Ch 6 - Financing and Reimbursement Methods

Question 1

Financing

Answer 1

Any mechanism that gives people the ability to pay for health care services.

In most cases, financing is necessary to have access to health care.

Sources of financing health care:
Private health insurance
Public insurance programs such as Medicare and Medicaid
Uncompensated or charity care

Complexity of financing:
Many payers
Many plans
Many programs
Many payment mechanisms

Question 2

Economic perspective of financing:

Answer 2

Working Americans finance their own health care and subsidize it for those who cannot afford it.

Employer-paid insurance is an exchange for more salary.

The Medicare tax is a type of prepayment for certain services received at age 65.

Moral hazard and provider-induced demand waste health care resources and add to the rising cost of health care.

National health insurance enables supply-side rationing; this has not been possible in the United States.

The ACA still leaves many uninsured—indirect or demand-side rationing

Question 3

Underwriting

Answer 3

Evaluates, selects/rejects, classifies, and rates risk

Question 4

Four principles of insurance:

Answer 4

1. Risk is unpredictable for individuals.
2. Risk can be predicted with some accuracy for a large group.
3. Insurance can shift risk from the individual to the group by pooling resources.
4. Losses are shared by all members.

Question 5

Government-Financed Insurance

Answer 5

2013 stats: A little over one-third of the insured are covered under public programs.
17% covered by Medicaid
16% covered by Medicare
Categorical programs: Benefits are designed for defined categories of people.

Question 6

Medicare

Answer 6

Title 18 of Social Security Act
An entitlement program
People contribute through taxes and are entitled regardless of income and assets.

A federal program
Administered by CMS, an agency under the U.S. Department of Health and Human Services (DHHS)

Finances medical care for:
Those 65 years or older
Disabled people who are entitled to Social Security benefits
Those with end-stage renal disease

The program does not offer comprehensive coverage.
	Main noncovered services:
Vision
Eyeglasses
Dental care
Hearing aids 
Many long-term care services

Medicare has four parts: Parts A, B, C, and D.

Question 7

Medicare Part A:

Answer 7

Hospital Insurance

Financed by payroll taxes:
Paid by all working individuals
Paid on all income earned
Paid equally by both employer and employee

Hospital insurance covers:

Inpatient services
Short-term convalescence and rehabilitation in a skilled nursing facility (SNF)
Home health
Hospice

The timing of benefits is determined by a benefit period. It begins on the day a beneficiary is hospitalized. It ends when the beneficiary has not been in a hospital or a skilled nursing facility for 60 consecutive days. Thereafter, a new benefit period begins. A beneficiary can have unlimited benefit periods.

Question 8

Medicare Part A:

Answer 8

Hospital Insurance

Financed by payroll taxes:
Paid by all working individuals
Paid on all income earned
Paid equally by both employer and employee

Hospital insurance covers:
Inpatient services
Short-term convalescence and rehabilitation in a skilled nursing facility (SNF)
Home health
Hospice

The timing of benefits is determined by a benefit period. It begins on the day a beneficiary is hospitalized. It ends when the beneficiary has not been in a hospital or a skilled nursing facility for 60 consecutive days. Thereafter, a new benefit period begins. A beneficiary can have unlimited benefit periods.

Question 9

Medicare Part A SNF benefits:

Answer 9

Eligibility begins after 3 consecutive days of hospital stay.
100 days maximum in SNF
First 20 days at no charge to the beneficiary; copayment applies from day 21

Question 10

Medicare Part A Hospital benefits:

Answer 10

Deductible is paid for the first 60 days.
Copayment required from 61 to 90 days.
Higher copayment required after 90 days and reserve days must be used.

Question 11

Medicare Part A Home health benefit

Answer 11

Patient must be homebound.

Patient must require intermittent or part-time skilled nursing care or rehabilitation care.

Question 12

Medicare Part A Hospice benefit

Answer 12

Patient must be terminally ill.

Only a token copayment is required.

Question 13

Medicare Part B

Answer 13

Supplementary Medical Insurance (SMI)

Part B covers such things as:  
Physician services
Hospital outpatient services (surgery)
Diagnostic tests
Radiology

Also covers certain screening and preventive services
Annual wellness exam  
For most services:
An annual deductible must be paid.
80:20 coinsurance

Question 14

Medicare Part C

Answer 14

Medicare Advantage

Beneficiaries are given the choice to remain in the original fee-for-service program or sign up for Part C.

Additional benefits (basic vision and dental) may be offered by the private managed care plans.

Beneficiary receives all Part A, B, and D services through the MCO.

It eliminates the need for Medigap coverage.

Question 15

Medicare Part D

Answer 15

Prescription Drug Coverage

Created under the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003.

Available to those who have Part A or B.
Monthly premium must be paid.
Annual deductible applies
Three layers based on spending

Question 16

Medicaid

Answer 16

Title 19 of Social Security Act

Finances health care for the indigent, but it is a means-tested program

Jointly financed by state and federal governments

Each state establishes its own eligibility criteria according to income and assets.

Each state administers its own Medicaid program.

Question 17

Children’s Health Insurance Program (CHIP)

Answer 17

Title 21 of Social Security Act
For children up to age 19

Most states cover children in families with incomes at or above 250% of federal poverty level.

States can use existing Medicaid or create a separate CHIP program.
Federal and state funds finance the program.