FINANCING HEALTH CARE AND REIMBURSEMENT
IN PT available
Obama’s Patient Protection and Affordable Care Act
- March 23, 2010
- Providers not only must abide by the limitations
or seek reimbursement directly from the
patient/client but also are encouraged to
assume a role as an advocate for the
patient/client to ensure appropriate access and
coverage for health care services
HEALTH INSURANCE
 Health Insurance – the variety of policies that
can be purchased to cover certain health-
related services and goods
 Risk – the probability of a financial loss
 To become insured (covered by the policy), a
subscriber (individual who purchases the policy)
purchases a health insurance plan from an
insurer (health insurance company).
 Covered Services – services that are reimbursed
by the insurance policy
o In-patient hospital services, outpatient
surgery, physician visits, office visits,
skilled nursing care, medical tests and x-
ray examinations, prescription drugs,
physical therapy, and maternity care
 Durable Medical Equipment (DME) – often
limited or not provided under the health
insurance plan
o Medical equipment (such as wheelchair,
hospital bed, or ventilator) that a
practitioner may prescribe for a
patient’s use over an extended period
FINANCING HEALTH CARE
 Access – the ability to receive health care
services when needed
 Premium – cost of the insurance
Sources of Financing Health Care:
1. The individual purchases a health insurance
policy directly from a health insurance
company.
2. Employer-Sponsored Health Insurance/Group
Insurance – most common method of financing
health care; employees purchase health
insurance through their employers
o Open Enrollment – an employee has the
opportunity to switch to a new health
insurance plan based on individual and
family needs and health insurance plans
o Deductible – the amount that a
subscriber incurs before a health
insurer will pay for all or part of the
remaining cost of the covered services
o Copayments – flat dollar amounts a
subscriber has to pay for specific health
services at the time of service
o Co-Insurance – usually expressed as
percentage; a cost-sharing obligation
under a health insurance policy
3. Government – major source of financing health
care
o Centers for Medicare and Medicaid
Services (CMS) – administers the
Medicare program and works with each
state to administer Medicaid, CHIP, and
health insurance portability standards
 Largest purchaser of health
insurance in the United States
Medicare
 Medicare – federally funded health insurance
program that was enacted in 1965 to cover the
elderly population, persons with end-stage
renal disease, and those who are disabled and
entitled to social security benefits
 Entitlement – Americans 65 years of age and
older who have contributed to Medicare
through taxes or meet other disability eligibility
requirements have the right to the benefits of
Part A of this program
 Beneficiary – an individual entitled to Medicare
 Medicare Part A – Hospital Insurance – provides
mandatory coverage for in-patient hospital
care, skilled nursing facility (SNF) services,
certain home health services, and hospice care
o Financed by payroll taxes from workers
and their employers and general federal
revenues
 Medicare Part B – Supplementary Medical
Insurance (SMI) – a voluntary program;
individuals entitled for Medicare Part A have
the option to purchase this
o Helps pay for physician services,
outpatient hospital services, select
home health services, medical
equipment and supplies, and other
health services, such as physical therapy
 Medicare Advantage – optional health plan that
replaced Medicare + Choice
 o Gain greater choice and can choose
from an array of private health plan
options, including managed care
arrangements
 Medicare Part D – enacted as part of the
Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (or Medicare
Modernization Act/MMA) and went into effect
on January 1, 2006
o Subsidizes the cost of prescription drugs
and provides more choices in health
care coverage for Medicare
beneficiaries
Medicaid
 Medicaid – health insurance program for the
indigent population and is funded jointly by
state and federal governments
The Children’s Health Insurance Program
- Obama signed the Children’s Health Insurance
Program Reauthorization Act (CHIPRA) on
February 4, 2009
- From 7 million children to 11 million children
- Previously known as the State Children’s Health
Insurance Program (SCHIP); was originally
created by the Balanced Budget Act of 1997
- A state and federal partnership that targets
uninsured children and pregnant women in
families with incomes too high to be eligible for
most state Medicaid programs but too low to
afford private health insurance coverage
REIMBURSEMENT METHODS IN HEALTH CARE
 Reimbursement – the process by which health
care providers receive payment for their health
care services
Retrospective Methodology
- Health care providers are paid after health care
services were rendered
- Commonly referred to as fee-for-service (FFS) –
otherwise known as indemnity or traditional
health insurance
 Claims – forms describing the medical
condition, services provided, and bill for
services
 Usual, Customary, and Reasonable (UCR) –
claim Is paid in full without dispute
Prospective Methodology
 Prospective Payment System (PPS) – various
methods of paying hospitals, health systems
and organizations, or health care providers in
which payments are established in advance
 Diagnostic-Related Groups (DRGs) – the
patient’s diagnosis determines the amount the
hospital will be paid; payment is a fixed amount
based on the average cost of treating that
particular diagnosis
 Resource-based Relative Value Scale (RBRVS) –
replaced the fee-for-service system; fees were
determined based on three components: the
total work completed, costs to practice
medicine, and an allowance for malpractice
insurance expense
MANAGED CARE
Managed Care Organization
2 Components of Managed Care:
1. Predetermined Payment Schedule – established
by the insurance company based on utilization
data
2. Provider Network (Panel) – consists of providers
who contract with the insurance company and
agree to accept the payment schedule for their
services
 Managed Care Organization (MCOs) –
institutions or groups that employ the managed
care principles
3 Major Types: (“triple option”)
1. HMOs (Health Maintenance
Organization) – proliferated with
the HMO Act of 1973, which
provided loans and grants to form
these entities
a. Staff Model – providers are
employed by the HMO that
also operates the facilities
where the services are
provided
b. Independent Practice
Association (IPA) –
individual
physicians/physician groups
form a legal entity that
contracts with the HMO to
provide services without
operating the facilities
where the services are
provided
 2. Preferred Provider Organization
(PPOs) – an “open managed care
model”
 A health insurer/employer
negotiates discounted or lower
fees with networks of health
care providers in return for
guaranteeing a certain volume
of patients
3. Point-of-Service Plans (POS) – offers
both in-network and out-of-
network benefits
 Primary Care Provider (PCP) – a generalist
physician who provides primary care services
 Gatekeeper – primary coordinator who
determines whether the patient needs to see a
specialist or requires other nonroutine services
 Pharmaceutical Formularies – list of drugs with
indications for their use
 Case Management – provides monitoring and
coordination of treatments rendered to patients
to control costs and utilization

Consumer-Driven Health Care Plans

- New health plan arrangements that are
receiving increasing attention from invested
stakeholders in health care