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Health Care Finance and Reimbursement

School of Nursing and Health Sciences, Capella University

MHA- FPX5006: Health Care Finance and Reimbursement

Fawzi Awad

July, 2021
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Health Care Finance

The cost of health care in the US has increased with the increase in population and

complexity of disease (Howard, 2008). These two aspects have further influenced the

accessibility and the value of medical care financing requiring the government to intervene by

providing affordable and accessible health care financing. The goal of this lecture is to

understand the role of each government health care financing plan. This will be through

evaluating the driving force of each, the target population, and the end goal when it comes to

promoting quality and affordable health care.

Lecture Objectives

 Explain the Health care Finance Programs

o Medicaid

o Medicare

o Managed care

 Explain the purpose of the program.

 Analyze the process of reimbursement for health care organizations.

 What steps must be taken in order to receive reimbursement for services?

 How complicated is each step?

 What kind of information is required from the organization?

 How long does it take to receive reimbursement?

 Explain the benefits of the program for both patients and health care organizations.

Medicaid
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Medicaid is one of the health care financing programs running under the Social Security

Act Title XIX meant for individuals and is based on their income (Harrison & Harrison, 2013).

The program was established in 1965 to help respective states finance their health care initiatives

and now operates as a federal-state partnership. The program, though intended for all states later

became optional based on the needs and demands of the various states making it dependent on

the leadership of the state. Despite it being optional, the program is still run by federal

government funds through state governments (Rosenbaum, 2002).

The federal law demands that the participating states provide Medicaid coverage to the

following

 Low-income pregnant women

 Low-income children under the age of 19years (Children’s Health

Insurance Program (CHIP)

 The elderly and disabled

 Families under the cash welfare programs

 Families with transitioning parents from welfare to work

Medicaid Reimbursement Process

The Medicaid reimbursement process is dependent on the Medicaid model used.

There are two Medicaid models

a) The Fee-for-service (FFS) model

The Fee-for-Service model works by equating a reimbursement for a specific service

whereby the doctors get reimbursed for the specific service accessed by the patient at a specific

time of need or item. The state medical assistance program pays the health care service provider

a standard rate for the given care.

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b) The Managed Care Model

Reimbursement under the managed care model is overall instead of specific. This means

that Medicaid reimburses the doctor or the hospital for general service and the hospital divides

the reimbursement per the service or care provided. Under Managed care model, the state pays

the organization a capitated rate despite the services received, this is usually a per-month/per-

member payment (Mandelbaum, 2015).

Steps to receive Medicaid Reimbursement and their complexity

The Medicaid reimbursement process is guided by two directives which include the

retroactive period and post-application period.

 Retroactive period- Period up to three months aiming to reimburse the Medicaid

applicant for the medical expenses paid during the three months before the month which

they applied for Medicaid.

 Post application period- period up to three months from the date of application to the time

a Medicaid card was issued.

The reimbursement on each case is dependent on the state's Medicaid guidelines since

some states strictly prefer that Medicaid applicants use services provided only by the Medicaid

providers, in which case, failure to use the Medicaid providers leads to a non-reimbursement

unless under exceptional cases.

For individuals to be reimbursed under retroactive period they need to provide the

following

 Be a U.S citizen and have a social security number

 Documentation of income
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 Nursing and social assessments where necessary- to determine the

medically necessary services provided at the time

 Proof of bills/ payment

 Filled Claim Transmittal Form with Medicaid provider identification

number, where necessary

Some steps are direct while others are more complicated especially in cases where there

is no clear guideline provided or followed by the service provider or the State. For instance, the

documentation of income may be difficult to align with the care sought especially in chronic

illnesses that may have led to job loss or decline in income. As much as it is essential to have

such a case placed as a priority to medical insurance, the insuring agency may take more time to

conduct reviews and approve a reimbursement. In other cases, it is not always easy to provide

comprehensive nurses assessments, especially where there is a need for follow-up services like

surgery further complicating the reimbursement process (Miller et al., 2013). However, the

organization providing care must provide all the care documents to help in meeting an average

figure for reimbursement. The reimbursement process and timeline are further guided by whether

it is a retroactive plan or a post-application period.

Medicare

Medicare was established to target people above 65years and above, people with End-

Stage renal disease, and younger people living with disabilities. It is a fully federal health

insurance program covering specific services classified as following

a) Medicare Part A - Hospital Insurance covering inpatient hospital stays and includes

hospice care, home health care, and care in nursing facilities.

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b) Medicare Part B - Medical Insurance covering outpatient care, medical supplies, certain

doctor services, and preventive services

c) Medicare Part D -Prescription drug costs coverage which included vaccines and

recommended shots.

Steps to receive Medicare Reimbursement and their complexity

Medicare reimbursement depends on the choice to work with an in-network provider or a

non-participating provider. For an in-network provider, the applicant need not make upfront

payments since Medicare pays the provider for the treatment or services provided (Sherrell,

2018). However, the applicant may be required to make out-of-pocket payments before Medicare

makes the payment. In cases where the applicant opts to work with a non-participating provider,

they are expected to fill in a claim form to get reimbursed and would be required to meet some of

the costs (Sherrell, 2018).

The non-participating provider reimbursement process requires the following steps

 Pay the full cost of the services to the healthcare provider directly.

 The provider has 1 year to submit a bill for their services to a Medicare Administrative

Contractor on behalf of the individual.

 If the provider does not file within the time limit, an individual must complete the Patient

Request for Medical Payment Form CMS-1490S by following the instructions on the

form. They must also provide itemized bills and a letter explaining why they are

submitting a claim personally.

 The individual will receive a Medicare Summary Notice (MSN) in the mail every 3

months, which outlines any claims for reimbursements. An individual can also log into

MyMedicare.gov to check the status of any claims.

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 Medicare Part B will reimburse 80% of the Medicare-approved amount for the healthcare

services the individual received.

In cases where the applicant had access to Medicare Part A and Part B, the service

provider sends the claim directly to Medicare therefore the individual does not engage in

following up on the bills. In this case, the applicant will not need to pay any upfront costs to

cover health care or services since the provider have a direct agreement with Medicare (Sherrell,

2018).

These processes are not fully fixed to terms and conditions as some instances demand

modifications, especially where some providers have different Medicare statuses, where the

applicant opts to work with non-participating providers and opt-out providers. It is especially

complicated to work with a non-participating provider since there is no existing contact with

Medicare meaning the applicant is following up on Medicare as an individual and may be

charged more than what Medicare covers.

Depending on the type of coverage, an individual may be expected to submit a claim

form where the provider fails to, however, in most cases, the provider submits the claim form on

behalf of the Medicare applicant ("What's Medicare?" n.d). The claim form is accompanied by

copies of itemized bills. The reimbursement may take up to 60days depending on the

communication between the service provider and the paperwork involved.

Managed Care

The managed care offers a health insurance system aiming to minimize health care costs,

increase health care quality and utilize available health care resources especially those associated

with Medicaid ("Managed care," n.d.). Managed care, also known as Managed Care

Organizations (MCOs) operates under the health maintenance organizations (HMOs) and
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Preferred Provider Organizations (PPOs) to contract, offer sustainable and innovative economic

incentives and reviews (Gottlieb et al., 2017). The MCOs offer economic incentives by

encouraging patients to work with affordable health care platforms, obtain preauthorization

before using hospital emergency rooms and choose regular-priced health institutions when it

comes to routine checkups ("Managed care," n.d.). The advantage of MCOs is that they reduce

the Medicaid program costs through their innovative economic incentives.

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References

Frailey, C. (2014). A primer on Medicaid telepractice reimbursement. The ASHA

Leader, 19(12), 30-31. https://doi.org/10.1044/leader.bml1.19122014.30

Gottlieb, L., Ackerman, S., Wing, H., & Manchanda, R. (2017). Understanding Medicaid

managed care investments in members' social determinants of health. Population Health

Management, 20(4), 302-308. 

Harrison, C., & Harrison, W. P. (2013). Introduction to health care finance and accounting.

Cengage Learning.

Howard, D. H. (2008). Introduction to US health policy: The organization, financing, and

delivery of health care in America. JAMA, 299(1).

Mandelbaum, B. (2015, September 30). Understanding Medicaid reimbursement. McKnight's

Long Term Care News. https://www.mcknights.com/blogs/guest-

columns/understanding-medicaid-reimbursement/

Managed care. (n.d.). Medicaid.gov: the official U.S. government site for Medicare | Medicaid.

https://www.medicaid.gov/medicaid/managed-care/index.html

Miller, S. C., Looze, J., Shield, R., Clark, M. A., Lepore, M., Tyler, D., Sterns, S., & Mor, V.

(2013). Culture change practice in U.S. nursing homes: Prevalence and variation by state

Medicaid reimbursement policies. The Gerontologist, 54(3), 434-445. 

Rosenbaum, S. (2002). Medicaid: Health Policy Report. The New England Journal of

Medicine, 346(8), 635-640.

Sherrell, Z. (2018, October 18). Medicare reimbursements: How they work and ways to make a

claim. Medical and health information.

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https://www.medicalnewstoday.com/articles/medicare-reimbursement#How-to-claim-

for-treatment-with-Medicare

What's Medicare? (n.d.). Medicare.gov: the official U.S. government site for Medicare |

Medicare. https://www.medicare.gov/what-medicare-covers/your-medicare-coverage-

choices/whats-medicare