Chapter 19 Health Care Economics Copyright 2013 Wolters

Differences Among Health Care Institutions • Services Offered by Health Care Facilities – Emergency

Differences Among Health Care Institutions (cont’d) • Voluntary Nonprofit Institutions – Exempt from federal,

Differences Among Health Care Institutions (cont’d) • Proprietary Institutions – For-profit health care facilities

Differences Among Health Care Institutions (cont’d) • Government Institutions – Funded primarily by local,

Health Care Payment Methods • Private Insurance – Employment-based, group plans – Offered by

Health Care Payment Methods (cont’d) • Private Insurance (cont’d) – Premium: monthly amount the

Health Care Payment Methods (cont’d) • Direct Payment – Patients pay for health care

Health Care Payment Methods (cont’d) • Government Plans: Medicare – Health care program for

Health Care Payment Methods (cont’d) • Government Plans: Medicare (cont’d) – Part A: inpatient

Health Care Payment Methods (cont’d) • Government Plans: Medicaid – Health insurance for low-income

Health Care Payment Methods (cont’d) • Government Plans for Military Personnel – TRICARE Copyright

Health Care Payment Methods (cont’d) • New Government Programs – SCHIP • State Children’s

Managed Care • Health care providers (gatekeepers) manage access to care • Goal: contain

Managed Care (cont’d) • Types of Plans – Health Maintenance Organization (HMO) plan –

Cost Containment Measures • Diagnostic related group (DRG) classification system • Patients assigned to

Utilizing Resources Efficiently • Responsibility of all health care professionals • Conscientious time management

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Differences Among Health Care Institutions • Services Offered by Health Care Facilities – Emergency room treatment – Community health education classes and materials – Health screening services – Clinical services – Medical education for physicians, nurses, & others – Financial contributions to community organizations – Coordination of events & donations for community organizations Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Differences Among Health Care Institutions (cont’d) • Voluntary Nonprofit Institutions – Exempt from federal, state, & local taxes – Must be operated for charitable purposes Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Differences Among Health Care Institutions (cont’d) • Proprietary Institutions – For-profit health care facilities – Owned by a corporation – Often consist of a chain of: • Hospitals • Nursing homes • Outpatient facilities – Pay local, state, & federal taxes Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Differences Among Health Care Institutions (cont’d) • Government Institutions – Funded primarily by local, state, or federal sources – Examples: • Military treatment facilities • Veterans Affairs (VA) hospitals • Public or government-funded hospitals • State mental hospitals • State rehabilitation facilities Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Health Care Payment Methods • Private Insurance – Employment-based, group plans – Offered by insurance companies – Employer pays part of premium; employee pays rest – Trend: employers shifting costs to employee Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Health Care Payment Methods (cont’d) • Private Insurance (cont’d) – Premium: monthly amount the insured pays for policy – Deductible: amount the insured must pay before benefits start – Co-insurance: insured shares a portion (10 -30%) of costs – Co-pay: flat fee paid by the insured per service Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Health Care Payment Methods (cont’d) • Direct Payment – Patients pay for health care with their own money – “Shopping around”: • Creates competition • Drives down prices Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Health Care Payment Methods (cont’d) • Government Plans: Medicare – Health care program for older Americans – Established in 1965 by amendments to Social Security Act – Expanded in 1972 to include disabled & their dependents – Converted in 1983 to prospective payment system Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Health Care Payment Methods (cont’d) • Government Plans: Medicare (cont’d) – Part A: inpatient care costs (no monthly premium) – Part B: outpatient costs (monthly premium) – Part C: extra benefits – Part D: prescription drug coverage Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Health Care Payment Methods (cont’d) • Government Plans: Medicaid – Health insurance for low-income & disabled people – Established in 1965 as part of Social Security Act Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Health Care Payment Methods (cont’d) • New Government Programs – SCHIP • State Children’s Health Insurance Program • Established in 1997 • Expired in 2007 – CHIRPA • Children’s Health Insurance Program Reauthorization Act • Passed in 2009 Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Managed Care • Health care providers (gatekeepers) manage access to care • Goal: contain costs • In-network vs. out-of-network providers • Utilization review Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Managed Care (cont’d) • Types of Plans – Health Maintenance Organization (HMO) plan – Preferred Provider Organization (PPO) plan – Point of Service (POS) plan Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Cost Containment Measures • Diagnostic related group (DRG) classification system • Patients assigned to DRG based on: – Diagnosis – Other demographic info • Health care paid in standard fees, regardless of actual costs • Offers incentive to hospitals for operating more efficiently Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins

Utilizing Resources Efficiently • Responsibility of all health care professionals • Conscientious time management • Electronic documentation Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins