Healthcare: 2 pages

Assignment: Critical Thinking: Managed Care refers to the cost management of healthcare services by controlling who the consumer sees and how much the service costs. Providers and consumers are concerned with the quality of care when the insurance companies are focused on cost control. Explain the strengths and weaknesses of managed care system in the US healthcare system. After watching â??High Price of Healthâ?… and reading Chapter 9, â??Impact of Managed Care on Healthcare Deliveryâ?, both outline the strengths and weaknesses of this type of practice. Using examples from these sources (and/or any of your own sources of information) write if you believe that using an assembly line approach to providing healthcare is the best model. Criteria Points Score Introduction/ opening statement: Healthcare is considered a business in the US, as part of our economy 2 Discussion/ description of issue Identify strengths and weaknesses of managed care What are the priorities of HMOs? What are the priorities of providers? What are the priorities of consumers? Who is watching or regulating quality of care? Cite evidence (facts and examples) to support your view 4 Concluding statement How this is relevant to understanding healthcare and healthcare reform Summarize your professional response and thoughts 2 Grammar/ Syntax/ Spelling Well written and well organized 2 Total 10

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Managed Care
Understanding Insurance
National Health Expenditures
â?¢ Historical NHE, 2015:
â?¢ NHE grew 5.8% to $3.2 trillion in 2015,
â?¢ or $9,990 per person
â?¢ accounted for 17.8% of Gross Domestic Product (GDP).
â?¢ Medicare spending grew 4.5% to $646.2 billion in 2015, or 20 percent of total NHE.
Medicaid spending grew 9.7% to $545.1 billion in 2015, or 17 percent of total NHE.
â?¢ Dec 2, 2016
â?¢ CMS.GOV Fact Sheet 2014
â?¢ The Center for Medicare and Medicaid Services projects that health
services will consume nearly 20% of the GDP by 2016.
â?¢ 2006:Total health expenditures reached $2.2 trillion, 16.2% of the
â?¢ 2010: NHE $2.6 Trillion, 17.3% of GDP
â?¢ 2014: NHE $3.0 Trillion, 17.6% of GDP, under ACA major coverage
expansions, especially Medicaid
â?¢ Since implementation of the ACA, NHE growth has slowed
â?¢ Since 1970, health care spending has grown 2.5% faster than the rest
of the U.S. economy.
© 2010 Jones and Bartlett Publishers, LLC
Average Annual Growth Rates for Nominal NHE
and GDP for Selected Time Periods
Source: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at (see Historical; NHE summary including share of GDP, CY 1960-2008; file
© 2010 Jones and Bartlett Publishers, LLC
â?¢ In 2007, hospital spending was nearly $700 billion, physician and clinical services
was $480 billion and other professional services such as chiropractors,
optometrists and podiatrists was $62 billion.
â?¢ Dental services were $95 billion and community center and school spending was
$66 billion.
â?¢ Home health care services were $59 billion which was an increase of 11% from
â?¢ Nursing home spending was $131 billion, prescriptions drugs was $227 billion and
medical equipment w as $61 billion.
â?¢ Hospital spending accounted for the largest percentage of national health care
expenditures with physician and other services, prescription drugs and nursing
and home health the next three largest.
© 2010 Jones and Bartlett Publishers, LLC
COSTS: Distribution of National Health
Expenditures, by Type of Service, 2008
Other Health
Other Personal
Health Care
Home Health
Care, 2.8%
Nursing Home
Care, 5.9%
Hospital Care
Note: Other Personal Health Care includes, for example, dental and other professional health services, durable medical equipment,
etc. Other Health Spending includes, for example, administration and net cost of private health insurance, public health activity,
research, and structures and equipment, etc.
Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the
Actuary, National Health Statistics Group, at (see Historical; National Health
Expenditures by type of service and source of funds, CY 1960-2008; file
© 2010 Jones and Bartlett Publishers, LLC
â?¢ In 2007, Medicare spending was $431 billion which is an increase of 7.2% from
â?¢ Medicaid spending was $329 billion which was a slight decrease from 2006.
â?¢ Private health insurance premiums grew 6% while benefit payments decreased
because of a decline in spending on prescription drugs.
â?¢ Out of pocket payments grew 5% in 2007 which was a result of prescription drugs
costs, nursing home services and medical equipment.
â?¢ Out of pocket spending accounted for 12% of national health spending in 2007
which has declined over the past 10 years
© 2010 Jones and Bartlett Publishers, LLC
Health Insurance Coverage in the U.S., 2008
Other Public
Private NonGroup
Total = 300.5 million
NOTE: Includes those over age 65. Medicaid/Other Public includes Medicaid, SCHIP, other state programs, and
military-related coverage. Those enrolled in both Medicare and Medicaid (1.9% of total population) are shown
as Medicare beneficiaries.
SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute analysis of March 2009 CPS
Rising costs
â?¢ Much of the burden of health care expenditures has
been borne by private sourcesâ??employers and their
health insurance programs have borne much of the
â?¢ In 2007, approximately 60% of Americans (180
million) have private health insurance coverage.
© 2010 Jones and Bartlett Publishers, LLC
Health Insurance Coverage of
the Nonelderly Population, 2008
Other Public
Private Nongroup
262.8 Million
SOURCE: Kaiser Commission on Medicaid and the Uninsured/Urban Institute analysis of 2009 ASEC
Supplement to the CPS.
â?¢ These numbers correlate with the fact that the longer we age, the
more chronic conditions occur which result in higher spending and
that female life expectancy is higher than male life expectancy,
â?¢ Private Insurance will lose money on the elder population. Before
Medicare elderly had trouble finding health insurance; Social Security
was not enough to pay medical bills
© 2010 Jones and Bartlett Publishers, LLC
Distribution of Average Spending Per Person,
Average Spending Per Person
Age (in years)
<5 $1,508 5-17 1,267 18-24 1,441 25-44 2,305 45-64 4,863 >64
Notes: Includes individuals without any spending in 2006.
Source: Kaiser Family Foundation calculations using data from U.S. Department of Health and Human Services, Agency for
Healthcare Research and Quality, Medical Expenditure Panel Survey (MEPS), 2006.
© 2010 Jones and Bartlett Publishers, LLC
Consumer, Provider, payer
â?¢ There are three parties involved in providing health
â?¢ the provider
â?¢ the patient
â?¢ the fiscal intermediary such as a health insurance
company or the government.
© 2010 Jones and Bartlett Publishers, LLC
Health Insurance as a Payer
â?¢ Health insurance is a financing mechanism that
protects the insured from using their personal funds
when expensive care is required.
â?¢ Having insurance also decreases the risks of delays in
seeking treatment that may result in increased costs
Health Insurance as Payer
â?¢ Health insurance, particularly employer provided health insurance, is
the primary source for payment of health care services in the U.S.
â?¢ Administrative costs are estimated at $120 billion annually.
â?¢ There are approximately 850 health insurance companies that
contract with millions of employers to provide coverage.
â?¢ Unfortunately, employer-provided health insurance has become very
expensive for businesses, resulting in the increase in cost sharing by
© 2010 Jones and Bartlett Publishers, LLC
Average Health Insurance Premiums and
Worker Contributions for Family Coverage, 1999-2009
Employer Contribution
Note: The average worker contribution and the average employer contribution
may not add to the average total premium due to rounding.
Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2009.
Worker Contribution
Private Health Insurance Plan Types
â?¢ There are two basic types of insurance plans:
â?¢ Indemnity Plans and Managed Care
â?¢ Indemnity plans or fee for-service plans are contracts between a
beneficiary and a health plan but there is no contract between the
health plan and providers.
â?¢ The beneficiary pays a premium to the health plan. When the
beneficiary receives a healthcare service, the plan will reimburse the
beneficiary based on an established fee for a particular service
regardless of the providerâ??s fees. The beneficiary will reimburse the
provider directly.
Health Insurance Plan Types
â?¢ Managed care refers to the cost management of health care services
â?¢ by controlling who the consumer sees
â?¢ how much the service cost.
â?¢ Health Maintenance Organization Act of 1973 was signed into law by President
â?¢ Health care costs were spiraling out of control during that period. HMOs and
MCOs would help to control the health care costs.
â?¢ MCOs integration of the financial industry with the medical service industry
resulted in controlling the reimbursement rate of services which allowed them
more control over the health insurance portion of health care.
© 2010 Jones and Bartlett Publishers, LLC
Managed Care
â?¢ Managed care became very popular in the 1990s. Enrollment
increased from 27% in 1988 to 95% in 2002.
â?¢ For a period, health care costs decreased during the 1990s as
a result of the influence of MCOS. However, the influence
was short lived and health care costs continued to increase.
â?¢ From 2000-2007, health care premiums rose 98% while
wages only rose 23%.
© 2010 Jones and Bartlett Publishers, LLC
Health Insurance Terms
All insurance plans fall into three categories:
â?¢ voluntary health insurance (VHI)- private insurance through employer or
individually purchased
â?¢ social insurance: Medicare (entitlement program because most people pay
into the program through payroll taxes all of their lives)
â?¢ public welfare insurance: based on financial need; Medicaid
Health Insurance Terms
â?¢ Group insurance :employers have a large group to purchase
insurance and the risk is spread among those paying individuals.
â?¢ Individual private health insurance: purchased by self employed or
people who cannot get insurance from employer
â?¢ These plans are being provided by the Health Insurance
Who pays
â?¢ Payment of health care services is derived from
â?¢ 1) out of pocket payments from patients who pay entirely or partially
for services rendered,
â?¢ 2) health insurance such as indemnity plans or managed care
â?¢ 3) public/government funding such as Medicare, Medicaid and other
government programs
â?¢ 4) health spending accounts (HSAs).
© 2010 Jones and Bartlett Publishers, LLC
Health Insurance Payment Terms
â?¢ There are two forms of payment
â?¢ Fee for service – retrospective
â?¢ Prepayment â?? prospective (capitation)
â?¢ These provide the basis for all health insurance coverage.
â?¢ As healthcare expenditures continue to increase, the major focus of
the healthcare industry is cost control in both the public and private
Fee for Service = retrospective payments
â?¢ Retrospective reimbursement methods for healthcare services,
which means that a provider submitted a bill to a health
insurance company that will reimburse the provider, had no
incentive to control costs in health care.
â?¢ The provider may be paid by the insurance coverage or out
of pocket by the patient.
Prospective Pay = set prices
â?¢ The establishment of a prospective reimbursement system for
Medicare and then MCOsâ??developed based on care criteria for
certain conditions regardless of provider costsâ??was an incentive
system for providers to manage how they were providing services.
â?¢ In a prepayment concept, the individual pays a fixed, predetermined
amount for the services rendered.
â?¢ MCOs negotiate prices with providers
History of Health Insurance Laws
â?¢ In the 1960s, President Johnson signed Medicare and Medicaid into
law which protects the elderly, disabled and indigent.
â?¢ President Nixon signed into law the Health Maintenance Act of 1973
which focused on effective cost measures for health delivery which
was the basis for the current Health Maintenance Organizations
â?¢ Also, in the 1980s, diagnostic related groups or (DRGs) and
prospective payment guidelines were established to provide
guidelines for treatment.
© 2010 Jones and Bartlett Publishers, LLC
History of Health Insurance Laws
â?¢ A National Health Care Program was proposed during Clintonâ??s
administration in the 1990s, it was never passed.
â?¢ The Consolidated Omnibus Budget Reconciliation Act (COBRA) was passed
to provide health insurance protection if an individual changes jobs.
â?¢ In 1993, the Family Medical Leave Act (FMLA) was passed to protect an
employee if there is a family illness. They can receive up to 12 weeks of
unpaid leave and their health insurance during this period.
â?¢ Also, in 1996, the Health Insurance Portability and Accountability Act
(HIPAA) were passed that provided stricter confidentiality regarding the
health information of individuals.
â?¢ In 2005, Massachusetts proposed mandatory health coverage for all
citizens so it may be that universal health coverage may begin at the state
© 2010 Jones and Bartlett Publishers, LLC
Childrenâ??s Health Insurance Program (CHIP)
â?¢ Authorized by the Balanced Budget Act of 1997, and codified as Title
XXI of the Social Security Act, the State Children’s Health Insurance
Program (SCHIP), now Children’s Health Insurance Program (CHIP),
was initiated in response to the number of children who are
uninsured in the United States.
Government – Hospital Reimbursement
â?¢ In 1982, Congress passed the Tax Equity and Fiscal Responsibility Act
(TEFRA) and the Social Security Amendments of 1983 to manage
Medicare cost controls.
â?¢ There was a mandate to hospitals for a prospective payment system
(PPS) to establish reimbursement rates for certain conditions.
â?¢ Each (Diagnosis-related Groups), DRG group represents similar
diagnoses of diseases that are expected to have similar use of hospital
Government – Hospital Reimbursement
â?¢ The amount of reimbursement is set per discharge of a patient.
â?¢ CMS reimburses hospitals per admission and per diagnosis, which is
based on a DRGâ??a prospective payment system for hospitals
established through the Social Security Amendments of 1983.
Government Resource-Based Relative Value
Scale Reimbursement
â?¢ Medicare developed a new initiative of RBRVS to reimburse
physicians according to a relative value assigned to a service.
â?¢ This reimbursement is divided into three components: physician
work, practice expenses and malpractice insurance.
â?¢ Medicare pays a flat fee for physician visit and is based on the
Healthcare Common Procedure Coding System which is used to code
professional services.
â?¢ The RBRVS, implemented in 1992, has become a standard Medicare
Part B reimbursement method
Government Reimbursement
Resource Utilization Group (RUG)
â?¢ This type of prospective payment systems for skilled nursing facilities,
used by Medicare, provides for a per diem based on the clinical
severity of patients.
â?¢ A classification system called resource utilization group (RUG), which
is a type of DRG, was designed to differentiate patients based on how
much they use the resources of the facility.
â?¢ As the patientâ??s condition changes, the rate of reimbursement
Government Reimbursement
Home Health Resource Group (HHRG)
â?¢ Implemented in October 2000, the home health resource group
(HHRG), which is a prospective payment used by Medicare, pays a
fixed predetermined rate for each 60 day episode of care, regardless
of the services.
â?¢ All services are bundled under a home health agency.
â?¢ The HHRG uses 80 distinct groups to classify patientsâ?? condition
CMS Innovation: 4 Models
1: The Bundled Payments Initiative: Link payments that multiple
service beneficiaries receive during an episode of care.
2 and 3: Retrospective bundled payment arrangement where actual
expenditures are reconciled against a target price for an episode of
4: Model 4 involves a prospective bundled payment (capitation)
arrangement, where a lump sum payment is made to a provider for the
entire episode of care.
â?¢ Part A: Hospitalization insurance
â?¢ Part B: Medicare Part B is a supplemental health plan to cover
physician services. It is financed 24% from enrollee premiums and
76% from federal treasury funds.
â?¢ Part C: Medicare Advantage: It covers all services in Parts A and B. It
is voluntary and available when an individual enrolls in Parts A and B.
This program was designed to move Medicare patients into more
cost-effective health insurance programs such as HMOs or PPOs.
â?¢ Part D: Prescription Drug Plan: Affordable drugs
â?¢ Medigap or Medicare Supplemental Plan: Medsup plans cover
copays, deductibles, and coinsurance, which can be very expensive.
Medicare has created 10 medsup plans that vary by state.
â?¢ Title XIX of the Social Security Act
â?¢ Provides health insurance to the medically indigent.
â?¢ It is a welfare program that is administered at the state government
â?¢ The program serves 45 million low-income Americans. Medicaid
spending varies based on the status of the U.S. economy.
â?¢ It is not a federally mandated program, however, all states have
Medicaid except Arizona.
â?¢ The ACA created Community First Choice as an optional Medicaid
benefit, which focuses on community health services to Medicaid
enrollees with disabilities.
â?¢ This will enable consumers to receive care at home or at community
health centers rather than going to a hospital or their facility.
â?¢ Also authorized by the Balanced Budget Act of 1997, Program of AllInclusive Care for the Elderly (PACE) is a comprehensive healthcare
delivery system funded by Medicare and Medicaid.
â?¢ The PACE model focuses on providing community-based care and
services to people who otherwise need nursing home levels of care.
â?¢ Their philosophy is that seniors with chronic care needs are better
served in the community when possible.
TRICARE â?? Indian Health Services
â?¢ The U.S. DOD operates the Military Health Services System which
provides medical services to active duty/retired members of the
armed services.
â?¢ As the active duty numbers increased, TRICARE was developed
to respond to the growing needs of retired members.
â?¢ TRICARE is regionally managed, structured after managed care
and it coordinates the efforts of the Navy, Army and Air Force.
â?¢ The Indian Health Service provides comprehensive health care
services directly to nearly 2 million American Indian and Alaska
Native tribes
Health Insurance Plan Types
â?¢ A recent trend in health insurance plans is consumer-driven health
plans (CDHPs) that are tax advantage plans with high deductible
â?¢ The most common CDHPs are health reimbursement arrangements
(HRAs) and HSAs.
â?¢ HRAs, or personal care accounts, began in 2001 as a result of an
Internal Revenue Service (IRS) regulation. An HRA is funded by the
employer but owned by the employees and remains with the
company if the employee leaves.
â?¢ This has been an issue because it has no portability.
Consumer Driven Plans
â?¢ A health savings account (HSA), which was authorized by the
Medicare Prescription Drug, Improvement, and Modernization Act
of 2003, pairs high deductible plans with fully portable employeeowned tax-advantaged accounts.
â?¢ This plan encourages consumers to become more cost conscious
when using the healthcare system because they are using their own
funds for healthcare services.
â?¢ The HSA, unlike the HRA, is a portable account, which means it can be
transferred to another employer when the employee changes jobs.
Assessment of MCOs
â?¢ The National Committee on Quality Assurance (NCQA) was established
in 1990 to monitor health plans and improve health care quality.
â?¢ Their focus is to measure, analyze and improve health care programs.
â?¢ a voluntary review process including surveys by managed care experts
and physicians.
â?¢ An organization can be accredited at three levels: excellent,
commendable and accredited.
© 2010 Jones and Bartlett Publishers, LLC
Assessment of MCOs …
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