Exam 2

Question 1

Why is the RAND Health Insurance experiment the “Gold Standard”?

Answer 1

1. Random assignment of people to plans with differing amounts of cost sharing reduces the adverse selection concerns = Elegant design
2. Consistent model applied across many health services
3. Results continue to be confirmed by smaller-scale, more narrowly focused studies

Question 2

Name three of the results from the RAND study

Answer 2

1. DENTAL SERVICES
   
   • Full coverage visits up 34%
   • Large transitory first-year effect
   • Preventive services about twice as price sensitive as basic care
2. CHIROPRACTIC SERVICES
   
   • Full coverage expenditures up 132% –and this is just between 0% and 25% coinsurance
3. EMERGENCY DEPARTMENT VISITS
   
   • Full coverage visits up 54%
   • 90% increase in non-urgent
   • 30% increase in urgent

Question 3

What is Moral Hazard?

Answer 3

1. It is the Law of Demand
2. It assumes that individuals with a health insurance policy use more health services
3. Insurers deal with the problem of Moral Hazard by increasing the demand for health services and pushing patients down the demand curve.

Question 4

What is the Price Elasticity of Health services and what does it mean?

Answer 4

-.2
This means that a 1% increase in the price of health services will generally result in about a 2/10 reduction in use. In other words, a 10% increase in price reduces use by about 2%.

Question 5

The RAND-Health Insurance Experiment included research in what areas?

Answer 5

1. Hospital Services
2. Mental Health Services
3. Dental Services
4. Deductibles

Question 6

What are free standing ER’s, what services do they offer, and how do they bill?

Answer 6

• These are emergency rooms that aren’t connected to any other facility but are usually doctor owned
• Generally located in suburban areas
• Urgent care is mainly given but they by law must cover life threatening emergencies
• Bill exactly like an ED because they have a lot of overhead

Question 7

What is Utilization Management?

Answer 7

Utilization management can be viewed as nonprice mechanisms to reduce moral hazard.

Question 8

Does UM prevent/preclude patients from obtaining services?

Answer 8

No

It simply dictates that the insurer is not liable for the cost of the service if UM procedures are not followed.

Question 9

What are the four Utilization Management Techniques?

Answer 9

1. Preadmission Certification and Concurrent Review
2. Disease Management
3. Discharge Planning
4. Gatekeeper - No change in admission

Question 10

What was happening during the Golden Age?

Answer 10

• Competition for patients (and their doctors) based upon services, amenities, and quality, NOT price!
• This implies that greater competition can lead to higher, not lower, prices

Question 11

What is Selective Contracting?

Answer 11

1. Some get contracts and some don’t
2. Purchasers able to exclude some providers from contracts
3. Adds price to the services-amenities-quality competition for patients
4. Implies that in the presence of selective contracting, more providers could result in lower prices

Question 12

Where did Selective Contracting start?

Answer 12

California
MediCal (Medicaid) is allowed to enter into contracts with a subset of hospitals based upon a competitive bidding process.

Question 13

How effective is Selective Contracting?

Answer 13

1. It is more effective when there are more hospitals in the local market
2. It is more effective when the PPO has a large share of the hospital’s book of business
3. It is used more effectively by HMO’s than PPO’s

Question 14

Difference between Selective Contracting and Favorable Selection

Answer 14

Favorable Selection leads to lower utilization

Selective Contracting leads to lower price

Question 15

Physicians and Managed Care Contracts

Answer 15

• 88% of physicians had one or more managed care contracts in 2008, nearly 70% had five or more contracts
• The more contracts that they have equals more patients that are directed towards them.

Question 16

What theories have been advanced to explain the increase in insurance premiums since the mid 1990’s and what do they mean?

Answer 16

Managed Care Backlash: Physicians and patients complaining about the nature of the restrictions that managed care plans impose.
Provider Consolidation: Decreased competition among providers has reduced the negotiation ability of insurers

Question 17

What’s the difference between a Monopoly and a Monopsony?

Answer 17

1. Monopoly Power = Large Seller
   
   • Controls price by controlling supply
   • Large Providers have this power
2. Monopsony Power = Large Buyer
   
   • Controls price by controlling demand
   • Large Health Insurers have this power

Question 18

Difference between Rhetoric vs. Reality

Answer 18

zx

Question 19

What is the Individual Mandate?

Answer 19

This requires everyone to have health insurance. It imposes a tax penalty for those who fail to get health insurance and subsidies for those with low income.

Question 20

Explain Qualifying Health Plans

Answer 20

Each of the qualifying health plans must cover essential health services under one of the four levels of coverage (Bronze, Silver, Gold, and Platinum)

Question 21

Explain what the Insurance Exchange is

Answer 21

1. A place where you can go to purchase a health insurance plan. If you apply for the plan within the enrollment period or under special circumstances, then you can qualify for government subsidies.
2. When the state sets up its exchange, the policies must be guaranteed to issue and guaranteed to renewal.
3. Insurers may use age, geographic location, family composition, and tobacco use to set rates. In setting theses rates, the highest plan can’t be any more than three times the rate charged to those with the lowest rate.

Question 22

What is the Pay or Play Mandate?

Answer 22

If an employer has more than 50 employees that work 30 hours or more each week, they are required by law to offer health insurance to them. If they don’t, then they will have a tax penalty to pay.

Question 23

How will the expanded ACA Insurance plan be covered?

Answer 23

1. It will be funded by pharmaceutical manufactures- they will pay 2.8 billion at first.
2. Durable medical equipment manufacturers will pay 2.3% tax on sales
3. Health insurance firms will pay 8 billion at the start in taxes

Question 24

Admittance Process to Mental Health

Answer 24

1. Treatment Evaluation
2. Commit the Patient (state takes responsibility for patient)
3. Transportation to facility

Question 25

What is a Navigator in a Mental health facility?

Answer 25

A trained individual able to help anyone look for health coverage options and complete eligibility and enrollment forms. Free service

Question 26

What is Workers Compensation?

Answer 26

A form insurance that provides wage replacement and medical benefits to those who have been injured on the job

Question 27

What are Bundled Services?

Answer 27

A single “bundled” payment to cover services delivered by two or more providers during a single episode of care or over a specific period of time

Question 28

What is Preadmission Certification?

Answer 28

The insurer requires that nonemergency hospital admissions be approved by the insurer before the patient is admitted to the hospital.

Question 29

What is Concurrent Review?

Answer 29

• This technique is typically used in conjunction with preadmission certification. It specifies the number of hospital days a patient is authorized to stay. If a physician wants a patient to stay longer, additional days have to be requested.
• Both techniques led to few admissions but didn’t have an effect on the length of stay.

Question 30

What is Disease Management?

Answer 30

• This program provides coordination of care across multiple providers for patients with chronic diseases for which there are well-defined practice guidelines.
• There isn’t enough information to prove whether or not this technique works.

Question 31

What is Discharge Planning?

Answer 31

This program requires the provider to have a plan in place at the time of admission for the patient’s care on discharge from the hospital.

Question 32

What is a Gatekeeper?

Answer 32

This program assigns a primary care physician to each subscriber. This physician must approve visits to a specialist or the insurer is not obligated to pay for the specialist visit.

Question 33

TeleHealth Current Event

Answer 33

1. Several states are starting to demand that insurance companies provide Telehealth
2. Telehealth is the communication with your doctor via skype, the phone, or some other technology
3. They are mainly focusing on telehealth being covered for the elderly that have difficulties leaving their home and for those who live in rural areas or far from a health facility

Question 34

CMS and The Exchange Current Event

Answer 34

1. They are eliminating 6 of the 30 special categories that allowed you to sign up on the exchange outside of the normal enrollment.
2. They want to allow minors to be able to apply for insurance
3. They want to be able to ask a series of questions that were previously banned from asking

Question 35

MODA Insurance Current Event

Answer 35

Alaska and Oregon mandated that MODA stop selling insurance in their states. This is because they lost a lot in their exchanges and the states didn’t think that they could cover the claims. This band started this year when they were mandated to stop selling on their exchanges.