01-04E - Introduction to Healthcare and Public Health in the US - Unit 04 - Financing Healthcare Part 1 - Lecture E

Introduction to Healthcare and Public Health in the US

Financing Healthcare (Part 1)

Lecture eThis material (Comp1_Unit4e) was developed by Oregon Health and Science University, funded by the Department of Health

and Human Services, Office of the National Coordinator for Health Information Technology under Award Number [IU24OC000015)].

Financing Healthcare (Part 1)Learning Objectives

• Understand the importance of the healthcare industry in the US economy and the role of financial management in healthcare. (Lecture b)

• Describe models of health care financing in the US and in selected other countries. (Lecture c)

• Describe the history and role of the health insurance industry in financing healthcare in the United States, and Federal laws that have influenced the development of the industry. (Lecture a)

• Understand the differences among various types of private health insurance and describe the organization and structure of network-based managed care health insurance programs. (Lecture d)

• Understand the various roles played by government as policy maker, payer, provider, and regulator of healthcare. (Lecture d)

• Describe the organization and function of Medicare and Medicaid. (Lecture e)

2Health IT Workforce Curriculum Version 3.0/Spring 2012

Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1)

Lecture e

Goals of Lecture e

• Publically funded health insurance– Insurance that is managed by the Centers for

Medicare and Medicaid Services (CMS)• Medicare• Medicaid• Children’s Health Insurance Program (CHIP)

• Medicaid/Medicare fraud and abuse• Workers’ Compensation



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Government Funded Healthcare• Government Health Insurance

– Medicare– Medicaid– Children’s Health Insurance Program

• Government provided healthcare services– TRICARE– Veterans Health Administration– Indian Health Service



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Medicare

• Created by Social Security Act of 1965– Social Security Administration determines

Medicare eligibility, processes premium payments

• Partially financed by payroll taxes (Federal Insurance Contributions Act [FICA])– 2.9% deduction (1.45% from employee, 1.45%

from employer)– FICA pays for Medicare Part A (hospital

insurance)

Health IT Workforce Curriculum Version 3.0/Spring 2012


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Medicare Part A• Hospital insurance• Helps cover:

– Inpatient care (including psychiatric hospital)– Hospital outpatient care– Skilled nursing facility or rehabilitation facility– Long-term-care facility– Hospice (end-of-life care)

• Patient pays deductible• Most Americans pay no premium—others can buy Part A

coverage



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Prospective Payment System (PPS)• System for reimbursing providers under

Medicare Part A – Controls costs– Pays predetermined, fixed dollar rate for most

patients, regardless of services provided– The rate depends on the patient’s diagnosis-

related group (DRG)• DRG reflects information in the patient’s chart at

time of discharge– Each type of facility has its own PPS



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Medicare Part B

• Medical insurance• Coverage

– Doctors’ services– Outpatient care– Home health services– Some preventive services– Other medical services

• Patient pays premium and deductible



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Medicare Part C

• Medicare Advantage plans– Offered by private companies that are

approved by Medicare• Companies provide all Part A and Part B; most

also include Part D• May offer extra coverage (such as for vision,

hearing, and dental services)• Patient pays premium and deductible



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Medicare Part C (continued)

• Part C options include:– Health maintenance organization (HMO)– Preferred provider organization (PPO)– Private fee-for-service plan– Special needs plan



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Medicare Part D

• Prescription drug coverage• Created in 2003• Voluntary enrollment• Provided by insurance company or other private

company approved by Medicare• Patients pay premium and deductible

– After a certain point, may pay up to 50% of drug costs themselves (“doughnut hole”)



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Medicaid• Helps pay medical costs of people with limited income

and resources – Joint federal and state program – Some people on Medicare qualify for Medicaid too– Funded by taxpayers’ income tax payments

• Administered through CMS at state level– States formulate and administer a plan that is subject

to federal regulations and guidelines– The plan outlines the nature and scope of services to

be provided



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Medicaid (continued)

• Each state has different eligibility requirements and co-payments – Must provide payments for hospital and

physician services– May provide payments for pharmacy, dental,

and eye care– Must not provide payments for abortions



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Medicaid (continued)

• Medicaid programs have different names in different states

• Federal government reimburses states for expenditures under Medicaid

• States accepting funding for Medicaid must provide coverage to families and individuals who receive:– Temporary Assistance to Needy Families– Supplemental Security Income (SSI)


14Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1)

Lecture e

Children’s Health Insurance Program (CHIP)

• Provides low-cost health insurance coverage• For children in families that earn too much to qualify

for Medicaid but can’t afford private health insurance– Each state has its own program and eligibility

criteria– Eligibility is based on child’s status (for example,

a child who is a U.S. citizen can qualify even if the parent is not a citizen)

• Also for low-income pregnant women

15Introduction to Healthcare and Public Health in the US Financing Healthcare (Part 1)

Lecture e



Medicaid and CHIPMay Work Together

• Typically cover a range of benefits, including:– Doctor visits, emergency care, hospital care– Prescription drugs, vision, hearing, dental– Free preventive care, including vaccinations

• Low premiums and cost-sharing may be available for other services



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Medicare/MedicaidFraud and Abuse

• Fraud is intentional falsification of information or deception of Medicare or Medicaid

• Abuse occurs when doctors or suppliers don’t follow good medical practices– Unnecessary costs– Improper payment– Services that aren’t medically necessary



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Medicare/MedicaidFraud and Abuse (continued)

• Examples of possible fraud/abuse:– Health care provider bills for services or

equipment that the patient never received– Someone uses another person’s Medicare or

Medicaid card to get medical care or equipment

– A provider bills for home medical equipment after it is returned



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Medicare/MedicaidFraud and Abuse (continued)

• It is not abuse to complain about quality of care from a physician, hospital, or other provider or facility

• The Medicare Web site offers options to file:– Inquiries– Complaints– Grievances– Appeals



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Methods of Fighting Medicare/Medicaid Fraud

• SMPs (formerly called Senior Medicare Patrols)– Educate older adults receiving Medicare and

Medicaid benefits to prevent, detect, and report health care fraud

• Online brochure (stopmedicarefraud.gov)– Helps older adults spot, stop, and report fraud

• HEAT law enforcement activities



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Workers’ Compensation• Form of insurance that provides fixed monetary awards

to employees who are injured or become sick during the course of employment– Regardless of who was at fault– In exchange for monetary award, employee gives up

the right to sue his or her employer for negligence• Workers’ Compensation is not:

– Disability insurance– Unemployment income



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Benefits of Workers’ Compensation Plans

• Wage replacement (form of disability insurance)• Compensation for economic loss (past and

future)• Medical benefits (form of health insurance)• Benefits to survivors of employees killed in work-

related accidents (form of life insurance)



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Workers’ Compensation:Federal and State

• Federal government– Provides Workers’ Compensation for non-military

federal employees– Administered by Office of Workers’ Compensation

Programs• State governments

– Since 1949, all states have required some form of Workers’ Compensation

– Most employers are required to offer this insurance– States investigate fraud and abuse



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Workers’ Compensation at State Level

• Administration differs by state– Some states operate state fund– In most states, Workers’ Compensation

is provided by private insurance companies



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Financing Healthcare (Part 1) Summary – lecture e

• Government health insurance programs operate on the federal level, state level, or both– Major government – Programs sometimes work together, e.g. Medicaid and CHIP,

Medicare and Medicaid

• All programs are subject to legislative change over time• Fraud and abuse – challenge for government programs• Workers’ compensation provides coverage to injured

workers



Lecture e

Financing Healthcare (Part 1) Summary

• There are two types of health insurance in the US – private and public/government

• The US government has three roles: pass laws, provide services, pay for service

• The US has both private and public health insurance systems; healthcare insurance is an important factor in healthcare spending

• The UK and Canada have primarily public-funded healthcare systems; the UK has a multipayer system and Canada has a single payer system

• Insurance spreads the financial risk of healthcare; it can be private or public or a combination as seen in the US, UK and Canadian systems

• State and Federal laws regulate US healthcare insurance – recent laws include: ERISA, COBRA, HIPAA and the Affordable Care Act )



Lecture e

Financing Healthcare (Part 1)References – Lecture e

References• American Association of Preferred Provider Organizations. PPO resources.

http://www.aappo.org/index.cfm?pageid=10. Accessed April 10, 2011.• American Association of Preferred Provider Organizations. PPO Toolkit.

http://www.aappo.org/AAPPO_Toolkit_FINAL.htm. Accessed April 2, 2011.• Bihari M. Understanding the Medicare Part D donut hole: learn about the Medicare Part D coverage gap.

http://healthinsurance.about.com/od/medicare/a/understanding_part_d.htm. Accessed April 7, 2011.• Centers for Medicare and Medicaid Services. Children’s Health Insurance Program (CHIP).

http://www.cms.gov/home/chip.asp. Accessed April 7, 2011.• Centers for Medicare and Medicaid Services. http://www.cms.gov. Accessed April 7, 2011.• Congressional Budget Office. Statement of Douglas W. Elmendorf, Director. CBO’s analysis of the major health

care legislation enacted in March 2010 before the Subcommittee on Health, Committee on Energy and Commerce, U.S. House of Representatives. March 30, 2011. www.cbo.gov/ftpdocs/121xx/doc12119/03-30-HealthCareLegislation.pdf. Accessed April 3, 2011

• Cornell University Law School. Workers’ Compensation: an overview. http://topics.law.cornell.edu/wex/Workers_compensation. Accessed April 7, 2011.

• Kaiser Family Foundation. Health care costs: a primer. August 2007. www.kff.org/insurance/upload/7670.pdf. Accessed April 2, 2011.

• Kaiser Family Foundation. How private health care coverage works: a primer—2008 Update. April 2008. www.kff.org/insurance/upload/7766.pdf. Accessed April 2, 2011



Lecture e

http://www.aappo.org/index.cfm?pageid=10

http://www.aappo.org/AAPPO_Toolkit_FINAL.htm

http://healthinsurance.about.com/od/medicare/a/understanding_part_d.htm

http://www.cms.gov/home/chip.asp

http://www.cms.gov/

http://www.cbo.gov/ftpdocs/121xx/doc12119/03-30-HealthCareLegislation.pdf

http://topics.law.cornell.edu/wex/Workers_compensation

http://www.kff.org/insurance/upload/7670.pdf

http://www.kff.org/insurance/upload/7766.pdf


References• Levey NM. Questions and answers about new rules on appealing rejections of health insurance claims. Los

Angeles Times. July 23, 2010. http://articles.latimes.com/2010/jul/22/nation/la-na-health-rules-qa-20100723. Accessed April 12, 2011.

• Marcinko DE. Understanding the Medicare Prospective Payment System. September 17, 2009. http://medicalexecutivepost.com/2009/09/17/understanding-the-medicare-prospective-payment-system. Accessed April 7, 2011.

• MCOL. Managed care fact sheets. http://www.mcareol.com/factshts/factnati.htm. 2011. Accessed April 9, 2011• Medicare.gov. Medicare Advantage (Part C).

http://www.medicare.gov/navigation/medicare-basics/medicare-benefits/part-c.aspx. Accessed April 7, 2011.• National Association of Workers’ Compensation Judiciary. http://www.nawcj.org. Accessed April 7, 2011.• National Bureau of Economic Research. Prospective Payment System (PPS) data.

http://www.nber.org/data/pps.html. Accessed April 7, 2011.• Obringer LA, Jeffries M. How health insurance works.

http://health.howstuffworks.com/medicine/healthcare/insurance/health-insurance.htm. Accessed April 2, 2011.• Partners Human Research Committee. Overview of the HIPAA final privacy regulations.

http://healthcare.partners.org/phsirb/hipaaov.htm. Accessed April 10, 2011.• Purcell P, Staman J. Summary of the Employee Retirement Income Security Act (ERISA). Congressional

Research Service report RL34443. May 19, 2009. http://aging.senate.gov/crs/pension7.pdf. Accessed April 3, 2011.



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http://articles.latimes.com/2010/jul/22/nation/la-na-health-rules-qa-20100723

http://medicalexecutivepost.com/2009/09/17/understanding-the-medicare-prospective-payment-system

http://www.mcareol.com/factshts/factnati.htm.%202011

http://www.medicare.gov/navigation/medicare-basics/medicare-benefits/part-c.aspx


References• Tufts Managed Care Institute. Managed care models and products. 1998.

www.thci.org/downloads/ModelsProducts.pdf. Accessed April 10, 2011.• U.S. Department of Health and Human Services and U.S. Department of Justice. Stop Medicare fraud: learn more

about fighting fraud. http://www.stopmedicarefraud.gov. Accessed April 7, 2011.• U.S. Department of Labor. Health plans and benefits. http://www.dol.gov/dol/topic/health-plans. Accessed April

11, 2011.• U.S. Department of Labor. Workers’ Compensation. http://www.dol.gov/dol/topic/workcomp/index.htm. Accessed

April 7, 2011.• Workers’Compensation.com. http://www.workerscompensation.com. Accessed April 7, 2011.



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01-04E - Introduction to Healthcare and Public Health in the US - Unit 04 - Financing Healthcare Part 1 - Lecture E