Final Exam! Flashcards
What is a Consumer Directed Health Plan (CDHP)?
It is a high deductible heath plan with a health savings account
True/False: The rational behind CDHP is that consumers will have enough money saved up so that they won’t have to worry about how much they spend on healthcare.
False! The goals of HDHP/CDHP is to make people more cost conscious.
HSAs and FSA are similar in that they are both “use it or lose it” accounts.
False! Those funds roll over. Flexible spending accounts are a “use it or lose it” account
The small group market is typically defined as firms with how many employees?
Less than 50 employees
Ture/False: Employers with 50 or fewer full-time employees are not subject to the “pay or play” mandate in the ACA; they are not required to offer insurance coverage to their workers or face penalty of $2000 per worker.
True.
HSA: main characteristics, how do they work, what are they typically combined with, who they’re good for, what are the tax benefits
It is a tax-sheltered financial account into which individuals or their employers may contribute funds and from which individuals may withdraw money to pay for qualified health services. Typically combined with a HDHP.
CDHPs: rationale behind them (moral hazard, RAND, etc)
HSA with a HDHP. The more people have to pay our of pocket the less they will use the services in general. High deductible encourages low spending.
Talk about the growth of CDHPs
Ok!
Medicaid, main characteristics, who funds it, who decides what they’re gonna cover and eligibility requirements, talk about CHIP who funds it, how you qualify, how the
qualification for CHIP differ from the qualifications for Medicaid
Medicaid is primarily for pregnant women, children, the elderly and the disabled. Funded both by federal and state government with some benefits required to be covered and others that are state specific. 138% of FPL for Medicaid with PPACA expansion.
Federal and state still cover CHIP, though the fed provides a 15% higher matching rate than Medicaid (65-83% of total costs). Qualify by being up to 350% of FPL at state’s discretion.
What is crowd-out?
Crowd-out is when a public program, like Medicaid, causes people to drop private coverage and shift to a free/lower-costing public program.
People leaving private insurance for Medicaid, for example.
Long-term care insurance, what it is, why people should have it, and why they don’t
It’s insurance for LTC (like nursing homes, home health, SNF, etc.) People should have it as must of 65 or older use LTC. Costs are high and most just spend all they have till they qualify for Medicaid.
Medicare: know the 4 parts, what each part covers, how each is funded, the characteristic that sets that part apart and trends for the future.
Medicare is a federal program for those individuals who are 65 years of age, disabled and/or have need of end-stage renal dialysis
Medicare Part A is funded by HI trust fund
Medicare Parts B and D are funded by the SMI trust fund and income tax
The future of Medicare is currently unsustainable. The HI trust fund will be exhausted by 2030.
Describe the original Hospital Service Plans
Baylor plan was a hospital plan for 1 hospital, it later evolved into blue cross and was the primary guide for Medicare part A
Describe the original “Prepaid Group Practice”
Started in LA, doctors were kicked out of the community, evolved into blue shield and guide to medicare part B
Private Health insurance grew rapidly during the 1940s and 1950s. Explain at least 2 reasons why.
Wage and price controls
Organized Labor
Federal Tax Codes
Full names and characteristics of HMO PPO and POS
Point Of Service: most expensive (preventative care and takes on the cost of the patient), very limited network
What does “Self-Insure” mean?
Self insuring is when you make conscious decision to bear the underwriting risk and to to not have a typical insurance plan. Rather, you set money aside to pay for your health care needs.
What is “risk premium”?
The most amount of money we are willing to pay to avoid the consequence of loss
What is “risk aversion”? How does a person’s degree of risk aversion affect his/her level of insurance
As they are more risk averse, they are willing to get “better” insurance
Explain 2 advantages of purchasing health insurance through an employer
Employers offer more options
Tax benefits
What is “Adverse Selection”?
Consumers buy insurance based on which services they know they will use, thus they select the best plan for their needs
What is the “HMO effect”?, Explain at least 2 examples
HMO effect uses PCPs to keep people out of hospitals
Use ASCs over hospitals
Gatekeeper PCP
What is “Favorable Selection”?, Explain at least 2 examples
Favorable selection attracts low utilizers
Marketing to areas of low utilizers
Targeting younger generation
Combating adverse selection: underwriting, Rate making
Underwriting creates a risk pool and matches low utilizers to the risk pool. Rate making: Community rating: put everyone into 1 risk pool. Manual rating: insurers seek to identify characteristics that are associated with higher experience. A healthy person goes into one pool experience rating - bases premium on prior or current claims of the group (prospective and retrospective).
What happens when insurers combine dissimilar risks?
put the young and old in the same risk pool. This is going to mess with rates because multiple people of different categories are in the same pool. That is essentially what PPACA is doing because insurance companies are not allowed to underwrite anymore.
According to PPACA, what characteristics can and/or cannot insurers use to determine a person’s insurability?
Cannot use pre existing conditions and health status questions
Can use zip code and birthdate
What is the best predictor of utilization?
Prior utilization
Why is it important to predict utilization/expenditures?
To be able to accurately forecast the money that goes to the bottom line. We want to be able to know what to charge for people using an insurance network and to cover all the expenses and losses of the insurance company.
Which public insurance program adopted a risk adjustment model; and how was the model applied?
Medicare
Uses the average of Medicare part A + Medicare part B per county
What is the PPACA’s Health Insurance Tax “HIT”? What will the tax revenues be used for?
A tax on insurance plan premiums
Revenues used to fund health programs
explain the PPACA’s Age Rate Restrictions
1:3 became 1:5 in paying for HI
“Moral Hazard”
Moral hazard is the law of demand which is that, at a lower price, people buy more of a good
How does moral hazard impact insurers?
Insurers combat this by lowering the premium but raising copay amounts (more out of pocket expense)
Push patients up the demand curve
Utilization management also is utilized to do this.
Price elasticity of health services? Provide the number and interpretation
-0.2
This means that a 10% increase in out of pocket price reduces use by 2%
What was the RAND-HIE
A useful study on adverse selection. It randomly assigned families to a wide range of plans with varying coinsurance rates. Both urban and rural areas in 4 census regions
14 fee-for-service plans and some in Seattle enrolled in an HMO
Why is the RAND-HIE still the “Gold Standard”?
It avoided the problem of Adverse Selection
It investigated a wide range of health services
The more recent studies have validated the RAND results
Describe the RAND-HIE findings in three different areas of healthcare that the study covered.
Hospital Services: 29% decrease of use between free care and 95% coinsurance
Physician Services: 67% decrease of use between free care and 95% coinsurance
Pharmaceuticals: 76% decrease of use between free care and 95% rate
Describe the main characteristics of freestanding emergency rooms
Like an urgent care. Bill like an ER
People worried that high cost will drive up insurance premiums (people not discretionary in ER usage)
Relatively low copay ($50-100)
HCA big drive in building these facilities (biggest in Houston)
Does utilization management preclude/prevent patients from obtaining health care services? Why?
UM does not prevent/preclude patients from obtaining health care services
State and describe 4 utilization management techniques.
Preadmission and concurrent review: For non-emergency hospital admission, approval must be obtained by insurer for coverage. The number of days approved by insurer for patient is determined in concurrent review.
Denial of payment: During retrospective review if services.days are determined after the fact to not be covered by insurer, the patient is then required to cover costs of those days/services
Gatekeeping: PCP must approve/authorize visits to specialists
Mandatory Surgical Second Opinion: duh.
What utilization management techniques have researchers found to be the most effective?
Pre Admission and concurrent review and Denial of payment
What was happening during the “Golden Era” of hospitals?
Doctors are competing on service, amenities, and quality. Price was not a factor until selective contracting began.
what is selective contracting?
Some providers get contracts and some don’t.
What does selective contracting do to the price of health services?
It lowered the cost of health services because cost was now a factor in getting a contract, not just quality and amenities.
How did selective contracting begin?
In California with MediCal. In hoping to reduce prices MediCal contracted with only certain hospitals with the leverage that they could provide patient volume, or else patens would have to pay the full price themselves discouraging use there.
Do HMOs or PPOs more effectively use selective contracting?
HMOs.
describe the fee-for-service methodology
For every service performed, there is a payment for that service.
Describe the capitation methodology
For a given community, there is a price per member per month (PMPM) that each person pays to receive care from specific facilities
How common is it for physicians to have contracts with managed care plans?
Extremely common, 88% have a contract
How do physicians benefit from having managed care contracts
Increased patient volume
What impact is the ACA having on physicians and how are they responding
More paperwork, lower cms reimbursement, more red tape
Repsonse - Drs accept fewer CMS patients, Drs joining Hospitals to work
two arguments that have been advanced to explain the increase in health insurance premiums
managed care backlash and provider consolidation
what is managed care “backlash” by the following:
Physicians
fewer available options of care
limited drug formularies
Patients
Limited to a physician and the network
What is provider consolidation
When providers create partnerships/buy out other practices/hospitals
What impact is health care reform having on provider consolidation
It has increase provider consolidation, although the FTC and DoJ are trying to crack down on it.
What have been the growth trends for PPOs and HMOs.
HMO decrease and PPO increase as consumers heavily value choice and freedom
Talk about and give examples of Monopoly and monopsony power
Monopoly: when there is a single large seller/ An example is before a drug can become generic, the company which developed the drug can sell it at any price as there are not competitors
Monopsony: When there is a single large buyer. An example is an insurance company can reduce the number of hospital days it provides (i.e. buys) and thus decreases the price per day of hospital days provided/bought.
What does a “Most Favored Nation” class do in a healthcare contract
A “MFN” clause states that the buyer (an insurance company) must be billed at the lowest price provided to any other buyer.
