Method of payment for health services in which a physician or hospital is paid
a fixed amount for each person served in a given time period, regardless of the
actual number or nature of services provided to each person.
· COINSURANCE (COPAYMENT)
The portion of the bill for a medical service, within allowable payment limits,
that is not covered by the patient's health insurance policy and therefore must
be paid out of pocket by the patient. (Coinsurance refers to a percentage,
e.g., 10 percent of the total charge; copayments are stated as flat amounts,
e.g., $5 per office visit.)
· COST SHARING
Any out-of-pocket payment the patient makes for a portion of the costs of
covered services. Deductibles, coinsurance, copayments, and balanced bills are
types of cost sharing.
· COST SHIFTING
The practice by which a seller of a health service, such as a hospital,
increases charges for some payers to offset losses due to uncompensated or
indigent care or lower payments from other payers.
A fixed amount, usually expressed in dollars, that the beneficiary must pay
directly to the provider before a health insurance plan begins to pay for any
costs of the insured medical services.
· DIAGNOSIS-RELATED GROUP (DRG)
A system for determining payments to hospitals, used under Medicare's
prospective payment system (PPS) and by some other public and private payers.
The DRG system classifies patients into groups based on the principal
diagnosis, treatments, and other relevant criteria. Hospitals are paid the same
for each case classified in the same DRG, regardless of the actual cost of
A method of paying health care providers a fee for each medical service
rendered, as opposed to paying them salaries or capitated payments.
A list of selected pharmaceuticals and their appropriate dosages felt to be the
most useful and cost-effective for patient care. Physicians are often required
to prescribe from the formulary developed by the insurance plan or HMO with
which they are affiliated.
· GAG RULE LAWS
Laws that make it illegal to include "gag" clauses in doctor contracts that
limit a doctor's ability to give information to their patients about all
treatment choices for a health problem, including information about treatments
not covered by the health plan.
· GATEKEEPER/CARE MANAGER
A health care professional, usually a primary care physician, who coordinates,
manages, and authorizes all health care services provided to a covered
beneficiary. Unless an emergency exists, the gatekeeper usually must
pre-authorize referrals to specialists, hospitalizations, and lab and radiology
· GROUP-MODEL HMO
An HMO that contracts with a single multi-specialty medical group to provide
care for HMO members. The HMO compensates the group for contracted services at
a negotiated rate, and that group is responsible for compensating its
physicians and contracting with hospitals for care of their patients. Kaiser
Permanente is the foremost example of this kind of organization. Also see
Staff-model HMO; Network-model HMO.
· HEALTH MAINTENANCE ORGANIZATION (HMO)
A managed care plan that combines the function of insurer and provider to give
members comprehensive health care from a network of affiliated providers.
Enrollees pay limited copayments and are usually required to select a primary
care physician through which all care must be coordinated. HMOs generally will
not pay for services obtained from a non-network provider or without a primary
care physician's referral. HMOs often place an emphasis on prevention and
careful assessment of medical necessity.
· HEALTH PLAN EMPLOYER DATA AND INFORMATION SET (HEDIS)
A set of standardized measures of health plan performance allowing comparisons
on quality, access, patient satisfaction, membership, utilization, finance, and
health plan management. HEDIS was developed by employers, HMOs, and the
National Committee on Quality Assurance (NCQA).
· INDEMNITY INSURANCE
A traditional health insurance plan which pays providers on a fee-for-service
basis. Consumers face few restrictions on provider selection, but may have
financial liability, including a deductible and coinsurance, greater than in
many managed care plans.
· INDEPENDENT PRACTICE ASSOCIATION (IPA)
A physician organization which typically contracts with an HMO to provide
services to the HMO's enrollees. The HMO usually makes capitated payments to
the IPA; however, the IPA may reimburse its physicians on a fee-for-service
basis. Physicians are in solo practice and can contract with other HMOs and see
other fee-for-service patients.
· MANAGED CARE
Any health care delivery system that attempts to control or coordinate use of
health services by its enrolled members in order to contain spending, improve
quality, or both. Arrangements often involve patient education and disease
prevention; formal programs for quality assurance and utilization review; a
network of providers with some form of contract with the health plan to furnish
a comprehensive set of services to enrollees; and financial incentives for
providers and patients to use cost-effective treatments. HMOs and indemnity
insurance plans with utilization review are both examples of managed care
· MANAGED COMPETITION
A way of organizing health care delivery and financing that attempts to combine
the best elements of government regulation and free-market competition. Those
paying for care are organized into large groups, and health plans then compete
for members based on premiums, covered procedures, access to services, and
perceived quality of care.
Public health insurance program that provides coverage for some low-income
persons and families for acute and long-term care. It is financed by state and
federal funds (the federal government pays at least 50 percent of the total
cost in each state), and is administered by states within broad federal
· MEDICAL SAVINGS ACCOUNT (MSA)
A health insurance option consisting of a high-deductible insurance policy and
a tax-advantaged savings account. Individuals pay for their own health care
up to the annual deductible by withdrawing from the savings account or paying
out of pocket. The insurance policy pays for most or all costs of covered
services once the deductible is met. Laws allowing limited demonstrations of
MSAs were enacted in 1996 for the general population, and in 1997 for Medicare
Federal health insurance program for virtually all persons age 65 and older,
and some severely disabled persons under age 65. It consists of Part A,
hospital insurance (HI) and Part B, supplementary medical insurance (SMI).
Sometimes referred to as Medicare Part C, this portion of Medicare was
established by the Balanced Budget Act of 1997. Beneficiaries can now choose
from an expanded list of insurance options if they are available in their area,
including health maintenance organizations, preferred provider organizations,
provider-sponsored organizations, and other insurance options like
private-fee-for-service plans and medical savings accounts. Beneficiaries must
actively select one of these options or they will be enrolled in the
traditional fee-for-service plan.
· MEDIGAP INSURANCE/MEDICARE SUPPLEMENTAL INSURANCE
Privately purchased insurance that supplements Medicare coverage and meets
specified requirements set by federal statute and the National Association of
Insurance Commissioners. Benefits may include payment of Medicare deductibles,
coinsurance, balance bills, and payment for services not covered by Medicare,
such as outpatient prescription drugs.
· NETWORK MODEL HMO
An HMO that contracts with more than one independent physician group to provide
health services. The providers may see patients who are not members of the HMO.
Also see Group-model HMO, Staff-model HMO.
· PARTIAL CAPITATION
An insurance arrangement where the payment made to a health plan is a
combination of a capitated premium and a payment based on actual use of
services; the proportions specified for these components determine the
insurance risk faced by the plan. Sometimes called "ambulatory capitation."
Any person or organization paying a health care provider for services or goods.
Typically, insurance companies and government health programs like Medicare and
Medicaid are the major payers. Most large employers pay for services directly,
and individuals pay for some services out of their own pockets.
· PHYSICIAN-HOSPITAL ORGANIZATION (PHO)
A legal entity formed and owned by one or more hospitals and physician groups
to obtain payer contracts and to further mutual interests. Physicians
maintain ownership of their practices while agreeing to accept managed care
patients. The PHO serves as a negotiating, contracting, and marketing
· POINT-OF-SERVICE PLAN (POS)
A managed care plan that combines features of both prepaid and fee-for-service
insurance. Health plan enrollees decide whether to use network or non-network
providers at the time care is needed, but usually are subject to reduced
coverage and sizable copayments for selecting non-network providers. The
increase in POS enrollment represents the area of greatest HMO growth.
· PREFERRED PROVIDER ORGANIZATION (PPO)
A health care delivery system through which an organization of providers
contracts to serve health plan enrollees on a fee-for-service basis at
discounted fees in return for more patients. Patients may use any provider
without a referral, in network or out, but have a financial incentive -- for
example, lower coinsurance payments -- to use doctors on the preferred
· PRIMARY CARE PHYSICIAN
A physician -- general practitioner, family physician, pediatrician, some
internists and OB/GYNs -- who serves as the patient's first point of contact
with the health care system and coordinates the patient's medical care.
· PROSPECTIVE PAYMENT SYSTEM (PPS)
The method used by Medicare to pay for inpatient hospital services and skilled
nursing facility care, in which payment rates are determined before services
are rendered, and not based on actual costs or charges of a specific facility.
Rates are intended to cover treatment costs for a typical inpatient with a
given diagnosis and are adjusted for the hospital's wages, teaching activity,
indigent care, and other factors. The BBA of 1997 requires PPS payments be
developed for rehabilitation hospitals, home health agencies, and, possibly,
long-term care hospitals.
· PROVIDER-SPONSORED ORGANIZATION (PSO)
Any organization created through the formal affiliation of health care
providers that seeks to act as insurer for an enrolled population. PSOs can be
physician-based, hospital-based, or a combination of both; typically, they are
local health delivery systems.
A primary care doctor's written permission for a patient to see a certain
specialist or to receive certain services. Required by many managed care health
· REPORT CARD ON HEALTH CARE
An emerging tool that can be used by policymakers and health care purchasers to
compare and understand the actual performance of health plans. Provides data in
major areas of accountability, such as health care quality and utilization,
consumer satisfaction, administrative efficiencies and financial stability, and
The probability of financial loss, based on the probability of having to
provide services to a patient or patient population at a cost that exceeds the
payments received. Under capitation payment systems, providers share the risk
that is born by insurers. Also, an insured person may be referred to as a
· RISK ADJUSTMENT
Increases or reductions in payment made to a health plan on behalf of a group
of enrollees to compensate for health care expenditures that are expected to be
higher or lower than average.
· RISK SELECTION
Enrollment choices made by health plans -- or by enrollees -- on the basis of
perceived risk relative to the premium to be paid.
· RISK SHARING
A method by which the risk of inaccurate rate adjustment is shared by plan
sponsors and purchasers, typically managed care organizations and states. In
contrast to traditional indemnity plans, in which insurance premiums belong
solely to the insurance company that assumes all risk of providing the care
paid for by these premiums.
The practice of an employer providing employees with health benefits financed
entirely through the internal means of the company, as opposed to purchasing
insurance coverage from commercial carriers. Claims processing is often handled
through an administrative services contract with an independent organization,
often an insurance company.
· SINGLE PAYER SYSTEM
A proposed health plan that would designate one entity (usually the government)
to function as the only purchaser of health care services. Under such a plan,
consumers would pay a tax to a single trust fund to be used solely for health
care expenditures. Canadian provinces operate insurance coverage for residents
under this system.
· STAFF-MODEL HMO
An HMO that delivers health services through salaried physicians who are
employed by the HMO exclusively to care for HMO enrollees. Also see
Group-model HMO, Network-model HMO.
An annual limit on how much in deductibles and copayments the patient has to
pay. Also called a "cap" or "out-of-pocket cap." If there is no stop-loss
coverage under primary coverage, separate stop-loss insurance may be purchased
to protect against an overly large single claim or excessively high aggregate
claims during a given period of time. Large employers who self-insure may also
purchase "reinsurance" for stop-loss purposes.
The classification of sick or injured persons according to severity in order to
direct care and ensure the efficient use of medical and nursing staff and
· UTILIZATION REVIEW (UR)
Examination of delivered health care services -- particularly specialist
referrals, emergency room use and hospitalizations -- to evaluate their
appropriateness, necessity, and quality. The review can be performed before,
during, or after care delivery.
inside the dilemma ·
financial incentive ·
cost v. care
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producer's notebook ·
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