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Fin/Reimb Methods

Financing & Reimbursement Methods

QuestionAnswer
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: 1190550002