The United States reimbursement method regarding healthcare encompasses the managed care standard. It refers to a system geared towards controlling expenses by controlling access. The fundamental aspect is, therefore, to manage the ‘quality’ of care, regarding relevance and effectiveness, which translates to limiting healthcare to care based on protocols validated by regularly reevaluated studies in what is referred to as evidence-based medicine.
The Health Maintenance Organization (HMO), is a specialized insurer that contracts health benefits from professionals for the benefit of its clients. Patients must contact a doctor or affiliated hospital. The doctor is paid monthly (fixed fee) regardless of the number of patients seen. There are many variations of this system. Examples include IPAs: These Independent Physician Associations bring together in the same region independent practitioners, general practitioners, specialists in a discipline or larger groups of generalists and specialists who offer their services to members of a managed care organization (MCO) on a contractual basis. The Indemnity Plan refers to a very high premium insurer offering free and easy access benefits, with little control. The Preferred Provider Organization (PPO), is a medium-high premium insurer offering moderate-cost access to care and cost control, including a free choice of doctor by the patient (Williams, 2010). The PPO reimburses a lump sum, and the patient pays the difference (co-payment). Naturally, these various forms of managed care differ very significantly in the amount of capital needed to finance them.
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The cost-sharing arrangements that are prominent in the US healthcare reimbursement system include copayments, co-insurance, and deductibles. Copayment is the amount that one pays directly to the medical provider while providing service. Coinsurance refers to the fee percentage that should be paid for some medical expenses, and the amount is stated by the medical provider. Deductibles include the amount of expenses for medical services that one must pay prior to the payment of benefits and are categorized as deductibles per calendar year, hospitalization, and emergency room services.
The Centers for Medicare and Medicaid Services (CMS) is an entity responsible for the delivery of Medicare. It is the largest health insurance program in the nation and covers close to 39 million Americans. The CMS also partners with state governments to offer Medicaid, a health insurance program for the poor and vulnerable. These two federal programs are funded by a dual system of contributions, both employer and employee, and public contributions. Today, Medicare covers about 45 million people and represents 19% of US healthcare costs, while Medicaid provides health coverage to 43 million people and accounts for 15% of health expenditures (Shaw, 2010).
Medicare covers Americans over 65 years old, younger persons who are disabled, and chronic renal disease patients. The system is composed of four categories. ‘Part A’ covers the healthcare facility in relation to acute care. Further, ‘Part B’ covers consultations and other care. However, Medicare does not cover all care, including dental care, optics, hearing aids, and other medical expenses. ‘Part C’ covers all the healthcare plans that pertain to private insurance companies. The plans are known as Medicare Advantage. Lastly ‘Part D’ allows one to pay for their prescription drugs.
The usual system of reimbursement of general practitioners is partial. In this system, the doctor receives a predetermined fixed payment calculated based on the number of associates he administers, regardless of the volume of service performed (Shaw, 2010). The capitation provides coverage on all services provided by the general practitioner, including preventive care and in-patient and out-patient care. The system is accompanied by the establishment of funds, whose purpose is the payment of services not performed by the general practitioner. In the partial capitation system, the physician receives, in addition to their income, a monetary value that is deposited in these funds for a referral. The capitation contracts may specify the retention percentage of the general practitioner's reimbursement, called withhold , to be used in the event of a deficit in the referral funds of all generalists serving a given population; as well as specify a limit of financial loss for general practitioners.
The pay-for-performance payment method is more beneficial for the U.S. health care system compared to the traditional fee-for-service system. The traditional system of health insurance, also called fee-for-service, is characterized as a reimbursement system per procedure performed. In this system, the insurer offers a full insurance plan, guaranteeing almost total reimbursement of expenses incurred by individuals. The moral hazard problem present in the provider-insurer relationship is not considered. The traditional health insurance system presents as the main deficiency the absence of incentives to control medical and hospital expenses, not solving the problem of moral hazard present in the contractual provider-insurer relationship.
Conversely, the main objective of the pay-for-performance payment method introduced by managed care is the rationalization of the use of medical and hospital services. In managed care, providers are hired by medical associations, and there is no direct contract with insurers. Insurers enter into a contract with the associations, which represent a group of doctors, to provide care to a population group. The crucial point defined in contracts of general practitioners and associations is the division of risk with insurers, which provides mechanisms to control the moral hazard problem in medical activity.
Thus, contracts established with managed care seek to solve the problem of moral hazard present in the provider-insurer relationship, introducing a structure of incentives based on the division of risk. In the traditional system, all the risk inherent in the provision of health care services is the responsibility of the insurers, which generates incentives for the overutilization of services. Further, the introduction of new types of insurance plans has enabled competition among insurers, while creating conditions for an adjustment between the supply and demand of health services. The diversity of plans offered by pay-for-performance payment method is guaranteed by regulations characterized by the reduced intervention of the State in the design of insurance contracts.
References
Shaw, G. (2010). The healthcare debate . Santa Barbara, Calif.: Greenwood.
Williams, R. (2010). Eliminating healthcare disparities in America. Totowa, N.J.: Humana Press.
