Week 3 Lecture Notes SPHU 3010
Week 3 Lecture Notes SPHU 3010 SPHU 3010
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This 6 page Class Notes was uploaded by Cara Macdonald on Friday September 16, 2016. The Class Notes belongs to SPHU 3010 at Tulane University taught by Arthur Mora in Fall 2016. Since its upload, it has received 4 views. For similar materials see Foundations of Health Care Systems in Public Health at Tulane University.
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Date Created: 09/16/16
Week 3 9/13/16: Healthcare Financing • 3 Dimensions o Insurance: how do we protect against risk? § Risk is defined as the probability of a substantial financial loss from an event of which the probability of occurrence is relatively small § We have to determine o ur own risk in many situations: determine whether we want insurance (where is the money more valuable?) § Insurance: mechanism whose primary purpose is protection against risk • Insurer is the person who assumes the risk • Underwriting is systematic technique for evaluating, selecting and classifying rating risks • Fundamental Principles: o Risk is unpredictable for the insured individual o Risk can be predicted with a reasonable degree of accuracy for a group or population § The larger the population, the more acc urate the prediction will be § Certain populations may be higher risk than others (ex. Old people) o Insurance provides a mechanism for the transferring or shifting risk from the individual to the group through pooling of resources § First form of insurance was in the battle leagues • Knew 4% of soldiers would die • Individual soldier risk varied • If each soldier gave a small amount of money to the total, they would all benefit from inusrance o All members of the insured group share actual losses on some equitable basis • Basic terminology: o Beneficiary or insured: any person eligible for service under a health plan contract o Premium: amount charged (usually monthly) by the insurer to insure against a specific set of losses. Also covers marketing, administration, claims processing, profit, etc. § You pay this even if you don’t exercise the benefits of insurance o Deductible: amount the insured must pay each year before receiving any benefits o Copayment: flat amount the insured must pay each tim e health services are received (eg $25 copay for physician visit) o Coinsurance: set proportion paid as beneficiary uses insurance o Out-of-pocket maximum: the maximum amount the insured must pay for care; once re ached, the plan pays 100% of additional expenses o Financing: how do we pay for this coverage? § Most common way of getting insurance is through healthcare • Companies offer to employees as further incentive other than higher wages o They usually pick 2 or 3 ins urance plans to offer for employees to choose from. This ensures the employees won’t just pick the most expensive option out there, for which the employers would have to pay o Employers may place you on a group plan with other, similar individuals to create an insurance pool. This is called group insurance: § Third party § Self-insured § Ex. Tulane is self-insured; sets aside own money, saves money from paying insurance provider • Tulane assumes all the risk, saves money that would be spent insuring small risk o Individual Private Health Insurance: § Health insurance marketplace § Private market o Managed Care: § MCO (Managed care organization is an entity that links the financing and delivery of health care services § Arrangements often include some type of financial consequences for risky event (i.e. high medical bills) • Ex. offer $2500 for all healthcare, you decide how it is used. • COMPLAINT: Physician used to decide how to use that money, but there was a lot of discomfort with the burden of health decisions on the physician and financially - driven decisions § Originally, MCOs shifted risk to providers, but now risk is increasingly being shifted to the consumer/beneficiary/patient § PCP as gatekeeper: can’t go see a specialist doctor unless you have a referral from a pri mary care provider • Saves insurance provider money by decreasing specialist use § Provider receives a capitated or prearranged fee regardless of whether the enrollee utilizes services or not § All care must be obtained from in -network providers § COMPLAINT: the more HMOs control (physician options, etc.) the easier it is for them to save money § National success of HMOs was not as high as anticipated o Preferred Provider Organization (PPO): § Contracts with “preferred providers” § Enrollee can use out -of-network provider but at increased cost § Instead of capitation, PPO’s make discounted fee arrangements with providers who, in turn, receive more patients § If the individual chooses to see a preferred provider, they will maximize the potential health benefits for cost o Plans: § Health maintenance organizations (HMOs): provide all costs of benefits, but you assume ALL the cost if you decide to go to doctors not on the plans § High Deductible Health Plans: also known as consumer-driven health plans (gaining popularity) • Carry high deductibles and low monthly premiums • Encourages insured to evaluate whether they really need to see a physician or not o Become a much more discriminant and thoughtful healthcare consumer • Usually paired with a health reimbursement (HRA) or health savings account (HSA) that allows pre-tax savings to be used to pay copays or coinsurance o Payment: how are providers paid? Dimension #2: • Largest portion of population has insurance through employment • Publicly financed programs: o Medicaid: for the po or o Medicare: for the elderly; automatically enrolled when you reach 65 o Others: § Children’s Health Inusrance Program (CHIP) § Department of Defense (active military) Class Notes 9/15/16: Health Care Financing/Risk Cont’d • Medicare: a social program o Government contracts with health care providers for range of health benefits, does not provide services directly § We contribute a portion of our payroll to pay for the elderly generation above us, in hopes that the generation below us will do the same for u s • Government is not involved in the delivery of healthcare o No restrictions on physicians or facilities as long as it is a Medicare-approved provider o Eligibility: as soon as you turn 65 (37 million elderly beneficiaries) § OR disabled or end -stage renal disease (ESRD) or any disease that causes similar disability o Several parts: § Medicare part A: gives hospital access but d oesn’t pay for care • For those who have earned a certain amount and paid Medicare taxes for 10 years o If not, can pay a monthly premium o Covers: § Inpatient hospitalizations § Skilled nursing facilities § Home health services • Must earn 40 credits (usually 10 years, for US citizens) § Part B: supplementary Medical insurance for physician/outpatient coverage • Basically what pays the physician • Requires an income -adjusted monthly premium o Whereas part A is free, you must opt into and pay for part B o Includes: § Physician services § Outpatient coverage § Physical therapy, etc. § Part C: Medicare Advantage • Basically parts A and B together, but rather than the government paying for 2 separate programs, allows you to seek a private, third-party who will manage all services o Saves you the trouble of dealing with insurance companies § Third party will deal with 2 parts (A and B) → comprehensive coverage o We hope as a society that providing this service makes coverage much more comprehensive to the individual § And that third parties will have incentive to practice preventive measures since the cost burden is on them • Saves the federal government money o We are trying to steer more patients into part C in hopes of reducing Medicare spending § This goal hasn’t come to fruition § Part D: prescription drug coverage • Requires monthly income-adjusted premium o Income is different than wealth! • You pay for this • When you reach the “donut hole”, you end up paying for all of your coverage § Examples of services NOT covered: • long-term care: this is weird bc elderly people (who Medicare is meant to cover) are the population most likely to need long -term care • Medicaid: Welfare service for the poor o We think as a society we should care for those who can’t care for themselves o Tax system like Medicare, but without any return expectations o Joint program between federal government and state government: § Fed provides: at leas t as much as the state, but not greater than 83% • Wealthier states get less $ federal assistance for Medicaid § States administer the program: • Set eligibility criteria • May choose to offer additional services outside the federal package o These services diffe r by state § Ex program in LA differs from other states; you may be eligible in one state, but not LA o Benefits: § Low income famiies § Individuals with disabilities § Elderly individuals § If you are eligible for Medicare AND Medicaid, you can use Medicaid coverage to pay for Medicare o Covers long-term care services: must be eligible for Medicaid if you want to be covered § May have to divest wealth to become Medicaid -eligible o List of mandatory services o Managed Care Organizations: increasingly, states are turning to MCO’s to manage their costs § Ex: Bayou Health in LA § Increases efficiency of funds o Problem of Cost-Shifting: § Physicians/Hospitals love private -paying patients • Private healthcare coverage tends to pay more than public systems o Medicare pays less, Medicaid pays least § Sometimes doesn’t even cover the costs of healthcare § Oftentimes, physicians limit their window of Medicaid-acceptance • Providers cost-shift- raise charges to private insurance to offset losses • Insurance companies pass increase on to employers as higher premiums o Payment by Private Insurance: § Third party payers: insurance companies, managed care organizations, government • Actively engage in receiving a nd paying claim § Fee-for-Service (FFS): • Healthcare is a sum of distinct units ofservice and supplies o Insuer or patient pays price set by provider o If paying out of pocket, you will receive multiple bills from multiple providers • Discounted FFS: o Insurance providers seek a discount from care providers o Studies show utilization rates increased to “adjust for” the discount so care providers still get paid the same amount o Incentive→ maximize encounters (how many treatments), maximize intensity (type of treatment) § The more i do, the more i get paid § Source of revenue is individual unit -of-service, gross revenue depends on number of units -of- service § Prospective payment system (PPS) : • Predetermined reimbursement amount for services o Provider profits if a ble to keep costs below prospective reimbursement amount o Insurers saw that this wasn’t effective healthcare, struck a deal with hospitals for how much they are willing to pay for a specific service • Incentive (hospital doesn’t want to lose money for treat ments beyond insurance payments)→ maximized efficiency, minimized intensity § Capitation: provider paid flat “per member per month” (PMPM) fee whether or not services are used • Provider at risk for $ loss if services provided exceed PMPM, but if they are less, provider can keep profit • Incentive to providers to provide cost-effective care • Danger of under-treatment, so quality controls are essential • Source of revenue is member • Primary care: 95% is very routine, ex wellness visits. Low intensity visits only have to occur every 6 months or so o Hard to estimate costs the higher intensity you go How Providers are Paid Cont’d: • Insurance payments: o Fixed rates from Medicare/Medicaid o Negotiated rates from private insurers • Physicians often at a disadvantage: o MDs are driven to join PPOs, or take salaried positions § Do not have the same leverage bigger hospitals have o Hospitals able to negotiate better rates • Remember cost-shifting: o Private insurers typically pay best o Medicaid pays the lowest rates
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