Key Terms and Concepts

Question 1

Provider - general

Answer 1

A provider is a licensed professional or entity that

provides a medical service to a patient.

Question 2

Facility provider

Answer 2

A facility provider is an acute care hospital, long-term
care hospital, inpatient rehab hospital, psychiatric
facility, skilled nursing facility, assisted living facility,
home health agency, hospice agency, clinic or
ambulatory surgery center.

Question 3

Professional

provider

Answer 3

A professional provider is a physician, pharmacist,
registered nurse or allied professional provider (APP)
rendering a medical service to a patient. (Clinical
social workers and physical therapists are examples of
APPs).

Question 4

Primary care

Answer 4

Primary care physicians are trained and boardcertified in family practice, general practice, general
internal medicine and pediatrics. They frequently
coordinate a patient’s care and refer patients to
specialists.

Question 5

Specialist

Answer 5

A specialist is a physician who specializes in a specific

disease, body system or type of healthcare.

Question 6

Third-party payer

Answer 6

A third-party payer is a health insurance plan paying a
provider for healthcare services delivered to its
insured patients. The other two parties in a healthcare
business transaction are the patient and the provider

Question 7

Out-of-pocket

payment

Answer 7

Payments made by patients in addition to what their

health insurance plan pays are known as out-ofpocket payments.

Question 8

Deductible

Answer 8

A deductible is a pre-determined amount that the
patient pays before the insurer begins to pay for
service.

Question 9

Coinsurance

Answer 9

Coinsurance is a percentage of the insurance payment
amount that is paid by the patient, along with the
amount paid by the insurer.

Question 10

Copay

Answer 10

A copay is a flat amount that a patient pays at each

time of service.

Question 11

Claim

Answer 11

Claim is another word for a bill for healthcare services

provided.

Question 12

Pre-authorization

Answer 12

Insurers may require providers to contact them to preauthorize certain high-cost services before treatment.
A pre-authorization is an acknowledgement by the
payer that it considers the service medically necessary
and will pay for it.

Question 13

Benefit payment

Answer 13

Once the insurer has determined the claim is
appropriate, a payment is made to the provider. This
payment is officially termed a benefit payment.

Question 14

Beneficiary

Answer 14

Insurers usually refer to the patient for which services

are paid as the beneficiary

Question 15

Covered benefit

Answer 15

The services for which the insurer will pay are usually

referred to as a covered benefit.

Question 16

Denial

Answer 16

The insurer may determine that the claim from the
provider is not a covered benefit and will not pay the
claim. This is known as a denial.

Question 17

Remittance advice

Answer 17

A remittance advice is a written explanation
accompanying an insurer’s payment (or non-payment)
of a patient account to a provider. The copy sent to
the patient is known an Explanation of Benefits (EOB).

Question 18

Medicare Part A

Answer 18

Medicare Part A (Hospital Insurance) is one of two
parts of the original Medicare program established by
Title XVIII of the Social Security Act in 1965. It pays
for hospital inpatient, skilled nursing facility, hospice
and some home health care. Part A is a premium-free
benefit funded by FICA payroll deductions.
“Categorical” eligibility starts on when a U.S citizen
who paid FICA taxes for at least 40 calendar quarters
turns 65. Disabled individuals under 65 who have
received Social Security for 24 months also qualify for
Medicare. Funded by a 2.9% payroll tax.

Question 19

Medicare Part B

Answer 19

Medicare Part B (Supplemental Medical Insurance) is
the “voluntary” part of original Medicare. It pays for
physician services, outpatient hospital and clinic care
and some home health services. While beneficiaries
over 65 pay a monthly premium tied to their prior year
income, about 75% of the total cost is paid from
general tax revenues. Since Part B is voluntary and
not everyone may qualify for Part A, it is possible for a
patient to have Medicare Part B but not Medicare Part
A or vice versa.

Question 20

Medicare
Advantage
(Medicare Part C)

Answer 20

Medicare Advantage plans, launched in 1997, are
commercial insurance plans (HMOs, PPOs or fee-forservice plans) that offer Medicare beneficiaries an
alternative to traditional Medicare. About 30% of
Medicare beneficiaries select Advantage plans because
benefits frequently exceed those of traditional
Medicare. Beneficiaries pay the normal monthly Part B
premium to CMS and sometimes also a separate
Medicare Advantage premium to the commercial
payer. Most plans have narrower provider choices than
traditional Medicare. CMS pays Medicare Advantage
plans a fixed, risk-adjusted monthly fee per
beneficiary that slightly exceeds the estimated cost of
providing similar services under traditional Medicare.

Question 21

Medicare
Prescription Drug
benefit (Medicare
Part D)

Answer 21

The Medicare Part D program, launched in 2006,
covers prescription medications for Medicare
beneficiaries. Commercial plans have monthly
premiums and vary in the cost and kinds of drugs
covered. Plans are allowed to negotiate discounts with
drug manufacturers.

Question 22

Centers for
Medicare and
Medicaid Services
(CMS)

Answer 22

The federal government, through the Centers for
Medicare and Medicaid Services or CMS, oversees all
parts of the Medicare and Medicaid programs. CMS can
waive a state’s requirement to participate in traditional
Medicaid if the state offers beneficiaries plans with
better benefits.

Question 23

Medicare Cost

Report

Answer 23

A Medicare Cost Report is an annual report that
institutional providers participating in the Medicare
program must submit to their Medicare Administrative
Contractor. For providers paid prospectively, the cost
report determines reimbursement for certain add-on
payments but does not affect the overall payment
rate. For providers paid retrospectively, the cost report
determines the payment rate. CMS uses cost report
data to update DRG and APC weights and determine
market basket updates

Question 24

Medicare Trust

Fund

Answer 24

The Medicare Trust Fund is the pool of FICA taxes that
pays for Medicare Part A and B. Unless Medicare is
reformed or payroll taxes are increased, the trust fund
is expected to be depleted within the next ten years.

Question 25

Fiscal

Intermediary

Answer 25

A fiscal intermediary is an organization that contracts
with CMS to pay Medicare claims and educate
providers. A newer term is Medicare Administrative
Contractor (MAC).

Question 26

Medicaid

Answer 26

Medicaid is a joint federal and state program
established by Title XIX of the Social Security Act in
1965 for low-income and medically needy people. It is
the single largest source of health coverage in the
United States. Medicaid covers low income families,
qualified pregnant women and children and individuals
receiving Supplemental Security Income (SSI).
Medicaid includes benefits not normally covered by
Medicare, such as nursing home care and personal care
services. Each state has different rules about eligibility
and applying for Medicaid.

Question 27

Children’s Health
Insurance
Program (CHIP)

Answer 27

The Children’s Health Insurance Program¸ signed into
law in 1997, serves uninsured children up to age 19 in
families with incomes too high to qualify them for
Medicaid.

Question 28

Provider networks

Answer 28

Provider networks are groups of providers (“panels”)
that contract with insurers as “preferred” or “innetwork” in order to attract patients (steerage). The
insurer steers patients to its panel of network providers
by paying a higher proportion of the patient’s costs of
care. Some provider networks are known as “narrow”
or “ultra-narrow.”

Question 29

Value-Based

Purchasing (VBP)

Answer 29

Medicare’s Value-Based Purchasing (VBP) program
started in 2012 as a part of the Affordable Care Act. It
reduces payments to providers that do not meet CMS’s
quality of care standards. Participation in VBP is
mandatory.

Question 30

Patient Protection
and
Affordable Care
Act

Answer 30

The Affordable Care Act, also known as “Obamacare,”

was passed in 2010. The 2015 legislation that reformed Healthcare. Physician payments (MACRA) is not part of the ACA.

Question 31

3 Accomplishments of ACA/Obamacare

Answer 31

(1) it reformed the health insurance market (healthcare
exchanges or marketplaces, individual and employer
mandates, and benefit standardization for all
marketplace, individual, and employer-sponsored
plans), (2) expanded Medicaid coverage from 100% to
133% of FPL for “expansion” states and (3) accelerated
the transformation of the healthcare the delivery
system through three key CMS-administered programs
(ACOs, value-based purchasing and bundled payments)

Question 32

Medical loss ratio

Answer 32

Medical loss ratio refers to the percentage of premiums
that payers must spend on clinical services and quality
improvement. The Affordable Care Act requires health
insurance issuers to spend at least 80% to 85% of
premium dollars on claims and quality.

Question 33

Individual

Mandate

Answer 33

The Individual Mandate requires individuals and families
without employer-provided insurance to purchase
health insurance or pay a penalty. The Supreme Court
in 2012 characterized the penalty as a tax. The penalty
ranges from $695 per year to a maximum of three
times the amount ($2,085) per family or 2.5% of
household income.

Question 34

Employer

Mandate

Answer 34

The Employer Mandate requires employers with 50 or
more full-time equivalent employees (FTEs) to offer
health insurance coverage.

Question 35

Insurance

Exchange

Answer 35

Insurance Exchanges are federal or state-run health
insurance markets designed to make health insurance
affordable and broadly available. They are more
correctly referred to as Health Insurance Marketplaces.
Individuals who purchase health insurance on an
exchange (in the marketplace) may qualify for premium
subsidies. 85% of enrollees receive such a subsidy. The
subsidies are not available on the individual market.

Question 36

Accountable Care
Organization
(ACO)

Answer 36

Accountable Care Organizations (ACOs) are groups of
Medicare providers and suppliers that work together to
coordinate care for traditional Medicare patients. Their
goal is to deliver seamless, high-quality care instead of
the fragmented care that often results from a fee-forservice payment system. The following groups of
providers can form an ACO: physicians or certain nonphysician practitioners in group practices, hospitals
employing physicians, certain critical access hospitals,
federally qualified health centers, and rural health
clinics.

Question 37

Bundled

payments

Answer 37

A bundled payment is a single prospective payment by
a health plan to all providers involved in a patient’s
episode of care where the providers divide the payment
among themselves.