Chapter 6 Healthcare Financing

Balance bill

The practice of billing the patient for the difference between the provider's actual charges and the amounts paid by third parties.

Beneficiary

A participant in a health insurance plan. Also called the insured or enrollee.

Benefit period

For Medicare coverage, a benefit period is determined by a spell of illness beginning with hospitalization and ending when a beneficiary has not been an inpatient in a hospital or a skilled nursing facility for 60 consecutive days.

Bundled charges (package pricing)

Set fees that include all related services.

Capitation

A method of reimbursement used by HMOs in which the provider is paid a set monthly fee per enrollee and is required to provide all needed services within the set amount.

Case mix

The overall acuity level in a facility as determined by the severity of the patient's condition.

Coinsurance

The proportion of cost sharing between the insurance plan and the insured.

Consumer price index (CPI)

Measures inflation in the general economy.

Copayment

The amount that the insured must pay out of pocket each time health services are received after the deductible amount has been paid.

Cost sharing

Sharing of costs between the insured and the financier or insurer.

Deductible

The amount the insured must first pay before any benefits are paid by insurance.

Demand-side rationing

Indirect rationing that occurs when not everyone has health insurance.

Enrollee

An individual covered under a health insurance plan. Also called a member, insured, or beneficiary.

Financing

Any mechanism that gives people the ability to pay for health care services.

Gross domestic product (GDP)

Measures the total value of goods and services produced and consumed.

Insured

An individual protected by insurance.

Means-tested program

A public program in which eligibility is determined by a person's level of income.

Medigap

A private insurance policy purchased by many of the elderly to pay for expenses not covered by Medicare.

Moral hazard

Consumer behavior that leads to a higher utilization of health care services when the services are covered by insurance.

Per diem

A daily rate of reimbursement.

Premium

The amount charged for insurance coverage.

Prospective reimbursement

Uses certain preestablished criteria to determine in advance the amount of reimbursement.

Provider-induced demand

Provider's ability to create demand for services that are financed through insurance.

Reimbursement

Payment made by third-party payers to the providers of services.

Reinsurance

A mechanism whereby an insurer can cover high-risk losses through insurance from another insurer. For example, self-insured employers generally protect themselves against the risk of high losses by purchasing reinsurance from a private insurance company.

Retrospective reimbursement

is a payment method in which rates are set on the basis of costs already incurred.

Risk

The possibility of a substantial financial loss from some event.

Stop loss

The maximum out-of-pocket liability that an insured would incur in a given year.

Supply-side rationing

Restricting the availability of expensive medical technology and specialty care.

Third-party payers

Insurance companies, Blue Cross/Blue Shield, and the government (for Medicare and Medicaid), who make payment for claims on behalf of the insured.

Underwriting

A systematic technique for evaluating, selecting, classifying, and rating risks.