HLTH 2030: Exam 2

Financing is

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

In most cases, financing is necessary

to access health care. Want to make sure you have insurance and if you don't often then you don't have access to care.

Finance is complex because

many payers, plans, programs, and payment mechanisms

Economic Perspective of Financing

-Working Americans finance their own health care through employment and subsidize for those who cannot afford it.
-Employer-paid insurance is an exchange for more salary.
-The Medicare tax (SS tax) is a type of prepayment for certain services received at age 65.
-General taxes= Medicaid and certain Medicare benefits

Insurance

a mechanism to protect against risk

Risk

The possibility of a financial loss

Insured

A person covered by an insurance policy

Insurer

insurance company that assumes risk

Underwriting: evaluates, selects/rejects, classifies, and rates risk

helps insurer determine fair price against specific risks

Four principles of insurance:

1. Risk is unpredictable for individuals.

2. Risk can be predicted with some accuracy for a large group.

3. Insurance can shift risk from the individual to the group by pooling resources.

4. Losses are shared by all members.

*Losses and gains are shared by all members (ex: employee pharmacy, or worksite provider)

Cost Sharing

•Insurance requires some type of this.

•The insured assumes at least part of the risk.

•The purpose of cost sharing is to reduce misuse of insurance benefits.

•remember we discussed moral hazard: you have insurance, so you utilize it all the time. This slows you down b/c you pay something every time you use it (a co-pay).

Premium

•Amount charged by the insurer to provide coverage

•Cost sharing by employers and employees (this is why it can count towards your annual salary)

•Think about light bill/rent you have to pay for it monthly or you don’t have it.

•Determined by Risk Ratings

•Experience rating (how dangerous is your job)
•Community rating (desk person pays same as neurosurgeon constantly exposed to pathogens)= flat fee
•Adjusted Community rating

•Deductible

•Amount the insured pays first before benefits are paid by the plan
•Paid annually (don't pay all up front- what if you don't need it)

•Copayment

•Money paid out of pocket each time health services are received

•% share is referred to as coinsurance (typically 80/20)

Does your co-pay go towards your deductible?

depends on your plan

Do you have a deductible for physician visits and one for hospital?

some do, some don't

Stop loss:

it limits the amount of out of pocket expenses to the insured

Findings of the Rand Health Insurance Experiment in the 1970s

•people started getting insurance and started using it a lot/ it was a research study that said if people have to do cost sharing will they still use it? Yes!

Effects of Financing and Insurance

1. Moral hazard and provider-induced demand waste health care resources and add to the rising cost of health care.
2. National health insurance enables supply-side rationing; this has not been possible in the United States.
3. The ACA still leaves many uninsured

Main types Insurance:

•Group insurance
•Self-insurance
•Individual private insurance

Main types of Plans:

•Managed care plans
•High-deductible health plans

±Group insurance

°Offered through an employer, a union, or a professional organization
°Anticipates large numbers of people in a group will buy insurance through a sponsor
°Cost and risk are shared among the insured.

•Self-insurance

-Large employers' workforces are large and diversified enough.
-They can predict their own medical experience.
-They can assume risk and pay all claims.
-High losses are covered through reinsurance.

•Individual private health insurance

−For those who do not have group coverage: farmers, early retirees, the self-employed. Risk is individually determined.
−This market grew by 5.3 million in 2014, but the effects of the ACA are unclear.

•Managed care plans

−They assume the risk in exchange for an insurance premium.
−They assume the responsibility for obtaining health care services by contracting with providers.

−Managed care organizations (MCO) consist of:

§Health maintenance organizations (HMO)
§Preferred provider organizations (PPO)

•High-deductible health plans (HDHPs)

•Prevent moral hazard
•Consumer-driven health plans

-HDHP/HRA

§HDHP is combined with a health reimbursement arrangement (HRA).
§Employer-financed account
§Tax exempt payments made for qualified medical expenses

•HDHP/HSA

-HDHP is combined with a health savings account (HSA).
-Mainly employee financed on a tax-deductible basis

Cobra: Consolidated Omnibus Budget Reconciliation Act (COBRA)

short-term stop-gap coverage, keep coverage through employer, pay entire premium, and 18 months but ACA extended

Public Insurance: Government Financing

−A little over one-third of the insured are covered under public programs.
−Categorical programs: Benefits are designed for defined categories of people.
−Financed by the government, but services are purchased (delivery) by the private sector
−Exception: VA finances and purchases (delivery) own

Medicare

-Title 18 of Social Security Act
-An entitlement program (only A)
§People contribute through taxes and are entitled regardless of income and assets.
-A federal program
Administered by CMS, an agency under the U.S. Department of Health and Human Services (DHHS

Public Financing

those 65 years or older, disabled people who are entitled to social security benefits, and those with end-stage renal disease

Medicare PART A

hospital insurance
−Financed by payroll taxes:
§Paid by all working individuals
§Paid on all income earned
§Paid equally by both employer and employee

Medicare part A cont. Hospital Insurance Covers

§Inpatient services
§Short-term convalescence and rehabilitation in a skilled nursing facility (SNF) (limited days)
§Home health
§Hospice
§Psych facility

Medicare part A. cont. –The timing of benefits is determined by a benefit period.

§It begins on the day a beneficiary is hospitalized.
§It ends when the beneficiary has not been in a hospital or a skilled nursing facility for 60 consecutive days.
§Thereafter, a new benefit period begins.
-A beneficiary can have unlimited
benefit periods.

Medicare part a cont. −Hospital benefits: Deductible is paid

§No copayment for the first 60 days.
§Copayment required from 61 to 90 days.
§Even higher copayment required after 90 days

Medicare part a cont. −SNF benefits:

§Eligibility begins after 3 consecutive days of hospital stay.
§100 days maximum in SNF
§First 20 days at no charge to the beneficiary; copayment applies from day 21

Medicare part a cont. −Psych benefits:

−190 days maximum per lifetime

Medicare part a cont. home health benefit

§Patient must be homebound.
§Patient must require intermittent or part-time skilled nursing care or rehabilitation care.

Medicare part a cont. Hospice Benefit

§Patient must be terminally ill.
§Only a token copayment is required.

Medicare Part B

supplementary medical insurance (SMI)

Medicare part B covers things such as

§Physician services
§Hospital outpatient services (surgery)
§Diagnostic tests
§Radiology

•Medicare Part B (cont'd)

°Also covers certain screening and preventive services
°Annual wellness exam
°For most services:
§An annual deductible must be paid.
§80:20 coinsurance

Medicare part B does not cover

§Vision
§Eyeglasses
§Dental care
§Hearing aids
§Many long-term care services

Medigap:

Gaps in coverage

°Supplementation from

±Private Insurance: 23%
±Employer still: 35%
±Low income qualify for Medicaid: 19%

Medicare Part C

Medicare Advantage

Medicare Advantage

°Beneficiaries are given the choice to remain in the original program or sign up for Part C.

°Additional benefits (basic vision and dental) may be offered by the private managed care plans.

°Beneficiary receives all Part A, B, and D services through the MCO.

°It eliminates the need for Medigap coverage.

Medicare Part D

Prescription Drug Coverage

Prescription Drug Coverage

°Created under the Medicare Prescription Drug, Improvement and Modernization Act (MMA) of 2003.
§Available to those who have Part A or B.
§Monthly premium must be paid.
§Annual deductible applies
§Three layers based on spending

Hospital Insurance (HI):

•funds funneled there to pay for Part A

Supplemental Medical Insurance (SMI):

•funds go there to cover B & D

Medicaid

°Title 19 of Social Security Act
°Finances health care for the indigent, but it is a means-tested program
°Jointly financed by state and federal governments
°Each state establishes its own eligibility criteria according to income and assets.
±MAGI System
°Each state administers its own
Medicaid program.
°Expanded under ACA
°"Churning"

Children's Health Insurance (CHIP)

•Title 21 of Social Security Act (1997)
•For children up to age 19 (with exceptions)
•Most states cover children in families with incomes above eligibility for Medicaid but not enough to afford private insurance
•States can use existing Medicaid or create a separate CHIP program.
•Federal and state funds finance the program.

Health Care for the Military

±U.S. Department of Defense
°Known as the Military Health System.
°For active duty and retirees, dependents, survivors, and former spouses.
°Each branch operates its own medical facilities.
°TRICARE is the insurance arm.

Veterans Health Administration (VHA)

±Largest integrated U.S. health system
±Cost control through global budgets
±23 geographically distributed Veterans Integrated Service Networks (VISNs)
±Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA)
°Covers dependents of disabled veterans
±VA Mission Act

Indian Health Service (IHS)

•Comprehensive care to members of federally recognized tribes and their descendants
•American Indian and Alaska Native (AIAN)
•Facilities include: Hospitals and health centers, School centers, Health stations and Alaska village clinics

Private Coverage Under the Affordable Care Act (ACA) (1 of 2)

±Three main avenues:
1.Insurers mandated to enroll young adults until age 26 under parents' plans
2.State-based health insurance exchanges (marketplaces). Income-based premium subsidies.
3.Expansion of Medicaid - Public (Left up to each state after the Supreme Court ruling)

Private Coverage Under the Affordable Care Act (ACA) (2 of 2)

•Initial projections were not realized.
•Many lost previous coverage.
•Most newly insured benefited from Medicaid expansion
•Play-or-pay mandate for employers
•Individual mandate was later repealed
•No provision for short-term insurance interruptions

Effects of the ACA

•Reduced uninsurance
•Improved affordability for low- to middle-income people
•Increased ability to have a usual source of care
•Access remained uneven
•High out-of-pocket costs for private coverage
•Market disruptions in some geographic areas

Private Health Insurance Trump's Health Reform

±Failed "repeal and replacement" of ACA
±Certain insurers could bypass ACA's "essential health benefits"
±Facilitated enrollment in Association Health Plans by small businesses and the self-employed
±Short-term health plans
±Zero-dollar premium plans through the exchanges became more popular than the "silver" plan
±Individual Health Reimbursement Accounts

Private Health Insurance COVID-19

•Private and public insurers waived copayments.
•CARES Act provided Medicare reimbursement to treat the uninsured.
•Payment for telemedicine
•Large losses in employment-based coverage because of government lockdown mandates that led to business closures

Trends in Employment-Based Health Insurance(Pre-COVID)

±Fewer small employers are offering coverage
±Workers in small businesses prefer higher wages rather than health insurance
±For large employers, there has been a slight uptick in the offer rates, yet the proportion of workers covered has declined.

Third-party payers

•Insurance companies, managed care organizations, BlueCross, government

Payment function has two facets

•Determine methods and amounts of reimbursement in advance of the delivery
•Actual payment after services rendered

Reimbursement Methods

±Charge: fee set by provider
±Provider files a claim
±Rate: price set by third-party payer
±Fee Schedule: listing of individual fees for each type of service

Reimbursement Methods: Fee-for-Service

Charges (prices) are set by providers, Each service is billed separately, "Usual, customary, and reasonable" became common, It led to cost escalations, Providers could balance bill, Ask patients to pay more (exception of Medicaid)

Reimbursement Methods: Resource-Based Relative ReiValue Scale (RBRVS)

°Medicare developed the program to reimburse physicians according to a "relative value" (RVUs) assigned to each service.
±Fee schedule published yearly
°Based on time, skill, intensity
±CPT vs. ICD-10

Reimbursement Methods: Managed care approaches: PPOs

±Discounted Fees
°Negotiate discounts with providers participating in the network
±Still use some variation of that Fee-For-Service

Reimbursement Methods: Managed care approaches: HMOs

±Physicians might have a set salary
±Capitation: Set monthly fee/enrollee
°PMPM: per member per month

Reimbursement Methods: Retrospective Reimbursement

-Rates are set after evaluating the costs retrospectively.
-Historical costs are used to determine the amount to be paid.
-Perverse incentives

Reimbursement Methods: Prospective Reimbursement

-Four main prospective reimbursement methods:
§Diagnosis-Related Groups (DRG)
§Ambulatory Payment Classifications (APC)
§Resources Utilization Groups now Resident Classification System (RUG) (RCS)
§Home Health Resources Group (HHRG)

Diagnosis-Related Groups (DRGs)

-For acute hospital inpatients
-Prospectively set bundled price according to the admitting diagnosis (DRG)
-The hospital earns a profit by keeping costs below the DRG reimbursement.
-MS-DRGs now reflect patient severity

SNFs

±Payment Driven Payment Model- changed in 2019
°A case-mix method to reimburse SNFs using minimum data sets (MDS)
°The case mix determines a fixed per-diem rate.
±The higher the case mix score, the higher the reimbursement.

Home Health

±Patient Driven Group model
°A fixed, predetermined rate for each 30-day episode of care, based on points
°Patient's functional status and clinical severity arranged into 432 categories
°Multiple factors determine the score
±Acute or post acute
±Community
±Comorbidity

Reimbursement Methods: Ambulatory Payment Classification (APC)

±Hospital affiliated only!!!!
±Medicare's Outpatient Prospective Payment System (OPPS)
±300 procedure groups
±Reimbursement rates are associated with each APC group.
±A bundled rate to include anesthesia, drugs, supplies, recovery

The ACA and Payment Reform

±Increased shifting of risk to providers
±New payment arrangements for Medicare to be worked out, to include:
°Bundled payments
°Shared savings arrangements
°Risk sharing arrangements
°Value-based Payments/Purchasing

Reimbursement Methods: Package pricing

±(bundled pricing)
°Number of related services are bundled in one price.
°It can align incentives that lead to collaboration among specialties.
°Medicare initiatives to bundle payments for an entire episode of care.

Value-Based Payments/Purchasing

±Payments to hold providers accountable for cost and quality in hospitals
±2% withheld from DRGs if not met
±Full $ if all 4 domains met.
°If only 3 domain scores met, some $
°2 or less no $
±Based on Achievement or Improvement points + HCAPHS scores
±Don't meet your 2% goes to other hospitals

National Health Expenditures

•Spending for all health services and related activities
•Evaluated as a percentage of GDP and as amount spent per capita
•18.7% of GDP
•Health care cost inflation is evaluated using the CPI (consumer price index)

Current Directions and Issues

•Value and affordability
•Adverse selection
•Cost shifting
•Mechanism to make up for revenue shortfalls
•Fraud and abuse
•False Claims Act, Social Security Act, and the Anti-Kickback statute

Trends in Private and Public Expenditures 2010-2018

±Notable increases in spending for hospitals and government administration and net cost of private health insurance
±Decreases in dental services; nursing home care; prescription drugs; and investment in research, structures, and capital equipment
±Sources of spending (2018): 53% private; 47% public

COVID-19 and Health Care Financing

±Simulation model predicted costs exceeding $10.6 billion based on an infection rate of 1.3%.
±Government-mandated shutdowns
°Economic crises
°Adverse health consequences
°Health insurance losses
°Financial stress for health care providers

Financing determines:

°Who pays for health care services and for whom
°Who produces which types of health care services

Financing affects:

±Demand and supply sides of the health care equation

Cost sharing includes

premium, deductible, copayment, and co-insurance

Premium

Paid monthly if you have coverage
- Pay even if don't go to doctor
- If you do not pay they will drop you and you have to pay for all services with no help

Deductible

$ amount (set by insurer)
- Must meet for insurer to pay for Bulk (not all) of services
- Can vary depending on single or family plans
- Paid annually: every year it starts back. There is never a rollover
- Do not have to pay if no services happen

Copayment

Flat $ amount must pay every time have services out of pocket
- Varies depending on service (PCP, Specialist, ER)
- Do not have to pay if no services happen

Co-insurance

: a % that insurance company will not pay for services, and you have to pay out of pocket
- Most common is 80:20
- Do not have to pay if no services happen

Both copayment and coinsurance

can go toward paying the deductible (depending on plan)

At some point you pay soooo much in copayments & coinsurance you

you meet a stop loss (out of pocket max) and insurer pays 100%

Three Step Ethical Decision-Making Model

Is it legal? Is it balanced? How does it make me feel?

Is it legal?

a rule set by a group (such as state legislators) to serve as a boundary of expected behavior. Failure to abide by a law results in penalties, such as a fine or imprisonment.
´Laws are based on what is believed to be fair and just.
´If you ask yourself, "Is it legal, and the answer is "no" there is no need to go further in the Three Step Model.

Is it Balanced?

it is important to the well-rounded individual. "All work and no play makes Jack and dull boy". If something seems extrememe to you, it is most likely not balanced.
´Ex: An athlete practices 8 hours a day in the off season and still does not get the results he or she desires might resort to steroids. This is, of course, not only illegal, but out of balance.

How Does it Make Me Feel?

How you feel is an all-essential factor in decision making, so your feelings should not be ignored. How you feel is most likely a product of your conscious and subconscious beliefs about any given matter.
´Have you ever done something then felt guilty that it made you sick? This is one example of how your feelings guide you mentally, and as in this case, physically.

What is outpatient care?

•Outpatient services or ambulatory care
•Ambulatory care: Diagnostic and therapeutic services for the walking patient, Used synonymously with community medicine
•Outpatient services: Services not provided with an overnight stay

Scope of Outpatient Services

•Primary care is the foundation for ambulatory health services.
•Services other than primary care are an integral part of outpatient services.
•Technological advances allow many advanced treatments to be provided in ambulatory care settings.