Chapter 2: Health Care Economics

1. Chapter 2: Health Care Economics

2. Differences Among Health Care Institutions • Services Offered by Health Care Facilities • Emergency room treatment • Community health education classes and materials • Health screening services • Clinical services • Medical education for physicians, nurses, & others • Financial contributions to community organizations • Coordination of events & donations for community organizations

3. Differences Among Health Care Institutions (cont’d) • Voluntary Nonprofit Institutions • Exempt from federal, state, & local taxes • Must be operated for charitable purposes

4. Differences Among Health Care Institutions (cont’d) • Proprietary Institutions • For-profit health care facilities • Owned by a corporation • Often consist of a chain of: • Hospitals • Nursing homes • Outpatient facilities • Pay local, state, & federal taxes

5. Differences Among Health Care Institutions (cont’d) • Government Institutions • Funded primarily by local, state, or federal sources • Examples: • Military treatment facilities • Veterans Affairs (VA) hospitals • Public or government-funded hospitals • State mental hospitals • State rehabilitation facilities

6. Health Care Payment Methods • Private Insurance • Employment-based, group plans • Offered by insurance companies • Employer pays part of premium; employee pays rest • Trend: employers shifting costs to employee

7. Health Care Payment Methods (cont’d) • Private Insurance (cont’d) • Premium: monthly amount the insured pays for policy • Deductible: amount the insured must pay before benefits start • Co-insurance: insured shares a portion (10-30%) of costs • Co-pay: flat fee paid by the insured per service

8. Health Care Payment Methods (cont’d) • Direct Payment • Patients pay for health care with their own money • “Shopping around”: • Creates competition • Drives down prices

9. Health Care Payment Methods (cont’d) • Government Plans: Medicare • Health care program for older Americans • Established in 1965 by amendments to Social Security Act • Expanded in 1972 to include disabled & their dependents • Converted in 1983 to prospective payment system

10. Health Care Payment Methods (cont’d) • Government Plans: Medicare (cont’d) • Part A: inpatient care costs (no monthly premium) • Part B: outpatient costs (monthly premium) • Part C: extra benefits • Part D: prescription drug coverage

11. Health Care Payment Methods (cont’d) • Government Plans: Medicaid • Health insurance for low-income & disabled people • Established in 1965 as part of Social Security Act

12. Health Care Payment Methods (cont’d) • Government Plans for Military Personnel • TRICARE

13. Health Care Payment Methods (cont’d) • New Government Programs • SCHIP • State Children’s Health Insurance Program • Established in 1997 • Expired in 2007 • CHIRPA • Children’s Health Insurance Program Reauthorization Act • Passed in 2009

14. Managed Care • Health care providers (gatekeepers) manage access to care • Goal: contain costs • In-network vs. out-of-network providers • Utilization review

15. Managed Care (cont’d) • Types of Plans • Health Maintenance Organization (HMO) plan • Preferred Provider Organization (PPO) plan • Point of Service (POS) plan

16. Cost Containment Measures • Diagnostic related group (DRG) classification system • Patients assigned to DRG based on: • Diagnosis • Other demographic info • Health care paid in standard fees, regardless of actual costs • Offers incentive to hospitals for operating more efficiently

17. Utilizing Resources Efficiently • Responsibility of all health care professionals • Conscientious time management • Electronic documentation