Health Care Financing and Managed Care

1. Health Care Financingand Managed Care

2. Objectives • To understand the basics of health care financing in the United States • To understand the basic concepts of managed care • To understand the changes taking place in health care financing and the impact on clinical practice

3. Who pays for health care in the United States?

4. Payers • Employer based insurance • Government • “Self pay”

5. Health Care Payers in the U.S., 1999

6. Employer based insurance • In recent years, major shift from fee-for-service coverage to various forms of managed care • Estimated 80% of plans are managed care • Employers provide health insurance for tax advantages, attract employees

7. Government health insurance • Medicare • Medicaid • Children’s Health Insurance Program (CHIP) • Military based health care (Tricare, VA)

8. Medicare • Federal program that started in 1965 • All costs paid by the Federal government • Part A paid by a dedicated Medicare tax • Part B paid by premiums and general revenue

9. Medicare Covers: • All U.S. citizens over age 65 years • Certain disabled persons under age 65 years • All persons with end stage renal disease

10. Medicare Part A • Covers inpatient hospital services, hospice care, very limited skilled nursing facility care • Has deductibles, copays • No premiums

11. Medicare Part B • Is optional and has required premiums (currently $50.00/month) • Pays physician services, certain outpatient care, certain home health care, physical therapy, durable medical equipment • Has deductibles and copays

12. Medicare does NOT cover • Most prescription or over-the-counter drugs • Acupuncture • Dental care • Health care outside the United States • Hearing aid or glasses • Routine physical exams or eye exams

13. Medicare options • Medigap policies: optional insurance policies sold by private insurers; cover some deductibles and copays, some cover other services; Medipak is local example

14. Medicare options • Medicare + Choice: optional managed care plans that Medicare recipients in which may enroll; operated by private insurers; variety of features; may cover otherwise uncovered services such as Rx drugs

15. Medicaid • Health insurance for the poor • Program operated by state governments under Federal guidelines • Costs shared by both Federal and state governments • CHIP: program started in Clinton administration to increase health insurance for children

16. Medicaid • Programs vary by state • Typically pay for certain inpatient and outpatient care, prescription and some nonprescription drugs, physician services, nursing home care • In traditional Medicaid, there are no deductibles or copays; in CHIP, there are both

17. Medicaid • Traditionally a fee-for-service program in most states • More are moving to managed care • In Arkansas, it is a centralized managed care, HMO model system; called ConnectCare

18. The Uninsured • 38 million persons in the U.S. without health insurance • Most (~75%) are employed; most at small businesses that offer no health insurance

19. The Uninsured • Less likely to have seen a physician • More likely to delay seeking care • Three times more likely to have significant adverse outcome • Four times more likely to have avoidable hospitalization or ER visit

20. Why managed care?

21. Evolution of managed care • Health insurance traditionally fee-for-service • Health care costs increased dramatically in early 1970-80s, much higher than inflation

22. Medical Inflation

23. Medical Costs in the U.S. • $1 trillion spent per year on health care • About 14-15% of gross domestic product • Approximately $4000 per capita

24. Evolution of Managed Care • Health Maintenance Organization Act of 1973; provided federal loans to new HMOs, required self insured large corporations to offer an HMO choice • Some studies suggested that managed care plans are more cost efficient, some by as much as 25%

25. Self insurance • Most medium and large employers in 1980s began to self insure • Often use outside companies to process claims • Led, in part, to a large variety of managed care plans

26. Managed care plans • Health maintenance organization (HMO) • Staff model • Group model • Preferred provider organization (PPO) • Point of service plan (POS)

27. Staff model HMO • Directly employs physicians and health care staff • Usually own their own hospitals and clinics, some use independently owned hospital through contracts • Well known example is Kaiser-Permanente • None in Arkansas

28. Group model HMO • Essentially a partnership among a group of physicians, hospital, and the health care plan. • Usually a large multispecialty group practice is single source of care for enrollees • Physicians agree by contract to terms of HMO • Payment via discounted fee-for-service, partial capitation, global capitation

29. Preferred Provider Organization • Contract with several independent physicians or groups and hospitals to provide care for enrollees • Usually associated with more provider choices, but may have higher premiums than HMO • Enrollees usually have financial incentive to use “preferred provider”

30. Point of Service Plan • Enrollees have a choice of “points of service” with physicians and hospitals; if they choose certain providers, there is less out of pocket expense • For physicians and hospitals, similar to a PPO

31. Physician Compensation • Discounted fee-for-service • Discounted fee-for-service with utilization based financial incentives (bonus or penalty) • Partial capitation • Global capitation

32. Utilization Management • Use of financial or other incentives to control utilization of health services (really cost!!) • Physician profiling: tracking of per member, per month visits, ER visits, inpatient days, charges per visit, pharmacy utilization, specialty referrals, etc.

33. PCP Gate keeping • Feature of vast majority of health plans • Each enrollee chooses or is assigned a primary care physician who oversees and coordinates care • Other physician services, hospitalizations, some tests must be referred by PCP

34. Advantages of managed care • Use of primary care physician, “medical home” • Cost containment • In some systems, well coordinated care • Preventive care, screening, immunizations • ??? Quality of care

35. Weaknesses of managed care • Less freedom to choose physicians, hospitals • Less clinical autonomy for physicians • Reduced access to specialty care • Bureaucracy • ? Patient satisfaction • ??? Quality of care

36. Physician Challenges • Coerced change situation • Conflict of interest, communication difficulties with utilization based financial incentives • Risk sharing agreements • Rapid change • ? Lower income