HCI Exam 3 Definitions/Memorization

Premium

the amount of money you pay to an insurance company or health plan to maintain your coverage for medical expenses, prescriptions, and other health services

Subsidy

a financial assistance or support provided by the government or an organization to certain individuals, businesses, or sectors that aims to reduce the cost of goods or services, promote specific activities, or achieve social or economic goals

can take form of direct cash payments, tax breaks, or reduced fees

Copayment

a fixed amount of money you pay out of pocket each time you receive a specific medical service or fill a prescription

do not contribute to policy out of pocket max

Covered entities

individuals, organizations, or agencies that fall under HIPAA that are required to comply with FIPAA riles to protect the privacy and security of health info

ex. health plans, healthcare providers, clearinghouses

Medicare

a federal health insurance program in the US that primarily serves people aged 65+ as well as younger individuals with specific disabilities or conditions

Medicaid

a joint federal and state program that provides health coverage to eligible low-income individuals and families

administered by STATES

CHIP

• Children’s Health Insurance Program

• state-based program that provides health coverage to children in families who earn too much to qualify for Medicaid but still need affordable insurance that ensures children have access to essential health services

Pharmacy Benefits Manager

• third-party organization that manages prescription drug benefits for health plans, employers, and other entities

• negotiate drug prices with pharmacies, process claims, and administer pharmacy benefits

Clawback

a practice where PBMs or insurance companies retroactively charge pharmacies for the difference between the amount paid by the patient (co-pay higher than cost of drug) and the actual cost of the medication that can lead to unexpected financial burdens for pharmacies

Spread Pricing

the difference between what a pharmacy is reimbursed by the PBM for a prescription drug and the actual acquisition cost of that drug

PBM Transparency Act of 2023

legislation aimed at increasing transparency in the PBM industry that seeks to address issues related to pricing practices, disclosure of rebates, and ensuring fair reimbursement for pharmacies

Pharmacoeconomics

a subdiscipline of health economics that evaluates the cost and effects of pharmaceutical products or interventions that involves assessing the economic value of medications by considering both their monetary costs and their impact on health outcomes by comparing different treatments, analyzing resource utilization, and informing decisions related to drug formularies, treatment guidelines, and healthcare policies

WTP

• Willingness to Pay

• the max amount of money that an individual is willing to pay for a specific health intervention

• represents the value an individual places on obtaining a particular health benefit

• benchmark: multiples of GFP/QALY

Budget

• financial plan that outlines expected income and expenses over a specific period

• serves as roadmap for managing financial resources effectively

• helps allocate funds to different activities, projects, or departments

• ensures spending aligns with priorities and prevents overspending or deficits

CMA

• Cost Minimization Analysis

• basic rule used by producers to determine the least costly goods or services assuming clinical outcomes are equivalent

• often used in preferred drug discussion when differences in drug class are minimal to none

CEA

• cost effectiveness analysis

• compares the relative costs and outcomes of different courses of action

• estimates how much it costs to gain a unit of a health outcome

• commonly used in health technology assessment and pharmacoeconomics

• compares interventions to each other

• results: cost-effectiveness ratios or net cost savings

CUA

• cost utility analysis

• overall measure of utility or value based on individual preferences

• evaluates/compares prorgams aiming to achieve the same goal in non-monetary terms

• use quality adjusted life years (QALYs) to measure benefits in terms of life expectancy and quality of life

CBA

• cost benefit analysis

• systematically measures the benefits of a decision or action minus the costs associated with taking that action

• compare benefits to total cost

• includes both tangible and intangible benefits

• helps determine project viability

Cost Avoidance Analysis

• proactive measures taken by businesses to prevent unnecessary expenses

• identifying potential future costs and implementing strategies to eliminate or minimize them

BIA

• budget impact analysis

• assesses the financial impact of adopting a new intervention or policy within a specific budget

• estimates additional costs incurred due to the intervention and its effects on the overall budget

• evaluate affordability of new treatments/tech

Deductible

amount paid out of pocket by policy holder before insurance provider will pay any expenses

Co-insurance

• percentage payment after a deductible up to a certain limit

• contributes towards policy out of pocket max

Drug Tier System

• the staging/tiering of meds based on their cost, cost comparison to current alternatives, availability, and clinical effectiveness and connection to standard of care and other cost factors

• low tiers: cheapest, generics

Claim Submission

process of sending a claim to the third party for reimbursement

Adjudication

online adjudication refers to billing 3rd parties for goods and services rendered; the process of completing all validity, process, and file edits necessary to prepare a claim for final payment or denial

EOB

explanation of benefits

statement sent by a health insurance company to covered entities/individuals explaining what medical treatments and/or services were paid for on their behalf

commonly attached to a check or statement of electronic payment

Share of Cost

amount of medical bills that you must have before medicaid can pay any of your other incurred medical bills

Medicaid program for people who have too much income/assets over limits for Medicaid

similar to deductible

Prior Authorization

a utilization management process by which some health insurance companies determine if their will cover a prescribed procedure, service, or medication

intended to act as a safety and cost-saving measure

Step Therapy

• managed care approach to prescription drugs intended to control costs and risks

• used in prior auths

• begin med for a medical condition with the most cost-effective drug therapy and progress to other more costly or risky therapies only if necessary

Split Billing

process of submitting a single claim to multiple payers for combined reimbursement

FSA

• Flexible Spending Account

• US program allowing pre-tax contributions through a commericla health plan to an account to be used for copays, deductibles, some therapies, and other health care costs

• limited to capped amount per employer

• if funds are not used by end of plan year, forfeited to employer

US Health Care System (insurance)

Mixed coverage (private and public)

Insurance Funding is primarily driven by

• out of pocket payments

• market provision of coverage (tax, employers)

  • employers get tax stubsidies

Largest percentage of US Pop has what kind of insurance

employer sponsored private insurance

Insurance premiums are dependent on

Toal RISK of covered events in given pool of covered entities

Risk

probability an individual will consume resources through a covered event

Factors that Influence Health Insurance Premiums

• income level

• age

• tobacco use

• state/federal laws

• type of insurance

• employer size

• state of residence

• type of community

• county of residence

• plan type

Flow of money (insurance)

• covered entities pay premium to insurance plan

• external contributions (tax dollars or employee contribution) go to pooled resources

• insurance plans pay to health provider

• covered entities pay copay/coinsurance to health provider

• private insurance takes pooled resources and invests

Most health care spending goes to what services

• hospital care

• physician services

• prescription drugs

Trends in Rx Drug Spending

• growth due to more spending per prescription, not increased prescriptions filled

• increased use of mail-order pharmacies, clinics, and home health care

• drug spending driven by small number of high-cost drugs (specialty)

Majority of prescriptions are filled with

generic drugs

80% of prescription drug spending is

brand-named drugs

PBM jobs

• developing lists of covered meds

• negotiating rebates from drug manufacturers

• contracting with pharmacies for reimbursement

• NOT by distributing meds

PBM Flow of Funds

• negotiate rebate from manufacturer

• pay share of rebate to health plan

• health plan pays admin fees, drug payment, dispensing fees

• pay pharmacy for drug and dispensing fee

PBM Flow of Services

• Negotiate formulary placement for manufacturer

• manage drug benefit for health plan

• contract directly with pharmacy to dispense drugs

Consolidation of PBMs and Insurance has resulted in

• vertical integration

• small number of companies manage majority of Rx drug benefits

PBM transparency

• little to none

• difficult to understand flow of money in Rx drug market, how PBMs determine prices

The 3 largest PBM companies

• Express Scripts (independent, publicly traded)

• CVS Caremark (segment of CVS chain)

• Optum Rx (segment of United Health Group Insurance)

• control 89% of market

PBM Transparency Act

• enhance transparency and accountability in drug pricing

• ban on deceptive pricing (spread)

• reporting requirements to FTC

• ban arbitrary clawbacks

PBM Reform Act

• address practices related to managing Rx drug benefits under insurance

• ban charging insurance diff amount than pharmacy reimbursement, clawbacks, fee adjustments to offset changes in federally funded health plans

  • exempt if 100% of price concessions/discounts are passed to health plan

• report to FTC

• enforced by FTC and state attorney

Key PBM Legislation

• uniform reimbursement rates

  • ban PBMs from charging insurance different amount than reimbursed to pharmacies

• clawback prohibition

• transparency requirements

  • disclose costs, prices, reimbursements, feeds, markups, discounts, and aggregate payments

• enforcement authority by FTC and state attorneys general

Patients Before Monopolies Act

• PBM Act of 2024

• prohibit common ownership of PBMs and pharmacies to address anticompetitive practices

• entities cannot own both a pharmacy a PBM/insurance company

• entities must divest pharmacy within 3 years

• reporting requirements by PBMs

• Enforced by HHS OIG, DOJ Antitrust, FTC, or state attorney genera

• civil penalities

Medicare

• insurance for 65+, disability, end stage renal disease or amyotrophic lateral sclerosis

• funded and administered by federal gov

• premiums, deductibles, co-pays

Medicaid

• insurance low income, limited resource, disability

• serves primarily women, children, families

• funded by federal and state

• administered by state

• cost capped based on income

Medicare part A covers

• inpatient hospital stays

• care in skilled nursing facility

• hospice care

Medicare part A does NOT cover

• room and board for hospice care

• private rooms

• private duty nursing, TV/phone, personal care

• physician services while inpatient

• long term nursing home care

• DME not medically necessary

Medicare part B covers

• outpatient care (ER/urgent care)

• DME, diabetes supplies

• preventive services

  • screenings

  • flu/pneumonia/HepB/COVID vaccine

  • certain Rx drugs

• lab work

Medicare part B does NOT cover

• routine physicals, dental, eye care

• dentures

• cosmetic surgery

• acupuncture/massage therapy

• hearing aids and exams

• long term care

Medicare Part C

• Medicare Advantage

• bundled plans offered by private insurance companies approved by medicare

  • can include dental, vision

• monthly premium + part B premium and co-pay

• out of pocket costs can be more cost-effective

• less flexibility

Medicare Supplement Insurance

• Medigap

• supplemental insurance offered by private insurance companies to cover copay, co-insurance, deductibles, international services

• standardized plans with various benefits

• must be enrolled in Part A and B (not available for C)

• monthly premium

Medicare Part D

• prescription drug plans offered by private insurance companies approved by medicare

  • each plan has own formulary, quantity limites

• covers vaccines not covered by part B

• monthly premium and copay

• inflation reduction act: out of pocket costs capped at 2000/year

• manufacturer discount program

• late enrollment penalty if you don’t enroll when you first become eligible or go for 63+ days without other coverage

  • exception: creditable coverage

IEP medicare

• initial enrollment period

• when first eligible for Medicare

SEP medicare

• special enrollment period

• qualifying events like moving, losing private drug coverage, or qualifying for extra help

AEP medicare

• annual enrollment period

• open enrollment

• oct 15-dec7

• can add, switch, or drop

Changes to Medicare Part D

• cap out of pocket spending to 2000

• donut hole (coverage gap) eliminated

• anti-obesity med coverage

• behavioral health service med coverage

• PA enhancements

• plan transparency

medicare extra help

• program to assist with costs of premiums, deductibles, and copayments for people with limited income and resources

• no coverage gap

• no late enrollment penalty

Medicare MTM

eligible if enrolled in Medicare Part D and take meds for 2+ disease states

Medicaid covers

• primary and acute medical services

• long-term services

• support to diverse low income pop

Medically Needy Medicaid

• share of cost

• income or assets that exceed limits. for regular medicaid

Statewide Medicaid Managed Care

• 2011: mandate managed care in Medicaid

• mandatory enrollment for most receiving full benefits

• Managed Medical Assistance provides Medicaid covered services

• most Medicaid ppl receive care from plan that covers MMA services

CHIP

• childrens health insurance program

• provides health coverage to targeted low income children and pregnant women with income above medicaid eligibility but have no health insurance

Children’s Medical Services

• Florida CHIP program

• managed by Sunshine Health

• eligibility: kids under 21 and eligible for medicaid or with special healthcare needs

• 2 versions:

  • medicaid children’s medical services health plan (no monthly premium)

  • KidCare Children’s Medical Services Health Plan (monthly premium)

OTC Coverage

• states do not need to cover in Medicaid programs

• MUST cover non-rx prenatal vitamins, fluoride (pregnant) and some tobacco cessation

• under EPSDT provision of Medicaid act, should cover non-Rx meds to correct illness for under 21

• most require Rx for payment under medicaid

DME coverage

• Medicare Part B

• Medicaid

• some under regular health plans

• PA review requirements reduced to <7 days

DME Medicare criteria

• usable for 3+ years

• medical purpose

• non useful in healthy

• used at home

DME Medicaid criteria

• usable for 3+ years

• medical purpose

• non useful in health patient

• used in home AND COMMUNITY

DME Standard Elements for DMEPOS

• required elements of a standard written order/Rx

• master list of items requiring face to face encounter within 6 months and written order prior to delivery

• master list of items requiring prior authorization prior to delivery

• master list include 439 items

DME Eligibility Medicare

• PCP must sign order, Rx, or certificate after face to face office visit (no more than 6 months before Rx written)

• patient must take order or Rx to approved supplier

• covered under Part B

DME Regulations

• often targeted by policy and regulations

• difficult to get and maintain needs

• providers find difficult to understand and operate

• care coordination/management difficult, multi source

• opportunity for TOC, Chronic care management

FL DME provider requirements

• physical location with DME and med supplies on site and readily available to the general public

• easily accessible to local public

• operate no less than 5 hours per day, 5 days per week

• signage that can be easily read from 20 ft

• functional land line phone

• submit proof of current accreditation

• register as DME provider

• Medicaid or Medicare provider status

Primary insurance

primary payer in split billing

pay initial cost

Secondary insurance

secondary payer in split billing

pay remaining cost + copay/coinsurance

Split billing considerations

important to ask pts if they have more than one form of coverage or pts who face challenges in paying for meds to guide to alt methods of payment

Flexible Spending Account

• US program

• if health plan through job, FSA can pay for copay, deductibles, drugs, etc

• capped amount per employer

• can reduce taxes

• use it or lose it

• some employers contribute to plan

Types of PA

• non-formulary/formulary exclusion

• brand-only

• tier-reduction

• step-therapy requirement

• limitations (dose, quantity)

• non-approved indicate

Cost saving effects of PAs

• promote cost effective alternatives

• systematic pathway to utilize high cost therapies efficiently

• steer pts toward formulary meds

• promote use of generic meds

• ensure pts have trialed all cost-effective alternatives

• support appropriate use of Tx through approved indications

Importance of Pharmacoeconomics

• shift from transactional to individualized, specialized care within interdisiplinary teams

• analysis important to maximize value for pts, payers, and society

• economic + humanistic considerations

Direct costs

• healthcare resources and related services (staffing, consumables, exams/procedures, admin, etc)

• costs to pts/families (extra expenses, travel costs, temporary residence, social services)

Indirect costs

costs to pts/families or society (work incapacity, loss of earnings, loss of leisure, premature death)

Intangible costs

• costs to pts/families or society (psychological suffering, pain)

Most common pharmacoeconomic analysis

CEA

CEA

• cost effectiveness analysis

• total cost vs total clinical effectiveness

• average ratio (ACER) or incremental ratio (ICER)

  • ICER better for pharmacy use (cost per UNIT of health oucome)

• compare costs and outcomes, easily understood

• requires quantifying outcomes, subjective

• want more costly, more effective drug or less costly, more effective drug

CUA

• Cost Utility Analysis

• subset of CEA

• pools costs over time relative to gained utility in quality of life

• cost vs outcome in QALY

• reported as ICUR ratio over time

• compare interventions w different disease states

• requires development of preference based utility values, complex, hard to translate

CBA

• cost benefit analysis

• identification, measurement, and comparison of the benefits and costs of a program or treatment alternative

• benefit to cost ratio

• monetizes both costs and benefits, easy to understand

• CEA>CBA for pharmacy use bc placing monetary value on indirect costs and benefits are difficult

Budget Impact and Cost Avoidance Analyses

• economic assessments that estimate the financial consequences of adopting a new drug of new intervention

• estimates expected new drug expenditures and compares to cost of drug of choice

• net difference: budget impact

• direct, easy calculation, useful in budget planning

• not accurate if only cost of drug considered, clinical outcomes vs drug of choice not available

Cost Avoidance

identifies potential savings without considering cost

Leading cause of injury and preventable patient harm

Medication errors

Medication Error Literature

• mostly institutional (hospital) data

• limited for community pharmacy rates (estimated 1.5% of all Rx have error)

Quality

• thedegree to which health care services for individuals and populations increase the likelihood of desired health outcomes and are consistent with current professional knowledge

• effectiveness, efficiency, equity, patient centeredness, safety, timeliness

Effectiveness

providing care processes and achieving outcomes as supported by scientific evidence