How are healthcare services financed in the US?

There are four categories of health insurance in the United StatesThe introductory video below, from Humana Healthcare, provide a quick overview of how health insurance works in the United States.

  1. Employer sponsored insurance, or group plans
  2. Individual health insurance, private plans
  3. Public coverage through Medicare (primarily the 65 years and older population)
  4. Public coverage through Medicaid

This video provides a brief overview of health insurance in the US.


After successfully completing this unit, the student will be able to:

  • Compare and contrast Medicare and Medicaid with regard to population served, program management and funding.
  • Describe the nature and current trends in employer-based health insurance and relationships to tax subsidies.
  • Define the primary types of costs and revenues.
  • Identify the main sources of money to pay for health care, how they have changed from 1960 to 2010 and how they are projected to change by 2020.
  • Define cost sharing. Describe its intended purpose, relation to moral hazard, and potential unintended consequences for patients.
  • Differentiate between co-pay, co-insurance and deductible.
  • Explain the four parts of Medicare with respect to covered services.
  • Compare and contrast Medicare and Medicaid with regard to the populations served and program management.

How are healthcare services financed in the US?
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Workers compensation was one of the first social insurance programs adopted broadly throughout the United States. Under workers compensation, employers are required to make provisions such that workers who are injured in accidents arising out of or in the course of employment receive medical treatment and receive payments ranging up to roughly two-thirds of their wages to replace lost income. Workers compensation laws were originally adopted by most states between 1911-20, and the programs continue to be administered by state governments today (Economic History Services, EH.net). Workers compensation served as a trial balloon for government-sponsored compulsory health insurance before the US moved toward a private (voluntary) system of health insurance. Legislative efforts in 16 states between 1916-18 were unsuccessful in compelling employers to provide health insurance to their workers.

Modern health insurance actually began in the form of hospital insurance during the Great Depression when the high cost of hospitalization threatened the economic well-being of both individuals and hospitals. The American Hospital Association supported hospital insurance, and helped organize hospital plans into the Blue Cross network while the California Medical Association started the Blue Shield plan to pay for physicians outpatient services. The two entities (Blue Cross and Blue Shield) later merged into the program we know today (from Shi & Singh, 2013).

Private health insurance (formerly called voluntary health insurance) began to evolve and expand in the United States in the 1920s. and later led to congressional discussions and reform to meet the specific needs of older adults, the underserved, and those living in poverty, eventually leading to the creation of Medicare and Medicaid programs that would receive public funding.

  • 1929 - Justin Kimball starts a hospital insurance plan for teachers at Baylor University. This later became the model for Blue Cross Plan.
  • 1939 - The California Medical Association starts the first Blue Shield plan, which was designed to pay physicians fees.
  • 1974 - Blue Cross and Blue Shield plans began to merge and are now virtually inseparable.

Health insurance became employer-based during the World War II era when, due to wage freezes, health insurance was used to compensate for the loss of salary increases. In addition, Congress made health insurance benefits nontaxable, and the Supreme Court ruled that benefits, including health insurance, were a legitimate component of union-management negotiations (Shi & Singh, 2013, p. 66.) Until recently, approximately 60 percent of Americans received their health insurance from their employers.

The video below from Humana provides a brief summary of the evolution of US Healthcare starting with the 1940s.

US Healthcare: A Short History

Before publicly financed health insurance was available, government provision of healthcare services to the poor took place at specific care sites, including municipal hospitals and state mental hospitals.

  • 1965 Medicare and Medicaid are enacted by the US Congress.

Both of these programs were created in 1965 as part of Lyndon Johnson's Great Society initiatives. Medicare and Medicaid are very different programs in terms of population serviced, funding source, funded services, and management. Medicare is a federal program, designed to provide coverage to the elderly and permanently disabled. Medicaid is a jointly funded program of the federal and state governments, and funding varies greatly among states. There is a saying that if you have seen one state Medicaid program, you have seen one state Medicaid program.

  • 2010 The Affordable Care Act (ACA) was signed by President Obama in March 2010. The ACA has provisions for Medicaid expansion may serve to standardize the programs, but it remains unclear how the expansion will play out in the individual states.

NOTE: A separate online module describes the Affordable Care Act in greater detail.

Through these historical events the various forms of insurance coverage for health care can be summarized by the graphic below on the left. The pie chart shows the percentage of the US population covered by each type..

In contrast to Europe, national health care failed to get an early footing in the United States due to a number of factors. 

  • Labor and political stability in the United States.
  • The decentralized American system gave the federal government little direct control over social policy.
  • The German social insurance system was denounced during WWI. Since then, the term "socialized medicine" has been used as a synonym for national health care
  • The AMA has historically opposed national health care initiatives.
  • Middle-class Americans have traditionally espoused beliefs and values that are consistent with capitalism, self-determination, and distrust of big government.
  • Many middle-class Americans are averse to the higher taxes that a national health care program would necessitate (Shi & Singh, 2013, p.68) Medicare and Medicaid.

How are healthcare services financed in the US?

EPO, PPO, HMO: The Alphabet Soup That Tells You How Your Health Plan Works

Health care lingo can be an alphabet soup of terminology. You can review a list of health care-related acronyms by going back to the Home Page of the course and selecting the "Guide to Acronyms". There is one set of terms that it is important to be familiar with so you know how your plan works - your health plan's type. Knowing the mechanics of your plan will help you navigate the complexities of health plan benefits and avoid unexpected and costly out-of-pocket charges.

Different types of insurance plans are offered on the exchanges, from employers, from Medicare (through Medicare Advantage) and through Medicaid.

The Commonwealth of Massachusetts has a helpful explanation of different plan types. The information below is adapted from their site.

Indemnity or Conventional Plans:

An indemnity plan simplly reimburses for services as they occur. The reimbursement goes to the provider or the insured. Indemnity plans were popular until the early 1990s. Today they are infrequently offered in the private markets. Medicare parts A and B are conventional plans (we refer to these as fee for service), and some Medicaid plans.

HMO (Health Maintenance Organization):

If you are in an HMO, you must use network providers - doctors, hospitals and other health care providers - that participate in the plan. The only exception is for emergency care. An HMO requires the selection of a Primary Care Physician (PCP) to manage your care. Referrals are usually needed from your PCP to see a specialist, who must also be in the network.

Types of HMOs

  • Staff model: The HMO owns the facility and pays the providers via salary.
  • Group model: The HMO contracts with only one provider group.  HMO patients must be seen within that closed group.  This group of providers may care for non-HMO patients.
  • Network model: Similar to the group model, but the HMO contracts with multiple groups. 

EPO (Exclusive Provider Organization): Similar to an HMO, with an EPO you must use network providers - doctors, hospitals and other health care providers - that participate in the plan. The only exception is for emergency care. Unlike an HMO, you do not need to select a Primary Care Physician, nor do you need to contact your PCP for referrals to specialists.

PPO (Preferred Provider Organization): With a PPO, you receive more comprehensive benefits by using network providers - doctors, hospitals and other health care providers - that participate in the plan. You have the option of using non-network providers, but with a lower level of benefits and higher out-of-pocket costs. Because PPOs usually have broader networks, they are generally more expensive - have higher premiums - than HMOs and EPOs. With a PPO, you do not need to select a Primary Care Physician.

POS (Point of Service Plan): A hybrid plan with features of an HMO plus indemnity coverage. Care within the network is similar to HMO arrangement previously described. The difference between PPO and POS is the way in which providers are reimbursed.

It is important for consumers to become knowledgeable about the terms of their insurance plans or risk unexpected out-of-pocket costs.  In some plans (especially HMOs) out of network visits are not covered, except in extreme circumstances, and even then they require pre-approval (for a service that is medicallynecessary and not provided by any of the HMOs providers). The exception to network rules is in medical emergencies, but even then there may be higher cost sharing if the emergency department is out of network.

The graphics below summarize the array of health care coverage in the United States. Subsequent sections will describe these various types of coverage in more detail.

How are healthcare services financed in the US?

How are healthcare services financed in the US?


How are healthcare services financed in the US?
Medicare, the federal health insurance program that currently covers 50 million Americans who are:

  • 65 years of age or older
  • People under 65 with certain disabilities
  • People of any age with end-stage renal disease (ESRD) (permanent kidney failure requiring dialysis or a kidney transplant)

Medicare helps to pay for hospital and physician visits, prescription drugs, and other acute and post- acute services. In 2012, spending on Medicare accounted for 15% of the federal budget. Medicare also plays a major role in the health care system, accounting for 21% of total national health care spending in 2012, 28% of spending on hospital care, and 24% of spending on physician services.

The Medicare program is comprised of four parts - Part A, Part B, Part C (also known as Medicare Advantage), and Part D. Together, these four parts provide coverage for basic medical services and prescription drugs. A Medigap (Medicare Supplement Insurance) policy to help pay some of the health care cost "gaps" (like copayments, coinsurances, and deductibles) can be purchased privately.

Medicare benefit payments are expected to total $556 billion in 2012; roughly two-thirds is for Part A (Hospital Insurance, or HI), and Part B (Supplementary Medical Insurance, or SMI) services. More than 20% is for Part C, Medicare Advantage private health plans covering all Part A and B benefits, and just over 10% is for the Part D drug benefit.

Medicare spending per beneficiary is highly skewed, with the top 10% of beneficiaries in traditional Medicare, accounting for 57% of total Medicare spending in 2009 - on a per capita basis, more than five times greater than the average across all beneficiaries in traditional Medicare ($55,763 vs. $9,702).

Source: www.medicare.gov/navigation/medicare-basics/medicare-benefits/medicare-benefits-overview.aspx

Medicare Part A (Hospital Insurance)

Coverage: Part A covers inpatient hospital care, some skilled nursing facility stays, home health care, and hospice care.   If you or your spouse have worked for at least 40 quarters (10 years) and paid Medicare payroll taxes, you qualify for Part A coverage, and you don't have to pay a monthly premium for it.   This is referred to as "premium-free Part A."

Funding: Part A is paid for by a portion of Social Security tax. Most people pay no premium because the individual or his/her spouse paid Medicare taxes while working in the US

A Medigap (Medicare Supplement Insurance) policy to help pay some of the health care cost gaps (like copayments, coinsurances, and deductibles) can be purchased privately.

Medicare Part B (Medical Insurance)

Coverage: Part B, or the Supplementary Medical Insurance (SMI) program, helps pay for physician services, outpatient hospital care, and some home health visits not covered under Part A. It also covers laboratory and diagnostic tests, such as X-rays and blood work; durable medical equipment, such as wheelchairs and walkers; certain preventive services and screening tests, such as mammograms and prostate cancer screenings; outpatient physical, speech and occupational therapy; outpatient mental health care; and ambulance services.

Funding: People who elect Part B must pay a monthly premium. Most people who pay a Part B premium have it automatically deducted from their Social Security check. If your income is limited, you may qualify for programs that will pay the Part B premium on your behalf. The standard monthly Part B premium in 2012 is $99.90. Some people on Medicare with higher annual incomes (more than $85,000/individual; $170,000/couple) pay a higher monthly Part B premium, ranging from $139.90 to $319.70 per month in 2012, depending on their income.  

Part B also has an annual deductible of $140 in 2012 - i.e., you must pay $140 out-of-pocket before Medicare begins paying. After you meet the deductible, most Part B services require a 20 percent coinsurance; this means you pay 20 percent of the cost of the service. If a doctor is a "participating provider" then the most he or she can ever charge you is 20 percent of the Medicare-approved amount for a service. This is called "accepting assignment."  

Medicare Part C (Medicare Advantage)

Coverage: Part C allows beneficiaries to enroll in a private insurance plan, called a Medicare Advantage plan. Medicare Advantage plans are managed care plans, such as Health Maintenance Organizations (HMOs) or Preferred Provider Organizations (PPOs). Medicare Advantage plans must cover all Part A and B services and usually include Part D (prescription drug coverage) benefits in the same plan. These plans sometimes cover additional benefits not covered by traditional Medicare, such as routine vision and dental care. All plans have an annual limit on your out-of-pocket costs for Part A and B services, and once you reach that limit, you pay nothing for covered services for the rest of the calendar year. The out-of-pocket limit can be high but may help protect you if you need a lot of health care or need expensive treatment. Out-of-pocket costs include deductibles, copayments and coinsurance.

Although Medicare Advantage plans must cover Part A and B services, they can have different rules, costs and restrictions. Some plans have higher cost-sharing requirements than Original Medicare for some services, and most plans apply restrictions that limit your choices of doctors or hospitals.

Funding: Medicare pays a fixed amount for your care each month to the companies offering Medicare Advantage Plans. These companies must follow rules set by Medicare. However, each Medicare Advantage Plan can charge different out-of-pocket costs and have different rules for how you get services (like whether you need a referral to see a specialist or if you have to go to only doctors, facilities, or suppliers that belong to the plan for non-emergency or non-urgent care). These rules can change each year.

Medicare Part D (Prescription Drug Coverage)

Coverage: In 2006, Medicare began offering outpatient prescription drug coverage under Medicare Part D. Medicare drug coverage is optional for most people with Medicare and is offered only through Medicare private plans. If you have Original Medicare and want Part D drug coverage, you can get a stand-alone prescription drug plan (PDP). People who want a Medicare Advantage plan and drug coverage must generally get it through one plan called a Medicare Advantage prescription drug plan (MA-PD).

Funding: There is a monthly premium for Part D. Premiums vary widely among plans, as do the drugs that are covered and the amounts charged for prescriptions. The standard Part D benefit has a deductible, which in 2012 can be no more than $320, and 25 percent coinsurance on covered drugs up to an initial coverage limit. This is followed by a coverage gap, during which enrollees are responsible for a larger share of their total drug costs than during the initial coverage period, until they reach the catastrophic coverage limit. Thereafter, enrollees have low costs for their drugs.

For more complete information about Medicare, see the following publication "Talking About Medicare - Your Guide to Understanding the Program" by the Kaiser Family Foundation (updated 2012)"

 Medicare Expenditures

How are healthcare services financed in the US?

How are healthcare services financed in the US?

Medicare takes up a significant chunk of federal spending (remember states do not pay for Medicare).  There is increasing concern because as the US population ages and life expectancy increases enrollment in Medicare will grow. See below.

How are healthcare services financed in the US?

Medicare is the federal health insurance program for 54 million people ages 65 and over and people with permanent disabilities. In 2013, spending on Medicare was $492 billion and accounted for 14% of the federal budget. Medicare also plays a major role in the health care system, accounting for 20% of total national health spending in 2012, 27% of spending on hospital care, and 23% of spending on physician services

Additional Resources:

  • Medicare module from kaiserEDU.org
  • An Overview of the Medicare Program and Medicare Beneficiaries Costs and Service Use; Statement of Juliette Cubanski, Ph.D., Associate Director, Program on Medicare Policy, The Henry J. Kaiser Family Foundation Before the Special Committee on Aging U.S. Senate, "Strengthening Medicare for Today and the Future", February 27, 2013

Medicare Coverage Choices at a Glance

There are two main ways you get Medicare coverage: Original Medicare or a Medicare Advantage Plan. These steps help determine which coverage to get.

How are healthcare services financed in the US?
 

Medicare Coverage Exercises

Utilize this PDF file below on Medicare Coverage Basics to analyze and calculate Medicare coverage in the situations listed below. Generate a list of costs for which the beneficiary is responsible (out-of-pocket costs). Assume both patients have Medicare A and B.

Source: developed by Mary Palaima, PT, MBA, EdD, Clinical Assoc. Professor at Sargent College of Health and Rehabilitative Sciences

Patient #1: A 68 y.o. female who had a stroke with multiple medical complications. She spent 65 days in the hospital, followed by 25 days in a local SNF (Skilled Nursing Facility), and then received home health services (nursing, PT, OT, SLP) for 21 days.

Answer

Patient #2: This woman had a stroke with medical complications. She spends 14 days in the hospital followed by 40 days in a local SNF, and then receives 50 visits of PT, OT, SLP as an outpatient. Assume the charge for each therapy visit is $100.00.

Answer

Medicare Quiz

Take this short quiz to see how much you remember!

 

How are healthcare services financed in the US?

If you would like more information about Medicare check these three sites:

  • The Commonwealth Fund site for Medicare  
  • The US government Medicare site aimed at consumers
  • Kaiser Family Foundation Medicare site 

Before January 2014 state Medicaid programs were required to cover poor pregnant women and children, and the FPL cutoffs varied by group. States had the option of providing increased coverage within these groups, and to expand coverage to other people. As previously explained Medicaid expansion will cover all persons up to 133% of the FPL in states choosing to expand. If states do not expand, coverage will vary by FPL within a group. Pregnant women, children, the elderly and the disabled have minimum coverage thresholds. Many states have minimal or no coverage for adults, especially for adults without children.

Financing and Reimbursement

Medicaid is jointly funded by the US Federal Government and the individual States. The federal government pays states for a specified percentage of program expenditures (the FMAP). More information is available on the Financing and Reimbursement web page at Medicaid.gov.

 Children's Health Insurance Program (CHIP)

The Children's Health Insurance Program (CHIP) provides health coverage to nearly 8 million children in families with incomes too high to qualify for Medicaid, who can't afford private coverage. Signed into law in 1997, CHIP provides federal matching funds to states to provide this coverage. See additional information on Cost Sharing.

If you would like more information about Medicaid, check these three sites:

  • Kaiser Family Foundation site for Medicaid 
  • The US government Medicaid site 
  • Medicaid statistics by state 

Comparison of Medicare and Medicaid

Medicare

Medicaid

  • Covers all elderly (as originally designed) and the permanently disabled.
  • No income/means test
  • Need Parts A, B and D or Parts C and D to have full coverage.
  • Nationally uniform program
  • Part A financed through payroll taxes
  • Parts B and D subsidized through general taxes, but the participants pay part of the premium cost
  • Will cover all those up to 133% of the FPL if the state accepts the ACA Medicaid expansion. Covers the existing categories of poor persons  (children, pregnant women, some disabled) in all states.
  • States may choose to increase coverage beyond the federal minimums
  • Public welfare
  • All services are covered under one program
  • Program varies from state to state beyond the essential benefits
  • Financed by the states with matching funds from the federal government according to each state's per capita income. Full federal coverage for newly enrolled under Medicaid expansion.

Dual Eligibles

Dual eligible refers to patients with both Medicare and Medicaid. The care of dual eligibles is often expensive, fragmented, and of varying quality.  Innovative models of care for duals (often consider duals < 65 years separately from elderly duals) are needed to provide efficient and effective care for these vulnerable populations. 

Infographic: Medicaid Spending and Enrollment: Who Is Covered and What Does the Program Spend on Their Care

Source: http://kff.org/interactive/infographic-medicaid-spending-enrollment/. The Infographic in the window above is a web page with links that you can explore on your own. You can scroll through the web page using the scroll bar on the right side of the frame.

Medicaid Information by Topic from Medicaid.gov

More Resources

  • http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/By-Topic.html)
  • http://facts.kff.org/chart.aspx?ch=464
  • http://facts.kff.org/chart.aspx?ch=472
  • The Commonwealth Fund site for State Health policy and Medicaid
  • The Medicaid Program at a Glance (from the Kaiser Foundation)

Medicaid 101: What You Need to Know

Source: http://www.kff.org/medicaid/ahr030113.cfm

How are healthcare services financed in the US?

Medicaidand Medicare are paid for by tax revenues; private insurance is paid for by individuals and employers (with the ACA, individuals will be eligible to receive public funds as subsidy for the purchase of private insurance on the exchanges). Public insurance covers an individual only. Private insurance is often available for individual or family coverage. Most private insurance is employer sponsored and is subsidized by tax exemption. Contirbutions by the employer and the employee are pre-tax contributions, meaning that the premium is not taxed. Howerver, this benefit is tied to employment, and the benefit does not continue once employment with a given company ends. ESI is more likely to be offered to specific types of employees: full-time, higher income, larger businesses, or unionized employees.


Challenges Associated with Employer Sponsored Insurance

  • COST: The rising cost associated with offering health insurance coverage to employees has made this practice unaffordable for many businesses.   Health insurance premiums have risen at a rate faster than inflation in the last decade, and employer sponsored health insurance premiums have risen 114% between 2000 and 2010 (Bodenheimer & Grumbach, 2012). The average annual cost of health insurance (including both employer and employee contributions) in 2010 was $13,770 for families and $5049 for individuals (Claxton et al, 2010), which highlights the growing challenges associated with financing health insurance coverage. As a result of the rising costs, many employers have either dropped insurance policies for their employees or increased the cost-sharing burden on workers. The increase in employee contributions to health insurance coverage has resulted in many employees being unable to afford the coverage offered by their employers.
  • COVERAGE INTERRUPTIONS :   Employment is inherently unstable, as people may be laid off from their jobs or may choose to leave or change jobs. Accordingly, when insurance coverage is tied to employment, there are inevitably interruptions in insurance coverage when people lose or change jobs. This is particularly problematic when people are forced to leave their jobs due to illness, as they may also concurrently lose their insurance coverage when it is needed the most. Individuals may also lose ESI if they receive insurance benefits through a spouse's workplace in the event of a divorce, job loss, or death of the working family member.
  • LOW-WAGE/PART TIME JOBS : In the last few decades, the U.S. workforce has shifted from a majority of highly paid, largely unionized, full-time workers with ESI to more low-wage, increasingly part-time, non-unionized workers (Bodenheimer & Grumbach, 2012). The latter are significantly less likely to provide insurance coverage to employees (Bodenheimer & Grumbach, 2012). The percentage of Americans with part-time jobs (which generally do not offer health benefits) increased from 12% to 21% between 1957-2000 (Bodenheimer & Grumbach, 2012). With fewer individuals having access to insurance coverage through their employers, the rates of uninsurance have grown dramatically in the past few decades and there is an increasing dependence on public health insurance programs.

For more information about ESI and the growth of premiums and employee contributions, check out Kaiser's employer health benefits survey: http://facts.kff.org/results.aspx?view=slides&detail=53

One way in which employers are trying to control health care costs is to institute employee well-ness programs. Do you think this is a reward for maintaining health or financially penalizing persons who are older or have health problems? See Goldberg, C.: Can My Company's Wellness Program Really Ask Me To Do That? CommonHealth Blog. September 28, 2012.


  • No tax subsidy, paid for with after-tax revenue for the individual.
  • Individual pays the whole premium.
  • Entire policy often more expensive than ESI.
  • Was based on experience rating (charge more for sick or risky applicants). State exchange programs will be based on community rating (same premium for everyone with only a few individual characteristics used).

The issue of tax subsidies for ESI is complex.The details are beyond the scope of this course, but if you have an interest in policy/finance you may want to read Tax Subsidies for Health Insurance:


 

How are healthcare services financed in the US?

Paying Providers & Paying Hospitals

How are healthcare services financed in the US?

How are healthcare services financed in the US?

Cost Sharing

Cost sharing is quite literally the insured individual sharing the cost of care with the insurance company. The employee has risk. In other words, if he/she uses care there will be a financial consequence. In theory this will make the inured individuals more likely to make health care decisions that take cost into account. In other words if the person has to pay a part of the care then he or she will chose less expensive care, avoid unnecessary care, and seek care only when needed. The economic theory of moral hazard maintains that insurance changes behavior. If a person is insulated against the cost then he or she will use more services.

Premiums are not the same type as cost sharing because they do not vary with utilization, but your book does categorize them as such. The three types of cost sharing are co-pays, co-insurance and deductibles. The arrangements vary by plan. See the infographic below for more information.

Humana Video on Deductibles and Copayments

http://www.humana.com/resources/videos/healthcare_education/deductibles_copays.aspx

For a synthesis of managed care and cost sharing check out The Anatomy of Health Insurance Infographic.

Source: http://dailyinfographic.com/overview-of-health-insurance-infographic

  

How are healthcare services financed in the US?


Main Characteristics of Managed Care

MCOs manage financing, insurance, delivery, and payment for providing health care:

  • Premiums are usually negotiated between MCOs and employers.
  • MCOs function like an insurance company and assume risk.
  • MCOs arrange to provide health care, mainly through contracts with providers.
  • MCOs manage the utilization of health care services.
  • Commonly used payment methods are capitation and discounted fees.
Source: Exhibit 9.1, p. 214 from Shi & Singh (2013)

See the table below for descriptions of the three types of manages care plans: Health Maintenance Organization (HMOs), Preferred Provider Plans (PPOs) and Point of Service plans (POS).

Main Differences in Managed Care Structures

  1. Choice of Providers
  2. Delivery of Services
  3. Payment and Risk Sharing Source: Exhibit 9.2, p. 223 from Shi & Singh (2013)

How are healthcare services financed in the US?

For more on managed care and the differences between HMOs, PPOs, and POS plans watch the Humana video below and read Bodenheimer & Grumbach (2005) Chapter 6 and Chapter 4 (pg. 32-33).

PPOs versus HMOs

The distinction between HMO and PPO is important. PPOs offer more consumer choice and control. There is generally a price for this choice, and that comes in the form of an increased premium.  If you are not completely clear on the difference between HMOs and PPOs I recommend watching the video below.

PPOs versus HMOs

Source: Humana http://www.humana.com/resources/videos/healthcare_education/ppos_hmos.aspx

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

Source: developed by Mary Palaima, PT, MBA, EdD, Clinical Assoc. Professor at Sargent College of Health and Rehabilitative Sciences


Community Rating vs. Experience Rating

Community Rating
  • A way of establishing the price for an insurance policy.
  • Starts and ends with a described/defined geographic community (i.e., Boston); everyone within that defined community pays the same premium. The premium is established based on the people who live in the defined area.
  • Consequence of this system is that people who have less illness in effect wind up supporting people who have more illness in a given year.
  • A young runner would pay the same premium as an elderly diabetic with community rating; in effect the young, healthy runner who doesn
  • t use many health care services would be subsidizing the cost of care for the elderly person with diabetes who would utilize more health care services.
  • Note that community rating practices tend to include more expensive people who are not in the workforce and can therefore result in higher premiums

Experience Rating

  • Another way of establishing the price for an insurance policy.
  • Everyone pays the same premium within a GROUP. but the group is not a geographic group; it is some type of organizational group (e.g., the employees of Boston University)
  • Created to be cheaper than community rating for employed groups. The expectation is that the total health care costs for the employer group would be less per person than in the community rated group.
  • Goal of this arrangement is to enable groups (largely employer groups) to pay less for their insurance because the experience within that group is likely to cost less overall than a community rating group which includes all the people who are not in the workforce (perhaps because they are sick and/or elderly).
  • All members of a specific group would pay the same premium; your group's premium would be different from another groups premiums. For example, a group of bank executives might pay a lower premium as a group compared to a group of coal miners. This is because miners have increased health risks as a result of the nature of their occupation and would likely cost more to insure than a group of bankers who do not face the same occupational health risks.

How are healthcare services financed in the US?
The main difference between community rating and experience rating is geography and inclusion.

 Note: The ACA returns to community rating practices in the health exchanges


How are healthcare services financed in the US?

The Medicare Quiz

Medicare provides health coverage to approximately 50 million beneficiaries ages 65 and older and younger people with permanent disabilities. Medicare remains a hot topic in Washington and around the country as political leaders and other policy makers weigh potential changes to the program. How much do you know about Medicare, the people it serves, the benefits it covers, and its financial status?

Test Your Knowledge  (Source: Kaiser Family Foundation (2013). Medicare Quiz.)

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

 

How are healthcare services financed in the US?

The Medicaid Quiz 

Medicaid, the nation's publicly funded health coverage program for low-income Americans, is a primary source of coverage, access, and health care financing, as well as a key component of the expansion of coverage in the Affordable Care Act. How much do you know about Medicaid, the role it plays in the lives of many Americans, how program dollars are spent and how Medicaid eligibility will change under health reform? (Source: Kaiser Family Foundation (2013). Medicaid Quiz)

What are the methods of healthcare financing?

revenue raising (sources of funds, including government budgets, compulsory or voluntary prepaid insurance schemes, direct out-of-pocket payments by users, and external aid) pooling of funds (the accumulation of prepaid funds on behalf of some or all of the population)

What are the three major ways healthcare is financed?

In the U.S., there are four basic modes of paying for health care:.
Public health insurance programs, including Medicaid and Medicare..
State employee health plans..
Private health insurance plans (both individual and employer-provided group).
Out-of-pocket costs for consumers..

What types of payments are used to finance health care in the United States?

Introduction.
Employer sponsored insurance, or group plans..
Individual health insurance, private plans..
Public coverage through Medicare (primarily the 65 years and older population).
Public coverage through Medicaid..

How are healthcare providers paid in the US?

Healthcare providers are paid by insurance or government payers through a system of reimbursement. After you receive a medical service, your provider sends a bill to whoever is responsible for covering your medical costs.