Healthcare Financing: Public and Private Payment Sources

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Medicare and Medicaid

Medicare and Medicaid are two separate government-run programs where Medicare is federal government-run and Medicaid is both federal and state-funded. Medicare covers healthcare costs for Americans above 65 years or under 65 years with a disability, regardless of their income (Medicare Interactive, 2019). Medicaid covers healthcare coverage for American citizens with very low incomes. Those eligible for both covers are allowed to have them and they collaborate to ensure the individual receives lower costs of healthcare. The differences between Medicare and Medicaid arise in their covered services and cost-sharing.

Services Provided

Medicare consists of two parts, Medicare A and Medicare B, with each covering different aspects of a holder’s healthcare. Part A is hospital insurance and covers inpatient hospice care, expert nursing facility, hospice, laboratory tests, operation, and home health care. Part B is the medical insurance that covers doctors and other healthcare personnel services and outpatient care. It additionally covers the cost of long-lasting medical equipment, home wellness services, and some precautionary amenities for its holders (Medicare, 2019). The services provided under Medicaid vary from state to state due to the variations in their type, amount, duration, and scope covered within the broad federal guidelines (Medicaid.gov, 2022). Federal guidelines prescribe the bare minimums a state is required to provide for the insurance holders but offer leeway for the states to provide or not provide other optional services. Obligatory services include inpatient and outpatient clinic services, doctor services, laboratory and x-ray amenities, and home-based care. Optional benefits include prescription medicines, case-control, physical rehabilitation, and occupational therapy.

How Providers are Reimbursed

Medicare reimbursements are directed to the billing provider, and the healthcare providers can choose to comply with the rates set by Medicare. Medicare settles 80% of the healthcare costs incurred by its insurance holders (Centers for Medicare & Medicaid Services, 2022). The money Medicare holds is mainly contributions from federal government taxes which are used to pay doctors, hospitals, and private insurance companies. Additional funding for Medicare arises from premiums, deductibles, coinsurance, and co-pays. Medicaid reimbursement is largely similar to that of Medicare as the insurer determines the rates and requires healthcare providers to comply with those standards (Centers for Medicare & Medicaid Services, 2022). Medicaid exempts most groups from out-of-pocket costs as it covers the biggest part of their healthcare costs. The reimbursement of funds from both Medicare and Medicaid follows scrutiny of the costs and massive paperwork that sometimes delays payment to healthcare providers.

Private Payer Models

Private payer models vary from Medicaid and Medicare which are largely government-funded. Private insurance is covered by commercial entities and health insurance companies that offer different reimbursement models. Insurance companies are regulated under American law and require their holders to pay predetermined rates. The insurance company then covers the healthcare costs for their holders based on the agreed rates with the contracts. The private payer models embodied the vision of the government which sought to shift from the fee-for-service model which offered minimal accountability for healthcare professionals. This ensured that healthcare providers were not merely paid for the volume of services offered, but instead for the quality outcomes and that the costs were controlled.

Methods of Provider Reimbursement

The reimbursement modalities within the private sector vary and different companies prescribe diverse models. The shared savings and shared losses model is an example of a reimbursement modality adopted by private insurers (Duncan et al., 2022). Up until the annual reconciliation, when total FFS expenditures for all members ascribed to the provider network are measured against a predetermined budget target, providers are reimbursed at contracted fee-for-service (FFS) rates (usually less a percentage withhold). Providers are eligible to receive a portion of the shared savings if overall spending was below the target; the percentage is frequently based on the attainment of specific quality indicators. In a two-sided arrangement, providers are liable to the ACO for a percentage of the shared losses if overall FFS expenses go over the cost objective.

The bundled payment model is an alternative for the private sector where the payor determines a definite price for all services associated with a specified “episode of care”. These include a knee or hip replacement surgery, across a variety of providers and care locations. Until year-end settlement, the participating providers are typically paid at the agreed-upon FFS rates (Struijs et al., 2020). Models may try to account for the severity of illnesses or account for anomalous instances in other ways. Global capitation models require an insurer to make a single, comprehensive payment to cover a person over a defined period, typically over a month for each member. The enhanced FFS model is an improved form of the traditional FFP model which supplements payments with bonuses or penalties related to performance evaluations. When healthcare providers achieve certain quality or utilization milestones, they are compensated with bonuses that act as incentives.

Patient Protection and Affordable Care Act (PPACA or ACA) Impact on Healthcare Delivery

The patient protection and affordable care act expanded the coverage of people eligible for both Medicare and Medicaid insurance. The act made it easier for people to understand the health insurance services provided by the government, along with additional subsidies (Williams, 2020). This made it more affordable for all while covering people with lower incomes. The implementation of these acts increased the number of Americans eligible to 16 million people within the first five years of ACA. This act also made healthcare affordable for young people who were not previously eligible for insurance. The young people could not meet the demanding financial constraints set by previous laws, but the incentives offered under ACA made this possible.

People with preexisting health conditions including people with chronic illnesses were no longer excluded from care with the onset of ACA. The insurers were required to cover their needs and provided sufficient funds to meet their needs, and these include people suffering from cancer. People with chronic diseases previously run out of care because their costs are high, and the insurer stopped paying for them at some point. ACA removed this curtain and availed these people with a chance to access care to the extent of their needs. ACA additionally increased the demand for healthcare providers to carry out more screening of people. The insurer was required to cover these costs and this has overall improved well-being.

Better screening is associated with the early detection of fatal healthcare conditions and timely management. This has improved the healthcare of the American people due to reduced mortality from preventable conditions. The chronic conditions are diagnosed early before their damage is extensive, prompting treatment and halt of spread. Prescription drugs have diminished in cost with the onset of ACA, as the insurer is required to assume greater responsibility. The outstanding con associated with the acts is the higher insurance premiums people have to pay, straining their incomes with more expenditure.

References

Centers for Medicare & Medicaid Services. (2022). Comparing Reimbursement Rates | CMS. Cms.gov. Web.

Duncan, I., Mackenzie, A., Bonfiglio, E., Wrigley, T., & Liao, X. (2022). Shared Savings Model Risk in the MSSP Program. North American Actuarial Journal, 1–11. Web.

Medicaid.gov. (2022). Medicaid Benefits. Medicaid. Web.

Medicare. (2019). What’s Medicare? Medicare.gov. Web.

Medicare Interactive. (2019). Differences between Medicare and Medicaid – Medicare Interactive. Medicare Interactive. Web.

Struijs, J., De Vries, E., Baan, C., Van Gils, P., & Rosenthal, M. (2020). Bundled-Payment Models Around the World: How They Work and What Their Impact Has Been. Web.

Williams, R. A. (2020). Healthcare Reform Law (Obamacare): Update on “The Good, the Bad, and the Ugly” and the Persistence of Polarization on Repeal and Replace. Blacks in Medicine, 91–95. Web.

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