Term
| Describe & explain physician payment systems |
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Definition
1. Discounted Fees (per service) - A certain % paid of full fee schedule. Ex. Fee = $150, get paid $130
2. Capped Fee Schedule (per service) - Maximum allowable amount physician can be paid
3. Capped Fee Schedule w/ withhold - Maximum amt. that can be paid and a portion of that withheld until certain objectives (utilization, quality, satisfaction) are met
4. Primary Care Capitation - Plan covers certain # of people & payment method is PMPM - per enrollee
5. Full Capitation - Paid a certain amt. per patient & hospital must provide all medically necessary services from this payment |
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Term
| What is expected relative risk? |
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Definition
| A measure of expected expenditures |
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Term
| Describe & explain the following hospital payment systems |
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Definition
1. Discounted charges - % of chargemaster prices, can be negotiated, does not reward low cost or penalize high cost
2. Per diem - Fixed PMT negotiated per day between hospital & insurer
3. Per stay - per admission, discharge like the DRG system
4. Capitation - PMPM - per enrollee |
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Term
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Definition
| A study that uses some type of statistical analysis to answer a question then puts those answers to practice. |
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Term
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Definition
| Splitting the payment between insurer & patient through coinsurance, deductives & co-pays |
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Term
| What did the Rand study find regarding effects of cost sharing on utilization? |
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Definition
| The more cost sharing - decreased utilization |
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Term
| What did the Rand study find regaring effects of cost sharing on health status? |
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Definition
| No effects on the average healthy person, but adverse affects on the sick/poor |
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Term
| Wong et al. - Effects of cost sharing on utilization & health status |
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Definition
Found to have no effect on utilization or health status
4 year study looking at chronically ill adults found that higher OOP expenses led to decreased utilization |
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Term
| Franks, Clancy, and Gold (JAMA 1993) |
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Definition
| 5000 people, follwed 15 years and found that 9.6% of insured died, while 18.4% of uninsured died |
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Term
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Definition
| Follwed 650,000 for 16 years(86-02),Found no difference between insured & uninsured mortality rates |
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Term
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Definition
| Followed the uninsured until they went on Medicare (1992-2006)- found no change in overall health status for previously uninsured |
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Term
| What were Rand's findings in comparing utilization & expenditures between HMO & FFS? |
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Definition
Utilization - similar
but, overall HMO has lower utilization, lower expenses & increased preventative services |
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Term
| Robinson (2000) on effects of Managed Care on Utilization |
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Definition
Utilization - HMOs lower admissions & LOS emphasized
Preventative care - overall utilization falls
Expenditures - ? |
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Term
| Miller & Luft (2002) on effects of HMOs on utilization |
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Definition
| Decreases utilization for hospital services |
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Term
| What did the Rand study find when comparing health status between HMO & FFS groups? |
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Definition
Not much difference for people in good health.
Poor & sick in HMO - worse health outcomes than FFS
Rick & sick in HMOs - better health outcomes than FFS
Patient satisfaction is ALWAYS lower in HMOs |
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Term
| Robinson (2000) on effects of managed care on quality of care |
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Definition
Clinical quality outcomes - no difference
Patient Satisfaction - lower in HMOs
HMOs - cheaper, but inconvenient & not favorable |
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Term
| Miller & Luft (2002) on effects of HMOs on quality of care & patient satisfaction |
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Definition
Quality roughly the same
Satisfaction - consistently lower in HMOs - related to preventative services |
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Term
| Why is setting the premium such an important decision for an insurer? |
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Definition
It must be affordable relative to the protection received from insurance
Income = Revenues - Expenses
Revenue = Premium * # of Policies
Expenses = Claims |
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Term
| What must the premium cover? |
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Definition
Expected cost of losses due to the claim.
Claims Expense = Pure Premium * Q + Administrative Costs to insurer
Admin Costs = captured via a "loading charge" 8% on average |
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Term
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Definition
Covers only expected losses
=Pure Premium * # of Claims |
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Term
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Definition
Covers expenses of securing & maintaining the business
Administrative Costs |
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Term
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Definition
= Medical Expenses / Total Premium
The amount of revenue used to cover medical services the plan covers - goal between 0.7 and 0.8 |
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Term
| Steps in Setting a Premium |
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Definition
1. Determine estimated Medical Expenses & target revenue
2. Adjust risk for specific employer group
3. Set Premium for specific employer group |
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Term
| Major types of Medical Expenses & information necessary to estimate expenses |
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Definition
1. Inpatient 2. MD Services 3. Pres. Drugs 4. Outpatient - Ambulatory 5. Ancillary 6. Other Ambulatory/Med. Equip.
To estimate...1. Expected Utilization
2. Cost per Unit |
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Term
| Calculating target revenue PMPM involves taking what factors in to account? |
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Definition
1. Expected Changes in Utilization
2. Expected Trends in Inflation
3. Expected administrative costs
4. Desired Profit Margin |
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Term
| Lippe (2001) What are the major risk factors for a specific employer group? How do these risks effect the desired premium? |
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Definition
1. Size of pool (& dependents)
2. Economic Factors
3. Demographic Factors
4. Industry
5. Provider Practices
6. Selection Factors |
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Term
| Describe and explain the direct risk adjustment metods. |
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Definition
1. Underwriting - Deciding whether or not to insure a group of people
2. Redlining - Denying insurance coverage for a particular group because of certain behaviors of that group that are high risk - ex. Roofing company |
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Term
| Describe and explain indirect risk adjustment and 2 examples of how it is done. |
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Definition
Alter a plan's conditions - i.e. differing copays, exclusion of certain procedures, tests, services, caps on # of services - to aviod over utilization.
Ex. 1 Pre-existin conditions
2. Waiting period |
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Term
| What is a basic community rating ? |
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Definition
| Only adjusted for single vs. family premiums - Calculation |
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Term
| What determines the charging ratio? |
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Definition
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Term
| What is community rating by class? |
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Definition
| Rating adjusted for age and/or gender and/or industry, etc. |
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Term
| Explain adverse selection |
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Definition
| Occurs when an insurer is unable to distinguish between low & high risk individuals - however, high risk individuals are more likely to purchase health insurance - this drives premium prices up |
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Term
| Name some steps insurers can take to avoid adverse selection. |
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Definition
- Experience rating
- Prior screening for pre-existing conditions
- Drawing enrollees from large employer groups
- Modifying/targeting benefits towards healthier people
- Set high deductibles |
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Term
| Preferred - risk selection |
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Definition
Takse measures to enroll as many low risk individuals as possible - but they pay average premiums - "cream skimming"
Ex. Charge group premium = $330
Enroll low risk pool = 5,000 people
Expected Losses of low = $800,000
($330)(5,000) - 800,000 = $865,000 |
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Term
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Definition
Adjusting premiums based on several different factors (prior health status, utilization, age, gender)- score used to adjust premium
Should solve problem of both adverse risk & preferred risk selection - better fit for needs of those with high risk |
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Term
| Glazer & McGuire (2001) explanations for why private employers don't use formal risk adjustment |
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Definition
1. Don't want higher risk individuals anyway
2. Open enrollment/one health plan
3. Can negotiate premium that corrects risk adjustment |
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Term
| Who determines or has the most control over payments? |
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Definition
1. Insurer sets unilaterally - i.e. Medicare - take it or leave it
2. Provdier sets unilaterally - not common - happens with "star" physicians - only take cash, etc.
3. Payer & provider negotiate payment amt - Both have clout, i.e. prestigious hospital or provider |
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Term
| Explain what "financial incentives of a given payment method" vs. "financial risk of a given payment method" mean. |
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Definition
Incentives - Actions provider could take to increase income based on 1)utilization 2)cost 3)quality
Risk - Risk that they will earn less than expected risk |
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Term
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Definition
| INCOME = TR - TC = (F*V)-(AC-V) = V(F-AC) |
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Term
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Definition
INCOME = TR - TC = (R*E) - (C*U)
R=fee E=enrollees
Provider receives fee (R) for set number of enrollees (E) then must provide unit of service (U) at a cost per unit (C) to enrollees for covered medical services
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Term
| Reimbursement - What are the possible sources of constraint (other than legal) that would cause providers to be able to act in accordance with financial incentives? |
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Definition
1. Provider - Professionalism/ethics, pride in profession, "legal action", reputation, peer pressure
2. Insurer - Utilization management, practice profiling, caps, ensuring adequate quality levels, ethics & reputation
3. Patient - Quality monitoring, increased utilization doesn't make much difference if OOP expenses not much |
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Term
| For Medicare, what are provider based incentives in a retrospectice, cost-based payment system? |
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Definition
Operated this way from 1965-1983 - Submitted cost report at end of year, got reimbursed
Insurer incentives: 1)AC - treat patients more cheaply, revenue decreases, inefficient
2)Provider Incentives - Do anything they want and get paid - again promotes inefficiency |
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Term
| Describe the MS-DRG classification system. |
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Definition
Medicare severity diagnosis related group - groups patients w/ similar clinical problems which are expected to require similar amounts of resources
335 base DRGs split in to 2-3 based on CC & MCC |
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Term
| Relative weight for a given MS-DRG |
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Definition
| Expected relative costliness of inpatient treatment for patients in that group relative to average costliness of all Medicare cases |
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Term
| What are base payment rates? |
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Definition
| How much we'd expect an efficient hospital's costs to be for both operations (variable) and capital(fixed) expenses |
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Term
| What other adjustments does Medicare make to payments for hospital services? |
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Definition
1. Rural
2. Medical Education
3. DSH
4. Transfer Payments
5. Outliers |
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Term
| How does Medicare pay for physician services? |
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Definition
Prior - 1992: RBRVS payments system
-Based on a list of services and payment rates, known as physician fee schedule
HCPCS coding system: 1)physician work 2)practice exp 3)liabilty |
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Term
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Definition
| Relative weight accounting for relative costliness of inputs used to provide physician services relative to the average cost of all services |
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Term
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Definition
| Standard dollar amount; updates payments for physician services annually using a sustainable growth rate |
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Term
| Sustainable Growth Rate (SGR) |
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Definition
A formula intended to keep spending growth consistent with the national economy - it cannot go over a certain % and if it does, they lower P
-Physicians dislike because it results in a price reduction per service |
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Term
| Name the other Medicare FFS systems. |
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Definition
-Hospice
-Dialysis
-DME
-Home Health
-Rehab Services |
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Term
| How does Medicare pay for beneficiaries enrolled in a Medicare Advantage plan? |
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Definition
PMPM (capitated)
-Must provide all necessary medical care
-Usually Parts A&B&D
-Can restrict choice of provider |
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Term
| What is expected relative risk? |
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Definition
| A measure of expenditures from taking on a given enrollee (i.e. high utilization = high risk) |
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Term
| What type of payment systems does Medicaid use for managed care programs? |
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Definition
23 states - CMS DRGs
9 state - per stay
12 states - per diem
6 states - cost reimbursement |
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Term
| Why is the choice of reimbursement method for providers such an important decisions? Discuss and explain. |
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Definition
1. Payment rates effect expenditures(costs) - which effects the bottom line and can be converted to "risk"
2. Quality is effected by the reimbursement method |
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Term
| Name and explain the factors that affect premium negotiation. |
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Definition
1. Insurer's Market Power - Dependent upon market share, the greater it is, the closer the actual premiums will be to desired
2. Employer's Size - 2 components:size & market share - bigger employer's get lower premiums based on their mkt. share
3. Employer's Market Power
4. Contract stability - longer contract, lower premium; if they've done business it makes both parties more flexible(increases participation rate)
5. Alternative Plan Choices for Employees - Willingness to negotiate decrease w/ # of choices |
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