments on certain time-cost sharing), deductible-(payment prior to insurance paying for services rendered), or coinsurance-(part of FFS policy pays % of service cost)
Comprehensive health insurance includes?
provide
benefits that include outpatient and inpatient
services; surgery; laboratory testing; medical
equipment purchases; therapies; and other
services, such as mental health, rehabilitation,
and prescription medications.
▪Most comprehensive policies have some
exclusion attached to their policies.
Opposite of comprehensive policies?
basic or major medical policies, which
reimburse hospital services, such as surgeries
and expenses related to any hospitalization (also disease-specific policies and Medigap or medicare supp policies)
2 basics types of insurance plans?
indemnity plans or fee-for-service plans, which
have contracts between a beneficiary and a
health plan but there is no contract between
the health plan and providers. The beneficiary
pays a premium to the health plan
Managed care plans include?
HMOs,
preferred provider organizations (PPOs), and
point-of-service (POS) plans
Managed care refers to?
the cost
management of healthcare services
utilization by controlling who the consumer
sees and how much the service costs
Health Maintenance Organization Act of 1973
Integrated managed care org into healthcare system
Managed Care Characteristics?
-Establish relationships with organizations and
providers to provide a designated set of
services to their members
-Establish criteria for their members to utilize
the MCO
-Establish measures to estimate cost control
-Provide incentives to encourage health
service resources
-Provide and encourage utilization of programs
to improve the health status of their enrollees
Health maintenance organizations (HMOs)
The oldest type of managed care.
Members must see their primary care
provider first in order to see a specialist.
3 models: Staff, Group, Network
Staff model (HMO)
Hires providers to work at a physical location
Group model (HMO)
Negotiates with a group of physicians exclusively to perform services.
This was the first type of HMO model introduced by Kaiser Permanente
Network model (HMO)
Similar to the group
model, but providers may see other patients who are not members of the HMO
Independent practice associations (IPAs)
A group of physicians who are in private practice see MCO members at a
prepaid rate per visit. The physicians may
sign contracts with many HMOs
Preferred Provider Organizations (PPOs)
-Do not have a gatekeeper like the HMO, so
a member does not need a referral to see a
specialist
-Do not have a copay but do have a
deductible
-Developed by providers and hospitals to
ensure that nonmembers could still be served while providing a discount to MCOs for their members
Exclusive provider organizations (EPOs)
Similar to PPOs but they restrict members to the list of preferred or exclusive providers members can use
Physician hospital organizations (PHOs)
Physician hospitals, surgical centers, and other medical providers that contract with a managed care plan to
provide health services
Capitation policy/ per member per month policy
provider is paid a fixed
monthly amount per employee, which is often
called a PMPM payment.
Discounted fees
a type of fee for service
but are discounted based on a fee schedule. The provider provides the service and then can bill the MCO based on the fee schedule.
Salaries
In this instance, the provider is actually an
employer of the MCO
Cost control measures of MCO
Restriction on provider choice, gatekeeping, utilization review,
Gatekeeping
the primary
care provider is the gatekeeper of all of the
care for the patient member. Any
secondary or tertiary care would be
coordinated by the gatekeeper
Utilization review
evaluates the
appropriateness of the types of services
provided. There are three types of utilization
reviews: prospective, concurrent, and
retrospective
Prospective utilization review
Implemented before the service is actually
performed by having the procedure authorized
by the MCO based on clinical guidelines
Concurrent utilization reviews
Decisions
that are made during the actual course of service, such as length of inpatient stay or
additional surgery
Retrospective utilization review
Evaluation of services once the services
have been provided. This may occur to assess treatment patterns of certain
diseases
Risk plans
Part of Medicare managed care.
pay a premium per member that is based on a county-of-resident basis.
Members could use both in-network and
out-of-network providers.
The risk plans
covered all Medicare services and vision
and prescription care
Medicare cost plans
reimburse the MCOs on
a preset monthly basis per enrollee based on
a forecasted budget. The cost plans allowed
members to pursue care outside the network
Medicare Advantage (MA)
Allows PPOs as an option.
Also allowed enrollees to participate in
private fee-for-service (PFFS) plans as part of
MA.
Carve outs
services that Medicaid is not obligated to pay for under an MCO contract (usually bc too expensive like mental health and substance abuse services)
National Committee on Quality Assurance (NCQA)
established in 1990 to monitor
health plans and improve healthcare quality
-est HEDIS to measure service and quality of care
MCO Issues
-As a result of the MCOs’ focus on cost, a
physician’s ability to practice without close
monitoring of their healthcare choices can be limited.
-Surveys indicate that the more managed care
networks the physician contracts with, the less
satisfied they are with managed care
States are increasing requiring
using Managed Long-Term Services and Supports
(MLTSS), a CMS Medicaid program
Challenges to MCOs
-Physicians are unclear about MCO obligations. AMA has developed a National Managed Care Contract (NMCC).
-Physicians are concerned with physician network rentals or silent PPOs, which are unauthorized third parties outside the contract between the MCO and the physician that gain access to the MCO discount rates
-The main insurer who has the contract with the
physician does not provide the information to the physician, and the third parties continue to
benefit from the discounted rates
Other challenges to MCOs
-Value-based reimbursement model: MCOs need to understand that both efficiency and quality are the highest priorities, not just efficiency.
-Data-driven decision-making needs to be
integrated into the culture.
-Increasing drug costs: Focus more on generic
drugs
-Consumer advocacy: Marketing their plans is
a necessity now
Healthcare sharing
Healthcare sharing is a way for Christians to
pay for their health care without using health insurance. When they have a medical need, Samaritan members receive support from other members and pay their healthcare providers directly from other members (membership fee)
ACA of 2010
eliminated lifetime and unreasonable annual caps or limits on healthcare reimbursement, provided
assistance for the uninsured with preexisting
conditions prohibited denial of insurance
coverage for children with preexisting
conditions, and extended coverage for
dependents up to the age of 26 years
Medicare Part A
primarily financed from payroll taxes and is
considered hospital insurance
Medicare Part B
a supplemental health plan to cover physician services. Part B covers two types of services: medically necessary
services, or services or supplies that are needed to diagnose or treat your medical condition and that meet accepted standards of medical practice; and preventive services, or health care to prevent illness
Medicare supplemental options?
(1) Medicaid if
the Medicare enrollee is eligible;
(2) enrollment in
MA, which can provide supplemental coverage;
(3) employer-sponsored retiree insurance;
(4) supplemental insurance policies from private insurance companies, which are called Medigap or medsup policies
Medicare Part C
plans cover all Medicare services and
vision and prescription care
Medicare Part D
The Medicare Prescription Drug Improvement and
Modernization Act of 2003 (MMA), which authorized Medicare Part D
- purpose was to
provide seniors with relief from high prescription costs
Program of All-Inclusive Care for the Elderly (PACE)
-funded by Medicare and
Medicaid
-provide the entire
continuum of care and services to seniors with
chronic care needs while maintaining their
independence in their home for as long as
possible
Workers’ Compensation
Employees are eligible for this program for medical care, death, disability, and rehabilitation services. Most employees receive 66% of their earnings, which is taxfree
-employer funded contracts with insurance
