Pharmacy Practice - Economic Principles and Health Care Financing Practice Exam Flashcards

Comprehensive practice flashcards covering Economic Principles, Private Health Insurance, Reimbursement methods, Managed Care Organizations, and the Medicare and Medicaid programs.

According to the Law of Demand, what is the relationship between price and quantity demanded?

As price falls, quantity demanded rises; as price rises, quantity demanded falls.

Which factors cause a shift in the demand curve rather than movement along it?

Income, prices of related goods, consumer tastes/preferences, number of buyers, and consumer expectations.

According to the Law of Supply, what happens to the quantity supplied when the price rises?

The quantity supplied rises.

What is the economic definition of the Equilibrium point?

The point where quantity demanded equals quantity supplied, also known as the market-clearing price.

What are the common characteristics of goods with Elastic Demand?

Many substitutes, luxury goods, large portion of income, and time available to adjust.

Why is health care demand considered mostly inelastic?

It is essential, has few substitutes, is often needed immediately, and insurance reduces sensitivity to price.

What is the difference between Perfectly Elastic and Perfectly Inelastic demand curves?

Perfectly Elastic has a horizontal curve where a small price increase drops demand to zero; Perfectly Inelastic has a vertical curve where quantity demanded never changes regardless of price.

How does Information Asymmetry differentiate the health care market from a Perfect Competition model?

The provider usually has more information about the service or product than the consumer (patient).

What historical event encouraged the expansion of employer-sponsored health insurance due to wage controls?

World War II.

What is a Third-party payer?

An entity (like private insurance or government) that pays for health care services on behalf of the patient.

What is the difference between Community Rating and Experience Rating in insurance underwriting?

In Community Rating, everyone pays the same premium regardless of health status; in Experience Rating, premiums are based on health risk or claims experience.

Define the patient cost-sharing term 'Deductible'.

The fixed dollar amount a patient must pay before the insurance company begins paying for covered services.

Define the patient cost-sharing term 'Coinsurance'.

A percentage of the cost of a service that the patient pays after the deductible has been met.

What is Adverse Selection in health insurance?

A risk management problem where higher-risk individuals (sick people) are more likely to purchase insurance than healthy individuals.

What is Moral Hazard in the context of health insurance?

Increased use of health care services because the patient does not pay the full cost, leading to potential over-utilization.

What are the core functions of Pharmacy Benefit Managers (PBMs)?

Administering drug benefits, processing claims, negotiating rebates, developing formularies, and contracting with pharmacies.

How does the incentive differ between Fee-for-Service and Capitation?

Fee-for-Service incentivizes increasing the volume of services; Capitation incentivizes controlling costs and preventing unnecessary care.

What reimbursement method uses a fixed payment per member per month ($PMPM$)?

Capitation.

What is the primary system Medicare uses for inpatient hospital reimbursement?

Inpatient Prospective Payment System ($IPPS$) using Diagnosis-Related Groups ($DRGs$).

What three factors determine the Resource-Based Relative Value Scale ($RBRVS$) for physician payment?

Physician work, practice expense, and professional liability insurance.

How is the Medicare Physician Fee Schedule calculated?

$RVU \times \text{Conversion Factor} \times \text{Geographic Adjustment}$.

What are the characteristics of a Health Maintenance Organization (HMO)?

Prepaid plan, defined provider network, requires a Primary Care Provider ($PCP$), requires referrals for specialists, and has the lowest patient cost-sharing.

How does a Preferred Provider Organization (PPO) differ from an HMO?

PPOs do not require a $PCP$ or specialist referrals and allow out-of-network care at a higher cost.

What is an Independent Practice Association (IPA) model HMO?

An HMO model where the organization contracts with independent physicians who maintain their own private practices.

What is the difference between Oversight and Accreditation in managed care?

Oversight is mandatory government regulation for legal compliance; Accreditation (NCQA, URAC, The Joint Commission) is a voluntary external evaluation of quality.

Who is eligible for Medicare?

Individuals age $65$ years or older, individuals under $65$ with certain disabilities, and individuals of any age with End-Stage Renal Disease ($ESRD$) or Amyotrophic Lateral Sclerosis ($ALS$).

What does Medicare Part A cover and how is it financed?

Covers inpatient hospital, skilled nursing, and hospice care; it is financed through payroll taxes.

What does Medicare Part B cover?

Physician services, outpatient care, preventive services, lab services, and durable medical equipment.

What is Medicare Part C?

Medicare Advantage; an alternative to Original Medicare offered by private companies that combines Parts A and B (and usually D).

What does Medicare Part D cover?

Outpatient prescription drugs.

What is Medigap insurance?

Supplemental insurance sold by private companies to cover out-of-pocket costs not covered by Original Medicare; it cannot be used with Medicare Advantage.

How is Medicaid defined and who administers it?

Medicaid is a means-tested program for low-income individuals; it is jointly financed by federal and state governments but administered by the states.

What are 'Categorically needy' individuals in Medicaid?

Individuals who meet both the categorical requirements (e.g., being a child or pregnant) and financial eligibility requirements.

Name three mandatory Medicaid benefits.

Inpatient/outpatient hospital services, physician services, and Early and Periodic Screening, Diagnostic, and Treatment ($EPSDT$) for children.

Name three optional Medicaid benefits.

Prescription drugs, dental services, and vision services.

How did the Affordable Care Act (ACA) affect Medicaid eligibility?

It established Medicaid Expansion, allowing states to expand eligibility to many low-income adults; this expansion is optional for states.

Which federal agency provides oversight for both Medicare and Medicaid?

Centers for Medicare & Medicaid Services ($CMS$).