Introduction to Healthcare and
Public Health in the US
Financing Healthcare (Part 1)
Lecture e
This 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
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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)
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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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 diagnosisrelated group (DRG)
• DRG reflects information in the patient’s chart at
time of discharge
– Each type of facility has its own PPS
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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Medicare Part D
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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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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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)
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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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
Health IT Workforce Curriculum
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Financing Healthcare (Part 1)
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Medicaid and CHIP
May 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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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Medicare/Medicaid
Fraud 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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
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Medicare/Medicaid
Fraud 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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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Medicare/Medicaid
Fraud 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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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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 workrelated accidents (form of life insurance)
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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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
Health IT Workforce Curriculum
Version 3.0/Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
23
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
Health IT Workforce Curriculum
Version 3.0/Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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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
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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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 )
Health IT Workforce Curriculum
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Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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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/doc12119/03-30HealthCareLegislation.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
Health IT Workforce Curriculum
Version 3.0/Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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Financing Healthcare (Part 1)
References – Lecture e
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/medicarebenefits/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.
Health IT Workforce Curriculum
Version 3.0/Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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Financing Healthcare (Part 1)
References – Lecture e
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.
Health IT Workforce Curriculum
Version 3.0/Spring 2012
Introduction to Healthcare and Public Health in the US
Financing Healthcare (Part 1)
Lecture e
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