Health Systems: Medicare Financing, Insurance Plans, and Reimbursement Models

Vocabulary flashcards covering key terms and definitions regarding Medicare Part A and Part B financing, health insurance plan models (HMO, PPO, POS), network types, and healthcare reimbursement mechanisms (Capitation, DRG, Fee-for-service).

Medicare Part A

Hospital Insurance; primarily funded through payroll taxes paid by employers and employees.

Medicare Part B

Medical Insurance; primarily funded through general federal revenues and monthly beneficiary premiums.

Payroll tax

A tax on employment earnings used to help finance Medicare Part A.

Beneficiary premium

A payment made by someone enrolled in an insurance program to maintain coverage; an important funding source for Medicare Part B.

General federal revenues

Money collected by the federal government through taxes and other sources; helps finance Medicare Part B.

HMO (Health Maintenance Organization)

A health insurance plan that generally requires members to use in-network providers and obtain PCP referrals for specialists.

PPO (Preferred Provider Organization)

A health insurance plan offering more provider flexibility, generally allowing specialist visits without PCP referrals and providing some out-of-network coverage.

POS (Point-of-Service Plan)

A hybrid of HMO and PPO features, generally using PCP coordination and referrals while allowing some out-of-network coverage.

PCP (Primary Care Provider)

A healthcare provider who coordinates routine care and may provide specialist referrals.

Specialist referral

Authorization or direction from a PCP to see a specialist; requirements vary by insurance plan.

Provider network

The doctors, hospitals, and other healthcare professionals contracted with an insurance plan.

In-network provider

A provider contracted with an insurance plan, typically resulting in lower patient costs.

Out-of-network provider

A provider without a contract with the patient's plan, often resulting in higher costs or limited coverage.

Capitation

A payment model where a provider receives a fixed amount per enrolled patient for a specified period, regardless of the number of covered services used.

DRG (Diagnosis-Related Group)

A hospital reimbursement classification system that pays a predetermined amount for an inpatient stay based on the patient's diagnosis and other classification factors.

Fee-for-service (FFS)

A reimbursement model where providers are paid separately for each healthcare service delivered.

Prospective payment

A reimbursement approach where payment amounts are determined in advance rather than simply reimbursing actual costs afterward.

Incentive for preventive care

Capitation can encourage providers to prevent costly illnesses and avoid unnecessary hospitalizations.

Risk of undertreatment

A potential problem under capitation when providers have financial incentives to limit necessary services.

Incentive for service volume

Fee-for-service can encourage more visits, tests, or procedures because providers are reimbursed for each service.

Financial risk under DRGs

Hospitals may incur losses when the cost of treating an inpatient exceeds the predetermined reimbursement amount.