Unit II

1. Unit II Financial management

2. Chapter 4Health care financing and payment for services By Jahangir Moini, M.D., M.P.H. and MorvaridMoini, D.M.D., M.P.H.

3. Overview • The U.S.: mostly utilized private insurance • Other countries: government-provided care • Costs of health insurance are much higher • The ACA was an attempt to manage costs

4. Reimbursement for health care services Most services reimbursed using fee-for-service payments (when services occur) Capitation: fixed amounts for certain services Services also reimbursed through salaries

5. Government-funded health care • Medicare – elderly, disabled, and patients with end-stage kidney disease • Medicaid – low-income children with no parental support • Later enlarged to cover all low-income people • TRICARE – began as CHAMPUS • Dependents of active-duty military personnel

6. Government-funded health care Federal government became primary insurer for many Since Medicare and Medicaid, the most significant legislative change has been the ACA

7. Medicare plans • Medicare – largest single health care program • Administered by the Centers for Medicare and Medicaid Services (CMS) • Part of Department of Health and Human Services • Four separate coverage areas

8. Medicare plans • Part A (Medicare Hospital Insurance) – • Reimburses for inpatient, hospice, and certain home health services • Pays for critical care access; skilled nursing • Funded through taxes on earned income • Eligible people may obtain Part B coverage • Pay premiums or enroll in an Advantage plan

9. Medicare plans • Part B (Medicare Medical Insurance) - • Reimburses for outpatient services, inpatient and office services • Covers durable medical equipment, certain services not covered by Part A • Annual deductible required (adjusted yearly) • Patient also pays 20% of allowable charges

10. Medicare plans • Part C (Medicare Advantage) – • Includes managed care and private fee-for-service plans (provide contracted care) • An alternative plan reimbursed under Part A

11. Medicare plans • Part D (Medicare Prescription Drug Plans) – • Prescription drug coverage • Certain Cost Plans • Certain Private Fee-For-Service Plans • Medical Savings Account Plans • High deductibles in a fee-for-service plan • Tax-exempt trust for qualified expenses

12. Medicare plans • Beneficiaries can get additional Medigap insurance • Based on location, more than one type available • General eligibility requires: • Individual or spouse to work for 10+ years in Medicare-covered employment • At least 65 years of age (unless disabled or with end-stage renal disease) • U.S. citizenship or permanent residency

13. Medicaid plans • Medicaid – federal program, administered by the states • Incomes below federal poverty level (FPL) • States may assign variations of its name, such as MediCal (in California) • States receive federal matching funds based on per-capita income

14. Medicaid enrollment and payouts

15. Medicaid plans • Provide services to the “medically indigent” • Most low-income children have Medicaid • About 1 in 3 children also, regardless of income • Most spending: • Elderly • Disabled children and adults • Primarily for acute care

16. Medicaid eligibility • Categorically needy – • Temporary Assistance for Needy Families (TANF) • Caretakers of children under 18(19 if in high school) • Institutionalized people with monthly income up to 300% of Supplemental Security Income (SSI) • Pregnant women • Children under age 6 with parents income at or below 133% of FPL • SSI recipients in some states: • People of certain ages • Blind • Disabled

17. Medicaid eligibility • Medically needy – • Families paying monthly premiums = • The difference between income and the income eligibility standard • Individuals with medical/remedial expenses to offset excess income

18. Medicaid eligibility • Special groups – • Some Medicare beneficiaries near 100% of FPL, with resources near 2x the SSI standard • Some working disabled below 200% of FPL, with resources no more than 2x the SSI standard • Some people 120% to 175% of FPL • Some Medicare beneficiaries 100% to 120% of FPL

19. TRICARE and CHAMPVA • TRICARE – for families of active-duty members • Regionally managed networks of civilian health care professionals • Supports: • Active-duty military and families • Retirees and families • Survivors not eligible for Medicare

20. TRICARE Air Force Army Coast Guard Marine Corps Navy Public Health Service National Oceanic and Atmospheric Administration

21. TRICARE • Medal of Honor recipients and family • Active duty or retired: • Unmarried children • Stepchildren • Some former spouses

22. TRICARE • National Guard and Reserve Component, active, for 30+ days • Spouses • Unmarried children • Retired National Guard and families • Reserve Component and families

23. TRICARE options Prime – mostly military treatment facilities Extra – preferred provider organizations (PPO) Standard – fee-for-service

24. CHAMPVA Civilian Health and Medical Program of the Department of Veterans Affairs Department shares costs of covered services and supplies with eligible beneficiaries

25. Eligible CHAMPVA beneficiaries • Must be at least one of the following: • Spouse or child of a veteran • Permanently disabled • Totally disabled • Service-connected disability • Surviving spouse or child of a veteran deceased due to a VA-rated service connected disability

26. Eligible CHAMPVA beneficiaries • Surviving spouse or child of a veteran who died while rated as permanently or totally disabled because of service • Surviving spouse or child of a military member who died • In line of duty • Not due to misconduct • (May be eligible for TRICARE instead)

27. Indian Health Service • Administered by the DHHS • Eligible: • Members of federally recognized tribes and their descendants • 3.4 million American Indians and Alaska Natives • Less than 2 million are serviced by IHS

28. Individual insurance market • Most pay for their own health insurance, or for their families • Coverage has grown quickly • Expected to be 24 million by 2024 • About 15 million have subsidized private insurance

29. COBRA • Consolidated Omnibus Budget Reconciliation Act – allows employees to continue coverage after termination of benefits • Amended Employment Retirement Income Security Act (ERISA) to include continuation of health care • Applies to employer group health plans with 20+ employees

30. COBRA • Employers with 20+ employees must allow them, and dependents, to keep coverage for up to 18 months (sometimes 36 months) for: • Death of the employed spouse • Loss of employment • Reduction in work hours • Divorce

31. COBRA Costs are similar to what they were while employee was still had regular coverage Once leaving an employer and using COBRA, Medicare is considered the primary payer

32. Children’s Health Insurance Program • CHIP – overseen by CMS, managed by states • Provides low-cost coverage for children whose families earn too much to qualify for Medicaid • Also covers parents and pregnant women in certain states

33. Children’s Health Insurance Program • Covers: • Physician visits • Emergency services • Prescriptions • Inpatient and outpatient hospital care • Laboratory and X-ray services • Dental and vision care • Immunizations • Routine check-ups

34. Children’s Health Insurance Program Many services free, some require co-pays (or monthly premiums) No payments more than 5% of income annually

35. Privately funded health care • Began with BlueCross in 1929 • After retiring, privately funded care: • Provided by previous employers • Purchased by individuals • Much more expensive for individuals to pay for their own insurance

36. Privately funded health care • Options: • Point-of-service • Health maintenance organizations (HMOs) • Preferred provider organizations (PPOs) • Exclusive provider organizations • Indemnity or fee-for-service plans

37. Privately funded health care • Disadvantages: • High premiums • Restricted options • Underwriting • Lack of guarantees • Recissions

38. BlueCross–BlueShield • Began as separate prepaid health plans • Pays specified expenses if premiums up to date • Maintain contracts with caregivers • Pays promptly • Regional representation • Educational information for providers • Coordinated by states to control: • Coverage changes • Membership transfers

39. Kaiser Foundation Health Plan • Utilizes capitation • Also known as a prepaid health plan • Non-profit • Funds reinvested in Kaiser Foundation Hospitals • Kaiser Permanente groups owned by physicians

40. Workers’ compensation Covers most work-related illnesses and injuries Employees get care, sometimes reimbursement Dependents of employees killed at work receive benefits Limits amounts injured employees can receive Eliminates liability of coworkers in most accidents

41. Workers’ compensation • Related federal programs: • Federal Employees’ Compensation Act (FECA) • Occupational Safety and Health Administration (OSHA) • Federal Employment Liability Act (FELA)

42. Workers’ compensation State programs managed by Workers’ Boards or Compensation Commission Provides weekly cash payments, reimbursements of costs Employees must be insured while working within scope of job descriptions

43. Figure 4-1: An injured employee discusses workers’ compensation with his physician

44. Self-insured plans Allow larger employers to assume financial risks of employees’ health care benefits No fixed premiums to health insurers Claims paid from a trust fund combining employer and employee contributions

45. Medical savings accounts • Tax-deferred amounts from income deposited as contributions • From employees, employers, or both • Should be used for medical expenses (tax free if qualified) • Withdrawals are called distributions

46. Medical savings accounts Usually associated with self-employed people Coordinated with high-deductible health plans Once annual deductible is met, plan pays any remaining covered medical expenses Remaining funds may be withdrawn as taxable income

47. Insurance and managed care Managed care plans offered by private insurers and the government Managed care = various types of HMOs and similar organizations Negotiate reimbursements and limit where treatment can occur

48. Managed care concepts Patient chooses one primary care provider (PCP) Care restricted to providers who accept fee schedule or capitation payments May (or may not) allow outside providers Referrals from PCP to specialists may be required Prior notification and utilization review usually required before referrals are authorized

49. Health maintenance organizations HMOs – provide services to subscribers in certain areas, for fixed fees Members pre-pay for services Preventive care provided to promote health, reduce overall costs PCPs coordinate services and make referrals

50. Health maintenance organizations Co-payments (co-pays) usually required; from $1 to $35 per visit Some services exempt due to co-insurance payments being required instead Based on location, state commerce divisions or corporations control HMO operations