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Fin/Reimb Methods
Financing & Reimbursement Methods
| Question | Answer |
|---|---|
| Complexity of financing | Primary characteristic of HC delivery in US Many payers Many private plans Many gov't programs Many payment methods |
| Who are the uninsured? | People not covered by either private or gov't health insurance |
| U.S. has a voluntary system | Employers not mandated to offer insurance (but can be fined if they don't) Employees not req'd to joint (can be fined if they don't) Gov't covers only certain groups |
| National HC Programs | Provide universal coverage for all citizens |
| What is financing? | Any mechanism that gives people the ability to pay for HC services In most cases, financing is necessary to have access to HC |
| Sources of financing HC | Private health insurance |
| Economic perspective of financing | Working Americans finance own HC & subsidize it for those who can't afford it Employer-paid insurance is an exchange for more salary Taxes support public programs |
| Health Insurance | Primary mechanism to obtain HC Regarded as a key component of HC financing Financing determines access to HC Demand related to financing (insurance increases demand) Insurance lowers out of pocket cost (pts consume more [moral hazard]) |
| Role & Scope | New services proliferate when they're covered by insurance Financing has given rise to sub-industries (home health, sub-acute care) Influence on technology diffusion & utilization Mgmt devisions influenced by reimbursement |
| What does financing affect? | Supply & distribution of health professionals Total HC expenditures |
| What increases expenditures? | Expansion of insurance Increase in health insurance premiums |
| Expenditures can be reduced by: | Restricting insurance Restricting reimbursement to providers Having fewer spcialists Spending less on R&D Direct control over utilization Designating certain services as not covered |
| What is the definition of health insurance? | A financial mechanism that shares & disperses risk of financial loss due to occurrence of an adverse event within a population of people |
| What is risk? | Possibility of a substantial financial loss from an event of which the probability of occurrence is relatively small (Car accidents common; however, risk is quite small that a specific person will have one in a given year) |
| What is a premium? | Fee paid by individuals &/or employers Creates pool of resources that provides income or service benefits to holders |
| Who are beneficiaries? | The holders of insurance contract |
| What is a policy? | A contract |
| 4 Principles of Insurance | 1. Risk is unpredictable 2. Risk can be predicted w/ some accuracy in a large group 3. Insurance can xfer risk from individual to group thru pooling of resources 4. Losses shared by all members |
| Purpose of Insurance | Protection from unforseen and severe financial loss |
| Risk Pool | Collection of premium fees from each member which can be dispersed to individuals who actually incur an event covered by the contract *Beneficiaries aren't guaranteed to receive benefits = to amount contributed to risk pool |
| Org/Admin of Insurance- Performed by private companies & the government | US is a dualistic mix unlike other countries Gov't regulates the insurance companies to make sure their reserves are adequate |
| Org/Admin of Insurance- Actuarial Analysis | Process used to determine the premium fee Premiums cover: plan, profit, benefits, admin expenses Analysis considers: demographics, past medical care use rates, known cost data |
| Moral Hazard | Financially irresponsible behavior regarding insurance Consumer behavior that leads to a higher utilization of HC services when services are covered by insurance |
| Insured? Insurer? Underwriting? | 1. Enrollee/beneficiary; individual protected by insurance 2. Insurance agency that assumes risk 3. Evaluates, selects/rejects, classifies, & rates risk |
| Cost Sharing | Insurance requires some type of cost sharing Insured assumes at least part of the risk Purpose of cost sharing is to reduce misuse of insurance benefits |
| 3 main types of cost sharing in private health insurance | Premium cost sharing Deductibles Co-payments |
| Premium | Amount charge by the insurer to provide coverage Cost sharing by employers & employees |
| Deductibles | Amount the insured pays first before benefits are paid by the plan Paid annually |
| Co-Payment | Money paid out-of-pocket each time health services are received % share is referred to as co-insurance |
| Stop Loss | Limits total out-of-pocket costs |
| Indemnity Plans | Reimburses the insured a pre-determined amount per service Insured is responsible for paying provider |
| Service Plan | Provides services to the insured Plan pays the provider directly except for deductible & co-payments |
| Covered Services- Benefits | Services covered by an insurance plan (medically necessary) Specified in a contract Dental coverage is often separate |
| 5 Main Types of Private Insurance | 1. Group 2. Self 3. Individual private 4. Managed care 5. High-deductible health |
| Group Insurance | Offered thru an employer, union, or professional org Anticipates large #s of people in a group will buy insurance thru a sponsor Cost & risk are distributed equally among the insured |
| Self-Insurance | Large employers' workforces are large & diversified enough They can predict their own medical experience They can assume risk & pay all claims High losses covered thru re-insurance |
| Individual Private Health Insurance | For those who don't have group coverage (farmers, early retirees, self-employed individuals) Risk is individually determined High-risk people often unable to get insurance |
| High-Deductible Health Plans- HRA | HDHP/HRA- HDHP combined with health reimbursement arrangement Employer-financed account Tax exempt payments made for qualified medical expenses |
| High-Deductible Health Plans- HSA | HDHP combined with a health savings account Mainly employee financed on a tax-deductible basis |
| Managed Care Orgs (MCO) consist of | HMO (Health Maintenance Org) PPO (Preferred Provider Org) Assume risk in exchange for a premium Assume responsibility for obtaining HC services by contracting with providers |
| Pt Protection & Affordable Care Act (ACA) | Mandates individuals to have insurance or pay a tax penalty Employers w/ 50+ employees mandated to offer insurance coverage or pay "free rider" tax Medicaid expanded to cover all people at or below 133% of federal poverty level |
| ACA | Mandate states to establish insurance exchanges Tax credit for small businesses with <25 workers It's illegal to deny insurance to people with pre-existing medical conditions To cost at least $150 bill in 2016, ~21 mill still be left uninsured |
| Reimbursement- 3rd party payers | Insurance companies, managed care orgs, BCBS, government |
| Reimbursement | Payment made by 3rd party payers to the providers of services |
| The Payment Function | Charge/Rate- set fee for a service Charge- price set by provider Rate- price set by 3rd party payer Fee schedule- index of charges listing individual fees for each type of service |
| Reimbursement Methods: Determine how much to pay providers | Fee for service Bundled charges (pkg pricing) RBRVS Managed care approaches Cost-Plus reimbursement Prospective reimbursement |
| Fee-for-Service Reimbursement | Charges set by providers Each service billed separately "Usual, customary, & reasonable" (UCR) became common Main drawback: provider-induced demand |
| Payment Function- Bundled Charges (Package Pricing) | Number of related services in one price Reduces provider-induced demand b/c fees are inclusive of all bundled services |
| Resource-Based Relative Value Scale (RBRVS) | Medicare developed program to reimburse physicians according to a "relative value" assigned to each service Based on time, skill, intensity |
| Reimbursement methods- Managed care approaches | Discounted fees Used by PPOs Capitation- used by HMOs, Per member per month (PMPM) fee to cover all needed services, prudent delivery of services, minimize provider-induced demand |
| Retrospective Reimbursement | Rates set after evaluating costs retrospectively Historical costs used to determine amount to be paid Perverse incentives |
| Prospective Reimbursement | Uses certain pre-established criteria to determine in advance the amount of reimbursement |
| 4 main methods of prospective reimbursement | Diagnosis Related Groups (DRG) Ambulatory Payment Classifications (APC) Resources Utilization Groups (RUG) Home Health Resources Group (HHRG) |
| Diagnosis-Related Groups (DRGs) | For acute hospital inpatients ~500 DRGs Prospectively set bundled price (according to the admitting dx) Hospital earns profit by keeping costs below DRG reimbursement |
| Ambulatory Payment Classification (APC) | Medicare's OP Prospective Payment System (OPPS) 300 procedure groups Reimbursement rates associated with each APC group Bundled rate to include: anesthesia, drugs, supplies, recovery |
| Resource Utilization Groups (RUG) | Case-mix method to reimburse SNF (case mix: overall acuity level in facility) Each pt classified into 1 of 66 RUGs Case mix determines a fixed per-diem rate: the higher the case mix score, higher the reimbursement |
| Home Health Resource Groups (HHRG) | Fixed, pre-determined rate for each 60-day episode of care, regardless of services given OASIS used to rate pt's fxnal status & clinical severity Assessment measure translate into points Total points determine HHRG category |
| Pay for Performance | Based on premise that reimbursement should be linked to quality & efficiency |
| Adverse Selection | Enrollment in greater #s by high-risk individuals Premiums rise for everyone, making insurance less affordable unless healthy individuals are mandated to buy insurance |
| Favorable Risk Selection (cream skimming) | Insurers select low risk people Difficult for high-risk people to get coverage Risk rating has been criticized: equity grounds; politically unacceptable |
| Cost Shifting | This was the traditional way for providing HC to the uninsured Capitation & prospective payment methods have eroded this capability |
| Fraud & Abuse | Significant problem particularly in Medicare/Medicaid Fraudulent billing may amount to 3-10% of total HC spending HIPAA of 1996: HC Fraud & Abuse Control Program |
| National Health Expenditures | Spending for all health services & related activities Eval'd as a % of GDP & as amount spent per capita 17.9% of GDP spent in 2010 HC cost inflation eval'd using the CPI |
| Financing plays a critical function in HC delivery | Enables consumers to obtain HC services through insurance coverages For providers, it reimburses them for the services they provide |
| Conclusion | Methods of reimbursement changed from retrospective to prospective Prospective payment & capitation used by HMOs contain incentives for the delivery of cost-effective health care |
| Financing is shared b/t private & public sources | Gov't incurs ~45% of all HC expenditures in the US A quasi-national HC system Public expenditure is expected to grow substantially if ACA is implemented in 2014 |
Created by:
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