Financing Healthcare (Part 1) Lecture E

Editor's Notes

• #2: Welcome to Introduction to Health Care and Public Health in the U.S.: Financing Health Care, Part 1. This is lecture e. The component, Introduction to Health Care and Public Health in the U.S., is a survey of how health care and public health are organized and how services are delivered in the U.S. It covers public policy, relevant organizations and their interrelationships, professional roles, legal and regulatory issues, and payment systems. It also addresses health reform initiatives in the U.S.
• #3: The objectives for Financing Health Care, Part 1 are: Describe the history and role of the health insurance industry in financing health care in the U.S., and Federal laws that have influenced the development of the industry Explain the importance of the health care industry in the U.S. economy and the role of financial management in health care
• #4: Describe the models of health care financing found in the U.S. and in selected other countries Explain the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs
• #5: Describe the various roles played by government as policy maker, payor, provider, and regulator of health care And, describe the organization and function of Medicare and Medicaid
• #6: This lecture discusses the government as insurance payor, including the different insurance that is managed, administered, and delivered through the government at the federal level, at the state level, or both through the Centers for Medicare and Medicaid Services, or CMS. It also describes the three CMS-administered programs: Medicare, Medicaid, and the Children’s Health Insurance Program, or CHIP, and how these programs operate, receive funding, and their relationship to each other. Finally this lecture will discuss Medicaid and Medicare fraud and abuse, and Worker’s Compensation.
• #7: Government-funded health care includes programs in which the government acts as an insurance payor for health care services and other programs in which the government, in addition to funding the costs, acts as provider of health care services. The latter include the government-run programs for active and retired military personnel and their families through TRICARE and the Veterans Health Administration, and the Indian Health Service. We will look at the programs where the government acts only as the payor for health care services, either directly or indirectly. This includes Medicare, Medicaid, and CHIP.
• #8: Medicare was created by the Social Security Act of 1965 as an amendment to existing Social Security legislation. The Social Security Administration determines Medicare eligibility and processes premium payments. The Federal Insurance Contributions Act, or FICA, mandates the collection of payroll taxes to finance Medicare. If employed, the abbreviation FICA on a paycheck refers to this payroll tax deducted from employees’ gross wages. Employees pay one-point-four-five percent of their gross pay into Medicare, which is matched by their employer for a total of two-point-nine percent. This FICA payment goes to fund Medicare Part A, which is the hospital insurance part of Medicare. The next slides discuss all four parts of Medicare.
• #9: Medicare Part A is hospital insurance, but is not limited to just hospital care. Part A also covers skilled nursing facilities, rehabilitation centers, long-term-care facilities, home health care, hospice programs, and certain outpatient care. Like most insurance, there is a deductible for this coverage. Americans who have paid FICA for at least ten years pay no premium for Part A coverage. Those who have not paid for ten years can purchase Part A coverage through premiums.
• #10: Medicare uses a prospective payment system to reimburse providers of Part A services. The goal is to make providers more cost-effective by paying them a pre-determined, fixed rate per patient no matter what services are actually performed. The rate is determined by the patient’s diagnosis-related group, or DRG. The DRG is assigned based on factors such as patient age, gender, principal diagnosis, other conditions, and surgical procedures performed.
• #11: Medicare Part B is medical insurance for physicians and other providers. It covers doctors’ services, outpatient care, home health services, some preventive services, and certain other medical services. Patients are required to pay a monthly premium and annual deductible. The patient is responsible for 20 percent of the coinsurance for health care services after the annual deductible. Many individuals have employer-provided supplemental insurance that covers coinsurance expenses. In addition, private supplemental policies may be purchased individually.
• #12: Medicare Part C refers to the Medicare Advantage plans. These are offered by private companies that are approved by Medicare. The plans provide Medicare parts A and B, and may offer extra coverage, such as vision, hearing, and dental care. Most of these plans include Part D, which is prescription drug coverage. Enrollees in Medicare Advantage plans pay a premium to the private companies for their coverage and also pay a deductible.
• #13: Each Medicare Advantage Plan charges different out-of-pocket costs and has different rules for services, which can change each year. A Medicare Advantage plan can take the form of a health maintenance organization, or HMO, a preferred provider organization, or PPO, a private fee-for-service plan, or a special needs plan.
• #14: Medicare Part D was created in 2003 and provides prescription drug coverage. Enrollment is voluntary, and enrollees pay a premium to an insurance company or other private company that is approved by Medicare. Enrollees also pay a deductible and co-payment. After a certain point, enrollees may have to pay up to fifty percent of their prescription drug costs themselves for a portion of the year. This controversial coverage gap in Medicare Part D, known as the “doughnut hole”, has been addressed in the Patient Protection and Affordable Care Act, passed in 2010.
• #15: Another program jointly administered by the federal government through the CMS and the states is Medicaid. It helps pay medical costs for people with limited income and resources. Some people qualify for Medicare and Medicaid together. Medicaid is funded by taxpayers’ income tax payments. States are not required to offer Medicaid, although all fifty states now have a program. Each state formulates and administers their own Medicaid plans, subject to federal regulations and guidelines. In these plans, each state outlines the nature and scope of services to be provided, then selects vendors to provide the services outlined in their plan.
• #16: Medicaid programs vary from state to state, each having different eligibility requirements and different co-payments. The rules for counting income and resources vary from state to state and group to group; however, some rules are mandated by the Federal government. States must provide payments for hospital and physician services; they may provide payments for pharmacy, dental, and eye care. No state may provide payments for abortions.
• #17: Medicaid programs have different names in different states. Some examples are BadgerCare Plus in Wisconsin and Medi-Cal in California. States are reimbursed by the federal government for their Medicaid expenditures. States that accept Medicaid funding must provide coverage to families and individuals who receive assistance under the federal programs called Temporary Assistance to Needy Families and Supplemental Security Income, or SSI.
• #18: The third government insurance program is the Children’s Health Insurance Program, or CHIP. It, too, is administered by CMS. It provides low-cost health insurance coverage to children in families that earn too much to qualify for Medicaid and who cannot afford to purchase private health insurance. Each state administers its own program with its own eligibility criteria. These criteria are based on the child’s status, not the parent’s status. Pregnant women with low incomes may also be eligible for CHIP.
• #19: Children who are covered by CHIP may also be covered by Medicaid. If so, they receive a range of benefits, including doctor visits, emergency care, hospital care, prescription drugs, and vision, hearing, and dental care. Children also get free preventive care, such as vaccinations. For other services, families may pay low premiums and deductibles.
• #20: There have been reports of fraud and abuse in the Medicare and Medicaid programs. Fraud is intentional falsification of information or deception. Abuse occurs when doctors or suppliers do not follow good medical practices, perhaps by billing unnecessary costs, accepting improper payment, or performing services that are not medically necessary.
• #21: Examples of possible Medicare or Medicaid fraud include a situation where the health care provider bills Medicare or Medicaid for services that the patient never received. Or perhaps someone uses a Medicare or Medicaid card that belongs to someone else to get medical care or equipment. A third example is when a provider continues to bill for home medical equipment after it is returned.
• #22: It is not abuse when a Medicare or Medicaid recipient complains about the quality of care they received from a physician, hospital, or another provider or facility. The Medicare website explains individuals’ options for filing inquiries, complaints, grievances, and appeals.
• #23: CMS has developed several ways to fight Medicare and Medicaid fraud. One is the SMP program, formerly known as Senior Medicare Patrols. It educates older adults receiving Medicare and Medicaid benefits so they can prevent, detect, and report health care fraud. Medicare also has an online brochure that explains how to spot, stop, and report Medicare and Medicaid fraud. HEAT, or the Health care Fraud Prevention and Enforcement Action Team is a joint effort of the federal government and the attorneys general for each state. This group has won hundreds of criminal convictions for Medicare and Medicaid fraud and has recovered billions of stolen taxpayer dollars.
• #24: Workers’ Compensation provides monetary awards to employees who are injured or become sick during the course of employment. Under Workers’ Compensation, it does not matter who was at fault - worker, employer, or customer. Accepting Workers’ Compensation means the employee gives up the right to sue the employer for negligence.
• #25: Workers’ Compensation provides several types of benefits to an injured employee or the survivors of a deceased employee. It can replace wages, acting as a form of disability insurance. It can compensate for past and future economic loss. It can provide medical benefits, which acts as a form of health insurance. It can also provide benefits to survivors of employees killed in work-related accidents, which acts as a form of life insurance. Workers’ Compensation, however, is not the same as disability insurance or unemployment income.
• #26: Workers’ Compensation functions at both the federal level and at the state level. At the federal level, Workers’ Compensation is provided to non-military federal employees under the Federal Employment Compensation Act. All U.S. states have had some form of compulsory worker’s compensation laws since 1949. Most employers are required to subscribe to insurance to cover Workers’ Compensation claims. State governments investigate fraud and abuse.
• #27: Workers’ Compensation programs are administered on a state-by-state basis. Some states operate a state fund for Workers’ Compensation, but in most states, private insurance companies provide Workers’ Compensation.
• #28: This concludes lecture e of Financing Health Care, Part 1. In summary, government insurance programs operate on the federal level, state level, or both, including Medicare, Medicaid, and CHIP. Some people are eligible for both Medicaid and Medicare, or for both Medicaid and CHIP. All of the programs discussed are subject to legislative change over time. An example of this is the CHIP program expansion in 2009 under President George W. Bush. Fraud and abuse represents a challenge in these large government programs and attempts are being made to manage this through education and legislation. Workers’ compensation is a federally mandated program provided in each state. It protects workers and their families when on-the-job injuries occur.
• #29: This also concludes the unit Financing Health Care, Part 1. In summary, the current U.S. system of health care payors developed as a result of historical and governmental influences and consists largely of private and public, or government-funded insurance plans. The government has three roles in health care: to pass laws that ensure fair competition and protect the public; to provide health care services; and to pay for services. National health care expenditures can be examined by categories of spending, contributor, and payor. Health insurance is an important factor in health care spending in the United States.
• #30: The public health plans in the United Kingdom and in Canada reflect the different social and political priorities of each country. Both the United Kingdom and Canada provide public health care coverage for their residents, funded primarily by taxes. The United Kingdom’s multi-payor system is centrally funded and administered, whereas Canada has a single-payor system that is funded through federal and provincial taxes. Insurance works by spreading financial risk. Insurers pay providers based upon the diagnosis code, procedure code, or the service provided, and contractual agreements for fees.
• #31: Different types of insurance plans include indemnity plans, Blue Cross Blue Shield plans, and managed care plans. In the U.S., individual organizations run private insurance and operate under state and Federal laws. The most important federal laws regulating insurance are ERISA, COBRA, HIPAA, and the Affordable Care Act.
• #32: Government insurance programs operate on the federal level, state level, or both, including Medicare, Medicaid, and CHIP. Some people are eligible for both Medicaid and Medicare, or for both Medicaid and CHIP. Fraud and abuse represents a challenge in these large government programs and attempts are being made to manage this through education and legislation. Finally, workers’ compensation is a federally mandated program provided in each state that protects workers and their families when on-the-job injuries occur.
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