PHR 515 Exam 1

Define multi-payer system. How does it apply to US health delivery system?

Define multi-payer system. How does it apply to US health delivery system?

Two or more providers administer health insurance. Individuals choose among competing health insurers for their care. (The U.S. has multiple independent insurance providers that individuals can choose from)

Define socialized medicine. How does it apply to US health delivery systems?

Government owns health care facilities and employs the health care professionals. (this means that workers in healthcare facilities are employed by the government, like in U.S. VA)

What is primary care?

The first point of consultation for general patients with non-emergent illness (mostly outpatient/office-based visits like GPS)

What is secondary care?

Services provided by specialists or hospital care (including emergency department).

What is tertiary care?

the highest level of specialty required care, most are provided in hospital setting (for example, organ transplant, brain surgery)

What country spends the most per capita (per person) on health care?

the US

(State of US Health JAMA Article Table 1) What are the top 5 diseases/injuries with respect to years of life lost in the US in 2016?

1. Ischemic heart disease
2. Tracheal, bronchus, and lung cancer
3. Chronic obtrusive pulmonary disease
4. Alzheimers disease and other dementias
5. Colon and rectum cancer

(State of US Health JAMA Article Table 1) Which disease/injury had the largest percentage increase in the number of "death" (not age-standardized death rate) comparing 1990-2016?

opioid use disorders

(State of US Health JAMA Article Table 1) Which disease had the largest percentage increase in age standardized years of life lost comparing 1990-2016?

Opioid use disorders

(State of US Health JAMA Article Table 2) What are the major risk factors for death?

1. Dietary risks
2. Tobacco use
3. High systolic blood pressure
4. High BMI
5. High fasting blood glucose

Define Life Expectancy

an average number of years that a person can expect to live at a given age, usually birth, based on current death rates

Define Years of Life Lost (YLL)

This represents the amount of additional years a person would have lived if they had not died prematurely. It is determine by subtracting the age at deat from the life expectancy (if the age of death is greater than the life expectancy, then YLL is zero)

Define Age standardized death rate

is used to make fair comparisons between groups with different age distribution

Define years lived with disability (YLD)

the number of years that a person lives with a disease, multiplied by disability weight (YDL quantifies the burden of a nonfatal health outcome)

Define disability-adjusted life year (DALY)

a standard measure of the burden of disease, it is calculated by YLL + YLD

Who are three major players in health insurance market? Understand how they are related.

a. The insurance company: The insurance company provides insurance to the patient in exchange for a monthly premium payment. After the provider makes a claim on care provided, the insurance company reviews this claim and pays the healthcare provider a reimbursement for the cost.
b. The healthcare provider: The healthcare provider provides care to the patient and receives a copayment. After providing the service, the provider makes a claim to the insurance company and receives a reimbursement.
c. The patient/individual: the patient pays a monthly premium to the insurance company to receive insurance, and pays a copayment to the healthcare provider at the time of receiving service

What is adverse selection? How do insurers plan to avoid it?

the tendency of those who are sicker to get health insurance (as a result, only sicker patients buy insurance and the insurer may go out of business). The insurance company avoids this by supplying employer-provided service, because if someone is employed then they are probably not very sick.

What is moral hazard? How do insurers try to avoid it?

a. when individuals demand more health care knowing they are insured than they would if they were not insured. (As a result, more costs incur to the insurer and insurer may go out of business). Insurance companies try to avoid this by cost-sharing, if the patient is also required to pay out of pocket costs, they are less likely to demand unnecessary healthcare.

What are the 3 kinds of patient cost-sharing?

deductible, copayment, coinsurance

Define deductible

Individuals face the full cost of their care, but only up to some limit; for example, a $100 deductible would mean that you pay the first $100 of your medical costs for the year, and then the insurance company pays all of the costs thereafter.

Define copayment

Individuals make some fixed payment when they get a medical good or service; for example, a $10 copayment for a doctor's office visit of a new prescription.

Define coinsurance

the patient pays a percentage of each medical bill (the coinsurance rate, e.g., 20%), rather than a flat dollar amount

Why predominant source of private insurance is employer-provided health insurance? Give two reasons (one from insurer's perspective, the other from individual's perspective)

Insurance companies want to insure individuals through their employers because it is important to collect enough premiums from a large risk pool to cover its cost for the group. They are also less likely to have the adverse selection problem because these individuals are working (less likely to have serious illness)

From the individuals prospective, there is a tax benefit. Workers are not taxed on employer health insurance premium, which is especially substantial for those that are in a higher income bracket (If you earn $100,000 and $1,000 is spent on employer health insurance premium, you are only taxed on $99,000 instead of $100,000)

Define the "risk pool"

The risk pool is the group of individuals that enroll in an insurance plan

Know the difference between fee-for-service and managed care. How do these systems affect physician's behavior related to patient care?

Fee-for-service: healthcare providers get paid for each service they perform with no limits on treatment decisions. This currently exists in public plans (medicare) but not private plans. Insurance companies do not like this model because healthcare providers are more likely to provide expensive healthcare to receive more reimbursement, even if the service is not necessary.

Managed Care: healthcare providers pre-negotieate the payment amount with the insurer, and there are restrictions on treatment choices. In this plan, there are different levels of coverage based on whether the healthcare provider is in-network or not. Capitation (fixed payment per member per month).

Compare and contrast PPO and HMO insurance plans. How do these systems affect patient's behavior related to health care?

PPO (preferred provider organizations): healthcare organizations that lower care costs by shopping for health care providers on behalf of the insured. Because patients can receive a discount if they visit an in-network HC provider, they may be able to save some money. The patient also has more flexibility in their ability to see specialists because they do not have to go through a gatekeeper.

HMO (health maintenance organizations): are health care organizations that integrate insurance and delivery of care. An enrollee is assigned a gate keeper (primary care physician) that is in charge of authorizing the patient's referrals, hospitalizations, and lab studies. However, these organizations tend to be limited in the care they can provide, and it can be difficult for patients to get referrals, and they lose access to the care if they travel.

Describe "iron triangle" of health care and apply the concept to different health insurance policies.

The iron triangle of health care relates cost of healthcare to the quality and the access.

In HMO plans, the cost of the healthcare is relatively cheap, but the access is limited as the patients have to go through a gatekeeper to see a specialist, and the quality is not as good because the PCP is doing more than they should.

In PPO plans, patients have access to many different kinds of good quality healthcare, but they have to pay a higher cost for this kind of insurance.

Know the general concept and examples of "service-based reimbursement", as compared to "outcome-based reimbursement".

Service based reimbursement is a kind of value based reimbursement. This includes the managed care options as provided by PPO, HMO, POS, and HDHP health care plans. The DRG system is an example of service-based care.

Outcome-based reimbursement ( also called value based reimbursement) is focused on the quality of care rather than the quantity. This is used by accountable care organizations (ACOs) and the medicare 30-day readmission penalties (both of which have the same goal of reducing readmission rates).

How are hospital inpatient services and prescription medications reimbursed? Using what code?

Hospital inpatient services are reimbursed through a bundled payment per in-patient stay. They use a DRG (diagnostic related group) code that is assigned for each inpatient by the insurer based on diagnostics and procedure, and the hospitals are reimbursed based on the pre-set amount of the DRG (not on what the hospital actually spends).

Describe HDHP and HSA and understand how they work together (Understand provided examples).

HDHP (high deductible health plan) requires high deductible (low premium), and is meant to prevent individuals from catastrophic medical expenses.

HSAs (health savings accounts) are tax-free spending accounts owned by the employee. Employees can designate a certain amount to HSA from their paycheck. The money put into HSA is not subject to payroll tax. Money that is not spent rolls over from year to year.

Together, HDHP and HSA make up the most common form of CDHP (consumer directed health plan). You must be enrolled in an HDHP it be eligible for an HSA.

What is the goal of Medicare (i.e., to provide coverage to whom) and how is it managed (i.e., at what government level)?

The goal of Medicare is to provide coverage to almost everyone 65 or older, and some people with disability and/or end stage renal disease under age 65.

Medicare is a federal program whose rules are the same all over the country (eligibility is determined by the federal government and solely funded at the federal level).

Describe Medicare Part A

Part A includes hospital coverage (inpatient) (can be from a private company or the federal default coverage, most people don't pay a premium for Part A because they or a spouse already paid for it through their payroll taxes while working)

Describe Medicare Part B

Part B is for medical coverage (outpatient) (can be from a private company or the federal default coverage, most people pay a monthly premium to the government for part B)

Describe Medicare Part C

Part C is coverage from a private insurance company, also called Medicare advantage plans

Describe Medicare Part D

Part D is prescription drug coverage (can only be purchased through a private company)

Describe Medigap

Medigap is a Medicare supplement insurance sold by private companies that helps pay some of the health care costs that Original Medicare (Parts A and B) doesn't cover, like deductible, copayments, and coinsurance (Medigap does not include prescription drug coverage, and one should have Original Medicare to buy Medigap)

What is the donut hole in Medicare Part D (concept, not the dollar amount)?

The donut hole represents the gap in medicare part D coverage when a certain dollar amount is reached. Coverage begins on January 1st and initially, patients receive the full coverage that they have paid for. Then, once a certain dollar amount is reached, the patient virtually loses that coverage in what is called the "donut hole". After a certain amount of prescription payments in the donut hole, the patient may reach another dollar amount that qualifies them for catastrophic coverage", in which the coverage kicks back in until December 31st. The dollar amount at which the patient reaches the donut hole changes every year.

What is the goal of Medicaid and how it is managed?

Medicaid provides health care to the poor.

It is a joint federal-state program in which eligibility is determined by the state, and the federal government pays states for a specified percentage of the program.

Describe CHIP

CHIP stands for Children's Health Insurance Program. It was introduced to expand eligibility of children and pregnant women for public health insurance beyond the existing limits of the Medicaid program. It provides coverage to children in a family that may not have a low enough income to qualify for regular Medicaid, but may not have a high enough income to purchase commercial coverage. The coverage and requirements vary by state.

Why do we care about the uninsured? Describe the relevant social influences on their disease management.

Most of the uninsured are those under 65 considered to be "working poor" They are too young to apply for Medicare, too poor to purchase commercial coverage, but too rich to qualify for Medicaid.

From a public health perspective, we care about the working poor because untreated communicable diseases may affect others. Additionally, without insurance, they may face inappropriate delivery of care (i.e. receiving care through emergency rooms that they may have been able to receive through a GP which could negatively affect the work flow in hospitals. Uninsured people also contribute to uncompensated care which could hurt healthcare providers financially as well.

What is uncompensated care?

Uncompensated care is the health care for which providers are not reimbursed. When uninsured patients visit hospitals (they cannot be turned down from emergency room care regardless of coverage status) there are a lot of unpaid bills resulting form these patients.

In 2020, it was estimated that $42.7 billion in uncompensated hospital care was delivered to the uninsured.

Know the positive and negative effects of public vs. private health systems.

Public (Government-Regulated):
- Positive Effects: Per unit healthcare cost is lower, Extended coverage for the poor
- Negative Effects: Delayed (or no) access to new therapy/technology, Low reimbursement for healthcare providers (can lead to staff shortages), Long wait, Limited choice for patients

Private (Market-Driven):
- Positive Effects: Quicker adoption of new therapy/technology, More choices for patients, Healthcare providers compete for quality
- Negative Effects: Limited access for the poor - Health disparities, Per unit healthcare cost is higher

What is Universal coverage?

Health coverage for everyone. It could take a single payer or multi payer system, like Medicare in US

What is single payer system?

Financed from a central fund. Often administered by the government, Also like medicare in US.

What is a PBM and what does it do?

PBMs are pharmacy benefit mangers that are entities that manage and administer prescription drug benefit for insurers. They are third party administrators (TPA) of prescription insurance responsible for formulary development and management, utilization and cost management, claims processing and provider payment. i.e. express scripts and Optum Rx

What is the equation of prescription payment from PBM?

Prescription payment = Product cost + Dispensing fee - patient cost share

Define AAC

Actual Acquisition Cost - The actual payment paid by a pharmacy to a supplier for a product, rarely used for determining reimbursement amounts under prescription benefit plans.

Define EAC

Estimated Acquisition Cost - An estimate of the AAC that is commonly used to determine the reimbursement amount for product cost under prescription benefit plans, usually expressed as a percent of AWP (EAC = AWP - AWP (%))

Define WAC

Wholesale Acquisition Cost - Manufacturers published catalog price for sale of a drug (brand or generic) to wholesalers. Wholesalers generally don’t pay WAC, but some lesser amount WAC is considered a close approximation for what pharmacies pay wholesalers for brand name drugs.

Define AMP

Average Manufactures Price - The average price paid by wholesalers to manufacturers for drugs distributed through retail pharmacies or by retail pharmacies that buy directly from manufacturers. Average of actual transaction prices. Used by government as the basis of payments to pharmacies for medicaid generic prescriptions.

Define AWP

Average Wholesale Price - A suggested list price for products purchased from wholesalers by pharmacies. Pharmacies usually purchase drugs at an amount lower than AWP. AWP often serves as a pricing index in the payment formulas used to determine payments to pharmacies under prescription benefit plans. EX. AWP minus 15% to 17% is common on brand name

Define MAC

Maximum Allowable Cost - A maximum amount per unit of medication that PBMs will pay pharmacies for multi source drugs. PBMs may set their own MACs. Pharmacies reimbursement for product cost cannot exceed the MAC amount regardless of the pharmacies actual cost for the medication. Provides an incentive for pharmacies to use less expensive generics rather than brand.

How is single source drug reimbursement different from a multi-source drug reimbursement?

Single source uses AWP: (AWP - (AWP(%)) + Dispensing fee

Multi source uses MAC: MAC + Dispensing Fee

*Both subtract copay and for DAW on multi-source use AWP

How are retail pharmacies reimbursed for prescription drugs under Medicare?

Medicare pays retail pharmacies through the prescription payment formula = Product cost + dispensing fee - patient cost share

How are retail pharmacies reimbursed for prescription drugs under medicaid? Describe FUL.

Single source drugs: AWP is used as pricing index

Multi-source drugs: Use MAC (Subject to FUL) or FUL is used

FUL is federal upper limit. Medicaid matching funds to states are limited to payments that cannot exceed the FUL for multi source drugs, calculated using AMP.

Spread Pricing

PBMs bill the health plan more for a prescription claim than the pharmacy is reimbursed for its product costs and dispensing services.

Rebates

Are given to PBMs by manufacturers to encourage PBMs to increase the market share for a particular medication. Single source give rebates to PBMs and multi source give rebates to pharmacies.

Formularies

Use tiered copays, different level of copays based on medications formulary status

Prior Authorizations

Programs used to allow access to certain meds for patients who meet specified criteria. Providers must get approval from insurance.

Quantity limits

Limits on days supply or number of dosages allowed per prescription

Step therapy

Use of prescribing pattern set by protocol based on the stage of illness or treatment effectiveness

Generic Substitution

use of less expensive generically equivalent medication in place of brand

Mail service

Offered by benefit plans, usually pay lower and offer more quantities

Flat Rate Rebate

Rebate based on a fixed percentage of the wholesale acquisition cost

Market Share Rebate

Manufacturers make payments to PBMs based on the market share that each PBM achieves for the drug product. Lower copays and prefer formularies.